Beginner's Advice

Hi everyone,
I'm interested in getting into the property market but would like some general tips on steps to take when starting out. I have saved 300K, am a newly graduated doctor earning 77K pa which is due to increase at the rate of ~12.5K p.a. for the next 5 years, then increase at a faster rate depending on the specialty I end up in (difficult to estimate but likely ~400K pre-tax p.a.).
Only debt currently is HECs at 68K. I live in my husband's townhouse which he is paying off currently, we plan to live there for a few years and then turn it into an IP and upsize when we decide to have children (? 5 years). I've never owned a property and am interested in purchasing one to start off with and then eventually enough IPs/other forms of investments to provide me with an income so that I'll be working for enjoyment rather than money.

Thanks!
 
My advice is to get the ownership structure and loan structure right. This can save you thousands in tax each year and make significant differences with compouding.

Generally borrow 103% without cross collateralising securities. You might do this by borrowing 90% from a bank and 13% from your spouse - depending on the circumstances.

Place your $300k into an offset. perhaps you could lend it to your spouse, with a written loan agreement at 0% interest, and he could park it in a 100% offset on his property.
 
Similar situation

Hi Tamblin,

Similar situation only that I've been in the doctoring field for a few years more, currently and very fortunately in a training program- I dread to think how much more difficult it will be for newly minted docs.

I think your projection of your future salary is a little too generous, coming from someone who's in the field for a bit longer- I wrote a long spill and then suddenly had a thought- Are you on a Rural Generalist program of sorts? It's the only training pathway I can see which can bring you that much increase in salary per year, reaching close to 400k (more like 200 to 300k if you have private practice rights in a very rural town, i think, and no life) per annum in less than 10 years.

Starting property or any serious investment plan early is good but can be very daunting given the first 5 years of your training life is devoted to research, audits, preparation for diabolical exams and, most importantly, trying desperately to secure a specialist training position.

Sorry, off topic... I just thought that salary projection is a little too generous and maybe not a good and realistic basis to plan your property investment strategy on... I certainly haven't seen that pay increase myself! Maybe I'm in the wrong State!
 
HI Tamblin,

I know a little about your industry :) and to be honest its one of the most ideal sectors (health) to be in, in terms of using the income to reinvest in assets to build wealth. Your high disposable income (plus overtime), combined with the job security of the health industry puts you in an amazingly strong (and safer) position to build wealth.

My best advice would be to buy some books and start learning the basics and build from there. If your serious about wanting to build a massive portfolio to achieve your financial goals, then start to absorb the basic knowledge from books. Also work on your mindset development. Jim rohn and Les brown youtube clips/books.

That would be a very good start IMO.

For a little more detail, i cut and pasted a post i made awhile ago below:

Look, in my honest opinion it really depends on the person's goals and timeframe. Different goals/targets will require different approaches/levels of effort.. To answer this question, I am going to make the assumption that the 'budding investor' has the goal of retiring in 15-20 years, on a passive income of say 250k net, a year.

1. Develop your mindset. I believe this is largely unavoidable and has to be done, if someone wants to achieve similar figures as the scenario above. 'Mindset' is just a word, but really it involves many things, some of which are: a) working out which beliefs are holding you back and tearing then down 1 by 1. b) adopting a belief system that is congruent with your goals and maximizes your chances for great success, c) reshaping one's personal philosophy about how they view success, failure, money, time, goals, investment, relationships, sacrifice, commitment, focus. (there is an abundance of information on how to do this: books, cds, dvds, YouTube clips. (I believe this is probably at least 75% the battle).

2. Develop your property investment knowledge. I would recommend that the budding investor buy at least 10-15 books by Australian authors on the subject. Not because any one book is the Holy Grail, but rather it will give a very good starting point and cover most of the basic topics. It will also, I believe allow the budding investor to eventually gain their own perspective on it all. Forums such as Somersoft are then a great place to discuss some of what they read/learned to get feedback etc and start to formulate what they think will work for them. Over the years it's a process of refining, discarding and adopting new strategies/approaches etc to find what really works best for the person's goals.

3. Develop a network of 'experts'. Accountants, brokers, conveyancers, tradies etc. Get a folder and start to build your team, adding great contacts that you have used over time and also get referrals from others who have had great experiences with their 'experts'. Never, ever think to try and DIY Property Management, contracts, schedules etc. Leave it to the experts while you focus your time/energy on the big picture. As a property business owner, you should see yourself as the entrepreneur whose job it is to manage his/her team, take advice from them but always do your own due diligence as well. Your most valuable commodity is time/energy. Don't waste it on things that others can do, and will generally do much better than you can. The goal is 250k in 15-20 years, not becoming a property manager or finance broker etc. Leverage off their expertise. This is essential. I just want to add here, if the budding investor can also find a mentor who has achieved similar to what the investor wants to achieve, and is willing to teach/guide them, this would be of massive, massive benefit).

4. Develop your negotiation skills. I believe it's important to spend some time on this topic, as every property acquisition we go through will most likely involve some form of negotiation. Becoming better at negotiating happens in 2 ways. One: from reading books and learning strategies, approaches, concepts, ideas etc, and Two: From experience. While experience will come with time, I believe that budding investors should buy some books and get a head start. Becoming a skilled negotiator can greatly influence your level of wealth and how long it takes you to achieve your goals, hence the reason I believe a budding investor should take this seriously.

5. Take massive action: Goes without saying that everything we learn, understand and are ready to apply is totally useless, unless you decide to take action, and a lot of it.
So those are my 5 points I would impart to a budding investor, whose goals are similar to the scenario I created above. Now it also goes without saying that for someone whose goals perhaps are more modest or they require less passive income in a longer timeframe, they can always adjust how much effort, focus, discipline, level of mindset sophistication etc they want to put in, increasing or decreasing it.




Well done to get this far! good luck!!
 
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