We all know that Doctors study for many years to become medical practitioners and the financial rewards are there for those who work hard. But is a good income, by itself, a guarantee of a healthy retirement? The answer is no.
You need a Strategy
MediGrow courses provide a reality check for Doctors on many levels. A basic analysis of income versus expenses provides a shock for many, particularly when you take into account the high level of taxes and interest on debt levels. Some fall into the trap of spending big when they earn big, ignoring the need for a plan for eventual retirement.
Properties are just one asset class that can provide an income stream and help put you in a position where your money is working for you. But how many properties do you need to retire? If you are relying on using income for investment properties as a retirement plan then it may not be in your best interest to acquire as many assets as you can possibly afford. Times have changed: property taxes are higher and renters are more unreliable.
How many properties is too many?
One of the main factors that influences the answer to ‘how many properties do I need to retire’? question is how much money you think you will need to retire comfortably and what type of cash flow must be available to you each month as the result of the collective value of those properties. It is about setting a goal that is in alignment with interest rates and other economic factors.
Retirement planning experts, like Voyager Wealth Management – a partner in the MediGrow education process, say that it is one thing to intend to depend on income from an investment portfolio and yet another to strategise carefully how financial independence can be achieved by running your portfolio investment properties like a business.
Sometimes having too many properties can prevent you from living off your portfolio because so much of your expense and effort is spent managing property. Some investors might be much better off if they can sell some of the properties and then pay the debt down on existing few properties. This means that any rental or business income you are receiving from the property goes to you.
Let’s just say that you own six properties. Owning two of your most profitable properties and selling off the rest might be a good idea because you can use the money from selling the other buildings to lower your loan repayments and upkeep your existing properties in a way that allows you to charge higher rents.
Equity versus income
Voyager advises investors to look more at living off equity rather than straight rental income and leverage out their loan-to-value property. You want to get rid of properties that are the vampire on your cash flow or too high maintenance as well.
Working out how you can make your investment properties work for you is usually simply setting a goal that is a figure that tells you how much you will need to live, say in 10 to 20 years’ time, and adjust your property ownership so that the income you receive compounds rather than being spent.
