Strategy for a high income earner?

Discussion in 'Investment Strategy' started by MartyMcFly, 22nd Oct, 2015.

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  1. Biz

    Biz Well-Known Member

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    Don't worry Marty, just kick back. We'll work out a good way for you to spend your money. :p
     
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  2. MartyMcFly

    MartyMcFly Member

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    Once I catch up with the old bills, I hope it's quite a nice playground to be in.

    The problem is that the more money, the more people find their way into your pockets.

    I'm still happy to pay for experts, but need to find the right ones and with something of a clue first.

    Plus, you guys are experts dishing it for free ;)
     
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  3. Propertunity

    Propertunity Well-Known Member

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    You sound like one of our many medico clients:
    1. Earning big $alary
    2. Paying lots of personal income tax
    3. Putting assets in spouse's name for asset protection
    4. Little or no investments and needing guidance on what to do
    5. A desire to cut down on working hours after a period but wanting investment income to replace personal exertion income
    Congratulations on finding this place and putting the question out there.

    You'll probably find a combination of strategies will get you where you want to be:
    1. Buy & hold in high CG areas
    2. Buy, reno, hold and refinance out some of the manufactured equity to use as deposits for more
    3. Subdivision of a suitable block with an existing house
    4. Small development of a duplex or 3-4 townhouse / villa development where you sell most but keep one each time
    5. Share investments
    6. Low risk option trading such as covered calls
    7. ....this is only a start - but you need to start somewhere
     
  4. Phantom

    Phantom Well-Known Member

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    Free? No...You will receive your Property Chat invoice in the mail within 2 working days..:D:D
     
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  5. wylie

    wylie Moderator Staff Member

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    My first comment is "why $500k passive income"? That is a LOT of spending power. I wouldn't know what to do with that much money. We certainly don't need anything like that much.

    $12.5M unencumbered property sounds like enough to feed a third world country. If you don't need that much, why bust a gut getting there just for the sake of it? What is that costing you mentally and family-wise?

    When I was young, a friend at work who was a fellow investor said he was aiming for five paid off IPs for his retirement. My dad used to aim for that too, and got there. The problem was by the time they felt comfortable enough and wealthy enough to travel, my dad had Alzheimers and couldn't travel anyway. They also had fallen into the trap of having been so careful with money early on, they couldn't quite let that mentality go. Dad always wanted a Mercedes but they never felt they could justify getting one. They certainly could afford it. I wish they had lashed out and got one and enjoyed it.

    I see similar traits in myself too, but try to fight it. I still need to sniff out a bargain and get a good deal, but sometimes I just think "what the heck, I'm going to have that". We still live fairly frugally because that is how we are hardwired.

    The other thing I would say is enjoy your family now. You don't get the chance again. You could probably cut back on your work commitments by half and still be better off than 90% of the population.

    One other thing I noticed is that with two IPs close to neutral and a PPOR which will become a good IP in a few years, I am guessing you are not paying down that loan, but putting it into offset against the loan so you can whip the cash out (leaving a nice tax-deductible debt on what is now your PPOR) and have a big deposit for the new PPOR.

    The simple answer that (to me) shines through, is that with such a great income (even halved if you take it a bit easy while the kids are young), and not being big spenders, you should easily be able to accumulate a big amount in your offset account and it shouldn't take too long to save enough for a nice PPOR.

    I didn't work for many years (chose to stay home with kids) so our wealth has come simply from having sacrificed in our early years and letting the market do its thing. You had a late start to big earning, but with such a good income, you too could enjoy life a little more by not working your buns off now, enjoy your family and still be better off than 90% of the rest of us.

    Your $2M portfolio now is not bad for someone "starting late". I say you're laughing ;).
     
  6. MartyMcFly

    MartyMcFly Member

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    Hi Wylie
    Some wise words.
    500K passive income was just the figure thrown out in the other thread, it's certainly not my goal, but it did suggest to me the difficulty in making BIG bucks with residential property.
    Starting late indeed. 2M portfolio sounds great, but my net worth is about 3 months pay ;)
     
  7. Ed Barton

    Ed Barton Well-Known Member

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    I remember a very similar post on SS. I'll send you my bank account details so you can recover the Nigerian millions.
     
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  8. wylie

    wylie Moderator Staff Member

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    I'm guessing on such a high salary you can quickly slog some cash into offsets and that net worth will grow faster than you can imagine. You have done the right thing so far, have a nice selection of property ticking away and clearly are smart enough to have got this far.

    Just keep that work/life balance in check.
     
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  9. THX

    THX Well-Known Member

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    I think the obvious answer here is to transfer your pay each month into the Property Chat investment account where a select few of us will wisely spend it. :p
     
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  10. hobo

    hobo Well-Known Member

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    The other thread was about attaining $500k passive income from a MUCH much more modest current earning capacity. In your position, it's practically a walk-in, IMO.
     
  11. MartyMcFly

    MartyMcFly Member

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    True. What would you do hobo?
     
  12. hobo

    hobo Well-Known Member

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    If we had annual income of $500k, I'd do exactly what we are already doing, but quicker. :D

    But seriously, I think I would:
    - initially diversify into shares / managed funds / REITs, both inside and outside of super;
    - pick up a few capital city residential properties along the way; alternatively (or in fact, additionally!) a couple of developable blocks with a view to exploring that option down the track;
    - and while doing both the above, I'd learn about commercial property and make a few investments in that arena over time.

    Honestly, our current milestone goal is more like half of yours (ie $250k passive income) so I can't be sure WHAT I'd do if (when? :D) it reached $500k. My answer may well be different at that point. And my answer might not work for you, either, as everyone has different strengths.

    Best of luck to you! You are in a very good position.
     
    Last edited: 22nd Oct, 2015
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  13. Kangaroo

    Kangaroo Well-Known Member

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    Pay salary to your wife( there is a limit, I think)
    Setup family trust to provide service, instead of your own name, distribute the profit to more members, very tax effective.
    Salary sacrifice to SMSF to the maximum.
    The rest will be the boring property investment.
     
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  14. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Whether such an arrangement will save tax will depend on the circumstances. It could create additional tax.

    You cannot just employ a spouse - what would they do? Would the wage be deductible to you?

    Similar with a trust. What are you contracting with the trustee to do?
     
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  15. MartyMcFly

    MartyMcFly Member

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    Thanks Hobo. I didn't mean to mislead, a 500K passive income isn't my goal, albeit nice. Just an example of an ambitious number. I guess I'm open to suggestions ;)
     
  16. Omnidragon

    Omnidragon Well-Known Member

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    If you had decent equity saved up, a $650k salary, you can probably acquire fairly substantial sites such as $10m+ development sites. Through a combination of luck, buying well and selling well, you could probably make $10m off that.
     
  17. Kangaroo

    Kangaroo Well-Known Member

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    What I mean is something along the line to explore:

    You cannot just employ a spouse - what would they do? Would the wage be deductible to you?-----Can he employs or contracts her to do paper/secretary work so that the expenses is deductible for him ?

    Similar with a trust. What are you contracting with the trustee to do?-----can family trust trustee company employs him at reasonably lower wages and try to distribute the profit ?
     
  18. sash

    sash Well-Known Member

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    People are forgetting when you are on $500pa there is some level of risk. Go conservative and ensure that you have a buffer.

    I have seen 600k execs fall back down to earth and struggle to get back into the job market.

    Doctors, Dentists are relatively safe if they are good at what they do. But a lot of them have trust structures as they can be sues for malpractice.
     
  19. Phil82

    Phil82 Well-Known Member

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    You still didn't say what it is exactly you do for a job. Cmon all us nosey parkers are dying to know!!
     
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  20. HomePage

    HomePage Well-Known Member

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    Simple get rich quick strategy for you:
    1. Set a massive portfolio target on the assumption you need achieve your current salary level as passive income.
    2. Spend like you were when you had the job quoted above (because you obviously survived to tell the tale)
    3. Invest that massive difference between your salary and what you will now spend
    4. Realise that you are probably just as happy spending this lesser amount as you are now.
    5. As a result, significantly reduce the size of your portfolio target.
    6. Reach financial independence in less than five years

    As to what to invest in, with such a short time frame until you hit financial independence, even term deposits would do the trick!

    BTW, most people would choke on having to do #2 and would be too ingrained with consumerist tendencies to have the required epiphany at #4 to sail through #5 & #6. Something to think about anyway.
     
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