A significant part of my business vision for the Savvy Dentist is to help dentists create intergenerational wealth for their family.
As dentists, we are often very driven and ambitious. We went into the career because we wanted a stable, high earning job that allows us to help people. However, a high salary does not necessarily translate into a stable retirement without a little bit of forethought.
Investing the wealth we generate now can ensure that we have pillars of wealth creation that will support our families into the future.
If not just wealth creation, but wealth management, that interest you, then investing a part of your earnings that quietly creates value in the background is a great start. For dentists, we have a relatively short time that we are likely to be earning our highest income – that tenuous period between opening our own practice and retiring. Maybe you even wish to retire early or work part-time. This is all possible with savvy investing particularly in the realm of property investments.
Investing in property is unique compared to other asset classes that are more ephemeral like stocks and bonds. But it’s a great option for anyone because property investing can also offer a higher return on your investment for less work. It also offers you higher control and creativity – that space where your investments can really pay off.
We’ll be looking at these three steps through the lens of property investments.
Understand your cash flow.
Analysing your money habits is step one. And this isn’t just about your business’s cash flow, but your own personal cash. What are you earning and spending? What structures do you have in place so that you’re setting aside a percentage for investing?
Now, this doesn’t mean you have to make incredibly detailed budgets or stress over pennies. This is a high-level look at your finances – where the money comes in and where it goes. Once you know the amount of surplus income you can invest, it’s about looking at small tweaks to optimise how you use it.
When you are first starting out with this, it can be easy to want to go all in. But you likely already have asset classes you’ve decided to invest in. There’s no need to divest everything and start over. It becomes a question of strategy. How should you dip your toe in? How do you want to deploy your capital over the next three or five years?
You can ask yourself questions like: how do I create a portfolio that generates wealth in the background? How do minimise the amount of time I need to spend managing it? These are the questions that will lead you to investments that offer a high return on your investment without a high time commitment.
Create a game plan before diving in.
Property is an expensive asset – especially in Australia where homes in Sydney regularly go for over a million dollars. If you were buying a business valued at a million dollars, you would take time to do your due diligence. You would create a business plan before committing those kinds of funds.
Property investment should be the same way.
This is a great time to evaluate your risk tolerance. How do you feel about losing money? How do you relate to risk? More and more people are investing in property today, but fewer are seeing good outcomes. It’s often because there’s so much advice out in the world and on the Internet about what you should and shouldn’t do. But you can take the time to look across all of the strategies available in the market instead of just picking the first one you see where someone was successful.
The property market is always changing – strategies that worked 10 or 15 years ago may not today. Evaluate which strategies excite you and you see a value in. Create a business case for yourself with each property you consider investing in.
Look where others are not.
The final tip is to look at what everyone else is doing – and then to look somewhere else. That’s where the real opportunities lie. A lot of Australians want to be investors. It’s a crowded space. If you can find pockets of opportunity where you don’t have to compete with dozens of others, you are much more likely to find investments that really pay off.
This is called blending strategies. You are primarily looking for loopholes or opportunities that have been overlooked by others. For example, in regard to property investment, when the United States’ housing bubble popped in the aughts, U.S. real estate suddenly it became a great market for Australian investors. There were some significant opportunities to purchase assets at cents on the dollar without losing a lucrative cash flow stream.
The question, “What else?” can serve you well with this. “So interest rates go up. What else? They’re looking at changing tax laws. What else?” Fostering a curious mindset will help you find those opportunities that will return results higher than the norm.
These steps are high-level thoughts you should be considering when deciding to invest your money, in property or elsewhere. Clarity about the future and how much your desired lifestyle is going to cost are important details to factor in. That might be defining what freedom looks like to you. What do you want your wealth to provide to you? And on what timeline?
Define what you want and use that to drive your decisions on investing. In a nutshell, all plans are reverse engineered to take you from where you are now to where you would like to be.