Why Doctors Should Consider Real Estate Investing

As a doctor, you’ve spent your life studying and working hard to become an expert in your field. You’ve worked long hours and sacrificed time with family and friends for years, but now that you’ve reached a certain point in your career, is it time to start thinking about how you’re going allocate the money that will no longer be spent on paying off student loans or funding medical practice expenses? If so, investment real estate might be an attractive option for your future income.

1. The path to financial security begins with understanding tax implications about real estate investing (Negative gearing)

As a doctor, a high-income earner, your tax bill is one of your biggest expenses and you should try to minimise it, within the legal framework, as much as you can. 

In Australia, the government gives you a tax break if you show a loss on your real estate investment. The interesting thing is that the loss doesn’t have to be a realised loss,  meaning that you don’t need to lose money to claim the tax break. As per case study below:

John, is an anaesthetist working on a public job and also with private practice income. He earns $300,000 from his public job and $400,000 from his private practice. He will pay up to 47% in taxes, because he earns more than $180,000 per year. 

John decides to buy an investment property to minimise his tax bill. He buys an investment property in Brisbane for $600,000. He then made a $60,000 deposit (10% of the property’s value).

His monthly repayments are as follows:

Rental Income  $28,000.00 
Interest expenses (5.6% interest rate) $30,240.00 
Agent Commission 7% $1,960.00
Advertising  $396.00
Council Rates $1,200.00 
Insurance  $310.00
Other expenses  $1,900.00 
Total Expenses: $36,006.00 

John’s total investment expenses for the year came to $36,006.00. He paid $8,006.00 more in expenses than what he earned in rental income.

By including a property depreciation amounting to $8,500.00, his property is negatively geared and he can use the $16,506.00 loss to reduce his taxable income – and by extension – reduce his tax bill. 

Net cash Flow -$8,006.00 
Property Depreciation -$8,500.00 
Total Negative Geared $16,506.00 
Tax rebate (47%) $7,757.82 
Net cost to maintain investment  -$248.18 

Many people are unable to maximise their tax claims because they don’t submit the property depreciation report.

Negatively gearing an investment property is not a decision that should be made lightly. Before making any decisions, it is important to consult with a professional.

BloomWealth Accountants will help you through the whole process by identifying the risks associated with negative gearing and help you formulate a strategy plan for your investment journey.

2. Doctors can leverage real estate as a means to financial security

If you’re a doctor looking to build wealth, investing in real estate can help you do that.

Most real estate investment strategies allow the use of leverage through borrowing — earning returns while using someone else’s money.

The simple definition of leverage is “using debt to increase your returns.” Borrowing money to finance projects enables investors to acquire more assets than they could otherwise afford, and to earn outsized returns proportional to equity invested. 

You may also be wondering how this is possible when your monthly mortgage payment seems so high. But the truth is that over time, your rent payments will add up and become substantial; this means that buying rental property has been proven to help people earn more money than an average investor who just allocates their cash into mutual funds or stocks.

Moreover, if inflation continues increasing at its current rate—which it likely will—then renting out a second property could actually become less expensive than paying your mortgage every month!

3. Medical professionals can take control of their financial future and retirement from a property portfolio by investing in real estate.

There’s a lot of money to be made in real estate, whether you’re earning passive income with an investment property or building wealth with a portfolio of properties that help you reach your financial goals. It can also give you peace of mind that comes from knowing that no matter what happens to the economy or your career, you have assets in place to help provide for your family beyond what’s currently working out right now.

As many Doctors have found, real estate investing can be a very lucrative investment opportunity.

Real Estate for Doctors
Real estate investing can be a great way to diversify your portfolio and add cash flow. In addition, real estate is tangible, unlike investments in stocks. While buying and selling stocks has no risk associated with it (other than the risk involved with the stock market), buying and selling real estate can be risky if you don’t properly research your market. However, because of its low overall risk level compared to other investments, such as stocks or bonds, it’s typically considered a good long-term investment option.

BloomWealth will help you

With the right tools and information, doctors can take control of their financial future.  Real estate investing is one of the best ways for medical doctors to create passive income and build wealth. However, as we’ve discussed in this article, it’s important that you do your research before jumping into the world of real estate investing. You’ll also want to consider what type of property is best suited for your needs and goals.

BloomWealth’s real estate investment strategies can include the review of existing property portfolios to determine the best way forward. In addition, we can examine existing mortgage debt and loan securitisation and recommend viable and beneficial alternatives.

If you would like to review your existing loans, or are interested in purchasing an investment property, please contact us.

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