Asset Rich, Cash Poor Solicitor

Earlier this year I met separately with two solicitors in very different stages of their career. Let’s call them “Barry” and “Ben”. Their ambitions of what they want through property are identical, but the outcomes will be very, very different.

Barry is a 59 year old high-flying solicitor who has been practicing law for just over 35 years. He is a partner at one of Sydney’s largest firms and has built a very good lifestyle for him and his family. He and his wife have a $6M home in Mosman, and he drives his Maserati with a smile. The firm is looking at restructuring and there is talk of Barry being asked to retire to make way for one of the younger stars of the firm.

On the other hand we have Ben who is a 26 year old lawyer, starting his career at a mid-tier firm in the city. Ben is striving to work his way up through his firm to partner, though realises that there is more to life than 80 hour weeks. He still lives at home with his parents and is looking to rent an apartment with a mate from university. He is trying to live with a better work-life balance now and plans to to travel in the future.

Both Barry and Ben approached me to learn about building wealth through investing in property, to “set themselves up for the future”. Though here lies the problem…

Barry has worked hard for decades, fostering a wonderful lifestyle for his family. They have a half-share in a holiday home at Bateman’s Bay and they take international holidays every year. Though all of his money has gone into this lifestyle, and into a bigger and bigger house. He hasn’t planned for the future. With retirement approaching he will enter this next stage of his life “asset rich, cash poor”.

I met with Barry to discuss building a property portfolio for the benefit of his and his wife’s retirement. Our investment strategy was centred around buying one or two properties generating high rental return to help supplement their cash flow. Capital growth will be moderate though they will be able to enjoy a slightly better retirement instead of relying solely on their superannuation.

Ben’s plan is much different. He has met with me as he wants to start building a property now. He realises that now is the time to act so we are buying his first investment property later this year. Due to his age we will invest into properties that will offer him the best capital growth based on his budget. The big difference here is Ben has time. He has decades of time to build some serious wealth across a number of properties, and we plan to buy an investment property every 2-3 years.

By the time Ben reaches his late 50s he should have the multi-million dollar family home and Maserati. By our calculations his investment property portfolio should be worth between $15M and $19M by then. Ben’s retirement will be much different to Barry’s, because he has used time to his advantage.