Please Help - I need a plan!!

[OmzT]

Thanks in advance for all the excellent advice I am sure to receive!!! Your time and effort is greatly appreciated!!

I have read for hours upon hours on this forum in the last week and have learned a lot. I also have a keen interest in investing which goes beyond the pursuit of money itself. I have read many financial books for leisure (most of them regarding the psychological aspect of investing).
I have been in and out of real estate since 2005 when i bought my: first fixer-upper (some huge ups and downs but thankfully i have just recovered from the huge loss during the bust a few years ago). I currently have no desire to be in the residential or multi-family real estate market. I am only interested in the commercial real estate market. I dabbled in stocks around 5 years ago and lost a lot of money ouch!! mid to high 5 figures.

I am 27 years old.
Married with 2 children. Wife is stay at home mom with no intentions of rejoining the workforce
1st child will be starting kindergarden this fall.


I have a had a rocky last few years, but lets skip that part and get to the important part...where I am now.

RRSP: zip zero
TFA: nada
Savings: zilch

Renting:
$1650/month + utilities/bills

No plans on buying a home till i have the the full purchase price in cash and can write a cheque!!

This is the part where i will receive CMF's wrath:

2 vehicles

Vehicle #1:
Bought New for ~39,000 in fall of 2010
financed at 0% for 3 yrs. no downpayment
~$1100/month

Vehicle #2:
Bought New for ~50,000 in fall of 2011
leased at 0% for 4 years, no downpayment
residual value around $21,000 which i plan to pay in cash when due
payment is ~615/month

Monthly Expenses are pretty heavy as i dont really hold back on the family :0
Ive just signed up for Mint.com and im running around $7000/month spending including everything.




Now to the interesting part...

I have basically been raising a family for the last 5-6 years on no income at all except whatever i could make flipping houses on the side. and have just started making a salary for the last 2 years at around $4/month after tax. (we've been spending more than i make every month)

I will start work this summer and have many job offers. None of these are salaried and i can run as much as i want through a PC of course.


I basically have a 1.1 mil commercial property with no equity in it
which makes 90,000$ net before payments/taxes
My options are staying close to home and making about:
~$300,000/year net to the corp/personal income before taxes
I can make more if I work harder.


I have no idea where to start or what to do.

This all stemmed from being approached by a private banker who offered to arrange plan all my finances and invest my future money for a fee of course!

I have an excellent Accountant who i just started seeing a few months ago and after reading this forum heavily i have a long list of questions for him.

Im also thinking about hiring a hourly fee-based financial planner to do a comprehensive short-medium term financial plan.

Please feel free to advise, critisize and scold!!! but please make it constructive as i am born again as far as finances are concerned!!! and wanna start this all off the right way.

an easy exit would be just working like a dog for a year or two and just paying everything off and holding the commercial property free and clear. but i want to do it the most efficient and effective way and make this a learning experience that will help me develop good habits that will continue for the rest of my life.

Thanks in Advance

[0xCC]

I think some minor clarifications are probably required before any meaningful advice is given.

Are you still in Alberta?

What was the initial reasoning behind the commercial property? Was it intended as a long-term asset or something that you were looking to flip? If you were looking to flip it what were your initial return expectations vs. where it is right now.

All of the loan stuff is a little bit hard to decipher but it looks like if we take away the student loans and the one small loan your total loans add up to 1.0175M (that includes the $520k mortgage as a separate loan from the list of personal loans but it isn't totally clear to me that they are actually separate). If those loans are all against the commercial property and that property is valued at $1.1M after commissions it doesn't look like you have any equity in that property.

Do you really need both of those cars? They are costing you about 20%-25% of your monthly spend just in payments not to mention gas, insurance and maintenance.

I have more questions but I a little short on time right now and the answers to those questions should provide some fodder for others. I guess the last set of really important questions are about where you want to end up and how long do you want to take to get there? Do you want to do stay with the real estate stuff? Do you want to buy a house for you and your family to live in (edit: sorry, you answered that but are you really prepared to wait until your kids are in high school before buying a house with cash)? Do you want to set up a medical practice? Do you just want to do locums and stuff like that instead of having your own practice? Do you have any thoughts on how long you would like to work?

[CJOttawa]

This may not be what you want to hear but you asked, so here goes.

Investing is what you do after you have cash flow issues worked out. My opinion: a "plan" isn't your biggest priority. Changing your attitude toward money is.

I won't berate you for the cars. I will tell you to get rid of them and buy reliable beaters. Two $15,000, late model used cars paid for with cash makes way more sense than two cars averaging $44,500 each.

Boil it down for us: What's your net, take home pay, NOW? ACTUAL, not "could make."

Ditch the idea of what you "could make if you work like a dog." If you go that route, it could also end in divorce when your spouse never sees you because you're at the office all the time. Then, you'll be coming here with a lot more serious problems and fewer resources to fix them with.

Scale back your lifestyle, pay off the debt, then think about the investing side.

[Helianthus]

Plan? This...

Scale back your lifestyle, pay off the debt, then think about the investing side.

[Four Pillars]

I'm not sure if you really need a financial planner at the moment. Once you start working as a physician, you should be able start paying off your debts. How fast you want to pay them off is up to you, but certainly paying off all the personal loans should be a priority.

Considering your earning potential, you are not in bad shape at all. I think the key is to make sure that you start spending a lot less than you earn, once the big dollars start rolling in.

[Sampson]

How did you amass the wealth to buy a million dollar property, while going to med school?

Do that!

Don't dabble into areas you are not comfortable or familiar (additional real estate, or stocks). And as F_P suggests, pay off your debt using your high income.

[CadMan]

And the most important bit: Be sweet to your spouse. Nothing messes up a doctor's financial plan more than marital strife. Plus it's more fun.

I love this, it made my day. I'm a lawyer, so can relate and might just have to change "doctor" to "lawyer" and put it up in my office.

[marina628]

May I suggest if you are flowing all income via the business that you pay your wife a small salary so she may also grow her retirement account.She will also be taxed at a lower rate than you. Another piece of advise don't contact the spammer ,there are many great people here who can help you with a debt repayment plan.You are fortunate to have great earning ability so the situation looks a bit desperate now but noting you cannot knock out in 5 years with some discipline.Have a look at your refinance options as your interest rate is very high ,I would be rolling that $100,000 @ 8% into the mortgage if possible as that rate sucks.
I have a feeling you bought the cars with little down and probably you would lose if you sell them now so probably have to deal with that now

[OmzT]

[Causalien]

I opt for selling the commercial RE. I've seen a lot of balance sheets and this one is pretty messed up.

The others have touched upon the necessary areas. So I'll pitch in on the asset allocation part.
As an investor there are things I don't do in your case. Budgeting on future income and any one assets weighting that is greater than 20% of net worth. Especially if they are on loaned money.

At this scale you are experiencing compound interest from the negative side. With all the worries piled onto you and shared by no one else. The psychological impact is another negative compound interest that affects both personal and professional well being.