My 12 string guitar fret markers start on fifth fret. Is this the way it should be? I see 12 string guitars that have the fret markers begin on the third fret. The guitar is a "Madeira" brand.
There is no way it should be. Fret markers are somewhat of a courtesy but have also become an artistic embellishment on guitars. Some start on 3rd, some 5th, I've seen guitars with one on the 1st fret and some with only one at 12th fret.
In fact classical guitars (at least all I've owned or played) have no markers at all.
It is common for guitars to have markers on the odd numbered frets 3-9, a special marker on fret 12, odd numbers 15-21, and 24 (if the fretboard goes up that high). It is not particularly rare, however, for guitars to omit the markers on frets 3, 9, 15, and 21. Generally, from what I've seen, a guitar which has any of 3, 9, and 15 will have all of them except possibly the last. Further, some may add fret markers on 1, 11, 13, and 23.
My preference is for guitars to have dots on four odd-numbered frets in each octave, but that doesn't mean guitars with other arrangements should be regarded as inferior or defective.
The very basic fret markers are on 5, 7 and 12, most commonly. This actually reflects the three basic places where the first 3 overtones are found.
The 12th fret marker on a lot of classical type guitars is not needed, when the shoulders of the guitar are level with that fret. And as ggcg says, some classicals have no markers, although I don't see why they don't need any.
I have classical guitars with side markings only on 3,5,7,9,12. Some electrics with a marker on fret 1 (Why??) 12 on electrics is often a double dot, as is 24, and between those, it's a copy of the 1st octave (took me ages to realise that !)