¶ Renting vs Buying for Residents
What's advice that you're giving to these now residents who are maybe in a high cost of living area ? Should I rent or should I just get like a duplex ? But with these interest rates I mean it's hella high . What's your thoughts on that stuff ?
The right answer if you're not going to be in a place for very long historically is to rent and not buy . If you look at the historical data , you got to be someplace three to five plus years for it to appreciate enough to overcome the transaction costs of buying and selling and residency tends to be three to five years long .
So it's always been a gamble to buy as a resident . Now there are times when it pays off . If you bought a house when I started residency in 2003 and you sold it when I left residency in 2006 , you might've doubled your money .
Right before the bubble . Right before the bubble ? Yeah , right before the bubble .
But if you came in and replaced those residents . You bought a house in 2006 and you tried to sell it in 2009 . Where were you then ?
So you know a lot of what we're discussing . You know I'm basing it off of the article that you put out back in March 14th the most common questions I get asked by young doctors . We'll put it in the show notes . Really good article that you wrote .
So I'm going to take a moment to be vulnerable and kind of talk about what's going on with us Two physician couple , right , renee OB I'm trauma surgery . We podcast , we have other businesses , but we also have a real estate business that we're pretty proud of , right . But also , at the same time , there's a lot of work that goes along with it .
Right , there's a lot of bookkeeping that you have to keep up with the second job aspect of real estate investing . Right , right . So you start to get to the point where we we sometimes think about , or at least I'm thinking about . I don't know if you want to verbalize that , but like is the juice worth the squeeze , right Is that ?
how you say it , or is the squeeze worth the juice . Whichever way , is the juice worth the ?
squeeze Right , you know . So you know we have , we're investing , we're index funding our way through this . We also have stuff that's invested in , you know we're using , you know , real estate excuse me in Vanguard real estate funds .
You know so we have investments in there , we have a syndication , but keeping track of all of that , like you said , is like a second job in itself . What , like when you are talking to , let's say , like young attendings or even mid attendings , with the way how things are now , like , what kind of advice are you giving them ?
Because there's always this craze of you know , yeah , you're a full time doctor , Right , and then you still got home life , and then you also have these side hustles . There's got to be a way to prioritize all of this stuff . What's your advice in terms of prioritizing ?
Making sure that you don't get too overleveraged in real estate , making sure you don't get too ? Do you know where I'm going with all of this ?
Yeah , yeah . I think this is a common dilemma among docs , particularly entrepreneurial kind of docs like yourselves . How do we do all this ? What's the right balance for us ? And I think there's a few concepts that are worth talking about . The first one is real estate investing in general , right , a real estate investing is a viable pathway to wealth .
In fact , it might be one of the fastest pathways to wealth with the reasonable amount of leverage and reasonable amount of work . In fact , I think maybe the fastest way to financial independence is actually to come out of residency .
Do all of your physician work as a locum tenens and put all the money you can scrape out of that that you're not spending because hopefully the locum's company is paying for most of your living expenses . Take all the money you can scrape out of that that you're not spending because hopefully the locums company is paying for most of your living expenses .
Take all the money you can scrape out of that and build a short-term rental empire . I actually think that's the fastest way to financial independence . I think it could probably be done relatively reliably in about five years . I really do , but it's a lot of work . It's not the lifestyle most of us would choose . There's a lot of downsides to it .
There's some risk there . You're going to have some leverage risk as well , but that's probably the fastest way out of medicine that I can think of . That said , I don't think that's what most people do . I think most people are like you . They get all excited about real estate . They're like look at all
¶ The Real Estate Balance for Doctors
these cool people doing all these cool things with real estate . Let's get us some of that real estate . And then they're forced to try to decide how they're going to invest in real estate . And there's all these different ways to invest in real estate that are totally reasonable . Right At one end of the spectrum is VNQ .
Right , it's the Vanguard real estate ETF . Right , you're buying 120 or 140 companies all this publicly traded real estate . You're very diversified . It's very liquid . It's very passive , it's very easy .
Right At the other end of the spectrum , you're buying properties with nothing on them and you're getting permits from the county and you're building the place and you're renting the place and you're managing the place and you know when you decide to sell the place , you're exchanging it for another real estate .
You know property and you know , and there's all this other stuff in between . You know private funds and syndications and turnkey properties and short-term rentals and long-term rentals and all this stuff in between . The most important thing is to match you and how you want to invest in real estate to where you fit on the spectrum .
And in my case , I'm a busy guy .
I'm doing white coat investor stuff . I'm still practicing medicine . I want to be out adventuring in the world . I'm living this post-financial independence life . I don't want to spend all my time working . I chose the very passive side of that spectrum . I'm in some passive private real estate funds .
I have a few syndications that I'm just waiting to go round trip , mostly private funds and VNQ . That's my real estate investments . You know , I thought about putting together a real estate empire but I just decided it wasn't worth the additional work for me .
So I think you've got to match your desire , your ability to invest in real estate to where you should be on that spectrum . And I think a lot of people kind of shotgun and they own a little bit of this and a little bit of that and a little bit of this .
Well , that's fine in the beginning , but after you have two or three or four of those , I think you got to dial in what you like , right . Do you like running short-term rentals ? Do you like , you know , getting landlord style calls ? Do you hate not having the control with a syndication or a private real estate fund ? Does that lack of control bother you ?
You got to look at all those factors and decide where you fit on the spectrum . And I think if you match yourself well on that spectrum you'll be happy with your real estate investments . But your place on that spectrum is not the same as somebody else's place .
Yeah , do you want to get those ?
phone calls . Man , I feel like there's a therapy session over there , I know . Well , you know it is something to think about , right , because one of the things you mentioned locums , right , and we often get the question of why did you choose to do locums , how do you do it ?
And so , you know , I was talking with a colleague of mine and she does full scope OB and she was just at her wit's end because the day was busy and she just could not see , you know , in the future , when she was not going to be this busy again , whereas I'm coming in and relieving her doing locums , and you know , I tell her , listen , you know she had
some , she had some notes that needed to be done . That was some nursing notes . I'm like , you know what , go home , I can do those things . And she's like , oh my God , thank you so much . And I said , well , you know I work a month at
¶ Finding Your Place on the Investment Spectrum
a time , so you know it's going to be a hard weekend , but I have a month to recover . You don't just go home .
And so we started talking a little bit more about just kind of the lifestyle , and it sounds like it's kind of the same thing with real estate , right , you have to figure out what you want your life to look like first and then start cherry picking the things that actually work for you . So if syndication is a thing that works for you , then fine .
Understand that there are going to be pros and cons to anything that you do , but you have to be able to do that . And so he asks me if I want to get those phone calls because we have a property right now which our property manager is . I won't call her a nightmare , but she's not the hardest thing to hire .
It's the hardest thing especially if you only have one or two or three doors or something like that Exactly .
We're talking about property managers here . Oh my goodness . Yeah , that could be crazy .
It's tough , and so I'm . I'm talking about potentially taking over that property . Now it is somewhat of a longer distance , but , sorry , my son just walked into the room . It is a bit of a longer distance for us . But you know , I'm asking myself is that what I want to do , with two small children , you know , a husband who works and travels , going away ?
Is that something that I want to do ? Because if I get that call in the middle of the night and my husband is away and I have my kids at home , what am I going to do ? So , yeah , this has been a really good topic to discuss , because now you've got me thinking , jim .
Yeah , well , I mean , here's the deal , right . I think the worst place to be as a direct real estate investor is in the one , two , three door kind of space , because at one , two , three doors you're like oh , I can manage this . And , property manager , it's hard to get a really good one and they charge so much , and I can still do it myself .
Well , that's a hard space to be in , right ? When you have 15 doors , or you have 20 doors , you're like of course I can't manage this myself , of course I have to have a property manager . And now you're going to a property manager with 20 properties . All of a sudden , they're much more interested in your business .
You end up with a better property manager , you got some economies of scale . You have to put some systems in place that reduce your hassle , whereas you were just winging it with two properties , you know , and so I . I think that's a really a bad spot to be in with just a couple of properties .
I think what you want to do is either go okay , this is what we're going to do . We're going to build this empire and we're going to get it to 15 or 20 or 30 properties , and uh , or or , or you just don't do it . You do private stuff , you know you do . You do syndications , you do private funds , you do VNQ , you do
¶ The Property Manager Problem
whatever . Uh , I think that's a tough place to be , and I think that's where a lot , of , a lot of docs end up is , with one or two or three properties , and then they have these dilemmas that you're facing now . So I think you guys just got a decision to make one way or the other .
You either got to build a bigger empire or you got to realize that real estate's cool , but you're not the direct real estate people .
Yeah .
Yeah , got a lot to talk about .
That is no . It's a lot to consider . I think I've made my decision .
I'm scared actually . Jim , thank you very much for screwing us up . Thank you , there's going to be a quiet drive home .
There's one other cool option out there that I've got an advertiser . I don't know if it's okay to mention or not . Bleep this out If it's not . It's a company called Southern impressions . They advertise on my blog and what they do is they do turnkey properties . So you're , I'm not buying a property in Utah now where I live .
I and they build the house to rent , then they put a tenant in it , they sell it to me and I own the property . So I have control of when it's sold and any big upgrades , the big decisions , but none of the small decisions . They handle all that . They do all the management . When I'm ready to sell , they sell it . You know it's turnkey .
I literally could buy a dozen of these properties and never see them in my life , never get a call about them in my life , and I think for somebody that really wants the unique tax benefits to owning the properties yourself and having that high level of control over them , but doesn't want a management nightmare , that's something to consider .
Plus , you get out of whatever high cost area you're in . You know I mean buying a local place here in Salt Lake now is starting to get crazy . You know the average home here is six or seven hundred thousand or whatever .
Salt Lake , yeah , it's getting expensive now , and so that would give me a chance to go to a less expensive market where instead of buying one property you could buy three , you know , and have a little bit more diversification that way . But something to consider , I you know , another place on that spectrum is a turnkey rental .
That's true . That's something we had in Kansas City .
Well , we did Remember that was . It was big in Kansas City .
Oh right , right , right . Yeah , it was big , Like several years ago we were looking in Kansas City , that was one of the big places . And then Nashville , tennessee .
Also , we went to med school in Kansas City , so we were really aware of , like you know , the neighborhoods really well . And then , several years into it , while we were attendings , we noticed that , you know , we started getting like people were saying , yeah , we'll rebuild this property there was neighborhoods that we used to drove up .
They rebuilt his property . They rebuilt my property . Where he rented man .
it was bad but it was cheap . It was like $200 . How much was it ?
$200 something . Your rent was $300 .
And this was what 2006? . Yeah , yeah , yeah , 2006 .
Yeah , 2006 is when we left , yeah , and the rent was $300 . For what A two bedroom , one bedroom apartment , something like that .
It was bad .
The tricky part about rentals like that is your tenants , right . Yeah , tenants that can only afford $300 rents Right . That's a different person than you know you might get $1,500 .
This landlord . He was smooth with it . He was able to keep this house within the med school for decades . Yeah , you know . So you know . I don't know how many people defaulted before I did , but I can imagine , though you know , they're getting a guaranteed check , a guaranteed refund check . They're using that to pay him and so forth .
But I'm sure he had to chase them down a couple of times , but the profits could have been that high . I mean , I'm sure he owned that property for was good everyone . This is dr knee yo . This is the end of this segment . I appreciate you for listening , but this ain't the end .
If you want more , go ahead and click the next button on your favorite podcast app . Listen . That's next for more banter between me and dr renee . That's next for more topics . That's next for more segments . Listen . Did you hit next yet ? Go ahead and click next . Hit it next .
¶ Turnkey Properties: A Middle Ground
Peace .