The Physician Philosopher Podcast
MMM 55: How to Create a Real Estate Empire Actively – Part 1
Have you thought about investing in real estate? How about having a real estate empire? Real estate is known for being an amazing source of passive income. It’s a great way to achieve financial independence!
However how easy is it to build a real estate investing empire that makes enough money for you to live the life you’ve always wanted?
That’s what today’s episode is all about!
Today You’ll Learn
- How to create a real estate empire!
- How easy is real estate, really?
- Why real estate is just one of the steps to become financially independent (you actually have to save the money)
- And more!
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Unknown Speaker 0:00
You may have heard that one of the fastest ways to get to financial independence is through real estate. Is that really true? If so, how do you get started on your real estate Empire today? Keep listening to find out.
Unknown Speaker 0:17
Welcome to the money meets medicine podcast where we talk about the personal finance topics you wish you would learn in medical school. I'm your host, Jimmy Turner. And here's your co host, who gave his kids snacks and an iPad just so we could record the show. Welcome to the real world of pandemic podcasting with Ryan Inman. What's up everyone? That is totally true. Guilty as charged. Unfortunately, my wife got called in to do an emergency bronc and Jimmy and I, we batch record a few shows together. We're not going to batch as many today as we normally would because of that. But yes, in order to do something, we wanted to get it out. We want to try to keep our schedule consistent. Yeah, so data the year here, my kids rarely get iPads. So they're very excited when I mentioned that they would get iPads. Okay, bye, dad. I'm like, No, no, I'm not leaving you. Okay, by dead. Like, wait, wait, wait, hold on here. pump the brakes. Guys. This is a completely judgment free space. Man. I am guilty as charged for doing the same thing on occasion. I mean, we're kids at home and you're working from home, you got a home business. That's just the reality sometimes, like you got to get stuff done. It's tough, but totally been there. Yeah, no, it's not about judging Jimmy. It's just understanding that yes, things have to get done. But also life has been throwing us curveballs. We're very fortunate that we're all healthy. Taylor actually was excited. She got vaccinated already. And I get to wait another, I don't know, 12 months probably for that ticker. But you know, I'm happy. All the frontline workers are getting it and they'll you know, probably go to what senior care facilities and older just a more vulnerable population. I'm happy waiting in line for that. But I saw a meme that was funny. It was, I'm so excited to get vaccinated. I'd even take the vaccine to my eyeball to get this thing going. I'm right there. I don't want to get COVID and I'm eagerly excited for that. Before we get in the show, though. This episode is sponsored by physician while services which is my fee only financial planning practice. As we start off the new year, a lot of you're going to be very excited to get your finances in order. And we are here to help you guys out we work with physicians all across the country. And we help hundreds of physicians all across the country. With their personal finances, we have a very in depth approach. We talked about life planning, it's not just all the ones and zeros. We're here to help you the whole way on your financial journey. And we do it for a fixed flat fee. It's not scaled based on how much assets you have or how much money you make, or anything else that you might have going on. It's right there on our website. So go to physician wealth services.com Check us out book a free call. Fortunately, or unfortunately depending on how you want to look at it you will be talking and hanging out with me in that free introductory call. We'd love to talk and get to know all of you in a no salesy, no slimy sleazy, no hidden fees, no gotchas and all that fun stuff. So check us out physician while services.com Jimmy we've got a giant can of worms that we can open with this show write actively investing in real estate. And as we kind of joked before we get on this is the sexy topic that everyone's interested in. But I look at this sometimes is physicians are highly paid in terms of let's look at the general population. And I'm not talking about even just within the sub specialties or whatever, just as a whole physicians are highly compensated and took a lot of time dedication and blood, sweat and tears to get there. But because this is that sexy topic and looking at like, Well, why do physicians just want to jump into real estate so much? Why is this so popular with physicians? So I thought, let's actually open this up, turn it back to you, because I know you're even potentially looking at dabbling into it. Why would you be interested as a physician in real estate? Yeah, it's a really good question. When you're hard working doctor, you're doing clinical work, and possibly more than administration research and teaching. Why would you do that? And I think there are a few different reasons that people really gravitate to real estate. One is that it's a way of diversifying your income. So I think a lot of doctors feel like they don't have a lot of autonomy or freedom in medicine, because they're kind of strapped to the income that they make at the hospital, and so, or in their clinics or operating rooms wherever they work. And so having another source of non clinical income is really appealing to a lot of doctors. And that's appealing to me. That's, you know, that's one of the reasons why I built my business. And it's one of the reasons why I'm considering going into real estate. I think that that tax law to a second idea, which is that a lot of doctors are looking for freedom and trying to get to financial independence. And there's really only two ways to do that, right. Like you can save enough money where you can have a large enough nest egg that you can safely withdraw a certain amount from that and be financially free in that way. And the other way is when you are able to cash flow through non clinical sources of income and the amount that you spend every month like once you do that you're technically financially independent because you have income coming in that matches what you spend from your non day job. So I think some people think about cash flowing as a way to financial independence. I'm a big fan of
Unknown Speaker 5:00
Having a hybrid model between those two things we definitely save in traditional ways. There are four, three b 457, our backdoor Roth, so on, so forth. But then after that, the question is like, well, if you have more money to save, where does it go? Why not diversified into real estate. And then finally, the sexy thing, the sexy topic, the reason why people really get into this stuff is because of the potential tax savings. That's why there's so much conversation unwraps real estate professional status, and being able to use that tax savings from your real estate against any other income that you make. And there are special rules for reps. And I don't think we're going to dive into that side of the nitty gritty necessarily on this episode. But suffice it to say that there are requirements to get that but if you do, there are some massive tax savings to be had. And so people hear that they're like, wait, I've already filled up all my tax deferred accounts. I've already given to charitable organizations, I'm already getting my interest, I'm already getting my salt deduction. There's another way I can deduct more taxes. And it's through this right. And so people hear that and they're like, oh, tell me more. I'm paying a six figure tax bill, how can I save on taxes? And that's why I think a lot of physicians high income earning hardworking people gravitate towards this, at least initially, I don't know they stay here once they find out all the details. But that's definitely what makes people gravitate toward the space initially. Yeah, so it's interesting. We even just in the last few meetings I've had with some clients or even some prospective clients, the rep status has come up. And I want to make sure it's crystal clear. And I think Jimmy, we should actually just do a whole show on this, to be honest, okay. But the idea is you can't work as a physician, and also be a full time real estate professional that does not mix. So if you have a significant other that is either not working or is potentially underpaid Jimmy's pointing at me, like I should be doing this for my wife, I was pointing to me, but whatever. The idea, though, is that there's still the physician in the family that is working. And then the spouse of the physician now is a real estate professional. And there's a lot of the tax laws are heavily favored. For one business owners, right we've talked about on the show, just the tax laws just are really not made for the W two earners. So it helps businesses a lot. But the tax code highly favors real estate investments in real estate investors who do it full time. If you're doing it passively. There's some tax benefits, but not a ton, right. But when you're doing it passively, all of a sudden, the losses that you have from like depreciation, even though you're receiving cash flow, you're depreciating, you're building your home, whatever it is, that offsets even clinical income, because that is your spouse or significant others active loss in their business. And that's where this stuff gets really interesting. No one really calls tax savings sexy. It's fun when you do that. But apparently, it's sexy to Jimmy so maybe that's why he's getting into real estate. I think it's so hot, so hot right now, I think it's hot not to have to pay Uncle Sam money, same thing. Yeah, details, details, details, there's a lot of different ways that people can invest in real estate actively. And well, you guys don't know. But we'll tell you here is that this is going to be a kind of a two part series. Next week, we're gonna be talking about all the passive ways that you can invest in real estate. But for active, there are lots of different things that you can do. And there's courses that are being sold to you, there's books that you can go read, there's podcasts you can go listen to, but there's a lot of ways to actively invest in real estate. Yeah. And so just to break that down a little bit more for those listening, because I used to, as of maybe three or six months ago, know literally nothing about real estate. And so I just want to break this down real high level, because I know there are lots of people out there that don't invest in this stuff. So just in case you're one of those people listening. So when we say active versus passive, what we're saying is how involved are you in the actual real estate investment property, so active, the most active you can get is actively managing it being a landlord, owning a property like that is Active Passive, that can get all the way to like wreaths or real estate, basically, index funds, you know, reads Ryan, real estate, real estate investment trusts, okay, yeah, I thought so which real estate index funds are buying those reads, and your company. So read index funds, and that is as passive as you can get, because you're literally just investing in a fund that's investing in real estate that then is managing the property, you're very distanced from it. And so you're not actually going to be getting any calls on that end about the broken toilet. Whereas on the active side, the most active side, that might be a call you get. So when we say active versus passive, there's a line somewhere in there where your involvement isn't as much and it's now considered passive. So this week, we're going to talk about active stuffs being very actively involved in real estate, in the property in the management, all that sort of stuff. So let's go with a really easy one that everyone can understand. Because active let's think of is just time, your time involved. In the passive side, I will always argue that there is nothing that is ever truly passive, you still have to do something, but then for the money to continue to come in. It can be more passively done. But let's look at this on buying a single family home. So this would be maybe your neighbor next door could be in a whole different state. There's all sorts of ways that you can own single family homes, but the idea that you go out you look at you
Unknown Speaker 10:00
You work with a realtor, or you become a realtor, or you go and get your license and maybe your significant others actually going for rep status. And now you're buying and selling homes and transacting, and now earning or saving some money, because every time you buy a home, you're basically saying, Hey, I'm gonna list my home and I have to pay this person two and a half percent to listed, and then whoever the buyer is going to have another two and a half 3% to their agent. So if you are a real estate professional status, that is a huge savings over time that you can end up basically counting that as additional income. So when you look at single family homes, you're working with an agent you're going through, you're looking at it from the lens of I want to buy this and rent this out. Now who you rent it out to could depend on where you're at the situation, the cost, I want to take this show and next show and kind of related to me personally. Again, this disclaimer, this of course, there's it's not investment advice or anything of that nature. But to understand how I think of things or how I've viewed things. It's always about you. Oh, yeah, totally selfish on this one. No, the ideas I can talk through, but also that you understand that this is not applicable to everyone, but I think can give some really good context. All of my family lives in Las Vegas. My whole family is in real estate. In one way, shape, or form. My mom and my dad were real estate developers. My uncle does real estate development as well. My aunt does commercial leasing my cousin does commercial sales my stepmom does, she's a real estate agent and broker, the REMAX my family's not very big, but everyone I'm really close to does real estate. So where I invest is where my family is where the whole team is where we've got handyman, and I've got discounted appliances, and all sorts of stuff that we can go through in a property manager, like I know everyone in town, which is in Las Vegas. So for single family homes, I knew that there's really two areas that I would want to play in town, that would be the area where they were mostly starter homes. When I was buying them, they were about 180 to $200,000 for a home now those homes are worth close to 300 or a little over that. But the average renter was a bartender, a waitress or dealer down on the strip, a lot of it was just workers that would work out on the strip. And these are really great homes that are affordable from a rent standpoint. And they cash flowed really well. There's homes that you could be buying that were half a million or more that you're now buying high end kind of luxury homes that you're doing for like Airbnb s right. And that's a way that you can be actively investing. Dr. David giardina. So the doctors unbound podcast, he does Airbnb s. And I'm always picking his brain because I think it's fascinating how much money he's actually making. These houses should not be cash flowing what they are, and he's getting like four or five x, what a long term lease would, but he's doing well or his wife is doing four or five x the amount of work to turn over to make sure it's leased to negotiate all that stuff that they're doing on Airbnb, that idea actually is super appealing to us too. And that's exactly where we're thinking about going is we live not too far from Asheville. And so we've thought about getting a property in Asheville doing an Airbnb with it and buy property, that's where we'd start and then turn it into two or three or four, and it could have multiple units in the same place. That's totally what we thought about doing and Kristin now doesn't work as a teacher anymore. She resigned in October. Because of that she would be able to do the seven or 50 hours and get reps and all that stuff. And so I think that, that Airbnb is also highly appealing for that reason, because honestly, you have to be a little more involved in the property in terms of setting up appointments and making sure that people are happy and getting reviews, there's a little bit more to do. So it helps with getting that rep status that we'll talk about in a different show. But I'll tell you that the two things just from like a high level that seemed appealing to me were the Airbnb model. And then the other one was starting with a single family home like you just mentioned, and then rolling that into an exchange a 1031 exchange and buying a duplex and then a triplex and then multiple units. I think that those were in terms of getting started the two ways that made the most sense to me from being from the outside and not having a huge real estate fund of knowledge like you did and your family does. Those were definitely the two that I was like, Oh yeah, Airbnb that makes so much sense. Or getting a single family home and then eventually exchanging it rolling into the next property. And then next one, the next one and then building that way. The idea though of snowballing, if you will, the opposite of a debt snowball, we're snowballing into more property and is it sounds fun, it sounds sexy, it sounds great. The idea that you'd be managing quads or triplexes or small apartments, by yourself or with someone, it's extremely difficult to do those things without a really good team. And even in the areas I don't want to own a quad or triplex in Vegas, because I know that it's in a really bad area of town that I don't want to be there at night. I definitely wouldn't want my wife to be there at night. It's just not safe, right but it can get single family homes in a great area with really easy access down to the strip or
Unknown Speaker 15:00
Whatever it is that are in areas that are going to appreciate that I wouldn't need to snowball those, you could continue snowballing buying more homes, there's the idea that, let's just use easy math say it rents out for 1000 bucks a month. Okay? The idea that you're buying homes and you get to, let's say, a certain number 10. And then you pay off those homes, were using the revenue that's coming in from all the different rents, after you pay one mortgage, then you would take all that money. Now you're snowballing the next one, and you snowball and the next one, and eventually, five homes that are generating $5,000 a month and you're making all the payments to the next house, that payment might literally be $7,000 a month, you're really paying those down quickly, to where now you have 10 homes, they're all free and clear, aside from a little maintenance and you know, reserve that you want to hold back, but you're generating $10,000 of mailbox money. That's some pretty cool passive income in the sense of that, but how active are you and managing the property, managing one property is pretty easy. Managing five properties is not that much fun. Managing 10 is just even harder. But if you have a significant other that's doing this full time, great. But if you're the physician and your spouse's working as a attorney, and engineer, dentist, whatever, and you both don't have time, it makes it really hard to do that into scale. And then you might feel like you're tied to the area. And there's just a lot of concentration risk. Well, you know, and I'm looking at it purely just Vegas and COVID. Right, there's hotels, big hotel MGM resorts, they're only coming online with three of their hotels, and we won't see the others come online into 2021 or early 2022. How does that impact the rental markets, when the majority of the people that are renting these homes are dealers and waitresses and cocktail hosts and all of that, like it severely impacts the market. And that's exactly the point that you made before that about both spouses working. That's exactly why we never considered real estate until Kristin, stepped back from her job as a teacher. But now that she has the time, that literally was that the moment where I was like, Oh, we could consider this now. And so we are taking a course. And it's going to be an opportunity, I think for Kristin and I to learn more about it. And honestly, the purpose of the course is to expose Kristen to the ideas so that she can make a decision, you know, after the course she may be like, you know what? It's just confirmed. This is not for me. Yeah, this sounds horrible. I want nothing to do with it. Great. Now you're gonna flip to the passive side and how you can diversify out but if it's like, oh, I could do this, or Oh, that's more interesting. Let's look at that. There's a way you can do it. Now, some of you are thinking, well, HGTV has taught me that I can fix and flip a house really easily and make a whole boatload of money. Incorrect. That is very fun to watch on TV, but it is very hard to make money in flipping homes and you will have to be scouring really off market deals. Not much on the MLS or the Multiple Listing exchange where you're essentially when you go on Zillow, or Redfin or Trulia or whatever service, you're kind of losing, it's pulling MLS data, everything's already been picked over for the most part in terms of those that are looking to buy house, fix it up, and then flip it out for profit. Now, if you were to buy something, fix it, and then hold it. And that's understandable. But it's actually really hard to transact. And to make good reliable money, fix and flipping. It is possible it is out there. There are people who do it, but they are doing it full time it is very active. And it is very much in the market, that you have to have contacts within the market and be proven as a good buyer to some of those agents or wholesalers that are going to give you those leads. a wholesaler is someone that and this is something you could do and quote unquote, invest in real estate. This is what people do, and you have little to no money. And you want to get into real estate is your goal. And you might send these flyers, we get them sometimes in the mail, right? It's Hey, we buy homes in your area, right? It's about one that basically put something together and send out a mass email. Sometimes they even get it to look like it's a handwritten note, when in reality, it's just a printer that makes a print, like a handwritten note, which is super clever. But the idea is, you know, hey, we've done this analysis on your property we offer cash or whatever it is, what that person is trying to do is just tie up your property in an off market deal that they say Hey, your house is worth $600,000 at least what they think it could be worth it from a fixin flip standpoint, and they think, oh, hey, based on what they do, and their due diligence, they can come in and offer you 500 and you might take it, well. They're going to tie up the property, they're going to put down the earnest money and then they're going to go actively out to their networks to try to find someone who's a fixin flipper, who will pay them five k because they tied it up. And now that fixin flipper comes in and says Yep, I can do this I can make money even with paying the wholesaler five K. And sometimes you get through due diligence and it doesn't work and you end up having to back out. It's an interesting gig. It is not something I personally would ever want to do. Terrible. it done. But when you have little to no money and you're trying to make ends meet and you're trying to get into the beast, it could be I had a buddy that did this actually.
Unknown Speaker 20:00
College was fascinating. Now this is also during the big craze 2005 and six whenever things go nuts, he was flipping houses and wholesaling them pretty easily, you can actually rent out a portion of your home or actually take out a long term lease. And then short term rental it. So the same guy is example, down in Mission Beach here in San Diego, he would go take a long term year long lease, he would find college kids that would rent it for the nine months. And then during the summer, he basically charged what he was charging a month he charged per week. And it literally paid for his whole tuition at USD. He's a phenomenal, fantastic individual, who always was extremely creative. That is a way to do this with no money down is to literally take a long term lease with someone. And to do that with their house, if there is a short term rental market demand. This is before Airbnb even existed. We've been talking a lot about single family homes. And I'd like to transition a little bit into like commercial properties. Because this is where physicians we you know, and spouses of physician, family, physician families, let's say, can get more bang for their buck, you're putting more to work in the real estate market. And that's because you're buying either something in retail or an office space. And what I mean by retail is, let's say you're driving down the street and you see the grocery store, Vons and it's got a little mailbox, etc. Inside there, it's got a Starbucks, it's got maybe a bank or whatever it is, and maybe the bank is even pushed off right out to the street. And it's its own little individual freestanding building, those are referred to as pads. What developers do when they're developing that shopping center, is they know that there are certain investors that want something that is somewhat turnkey, but still active enough that they can turn around and buy the income. And so what they'll do is they'll go through, they'll develop this little pad, basically pad with utilities drawn to it, and you buy that in, let's say, it was a million dollars to buy that pad, you can go get debt on this and whatever. But then you're gonna go find a big tenant could be chick fil a, it could be a bank, it could be whatever. And they're going to come down, and they're going to want to build a building, they're going to want to take all of basically the hard work out of it for you. And for basically owning and building this up, they will pay you, they will take care of the you know, the property taxes, the insurance, all the maintenance on the building. Now it is expensive to do, we're talking potentially millions of dollars to do these things. But once it's set, the bank lease might be for 20 years, it might be a 10 year lease with three, five year extensions, anything can be negotiated. There's upfront work, there's a lot of risk involved. But if you have a big national tenant with a fortune 500, or fortune 100 company, think McDonald's chick fil a Carl's Jr, whatever. Most of the time, they don't own the building, they don't own the land. They're renting it long term from someone they went in, they did their own tenant improvements or T eyes. And they've made it to the restaurant that they wanted. So the bank the statics that they want, and the owner had to help furnish and supply that concept using money. The idea is, let's say that it took $200 per square foot to really build out the bank to when you walk in, you're like, wow, this is a nice bank. As an owner, you might have said, Hey, Chase Bank, I'll give you $100 per square foot as your allowance. Anything over that's on you. Everything's negotiable. But if you think about, Hey, this is a 5000 square foot building, that's $500,000 that you're going to have to give to them so they can turn around and build out the bank that then over time, you will not only earn that back plus, whatever you paid for the building and long story short, there's ways to make money inside of some of these retail spaces that don't require 10s of millions of dollars, but still require a significant amount of money to invest in those. Do you get free chicken biscuits? I mean, everything's negotiable, right? I'm getting free chicken biscuits. I'm giving you 500 grand. I'm just saying. Another example I'll use here is, like I said, My family's in real estate development in Las Vegas. My dad is developed like 7 million square feet. I'm calling him old and inexperienced here. And one of the deals that he's been developing now through COVID is there is nine buildings. They're all 10,000 square feet. They're all on major intersections and major streets. They're single storey, so it's kind of an unheard of product that anyone was building in town recently. Now they'd built a lot of this stuff back in like the late 90s and early 2000s. But nothing has really been built in this product for at least a decade. And it was because land became so expensive. Well, during the downturn in Vegas was very depressed. Basically, they put together this deal, they had to fix a lot of the easements they had to bring in dirt. They got lucky that the Raiders were digging up a bunch of dirt. So they basically ported whatever's was coming from the Raiders over there and it was extremely cheap just to transport the dirt. And so there's a lot of work to get this land ready, but he built these things.
Unknown Speaker 25:00
Nine buildings. And you could buy one of these buildings, a whole 10,000 square foot building, if you needed for your practice. And actually a lot of them are doctors and dentists and things that are going into this. Or you could take a portion of the building, let's say 2500 square feet of the 10,000 square foot building. And you can basically buy that little kind of office condo, that is now what you're doing. Well, that could be for someone who has a small practice, who doesn't think they're going to grow into something, but they want to own it versus lease it, because it actually ends up being cheaper to do that, versus leasing. And you own a building, which is great. Or from an investment standpoint, you can actually own a piece of a building that you could turn around and leased to a doctor's office, or dentist or whatever it may be. And for that area of town, just to give everyone some perspective, that you could turn around and buy that building and put 30% down. So you know about $200,000, you'd have to put down some of your thinking, Okay, like I could tolerate some of your like, that's so much money, why would I ever have that much lying around, just hear me for a second, then you'd say, hey, look, Jimmy's gonna put his practice in there. And we're gonna give him $100 per square foot allowance to build out part of what he needs, but he needs some real specialized equipment and stuff, then that's on Jimmy's bill, we don't want to pay for that. Right, we'll help you build the walls and build out some spacing and help you plan and all of that. And that's what those costs will go to. That means that I need to come up with another 250,000. In order to help Jimmy build out the space. Jimmy takes a 510 seven year whatever lease that hopefully I'm earning not only this back, plus some and those buildings are cashflow like 8%. So out of bad return, if you think about it, you're gonna have to put in 450,000 to buy this little space to help someone build it out. And you're going to earn 8% of your on your money. It's in a great spot of town, highly trafficked, right. And a lot of this might be well, maybe my practice would just buy this. But sitting here from an active real estate side, that's a pretty killer deal. When you're looking at, well, this is the office space I'm going into. But when you compare it to potentially multifamily investing, that deal doesn't look that great, right? 8% most multifamily they're trying to earn 1213 14%, there's usually a pref plus a kicker on the backside, what pref a preferred return. So it could be, hey, Jimmy, I'm going to make sure that no matter what happens, we've written into this contract that you are going to come and invest with us and we're going to pay you 6% on your money. Like before any profit can get realized, you have fronted some of the capital. And we're going to make sure you earn 6% on that capital. Sounds like a deal, right? Yeah. And then there's usually some sort of equity split on the back end. And we can talk more about that next week where we're going over syndications and what that looks like. But the idea is that even inside real estate, all real estate isn't created equal, the return that you would get on some of those retail pads I was talking about, might be extremely low, considering that you have a big national tenant, and you had to build out a bunch of stuff, and but it potentially could appreciate significantly, and you're gonna get some cash flow, but there's not a ton of risk. So there's not a ton of reward unless you were the developer, then that's totally different. But there's so much risk. In the development side, the people who are investing in development deals, those returns are upwards of 30%. But there's so much risk because anything Coronavirus, could have literally decimated these projects, and they lost millions of dollars. Like it's not as simple as buying a single family home development is extremely risky. And I actually don't like the development sides. One of the reasons why I don't work with my family and I did something completely different is because there's just so much risk involved in those but higher risk, higher reward. There's other ways, though, that you could do this. And I know we did this deep dive into some of the different ways but there's other things you can just literally buy land, right? I'm not a huge fan that you can't appreciate that. And you might be saying, Well, I know the town's gonna go out this way. And I don't know what I want to do with it and lands kind of cheap. I'm gonna go off and buy land, well, you're becoming a land broker. I'm not a huge fan, but I know there's people that have made millions and millions of dollars, specifically in Las Vegas, knowing that, hey, there's mountains on every side, the town's gonna grow. And at some point, this lands gonna be worth a ton. And they'd thought ahead and purchased it and 30 years later, that land had 400% gone up, and they've made a killing on it. But that is, I think, not a best place to generally put money. There's mobile home parks, people that are buying and putting in these mobile home parks are making really good money. They're, they're self storage. I hate the concept of storage and storage units. Like I can see a small need for a storage unit. But I'm also like, you probably have so much crap. That doesn't mean anything to us. You can throw it in a storage in me paying on it. And it seems silly to me but you know, it's there's some needs Oh hey, we're moving. We can't do this or, hey, I'm taking this locums thing and I need to throw my stuff in here for three months. I get the
Unknown Speaker 30:00
use cases. But generally just as Americans like to think storage, silly, but the people who own the storage units make really good money. So just meant, alright, I know, whatever. But now it is been kind of like this is the easy money. And so lots of storage and things are being torn down to build storage units, I think eventually there's going to be this oversaturation inside that market. But the returns are significantly better than seven or 8%, that I'm talking on the development side, right. But I think there's a lot of going to be outside market risk that is pre being built into that. And I wouldn't want to hold the stuff you might have heard of senior living, right, there's, you're building these buildings, you're building it out for senior care facilities, and you turn around and you could potentially develop these and flip it out to one of these large senior care conglomerates, that's basically got them all across the nation you can own, why don't you can just buy it from someone and run it yourself. There's 1000 ways you can do this stuff. But I'm not saying that all of it is the best way to do it. And it's really going to be personal to you and how you want to do that a lot of these things I mentioned at the back end here are things that I would never want to touch. And that's kind of what I'm curious about, right? Cuz I can tell you coaching people, the number one thing that gets someone stuck and prevents them from actually moving forward in anything, real estate included, is getting stuck in the weeds, like they start in the weeds. And they're like, wait, Ryan just mentioned 4227 different ways you can invest in real estate. How in the world? Do I pick which one? Well, we didn't even go over all of them either. We're just I'm just carrying out some at the very end here of like other ways. So we don't get some email that says, Hey, guys, you forgot tax liens. And you can do that, like, yeah, I get it. There's 1000 ways. The hospitality, you could go by a little budget hotel and run a hotel if you want, there's a billion ways you can do this. Let's say that you didn't have the family that you have, and you're a physician family looking to start getting into active forms of real estate. I'm curious picking your brain, I did exactly this, I started small, and I bought a home. And then I bought another home. And then I bought another home. And I kept doing that. We ended up having six. Now in 2020, we ended up selling five of them towards the end of the year. And I would have sold the sixth one, but I'm not going to evict my cousin in a pandemic. So he gets to live there. And I'm not touching his house, but I did refi it and take all the cash out of that. So effectively, I did the same thing, which is a strategy that people do have break it down. This isn't. Look how cool I am story. This is just a story of how this could work. We bought this house in 2014. And with the intention that he was going to live in it. He's lived in it ever since I wanted to help him out. He was going through a tough time and I wanted to give him stability. And we had extra money that we could invest. You know he's in real estate he sells actually medical office buildings. It's like his whole thing is medical office. But I had him go around, look at different areas helped me underwrite, we walked through a whole bunch of stuff together, we ended up buying the house that in the area that we both agreed would be a good area that he'd like living in with the idea that he'd be in there for at least five years. We bought it for 180. It currently appraised at 275. It's up let's call it 100 K. But when I bought it for 180, I had to put 25% down. So I ended up putting like 40, some 45,000, let's call it down into the house, it needed a little bit of stuff, I think we had all in all 50 k into the house. Now this whole time he's been paying the rent, I don't charge him anything really extra, I think his rents 1100 and market rents like 1500. So I'm not milking it for what it is I'm helping him. So he's basically paying the bills. And we have a little bit of money that's going into the kitty to know if the AC blows up. Or if we get a roof leak or whatever it is. But it's very transparent. He knows exactly all the numbers. He's really smart. He's seen everything. He helped me underwrite everything. But when I just did the refi, I was able to pull out $60,000. So this whole time I've been having him pay down my mortgage a little bit, we've been saving a little bit. I'm getting the write offs with a deduction as we depreciate this stuff. So I'm not even generating taxable income from it. And now I was just able to pull out all my money plus some, right because the market had appreciated quite a bit since I bought it. And that is a cool, interesting strategy that some people will use to then further more growth, I can easily take the 68 K and go buy another house if I wanted to. I'm not going to but I could. Some people would say well, why would you do that? The whole goal would be is to pay down those houses quickly and then have the whole 1100 come back to you. Yeah, why did you sell the five? I just honestly looked at the market and said, hey, look, I don't see how we're going to in the next few years rapidly keep appreciating for what it is. I think there's more downside risk. It's very specific to the market in Las Vegas. I think the people who are renting are really hard working find people that they're going to have hard times finding more work and just across the board, just
Unknown Speaker 35:00
town is going to be suffering at some point. Right now it's artificially propped up because they're just not a lot of people putting their houses up for sale. And there's still people that are moving in droves from California fleeing high taxes that are coming in and buying houses. So I think there's a real weird supply demand happening right now in town. And I literally, I feel like I got pretty close to top dollar for those houses, their starter homes, these are not doctor homes, these, and I says a little jokingly here, but these are not homes that are 4000 square feet and gated community and have the ability to put a pool, these houses are 15 1700 square feet, very little like dog run tight backyards, that are truly starter homes for someone buying their first home, it's a fantastic house, this is exactly how we would have bought it for our first home. And those can only go so far. Because once they're out of reach for everyone, there's no one that's going to be able to pay for those houses. And the rents aren't going to keep up with those prices either turns into a California situation, which I think is very rare. And it's because of our weather and the beach and those things that really keep those prices super inflated. Vegas doesn't have that draws the frickin desert. Right? It doesn't have the draw of 75 and sunny in Orange County, California and you know, five miles from the beach. I just don't see that dynamic really working out that well, in the short term. Yeah. So I think it's really cool to discuss these ideas, because I know this is something that a lot of doctors consider for the tax savings for additional cash flow and other ways to financial independence and diversifying their income. And so I think it's pretty neat actually, while we have looked into single family opportunities, potential Airbnb ease and that sort of stuff. I actually learned a lot just listening to you on the show, as your co host. So appreciate the education and I'm sure a lot of other people listening to. I think Jimmy just gave me a compliment everyone. I almost spit out my drink. Be careful. I might take it back. There's the Jimmy we know. Yeah, hopefully this is helpful for you all, we really appreciate you guys being here. You know, as a reminder, this episode was sponsored by physician while services which is my fee only financial planning practice. And, you know, we help physicians, hundreds of physicians all across the country, top to bottom best coast to the wrong coast, which you know, we're Jimmy lives. Ouch. Oh, offense, dude. Well, actually, you could take a little but we help physicians with their finances, understanding what's important to them, healthy helping them think through what that ideal life looks like, and really matching their money and their investments around that piece. We charge a fixed flat fee. There's no hidden fees. There's no gotchas similar to the Hippocratic oath, we sign a fiduciary oath with all of our clients that basically just States under no circumstance, are we going to put our interests ahead of our clients. That's really the foundation that I built the whole business on. And the other piece would be is I really built it as a tailor. My wife was sitting on the other side, what I want her to experience. So check us out at physician while services.com we do a free introductory call, you'll be doing it with me. And I would love to get to know all of the people in our community that might need financial planning help. So thank you so much for being here, everyone. We really appreciate you. And now let's hear that amazing disclaimer. So she can get some money in that Roth IRA dolla dolla bills. All right, everybody. Thanks for listening. I appreciate everybody being here and hopefully you learned as much as I did on the show. We will see you next week. Take care. Cheers.
Unknown Speaker 38:33
Hi dad. Dr. Jimmy Turner is a practicing anesthesiologist. Mr. Aiman is a fee only financial planner, you should know that this show is not personalized financial advice free. In fact, this show only for your general education and entertainment purposes. So keep listening to learn how to become a three yourself Angel guru, or go find a great fee only financial planner like Mr. Edmund to create a personalized financial plan.
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