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Really, Real Estate?

There is a lot of business talk for docs when it comes to real estate. We have the income and street cred to get the mortgages from banks, and we have the computing power to choose the right investment properties. But there is a trade-off, too.

As a disclaimer, I’ve always been fascinated with real estate and have close friends who are as much doctors as they are real estate investors. I own 3 properties, but these were bought for me to live in and rent out to friends and family when I’m not there.

It Takes a Lot of Time

There are 2 ways to think about time – active and passive. Active time is when you’re glued to a phone or computer doing the work to manage the property by talking to contractors, lawyers, or researching.

Passive time is the time you spend on the shitter thinking and worrying about the property. Passive time costs are heard to measure and track but also are worse emotionally than active time.

Active time spent can be sometimes rewarding but of course it can also be frustrating. The active time can eventually be handed off to someone else. Passive time is the mental bandwidth that makes you short tempered and leaves little on the table to deal with normal day to day stuff like your kids not doing their homework.

Real Estate is a Zero Sum Game

Well, not exactly. You, as a real estate investor, might be helping turn around a community, create local value, and even add to economic growth. However, more often than not, you, as the investor, will benefit from the appreciation of the property and the appreciation of rental prices.

For example, you might make the yard look nicer and cover the open garage. Now you can charge more which means there is one less quasi-dilapitated home that a lower-income family could afford.

For me to make more money someone else will have to have their rents raised. This statement can be argued with in 100 different directions but I’m going to stick with it for now because it’s been fairly true throughout the world.

Driving Up Real Estate Prices

When rich people enter something, they are often doing it for profit. But housing is one of these things that most people not just want but need. Even if the house isn’t livable for you and me, they might prefer the more beat-up house.

I’m not arguing that nobody should own homes, but in a fair market, in a manipulated market, the majority of the homeowners should be those who live on that property.

Oh, by Dr. Mo, you bald, hairy bastard, you’re saying that I should get rid of my 34 doors because I should feel sorry for those people who didn’t work as hard as me?

First of all, I CHOOSE to shave my head, which makes me bald, but the way you said it, it’s just rude. And no, I’m not saying that you shouldn’t invest in real estate but there are tons of real estate investment options from commercial to land investing.

Though all of these eventually lead to value creation and rising costs, they don’t exert as much top-down pressure on the families trying to get into their homes.

Of course, the idea that you need a SFH as a family to “make it” in the US is quite outdated but who am I to shit on someone else’s dream.

Allure of Fast Financial Freedom

The fastest way to get out of medicine is to aim for early retirement by saving a ton and investing it. The cost-cutting is obvious. But what do you do with the money? You invest it in securities, business, or real estate.

Technically, if you buy 5-6 homes over your career as a young attending, your tenants will pay off the house for you. And you could even do a lot of good by those families if they rent your place long enough.

But that’s not the business of real estate investing – don’t kid yourself.

And what happens when you are financially free? The kind of person who buys 6 SFHs is capable of saving a lot of money. They likely not only have a $3M real estate portfolio by the time they retire but another $5M in investments. A bit much, don’t you think?

The Learning Curve

Being the hypocrite that I am, remember, I own 3 condos, 2 in the US and 1 in Spain. In my defense, I’ve rented my properties at below market rates to people who needed them. Though, from time to time, I also put it up on AirBnb which … well, it’s not that I don’t like the idea of short-term renting, I just hate that most municipalities are incapable of legislating such a concept.

So, during this past decade, I’ve had to learn how to be a landlord. I bought one of my properties sight unseen, and I’ve managed cleaners and handymen remotely.

None of this is fun. I’ve only met one person so far who said they enjoy it but every other person I know who actually does real estate investing on the side tells me there are a lot of headaches with it.

Alternatives to Real Estate Investing

“All the rich people in the US are real estate investors.”

-My mother … and propably your mother

Rich people aren’t rich because of real estate investing; they are rich because they happen to invest in real estate. It undoubtedly adds to their portfolio, but who knows what their portfolio might be if they invested in their own profession?

As a doctor, I can buy a small private practice and put my management skills to work to run a lucrative practice that I can sell in the future. After all, what’s sexy about real estate is that it generates an income stream AND grows equity. But, shit, I can buy a used classic Mustang and rent it on Turo and generate monthly income.

I can buy securities that pay dividends and grow in value over time. I can also buy land and grow tons of fruit trees on it, rent it to a farmer, and sell it when it appreciates.

Financial Wealth Is Overstated

As someone who had a net worth of $1.2M in my late 30s, I really didn’t/do much with that money. I bought condos in cash, but these are cheap ass condos, nothing fancy.

I know we all work to make a dollar, but unless you have significant wealth, it’s unlikely that your life will be qualitatively different. And the pursuit of that wealth ain’t free, either.

I could have had a much bigger net worth, but I decided in my late 30s that I had hit the number I needed. Maybe now my net worth is higher, or maybe it’s lower. Don’t know, don’t care.

The most important wealth I have is the wealth of perspective that we live a finite life that can be lived a million different ways, and the suffering is all in our heads; not that suffering isn’t real, but you can live a shitty life and not suffer, and you can live a financially wealthy life and be miserable.

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