Real estate cash flow vs Physician/Doctor cash flow. Difference?

32 Replies

Real estate cash flow vs Physician/Doctor cash flow. How many houses and how much time would it take a real estate investor to get enough cash flow to equal that of a doctor making 300k + benefits a year? 

I am assuming it is much easier for a doctor to buy rental properties and scale up to a 300k cash flow from investment properties than a full-time real estate investor starting off with 100k cash?

Originally posted by @Bryan Tasumi :

Real estate cash flow vs Physician/Doctor cash flow. How many houses and how much time would it take a real estate investor to get enough cash flow to equal that of a doctor making 300k + benefits a year? 

I am assuming it is much easier for a doctor to buy rental properties and scale up to a 300k cash flow from investment properties than a full-time real estate investor starting off with 100k cash?

 Depends on your area.  Also real estate income is taxed differently, so that that into consideration.

Also take into consideration the 7 years of med school, cost of med school, time to build the practice and get to $300k a year, cost of malpractice insurance, ect.  

Not to mention you could easily structure your real estate in a way that free's up your time more so than a Dr. Not saying it's set it and forget it, but it's not like your doors require the same attention as patients. 

Assuming positive cash flow after expenses of $200/mo per door, you would need a lot of doors to get up to 300k.

It's an apples vs oranges comparison. Plenty of investors make well over 300k (especially if you're flexing your entrepreneur muscles). Plenty of docs make well over 300k as well...

It’d take 125 doors if you’re assuming 200 a door. However, you’ll pay much much less in taxes on real estate than you will in being a doctor so if you assume a doctor pays about 70k in taxes and a buy and hold RE investor pays significantly less, you’d only need 95, call it an every 100 to factor in some taxes and cost of benefits.

This is a rough analysis but you get the idea. Now if you pay down your rentals and have no debt on some your cash flow could almost double, reducing your doors significantly.

I make 10k/month in notes. Did 4 rehab flips long distance for another 90k. And I have another business and... I pay very little taxes. doctors like everyone else is trading time for money.

@Bryan Tasumi

250 - Rental units that profit on average $100

60 - Wholesale deals that profit on average $5000 

12 - Flips that profit on average $25,000 

Honestly I wanted to be a doctor when I was a kid. The thing was that I didn't want it because I had a passion for that kind of work or wanted to help people. I wanted to be a doctor because in my mind as a child, doctors were the richest people. They got paid the most. I had no clue about sales or business back then. 

Being a Dr you do not get passive cash flow.  You are exchanging your time for money.  I'd recommend to google David Phelps.  He helps Docs realize passive income while they live the rat race.  I personally decided a long time ago that I do not want to work for all my money but rather have my money work for me.  Rentals is what helps me realize this dream and live life not work it.

Hi Bryan,

I am a Brooklyn, NY Investor.

I also have 2 good friends of mine that are Doctors.

One moved to Florida and does incredibly well as a ER Doc doing Locums. $300k a year would be about average for him working 1/2 the year.

The other is a full time Internist, but bought his place in a low income area in the Bronx.

I've know the ER Doc for 25 years and he used to live in Brooklyn before he moved to Florida.

The interesting thing was that I started Investing in Brooklyn 20 years ago.

The ER Doc, while he made a great salary, did NO investing, but enjoyed the finer things in life, basically lived a great lifestyle. He barely had any savings after over 15 years as an Attending, maybe around $1/2 Million in the bank.

He always visits me, wondering why I was investing in properties and managing them myself. I also was a high Earner, working for financial firms.

For 20 years, he watch my properties climb astromonically.

He saw me purchase an Investment Property in the year 2000 for $140k with only $28k ($21k down, $7k closing), he thought I was crazy, considering it was tiny (2 apts about 550 sqft each) and in not such a good neighborhood.

Every year he came to Visit, he asked how I was doing. But you can tell that his remarks was something which he expected to say, "see... I told you it was a waste of your money to buy that property."

In the year 2003, the value of that house went up to $230k (the attached cookie cutter house sold for that much in that year). I told him that, he thought it wasn't true so he didn't pay any attention to it.

In that year, 2003, I bought another property, for $590k and another one in the year 2004 for $890k.

All of these properties he would not consider as something he would buy because he just didn't want to deal with Investing. He thoughts was that he was a hard working high earning ER Doc doing Locums and that made him an instant millionaire when he retired.

By the year 2014..... the ER Doc had watched these properties increase in Value astromonically, asked how I was doing.

The property bought in 2000 for $140k with $28k invested was worth about $700k.

The property bought in 2003 for $590k with about $350k invested (some for renovations) was worth $1.4 Million.

The property bought in 2004 for $890k was worth $1.7 Million.

By 2014, he finally realized that as an ER Doc making a killer salary..... he was priced out of these Investments.

By 2015, he understood that if he waited too long to Partner with me, it may be too late for him, even at his salary. Eventually, he did Partner on 2 buildings at a small percentage. Those 2 buildings continued to appreciate as I bought those in areas which continues to move up.

NOW, in 2017, the 3 buildings I mentioned above which the ER Doc watched since the beginning did the following:

2000 - bought for $140k with $28k invested now worth $1 Million... an increase of $832k

2003 - bought for $590k with $350k now worth $2.4 Million... an Increase of approximately $1.46 Million.

2004 - bought for $890k now worth $2.8 Million... an increase of about $1.7 Million.

All 3 of these buildings gives a great deal of Cash Flow. The 2004 building alone gives my Partners and I around $3k PER MONTH.

The ER Doc realized that NOT Investing:

1) put his retirement in a risky situation because of his high lifestyle

2) He now doesn't have enough money to buy one of the Investment Properties which are really only in a B or B+ neighborhood here in Brooklyn.

3) His Net Worth was WAY under mine.

4) He has no residual cash flow to become financially free when he retires at his current life style. He is dependent on his savings and possibly Social Security... Imagine that! Dependent on Social Security for a Doc that was making all that amount of money for so long!

Anyway, with every year in the future, his salary is not keeping up with the price of the Investment Properties. Had he invested when I did in 2000.... he would have been FAR BETTER OFF. And he KNOWS THAT NOW.

The other Doc, the Internist..... while he invested, he did so in non-appreciating assets (a coop in this case) and areas in NYC. He purchased a coop in 2005 for about $75k. That same coop today is still worth $75k. He made ZERO on that coop. When compared to my property in 2004 that increased in value by $1.7 Million...... he was then effectively PRICED OUT.

Of course if a Doctor who is making $300k a year doesn't want to live a certainly lifestyle, he's going to be fine with what he can save. I'm not saying you HAVE To invest..... but why NOT?! The ER Doc in particular will regret scaling back his current lifestyle if he doesn't invest.

Or...you can do both. My day job is medicine. Bought two properties during residency. Most thought I was crazy to do so and that I should just wait. I saw it as an opportunity to house hack and leverage myself into low interest rates in a rapidly appreciating market.

Most residents/physicians can’t find the time or energy when working 80 hrs a week to still find/manage/learn about REI. It’s a hobby for me. I genuinely enjoy it.

I also educated and encouraged 3 of my co-residents to buy and they all profited heavily and were very thankful for it. Others missed the boat or just felt overwhelmed.

Benefit of this field is above average income security, and significant capital that I can put towards investments as long as I continue to live below my means.

At the minimum, I’ll be buying one Class A/B area condo per year which is low maintenance. At best, I’ll pick up a multi-family. I am heavily leveraged now early-on knowing that my expenses are kept in check and my income can support any negative fluctuations in the market.

Doctors(non-working) can get a mortgage if they have a job offer letter upon graduation. Other than that I am not aware there is any advantage.  My client who is a surgeon sold his 1.2M home in Hawaii facing the Pacific Ocean came to mainland(CA), he missed out on his home biddings twice. Many two income engineers have a combined income way 100K over his solo income. High tech salesman can make $500K.

Doctor barely got a 1.3M home with an in-law quarter. All winners compete with cash in this case.

Honestly, I think the key to building wealth quickly is to get into a job or career that is high paying.  But then, rather than increasing your lifestyle right away to your income level, keep your expenses low and become a real estate investor.  The income from your high paying job will make it much easier to get loans and other sources of credit and capital which will make building a portfolio much easier.  I have a counseling business which brings in about 130-140k a year in revenue.  The income from this business has helped me get several lines of credit that I have used to build a portfolio.  Then I started a few different real estate businesses, one for flipping, and 3 for holding properties.  Those businesses are starting to mature to the point where they can get their own loans and I can start shifting the real estate business debt out of my own name and into my real estate business' names. 

I attribute the growth to first having a job or business that brings in a good amount of money, and then using that income to get qualified for loans from banks convincing them that you would be able to pay back the lines of credit they give you.

@Bryan Tasumi when you first start out it’s not going to equate but after you start and get a house then two next year...etc. It’s going to exponentially get bigger. As a doctor you have a leg up on engineers like myself in terms of starting capital. But at the end of the day you are just a bigger hamster.

The average millionaire has several streams of income. To me, money creates FREEDOM. Other than that, it’s quite evil as some of us may know. The more success you gain, the more you desire (at least for me). The desire to strive for more should make a sophisticated investor/entrepreneur make some “sacrifices”. The sacrifices which may include spending less even though there is more $ and simply tucking that cash away for more / larger investments. Money attracts money and it certainly takes money to make money in a majority of cases. Self building to me is the most passionate way to grow on paper as well as inside. Sunday Scaries? Not me, Monday is one day closer to keep turning dollars and keep the progression rolling. Life is all about finding about what your passionate about and taking action upon that passion. All of us on here are all in to RE and or getting their feet wet. Once you get a taste of it, you will want more. RE creates freedom, maybe not 100% but close enough for most ! No ER room for me :-)

Honestly, I’d get bored looking at Zillow/Redfin all day.

It’s fun to see and treat patients, while my money continues to make me money.

Also, I can work as little or as much as I want to as a physician - whether that’s working 20 hrs a week and making $100k or 60 hrs a week making $300k+.

The docs you see complaining are the ones working like dogs cause they have no other hobbies or interests outside of medicine and act like they are forced to work day in/day out.

If I can continue to practice medicine for free someday, because my investments are able to float my lifestyle, I would.

I cannot think of a work schedule that I have not heard of a doctor working.  This includes 7 days on 14 days off.  It really depends on the specialty and the type of practice.  Their incomes also range from $100,000- $7,000,000.

Originally posted by @Bryan Tasumi :

Real estate cash flow vs Physician/Doctor cash flow. How many houses and how much time would it take a real estate investor to get enough cash flow to equal that of a doctor making 300k + benefits a year? 

I am assuming it is much easier for a doctor to buy rental properties and scale up to a 300k cash flow from investment properties than a full-time real estate investor starting off with 100k cash?

 A buddy of mine is a surgeon. He does make good money, when he is working. He had shoulder surgery himself, so he wasn't working. ;-) I have properties. I make my cash flow if I never do another thing. There is more to investing than just the numbers.

@Bryan Tasumi

As many have said, it's an apples and oranges comparison, but I'll do my best to give you an accurate answer. So let's break down the numbers.

Let's say you make a W2 income of $300k/year. Assuming you are single, your federal taxes would be $77,043 plus $13,100 in FICA taxes. Additionally, I see you are in California, so your Cali tax bill would be $25,097. That totals $115,240.

Additionally, I hope you would be saving 20% of your gross income and putting it into a low-cost index mutual fund for retirement if you weren't into real state. That's another $60k/year. Obviously, with a long-term buy and rent strategy, you don't need to "save" that money for retirement because your passive rental income is your retirement.

Because real estate is so tax efficient, I think it's a better idea to compare the $300k/year physician salary to $125k/year in passive income from real estate ($300k - $115k - $60k = $125k).

$125k/year is roughly $11,000/month, and assuming $150/door, that's 70 doors. Obviously the math is a bit more complicated when you take hypothetical 401k/IRA contributions as well as the fact that it's unlikely you pay zero taxes for your real state empire. I'd be on the safe side and agree with what many are saying here: somewhere from 90-125 doors.

@Rocky V.   now to be fair and balanced like Fox news @Brie Schmidt   you buy and hold folks just did not wake up one day with a rental portfolio you put time and energy into building it you were smart you have drive you have business acumen .... and now that you have one you do have to put some time into it.. its not like these things take zero time like a mutual fund.. you have to either manage your mangers or do some maintenance or tenant interactions.. but I think the allure to it is you are not working for someone else.. or having to go to the same place daily.  Successful real estate agents can make big money and love what they do and not kill themselves... I know my wife does quite well and sometimes tops that 300k a year with NO risk of owning anything .. And Brie is on fire and building.

So these things all take time risk and effort to implement.. I don't think any of you successful landlords just fell into it.. unless you inherited it..

ON the passive end of real estate though the most passive I see is those that buy strong B or A class multi family that they hand over to professional management who then manages the onsite manager who is an employee..

but even then I had a friend that owned a 300 unit in OKC and she had to move there for 5 years because its was so poorly managed that she was going to lose it.. she ended working in it everyday turning it around and then selling it and coming back to PDX..

So we just can't paint a broad brush on it and say being a landlord is heaven and I never have to work again.  plus your in recapture purgatory you get in you have one heck of a time ever retiring or exiting .

this is why god and the IRS made Charitable remainder trusts.. one way to exit without getting hammered.  ( if you have no succession plan and are planning on giving it all to the kiddos on a step up basis when you go through the pearly gates.)

@Bryan Tasumi Any professional who does not invest (public or private markets) will run into the same issues that the hypothetical doctor making 300k will run into. There is no upwards limit on the entrepreneurial spirit. 

That being said, most doctors (not all) are living better lives, financially speaking only, than the average investor. Even if they don't invest in the first decade after finishing their residency, they still have a leg up on the average investor because of their higher salary which leads to a higher investable capital as well as the willingness of financial institutions/wealth managers to lend a ton of money at cheap rates to physicians. 

Physicians like the rest of us make some bone headed decisions. In most cases, they just have more margin of safety. Essentially, they can bail themselves out of more problems than the average investor can on account of their higher salaries. 

Legends like @Jay Hinrichs are at a different level though. They make more money at 19 than most people make at 40. 

@Omar Khan   I have had my bad days... its not been all wine and roses and a meteoric rise.. other wise I would be sipping umbrella drinks.. I do help some physicians though with their investing goals and find them to be quite fun to work with..

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