Real estate cash flow vs Physician/Doctor cash flow. Difference?
Hayward, CA · Member since 2017 · 70 posts · 7 votes
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?
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.
Doctors don't have cash flow, they get a salary. Your question is the difference between a W2 salary and investment cash flow. Cash flow is the result of your money doing the work, W2 income is the result of you doing the work.
This is a fundamental concept that everyone needs to understand.
To become a doctor you invest 8+ years of time and well over $100K into your education.
If you are trying to chose between becoming a doctor or a real estate investor, there is no doubt you can become financially independent much faster in real estate.
There are even other career options that give you better pay to investment ratio. You really should become a doctor because you love the profession, not just as a paycheck. It is way too much time investment to be only for the money.
Just my opinion, good luck.
Reading this thread is actually funny......but I agree it’s kind of unfair to compare a doctor to a landlord. A better comparison would be someone in real estate such as a flipper, a great wholesaler, a great realtor(the last two are very hard to find nowadays since everyone wants to become a realtor and or wholesale). It’s very possible for those three occupations to do well beyond what a doctor salary can(if the inventory is good and available). But I honestly think a better comparison would be a doctor and a CPA, almost any kind of engineer, a lawyer, and a dentist. But at the end of the day as most people have mentioned those are just employees. If you really want to obtain freedom of any kind it’s almost a necessity to beocme the employer instead of employee. Economically speaking that is....
There have only been 4 ways to survive throughout mankind. These four ways are pretty much solidified in stone.
1. Business owner- this includes real estate as well because it is a business(certain parts). Wholesaling is a business(when done correctly) . Fix and Flipping is a business. Being a landlord is a business. Owning your own brokerage is a business. Owning patents. Owning Trademarks. Own your own software company. Owning your own pharmaceutical company. Being partial owner of anything. I think everyone is seeing the pattern I’m going here....your the employer and must hire employees and or implement business systems for the business. Otherwise self employment is really just a job that you imprison for yourself.....
2. Employee- where most people are in the world. You get a salary(fixed monthly pay) or paid hourly(fixed hourly pay as most employers don’t want you to go overtime) some employees enjoy a pretty good life as some of the job titles I mentioned above. This isn’t necessarily a bad thing as long as you know what you are and must know your on the clock. I mean that figuratively and literally because if you stay an employee your entire life without having money to live off for retirement...you automatically go onto this......
3. Government assistance- if you don’t have enough money saved up or actual real investments,this is where most people will be. Because they don’t have enough money to live off. SSI, and other government incentives are all just a nice way of basically saying the government will take care of you(more so control). Backtracking a bit.......it’s not entirely a bad thing for someone transitioning into another job to use this assistance because this is what it’s for, temporary assistance.
4. Rob and steal- I don’t want to say too much on this but when there are no other options this is what people must do to survive
Those 4 things are in order of what a person can do in order to survive. Its one of those things that...if you don’t realize what your doing in life and direct your path to become 1 you will fall to number 3. It’s just my two cents though.
@Bryan Tasumi most doctors don't make $300k, anywhere in the US. They most likely need to specialize and practice in a big city.
Incorrect, and I know this for sure. I just signed a standard contract pretty close to where you are, non-specialized, and average sized market. There is an acute shortage of non-specialized providers and it is leading to higher pay.
If you Google physician compensation it is always way under what physicians really make. It’s kind of a known within the field to let it be and not mess with public perception. I can definitely say the numbers are way off.
My compensation will be above that and so is every doctor I work with, in potentially the largest organization around. Most of my colleagues are going to make a lot more than me.
As for RE, I managed my own rental initially to learn the ropes. Even did minor plumbing work, removed/installed toilet, etc. Then again, I even do my own brake/rotor jobs on my car so I may be an exception here. Most my physician colleagues think I’m nuts for that.
That being said, I did hire a property manager for my units in Vegas for when I move out. Always nice to be able to expense occasional visits to Vegas but it’s a long flight!
I really dont have much to contribute here that wasnt already said but I enjoy seeing some highly successful people jump in and give their opinions. So thanks to @Bryan Tasumi for starting this.
My one observation is this. I think its easier to live cheaply when you make less money. And so I think its easier for a janitor to get use real estate to get out of the rat race then a doctor. People who make 300K a year or more need 300K a year or more to live. Its far easier to build a 5K a month cash flow than a 25K a month cashflow. Once you get to 5K and out of the rat race then you can pour on the gas and make the 300K+ we all want.