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

[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?

[Llewelyn A.]

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.