Real Estate investing and property management

[worldwideinvester1940]

I will be attending medical school this year (U.S DO school) and was formely a real estate broker both on the commercial and residential side. For all you investors physician/residents out there, I have a few questions.

1) Why not buy a multi-family house during residency?

If you are in a good location where demand is high, I don't see any negatives in buying a multi-family house. Even if you are moving during fellowship or during as an attending, you can always have a local real estate agency manage your property for relatively cheap. What are the negatives to this?

2) What are your thoughts about investing in commercial real estate as a physician?

In my area, this is hot and the costs are reasonable. Cap rates are high. I've always wondered, is it possible to be a full-time physical while owning a number of commercial properties? With strong management team and backing of a decent broker, you're properties can be rented fairly quick. So why not invest in commercial properties?

 

 

Any thoughts on this?

 

[PhysicianOnFIRE]

#1: I think it can be a great idea, particularly for longer residences. Chad Carson has an excellent guide on "House Hacking" in this manner.

#2: More work and more risk with more knowledge required than most of us are willing to take on. If you are successful, it can obviously be quite lucrative. But I've also know an anesthesiologist who went bankrupt in spite of earning $400,000+ per year because he unsuccessfully invested in commercial real estate.

Best,

-PoF

[worldwideinvester1940]

PhysicianOnFIRE wrote:

#1: I think it can be a great idea, particularly for longer residences. Chad Carson has an excellent guide on “House Hacking” in this manner.

#2: More work and more risk with more knowledge required than most of us are willing to take on. If you are successful, it can obviously be quite lucrative. But I’ve also know an anesthesiologist who went bankrupt in spite of earning $400,000+ per year because he unsuccessfully invested in commercial real estate.

Best,

-PoF

Click to expand...

Makes perfect sense. Each location has their differences. In central mass. commercial real estate has been stable and lucrative. I noticed you are an anesthesiologist. I have been considering anes. but still have a lot of time before I need to make a decision. I find an interest in the pain management side.

What are your thoughts about balancing a being an anesthesiologist and managing real estate properties? Will the pain management sector allow for more flexibility than being an attending anesthesiologist in the OR? While this is not a reason to choose a flexibility, I'm curious to what your thoughts are.

 

Thanks!

[PhysicianOnFIRE]

worldwideinvester1940 wrote:

Will the pain management sector allow for more flexibility than being an attending anesthesiologist in the OR?

Click to expand...

Pain docs generally don't take call, at least not the type where you frequently go to a hospital and work. Same with an outpatient only anesthesia job, although I wouldn't pigeonhole yourself to just that if you go with OR anesthesia, at least not early in your career. But with either one, you can generally expect to have nights and weekends free.

OTOH, a job with call will very likely give you post-call days off. Some RE work is more easily accomplished during the daytime M - F.

I've written a post on the impact of specialty choice as it relates to achieving FI, FYI.

Cheers!

-PoF

[worldwideinvester1940]

PhysicianOnFIRE wrote:

worldwideinvester1940 wrote:

Will the pain management sector allow for more flexibility than being an attending anesthesiologist in the OR? 

Click to expand…

Pain docs generally don’t take call, at least not the type where you frequently go to a hospital and work. Same with an outpatient only anesthesia job, although I wouldn’t pigeonhole yourself to just that if you go with OR anesthesia, at least not early in your career. But with either one, you can generally expect to have nights and weekends free.

OTOH, a job with call will very likely give you post-call days off. Some RE work is more easily accomplished during the daytime M – F.

I’ve written a post on the impact of specialty choice as it relates to achieving FI, FYI.

Cheers!

-PoF

Click to expand...

Thank you! I'll definitely take a look. Online reports seem to show that Pain compensation and hours is better than OR Anes. Is that typical?

Of course, compensation isn't everything. Just curious on how to balance real estate affairs with being a physician. I'll check out you're posts. Really appreciate your advice!

[Gas_Doc]

worldwideinvester1940 wrote:

Thank you! I’ll definitely take a look. Online reports seem to show that Pain compensation and hours is better than OR Anes. Is that typical?

Of course, compensation isn’t everything. Just curious on how to balance real estate affairs with being a physician. I’ll check out you’re posts. Really appreciate your advice!

Click to expand...

The real answer is "depends on the practice." It is both location and practice dependent. The better the candidate you can be the more choosey you can be when looking for the right job.

If you are interested in anesthesia, you should be aware that general anesthesiology and Pain are VERY different. You'd have to pay me an astronomical sum of money to be a pain physician.

[mamaham]

worldwideinvester1940 wrote:

I don’t see any negatives in buying a multi-family house. Even if you are moving during fellowship or during as an attending, you can always have a local real estate agency manage your property for relatively cheap. What are the negatives to this?

Click to expand...

you cannot think of any negatives?  I cannot think of any positives (except for maybe the potential of possibly paying your mortgage with the tenant's rent... and that is a maybe depending on expenses, vacancies, etc.)....

I guess it really depends on your residency (the specialty, the program, your personality, etc).  We just finished 7 years of residency/fellowship (well, my spouse did but I was certainly along for the ride), so maybe I am being a bit negative versus those that have long since finished residency and now have rosy memories....  You do not mention if you are single etc, but there is absolutely no way that he could have had a multi-family house as a single person (and managing our household was more than enough for me let alone dealing with being a landlord).  Residency took up all of his time and he was Q3 for most rotations.  He had no time for regular house repairs let alone dealing with finding tenants and dealing with their issues.  I am just imagining the tenant calling with issues when you are on call (and cannot take phone calls) or post-call after having worked 30+ hours.  Then you have to go deal with their leaking toilet or something...  Then you have a vacancy and are trying to vet out new tenants on your very few days off a month?  or they have their tv blaring or a party going when you are post-call (or pre-call)....  no thank you!   All that said, I am not sure how DO residency differs from MD residency, so your situation may be totally different....

we bought a house during residency and although we did come out ahead financially... if I had it to do over, we would definitely have rented!  be the tenant not the landlord!  http://www.physicianonfire.com/rentvsbuy/


 

[Hank]

You definitely don't want to have a tenant unit that's a one bathroom.  If there's a second working toilet, then it isn't a "3 am plumber" emergency, it's a "fix it tomorrow during daylight hours" plumbing emergency.

Here's a cheap form of landlord insurance: buy Toto toilets.  Cheap toilets are far more expensive in labor after the fact.

Pay a little extra for conscientious tradesmen who will take ownership for fixing things right the first time.

[worldwideinvester1940]

Gas_Doc wrote:

worldwideinvester1940 wrote:

Thank you! I’ll definitely take a look. Online reports seem to show that Pain compensation and hours is better than OR Anes. Is that typical?

Of course, compensation isn’t everything. Just curious on how to balance real estate affairs with being a physician. I’ll check out you’re posts. Really appreciate your advice!

Click to expand…

The real answer is “depends on the practice.” It is both location and practice dependent. The better the candidate you can be the more choosey you can be when looking for the right job.

If you are interested in anesthesia, you should be aware that general anesthesiology and Pain are VERY different. You’d have to pay me an astronomical sum of money to be a pain physician.

Click to expand...

Just curious, why would you not be a Pain physician?

[worldwideinvester1940]

mamaham wrote:

worldwideinvester1940 wrote:

I don’t see any negatives in buying a multi-family house. Even if you are moving during fellowship or during as an attending, you can always have a local real estate agency manage your property for relatively cheap. What are the negatives to this? 

Click to expand…

you cannot think of any negatives?  I cannot think of any positives (except for maybe the potential of possibly paying your mortgage with the tenant’s rent… and that is a maybe depending on expenses, vacancies, etc.)….

I guess it really depends on your residency (the specialty, the program, your personality, etc).  We just finished 7 years of residency/fellowship (well, my spouse did but I was certainly along for the ride), so maybe I am being a bit negative versus those that have long since finished residency and now have rosy memories….  You do not mention if you are single etc, but there is absolutely no way that he could have had a multi-family house as a single person (and managing our household was more than enough for me let alone dealing with being a landlord).  Residency took up all of his time and he was Q3 for most rotations.  He had no time for regular house repairs let alone dealing with finding tenants and dealing with their issues.  I am just imagining the tenant calling with issues when you are on call (and cannot take phone calls) or post-call after having worked 30+ hours.  Then you have to go deal with their leaking toilet or something…  Then you have a vacancy and are trying to vet out new tenants on your very few days off a month?  or they have their tv blaring or a party going when you are post-call (or pre-call)….  no thank you!   All that said, I am not sure how DO residency differs from MD residency, so your situation may be totally different….

we bought a house during residency and although we did come out ahead financially… if I had it to do over, we would definitely have rented!  be the tenant not the landlord!  http://www.physicianonfire.com/rentvsbuy/

 

Click to expand...

I plan to do an Allopathic residency, so it won't be difference.

Through my years as a real estate broker, I agree with most of your statements. It is a pain to fix toilets in the middle of the night and confront tenants about noise.

 

But here is the thing, it does not have to be YOUR responsibility as a landlord (depending on your location of course). Here in the boston area (and suburbs) local agencies would happily manage your properties for LOW cost.

 

How do I know? My family owns a large portfolio of real estate (both commercial and residential). It's a pain to manage the properties, but when outside agencies can do the work, why does it seem so difficult?  Even vetting properties is not so difficult. In the boston area, property managers do not pay agencies any more for providing rental services. The market is SO landlord driven.

 

The overall point, I feel as though buying a multi-family home and renting it out using property managers at a low cost and free rental services will probably be better than paying rent. Also, it helps having family members in the industry...

 

 

 

[mamaham]

worldwideinvester1940 wrote:

But here is the thing, it does not have to be YOUR responsibility as a landlord (depending on your location of course). Here in the boston area (and suburbs) local agencies would happily manage your properties for LOW cost.

Click to expand...

Sounds like you would just have to run the numbers to be sure that you are actually going to be better off than paying rent.  There are a lot of "hidden costs" in there that people tend to overlook when thinking about real estate returns (as you are aware with your past background).  Dr. Dahle did a post on that but I cannot find it right now...   In my area, I would find it hard to believe given what the property managers charge and where the house would be given commuting to the hospital.  My opinion, irregardless of the financial piece and whether or not you DIY or have a manager, is that in residency your sole focus should be 1) totally focused on your training, and 2) survive (including survival of your close family relationships as well).  I do think owning a property of any type/management situation just distracts from the goal of residency.

[adventure]

worldwideinvester1940 wrote:

If you are in a good location where demand is high, I don’t see any negatives in buying a multi-family house. Even if you are moving during fellowship or during as an attending, you can always have a local real estate agency manage your property for relatively cheap. What are the negatives to this? 2) What are your thoughts about investing in commercial real estate as a physician? In my area, this is hot and the costs are reasonable. Cap rates are high. I’ve always wondered, is it possible to be a full-time physical while owning a number of commercial properties? With strong management team and backing of a decent broker, you’re properties can be rented fairly quick. So why not invest in commercial properties?

Click to expand...

1. Risk is the negative.

2. Again, risk.

[adventure]

worldwideinvester1940 wrote:

The overall point, I feel as though buying a multi-family home and renting it out using property managers at a low cost and free rental services will probably be better than paying rent. Also, it helps having family members in the industry…

Click to expand...

Use a spreadsheet to actually run the numbers. Probably good for horseshoes and hand grenades, but not for investing, work, or retirement.

[worldwideinvester1940]

adventure wrote:

worldwideinvester1940 wrote:

If you are in a good location where demand is high, I don’t see any negatives in buying a multi-family house. Even if you are moving during fellowship or during as an attending, you can always have a local real estate agency manage your property for relatively cheap. What are the negatives to this? 2) What are your thoughts about investing in commercial real estate as a physician? In my area, this is hot and the costs are reasonable. Cap rates are high. I’ve always wondered, is it possible to be a full-time physical while owning a number of commercial properties? With strong management team and backing of a decent broker, you’re properties can be rented fairly quick. So why not invest in commercial properties? 

Click to expand…

1. Risk is the negative.

2. Again, risk.

Click to expand...

Do you own a number of properties yourself? Again, it's location dependent. In the Boston area, housing nearly recession proof. I was renting studios to students at $1,200 per month in 2009. Now they are at $1,800. I have a spread sheet for multi-family homes, which is pretty accurate. I can see there being a high risk in less demanding areas (midwest or the south).

[adventure]

worldwideinvester1940 wrote:

Do you own a number of properties yourself? Again, it’s location dependent. In the Boston area, housing nearly recession proof. I was renting studios to students at $1,200 per month in 2009. Now they are at $1,800. I have a spread sheet for multi-family homes, which is pretty accurate. I can see there being a high risk in less demanding areas (midwest or the south).

Click to expand...

Yes, I do own properties.

Location is not the most relevant point here - does the business model support the numbers to actually earn the required profit. Do you have a proforma for each property you are considering? Why did you stop renting after 2009? While studio's may rent for more than they did 8 years ago, the cost to buy said property has also risen. Point is, you need the numbers to determine if it's a worthwhile investment of capital, at this point in time.

 

And, you may or may not have the time in medical school to do school, and life, and run a business on the side. How you invest your time between those areas in something to consider too. Medical school is a huge time sink, and anesthesia residencies (others notwithstanding) aren't easy to get in to. Go for it, but have a plan to ensure success (as much as possible) to measure, limit, and mitigate risk. This applies to business and school.

School, life, and business is a tricky combination.

mamaham wrote:

1) totally focused on your training, and 2) survive (including survival of your close family relationships as well).  I do think owning a property of any type/management situation just distracts from the goal of residency.

Click to expand...

agreed.

 

All are noble pursuits. My advice would be not to sacrifice one for another. But tackle what you can, and find some time to enjoy it too!