Following Content Also Features as a Guest Blog Post from Prudent Plastic Surgeon.
I became a physician landlord a couple of months ago.
I love it. Every month, my tenants pay rent that covers my mortgage (building my equity), all other expenses, with extra cash left over that goes right into my pocket. I also have the satisfaction of providing high quality housing to awesome tenants who needed it.
So why is it that so many physicians are hesitant to become landlords?
Or maybe that’s even put to mildly. Most physicians I meet actively avoid becoming landlords and tell me all about why I shouldn’t do it. Even though they themselves have never done it!
Here’s the real irony
I’m going to paraphrase Cory Fawcett in his awesome book, The Doctors Guide to Real Estate Investing for Bust Professionals.
When I tell people that I invest in real estate and am a landlord, they ask me why I would want to do that.
“Isn’t it risky?”
“What if a tenant sues you?”
“It’s going to take up so much of your time, is it really worth it?
But, when I tell people that I am a plastic surgeon, they all tell me how great that is. They don’t chide me about waking up in the middle of the night to salvage a free flap. Or about the tons of debt that I took on to reach this point. Or the risk of a frivolous malpractice suit.
Why is it that with one endeavor, all of the focus is on the negative and for the other, it’s all on the positive?
I don’t know the answer but it’s interesting to think about.
My journey as a physician landlord
Due to this bias, I really want to share my story of becoming and now my experience being a physician landlord.
I recognize that a few months is a small sample size, but I remain very confident in my decision and see no reason others can’t have the same experience.
Becoming a physician landlord
I’ve talked a great deal already about the benefits of real estate investing and why physicians are uniquely placed to take advantage of them.
I’ve also gone into depth to explain my system for screening and analyzing investment properties the right way to ensure you are successful as an investor.
The logical next step, after deciding to invest in real estate and selecting/purchasing an investment property, is managing that property.
There are a wide range of options to manage a property
The beauty about directly investing in real estate is that you can make it as passive or as active as you want. There is a spectrum of options.
But, you usually will hear about only 2 options at the ends of the spectrum:
- Hiring a property management company
These are certainly the two most commonly employed options. But they both have their issues.
The knock on self managing your property is that it will take too much time and be a headache. People worry about the mythical leaky 2 AM toilet even though they’ve never had a leaky toilet at 2 AM in their homes in their lives. But it certainly is the most cost effective option.
The issue with property management companies is that they are expensive, and eat into your profits. The going rate for property management companies is a monthly fee of 10% of collected rents and a one-time fee of one month’s rent for trueing over a unit between tenants. Yuck.
There is another choice!
There is a hybrid approach in the middle of the spectrum and that is what we have chosen to employ.
We use an online platform called Hemlane to manage our property. This platform is the intermediary between me and my wife and our tenants. Prospective tenants apply through the platform, advertising of units is through the platform, and maintenance requests are through the platform.
And then, we self manage from there. We keep out own books, we do the repairs that we can or get a member of our team (electrician, etc) to help when needed, and we do showings ourselves.
Doing this brought our property management costs down to 2% and our turnover fees to a very conservative estimate of $500/unit. It raised our cash-on-cash from 11% to 16%.
There are options on Hemlane to pay more for them to do things like manage maintenance requests and such. But I feel comfortable handling that myself and pocketing the difference as profit.
If you would like a referral to Hemlane, please contact me at email@example.com.
My actual experience as a physician landlord
I am a full time plastic surgeon at a major city Level 1 trauma center. As I mentioned above, I also manage an investment property using an online platform for assistance.
I am a bonafide physician landlord.
And I can tell you that it has been fantastic. The benefits far outweigh the negativity that comes when I share this with other physicians.
The key: automating your business processes.
Your real estate investments are a business. You have to run it like a business. And businesses automate.
A few examples of my life as a physician landlord
The online platform Hemlane places ads for our units on various sites. But we screen the tenants ourselves and do out own showings.
Upon listing our first 2 units, they were rented out within a week. We did about 4 total showings. It took about 2 hours total of our time. By doing this ourselves, we got to know the tenants and ensure they would be quality tenants that kept expenses low and didn’t give us a headache. We also got our units rented out much faster than if we had someone else do it.
Case and point, our tenant for one unit was moving from Puerto Rico to Buffalo. My wife was born in Puerto Rico and now lives in Buffalo. She was able to communicate on a personal level with the tenant to get to know him and also to share the benefits for him of our unit (located within a vibrant Puerto Rican community near Avenida San Juan).
The minimal effort was certainly well worth the benefit of decreased vacancy and high-quality tenants.
It wasn’t a leaky toilet but…
A couple of weeks after we rented out our downstairs unit, the tenants messaged us that a few of the outlets were not working. The message came at 9 AM on a day when my wife was teaching classes and I was in the OR.
Was it stressful? Or difficult to manage?…Nope.
I texted our electrician, a member of our real estate team that was established before we rented out the units. I asked him to stop by and check things out.
He went over later that day, texted me that all was fixed, and that he would send me an invoice. Easy. Done.
Now why would I pay a middle man property manager extra just to do that easy task?
There will be times I’m sure when I have to do something mildly annoying to manage the property. But I’m ready for it and I certainly won’t let if detract from the fact that real estate investing has already increased my net worth in the order of 6 digits.
Don’t let becoming a landlord distract you from massive action
Real estate investing is a wealth accelerator.
Done correctly, I firmly believe it is one of the best investments that a physician can make. It does take some effort. But the link between your effort and your income with real estate is not highly correlated as it is with your day job as a doctor or professional.
It is passive money, or at least as close as you can get to it (in my humble opinion).
If I can do it and tons of others can, you can too. Just a few months ago, I had no idea about real estate investing. There’s nothing special about me.
Get started with these resources!
And, if you want to learn more about automating your real estate investments, I highly, highly recommend checking out this course by Cory Fawcett! I took it with Selenid and it made us such better landlords and investors!
Blog Post Excerpt from Prudent Plastic Surgeon.