My Venture Into Real Estate Investing

My Venture Into Real Estate Investing

Real estate investing has always been intriguing to me. But I was always a bit intimidated by it. However, as I learn more about real estate investing, I have become quite a bit more comfortable with it.

Now, it real estate has slowly grown to become almost 10-15% of my investment portfolio.

In this post, I’ll talk about my journey with real estate investing.

 

Initial Hesitancy with Real Estate Investing

I am in a completely different place now compared to when I first started my investing career.

Eight years ago, when I first started making “real doctor money” with my first attending job after residency, there were several reasons why I was hesitant to start real estate investing.

Limited Time

First of all, as a resident or new attending, most of our time is spent learning how to be a better physician. The learning curve is steep in the beginning no matter what field of medicine you’re in.

In the early stages of my career, I would work about 60-65 hours a week. There was barely enough time for self-care, getting adequate sleep, spending time with loved ones, and having fun. I was too busy living it up so I chose not to commit time for learning about real estate and implementing an action plan.

Do I regret this? Not at all. I made the most of all the time I had outside of work by enjoying it with the people I love.

Ultimately, we have the same 24 hours as everyone else. At that time, I just chose not to devote any of it to real estate investing.

Index Fund Investing is Super Easy

Index fund investing is really simple. Open a taxable brokerage account, fund it with money you plan to invest, then buy a broadly diversified total stock market index fund or the ETF equivalent. After that, all you have to do is regularly invest some portion of your income by buying more of that stock index fund (or ETF) and watch it grow. It’s really that easy.

Real estate investing isn’t quite as straight forward. And there are many different ways to invest too! For example, if you own rental properties directly you would likely have to do a lot of research. Which property should I acquire? Is it a good deal? Am I going to manage it myself or hire a property manager? Passive real estate investing in the form of crowdfunding and syndications requires research and due diligent too. Do I trust the sponsor and general partners of this deal? Does their business plan make sense?

There are many other ways to invest in real estate, but whether it is active or passive there are so many things to consider. It’s not quite as simple as stock index fund investing where all you need is money, an internet connection, and the ability to click “buy”.

Real Estate Is Not Liquid

The most liquid form of investing in real estate is through real estate index funds (like Vanguard’s VGSLX) or public traded real estate investment trusts (REITs). Otherwise, most forms of real estate investing is quite illiquid. If you need your money in a few days, you can’t just sell a bunch of rental properties tomorrow. Good luck with that.

Everybody’s investment strategy and philosophy is different and unique to their own specific needs. For me and my family, I chose to build up a sizeable investment portfolio of liquid assets prior to thinking about investing in relatively illiquid assets like real estate.

Part of the reason for this is because my wife has sizeable law school student loans. We are counting on her loans eventually being forgiven through PSLF. But you just never know. What if her loans aren’t forgiven? As PSLF insurance, we invested what she would have paid in loan payments into investment accounts with stock index funds. That way, if there was a situation in which her learns were not forgiven, we can easily sell those stock index funds to pay off her balance.

Some people actually like the fact that real estate is illiquid. But everybody’s situation is different. And in our case, I preferred more liquid assets like stock funds.

Little To No Desire

Simply put, I didn’t invest in real estate early on because I didn’t have the desire.

I had limited time and I chose not to devote any of it to learning about real estate. In my opinion, investing in stock index funds is much simpler; so it was just easy to take the efficient path of least resistance. And finally, real estate investment wasn’t a big part of my investment strategy because I valued the liquidity of other assets like stock index funds.

There was no compelling reason for me to invest in real estate.

 

Real Estate Investing Now

So what’s different now?

Well, a lot.

Work Less

First of all, I work a lot less than I did. For the past four years, I have only been working 40-44 hours a week.

Dropping down from 60-65 hours a week to 40-44 hours a week is a huge deal.

Learn More

While a lot of my non-working time is spent enjoying time with family and the people I love, I have used some of this extra available time to educate myself. I have had more time to learn more about real estate investing and investing in general.

A lot of what I learned is through real estate centered, physician finance blogs such as Passive Income MD, Semi-Retired MD, 39.6, and Financial Success MD.

Network

Through blogging and attending finance conferences, I got to meet a lot of amazing people. Many of these people are physician finance bloggers (like the ones I mentioned above) / podcasters / entrepreneurs who are doing some incredible things.

Getting to know these physician real estate entrepreneurs in-person dramatically increased my comfort level with real estate investing.

Suddenly, taking the first step wasn’t so hard.

Becoming More Financially Independent

After more than 7 years of saving half of our income and investing the difference stock index funds, we have hit a few financial milestones. We certainly became more financially free.

While our investment portfolio alone likely wouldn’t support our current lifestyle here in Southern California, it’s getting close. If we sold our house and moved somewhere cheaper, we would definitely be FI and working could be optional.

Needless to say, we also have more than enough in liquid assets to pay off my wife student loans if necessary, as well as the taxes that we’d have to pay after selling assets.

Rethinking Risk and Asset Allocation

Now that we are relatively financially independent, I started to re-evaluate our risk profile and reconsider our asset allocation.

I remain comfortable with a bond allocation of 10%, which is all in one of my 401k retirement accounts. In an economic environment with close to zero percent interest rates, I am not too enthusiastic about increasing my allocation to bonds. I simply just rebalance whatever I have within the account.

So instead of adding more money to bonds, I have allocated much more money to real estate and a little bit more to stocks and crypto. Yes, I know that real estate has a higher risk profile than bonds. But I’m okay with increasing risk. Being relatively financially secure / independent with no intention of leaving my high paying job, I am okay stomaching the increased risk in order to diversify into other assets like real estate and cryptocurrency.

 

How I’m Investing In Real Estate

Okay. So after years of saving and investing in stock index funds I have finally taken the plunge and started investing in real estate.

The combination of increased knowledge and building my network of trusted colleagues who also invest in real estate bolstered my confidence and comfort level with real estate investing. At the same time, recent market conditions and my current financial situation led me to decide that diversifying my portfolio into investing more in real estate is the way to go.

So what did I do?

Passive Real Estate Investing

I decided that passive real estate investing best fits my investment strategy and goals.

Passive Income MD highlighted a few of the big reasons why physicians like myself prefer passive real estate investing. In short, it affords you more time, allows you to leverage other people’s time and energy, you can start small, and it’s hands off. You don’t need massive amounts of capital and you don’t have to be a landlord. Score!

Real Estate Syndication or Fund?

After deciding on going the passive route, I had to decide whether to invest in a real estate syndication or fund. Both are common ways to passively invest in real estate.

I’m not going to delineate the pros and cons of each because that can be found in greater detail in other blogs.

In the end, I went with investing in real estate syndication for a few reasons. First of all, investing in a real estate syndication seemed simpler from a tax perspective.

One of the biggest reasons, however, is because I knew the sponsor of the syndication. Last year, Victor of 39.6 announced that he would be a sponsor of a real estate syndication deal. I’ve met Victor and his family multiple times at conference, networking events, and when they came down to San Diego. Not only is he smart with an excellent investing track record, but I knew him pretty well, consider him a friend, and have a lot of trust in him and his team. Plus he has considerable skin in the game since he has a sizeable investment in the syndication deals as well.

Have you ever thought to yourself: “I just want to invest in whatever that person is investing in”. I have. Victor is someone who falls in my list. So when the opportunity came to invest with him, I took it.

 

How You Can Invest In Real Estate

There are many ways to invest in real estate. And the spectrum varies form very passive to very active. Each with their own pluses and minuses.

You just have to choose your flavor of investing. For me, it was passive real estate investing through real estate syndications with a trusted friend and colleague as a sponsor.

But let’s say you don’t personally know a sponsor. Well, there are blogs and courses that can help with vetting sponsors. In fact, PIMD has a course for that.

What if passive investing isn’t your flavor? If you have the time and energy, then taking an active approach with direct ownership of cash flowing rental properties may be the way to go. That’s what my friends over at Semi-Retired MD did to achieve Fast FIRE in less than 5 years. And if you want learn how to do it, they also have course that can teach you .

 

Final Thoughts

For a variety reasons, I started to venture into real estate investing.

The timing felt right as I became more financially literate, gained more knowledge, and got to know more successful physician real estate investors.

I ultimately chose passive real estate investing through syndications because it was easy for me to vet the sponsor– I know and trust one of them as a colleague and friend.

Real estate investing can be intimidating at first. But there is a lot of free information out there via blogs and podcasts that can help you with your real estate journey. And if you don’t have the time to sift through various blogs and just want the information fed to you, you can always consider taking a real estate investing course!

Full disclosure: Some links above may contain affiliate links. If a product was purchased using my affiliate link, I may receive financial compensation at no additional cost to you.