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Why Physicians Should Invest for Cash Flow in Real Estate


August 5, 2020

Harsha Moole, M.D., MBBS


“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”  – Franklin D. Roosevelt

 

Introduction

Why Physicians Should Invest for Cash Flow in Real Estate. Whether you’re a young, budding physician or one who’s slowly beginning to envision retirement in the horizon, to invest for cash flow is essential to creating a better life for yourself. Time is a limited resource, which means that it must be devoted to what matters most in life – family, friends, your passions. Earning income must never take up all of your time. When you find yourself burnt out and overworked just to sustain the life you are currently living, that’s when you know it’s time to switch things up. Furthermore, there are other efficient ways to earn money such as to invest for real estate cash flow, and that’s what we’re here for today.


Invest for Cash Flow

The Rationale – Invest for Cash Flow in Real Estate

Behind the noble sense of duty and the fulfilling experience of devoting your day-to-day to healing others in every sense of the word, there are many less-than-glamorous aspects to the job. Physician burnout is not just real – it has been an industry-wide problem for the past few decades. According to the American Medical Association, there is an overall physician burnout rate of 42% based on a January 2020 online survey enjoined by more than 15,000 physicians from 29 specialties. Based on the survey, the top causes of burnout have not changed over the years, with 55% of respondents choosing “too many bureaucratic tasks” as the leading cause of burnout. One-third said spending too many hours at work added to their stress, while 32% said lack of respect from administrators, colleagues or staff contributed to burnout.

This is why here at PhysicianEstate, we firmly believe in not letting your being a physician become the end all, be all. Sure, every job has its pros and cons, but it’s also very important to recognize that there are other ways to earn money which are physically, emotionally, and mentally less taxing. This brings us to why you should invest for cash flow in real estate.

 

Cash Flow Definition | What is Cash Flow? How Do You Determine Cash Flow?

Before we get down the nitty gritty, let’s do a quick rundown of what cash flow is. Technically speaking, cash flow is the difference in the amount of income and the aggregate expenses you incur from an investment. Let’s say you earned $800 from rent for a real estate property you invested in. If you have $500 worth of expenses each month to maintain the property, your cash flow from said real estate investment would be $300 per month.

You uncover a property’s true value and potential by determining the real estate cash flow from a particular investment. As long as you have complete information (which we will get at in a bit) at your disposal, determining cash flow is definitely something you can do on your own.

 

The Benefits of Investing for Real Estate Cash Flow

  • Create an avenue for semi-passive income.
    • Investing for cash flow in real estate is a proven way to let your money work for you. Apart from doing due diligence prior to investment and the mundane tasks of maintaining the property down the line, it does not require a lot of time and effort from your end.
  • Enjoy immediate cash return.
    • Investments such as a rental property allows you to receive income in rather fast turnovers. You look forward to monthly revenue without having to exert much effort in return.
  • Reap possible long-term appreciation.
    • Some properties may even turn out better than expected and morph into a long-term investment. It is not very uncommon for a rentee to express interest in purchasing the property permanently. Another positive real estate cash flow scenario could also look like this: having a property rented out while you are setting it up for long-term appreciation.
  • Building your real estate portfolio.
    • Taking off from our last point, investing for cash flow is a great way to ease yourself into the world of real estate investment. Handling properties that generate cash flow from operations is a perfect way to get yourself used to the process and procedures required in cultivating successful real estate investments.

 

Why You Should Consider Investing in Real Estate Cash Flow

  • Physicians are high-income earners so you qualify as an accredited investor.
    • In the world of real estate investment, being an accredited investor is something you wish to strive for because this means you are eligible for multiple streams of passive income. In one of our earlier blogs, we explain that physicians are most often qualified as accredited investors because they pass the Accredited Investor Requirements set by the Securities and Exchange Commission (SEC). We find it very important to note that just because you are a physician, does not automatically imply that you qualify as an accredited investor. To learn more about these requirements and whether you qualify, click here.
  • Real estate cash flow allows you to lighten your workload as a physician.
    • Investing for cash flow lets you detach from your job as a physician, thus curbing the dangerous downfalls of physician burnout as early as possible. Ironically, when you’re less attached to your work and how much you need it to support your life, you perform better, you are happier serving patients, and you create a better life for yourself in the process. It also gives you the privilege to earn just as much (or maybe even more), regardless of whether you are clocking in the same clinic hours or less. Now that your financial resources are not dependent on your work alone, you have more freedom to drop clinical hours as needed, maybe to spend more time with family or for yourself, follow your other passions – you name it.
  • Your day-to-day expenses and other financial goals are no longer dependent on a single paycheck.
    • When you have more than one stream of income, you never have to worry about not having enough. To invest for cash flow is not just a fallback in case things go south at your physician job – it’s an important facet to achieving financial freedom. Even billionaire industrialists like Andrew Carnegie recognize that cash flow from operations in real estate are worthwhile investments. “Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.”

 

How to Begin Your Real Estate Cash Flow Journey

  • Understand your market.
    • To begin your journey in real estate cash flow, you must first survey the area where you wish to become a real estate player. What are the market’s consumer behaviors and habits? How much purchasing power do they have? This will shed light on what type of properties you should invest in.
    • Talk to local experts, attend local real estate networking events, stay in touch with your real estate brokers, read books, listen to podcasts – grow your knowledge base.
  • Analyze competition a.k.a. other rental properties within the perimeter.
    • Once you have set your eyes on certain properties, the next important step is to survey your competitors. How much are other properties being rented off? How frequent are properties turned over from one rentee to another? This information will help you put a reasonable yet competitive price tag on your chosen properties.
    • www.rentometer.com is a great tool to check the current rents in your market. You can also go on to Zillow / Realtor / Craigslist to look for rents in similar properties.
  • Carefully assess the value of each property.
    • Remember what we first talked about regarding cash flow? Important details like how much income you will be able to get and what expenses each property will incur shall help you determine how much cash flow you will receive from an investment. Your projected cash flow from operations shall determine whether a property is a worthwhile investment.
    • Use calculators like this to run your numbers – https://www.calculator.net/rental-property-calculator.html
    • Cap rate of >7%; and monthly rent to property value ratio of >1% is considered a good deal.
  • Strike up the best deals.
    • Make sure to do your research comprehensively before deciding to invest. You are barely able to find any lucrative deals online. Most of the deal the reach the online listing websites are overpriced or have some downside to them. You should find your deals much before they hit the online space. Experienced commercial real estate brokers have pocket listing, that that share exclusively to their buyers. So, it is very important to have good working relationship with your brokers. Carefully study all your options and try to be on the lookout for profitable bargains before you make a decision. If you are searching for worthwhile investment opportunities, we at PhysicianEstate are more than happy to help you out.

 

Summary

When it comes to real estate cash flow, identifying your rental property income and expenses accurately is crucial to investment success. At the end of the day, the goal behind investing for cash flow is to eventually not have to rely on job security in the long-term. Real estate cash flow is a tried and tested method to achieving financial independence, greatly eliminating the notion that you must slave over a 9-5 shift on the daily to achieve financial success.

Invest for Cash Flow

 

Here at PhysicianEstate, we welcome all physician entrepreneurs to learn about commercial real estate investments, rental property investments, and wealth generation. We encourage all physicians to eventually become real estate physician investors. We know a great deal about Who – What – Why – How. 

Stay in touch with us by signing up for our newsletter. The newsletter will keep you up to speed on the current real estate investments we are looking at, provide physicians with investment opportunities, and much more.  

Legal Disclaimer: This is not investment advice. I am not a legal and/or investment advisor. This is my personal blog, and all information found here, including any ideas, opinions, views, predictions, forecasts, commentaries, suggestions, or stock picks, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as personal investment advice. These are my views, it is not a production of my employer, nor is it affiliated with any broker/dealer or registered investment advisor. While the information provided is believed to be accurate, it may include errors or inaccuracies. To the maximum extent permitted by law, PhysicianEstate disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses. You should consult with an attorney or other professional to determine what may be best for your individual needs. Your use of the information on the website or materials linked from the Web is at your own risk. 

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Authored by Harsha Moole, M.D., MBBS

Hey there! I hope you enjoyed reading this blog. PhysicianEstate is my brain child and passion project. I run this platform to empower entrepreneurially motivated physicians to make financially educated investment decisions and discuss asset protection strategies. Lots of important but free content here and here! If you have any questions or if you are interested in partnering with me, let’s connect! hmoole@physicianestate.com

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