I continue to iterate as I consider my future as a real estate investor.
In the culmination of a 3-part series, I'd concluded that a viable next step after I depart medicine would be directly investing in real estate. In that post, I laid out my careful plan: invest in and self-manage multifamily properties, obtain Real Estate Professional Status, claim bonus depreciation, shelter our W2 income and perform Roth conversions.
I even stress tested the idea with my mirror friend, a trusted mentor who poked and prodded to find weak spots in my argument. He concluded that my plan appeared to be sound.
What works for an individual, however, does not always work for a family.
When I laid out my careful plan to the mirror that matters most - my wife - she raised some very reasonable concerns. The most resonant was that I would be exchanging one job for another with comparable hours (750 a year) if I intended to obtain Real Estate Professional Status.
If our objective in pursuing financial independence was to stop exchanging time for money, why would I put myself in a position to continue this exchange?
Additional concerns revolved around our longstanding plans for extended slow travel, during summers when the kids are out of school and additionally during our early empty nest years if health permits.
If I needed to target a set number of hours per day to demonstrate material involvement in managing the properties, how would I maintain the schedule flexibility so essential to travel? Might my requirements restrict our ability to travel much as my career in medicine had done for so many years? Worse, would I travel only to work remotely in such a manner that I was not present for my family while we were away?
Our discussion gave me significant food for thought, and my wife was extremely patient. I am not the easiest person to dissuade from a good deal. In fact, the optimizer in me who wants bragging rights was excited to pull of this feat simply because it could be done.
I decided to bounce the idea off another friend with a similar enthusiasm for real estate, fellow blogger The Darwinian Doctor. We'd met for coffee over a year ago to discuss ideas for our budding ambitions to incorporate real estate into our plans.
Being earlier in his career (and acknowledging his costlier lifestyle), he had enrolled in a real estate course designed for physicians and was plowing ahead in acquiring a real estate empire of cash-flowing, out-of-state rental properties.
Since we'd been newbies at comparable stages at our last get-together, and he was now more seasoned than I, I sought his advice on my idea. With surgical clarity, he cut to the chase: You could achieve REPS status, he told me, but do you need to in order to reach your goals?
He and my wife were right. I'd almost let the possible sideline me from the important.
Comments 6
It’s likely the time invested to make this a going business won’t be much different whether you’re certified or not. Businesses like this do not run themselves. When I picked up my second daughter in China I was day trading options. My tact was to watch the market for half an hour let the market trade and then close out my positions. China is 13 hours ahead which meant I HAD to be up trading at least till midnight and then get up early to close out my positions and analyze tomorrows bets, while attending to the duties of family and travel in a foreign country with a family of 4. Trading paid for the trips and the adoptions, but I didn’t get much sleep.
Author
Sounds exhausting. What I’m hoping is that I’ll be able to pay for professional property management, but learn by managing the managers what does and does not work. Then if at some later point it becomes an interest I want to spend more time on, I retain that prerogative. We’ll see how it turns out…
Thanks for the shoutout, CD. Glad our conversation was helpful.
I really hear you about not being able to pass up a good deal. I’m that guy who buys an ugly shirt because it’s 80% off.
I can’t wait to see where your real estate journey takes you!
Author
TDD,
You continue to inspire the rookie in me to take it up a notch, although I’ll be doing that far less aggressively to ensure I don’t leave my family picking up the time tab for this new interest.
As for your ugly discount shirt, I laughed aloud with recognition. To this day, my dad owns a pair of lime green golf pants (he’s never golfed in his life) he once purchased because it was a designer brand at a rock bottom price, plus an additional discount. He looked like a gigolo for widows in Boca Raton. Maybe you and he can put out a charity calendar dressed in your favorite deals?
Appreciate your being there as a sounding board and generous fellow finance nerd, especially for being so gracious when I make numerous faux pas that betrays my ignorance of fundamental principles (i.e., depreciation and recapture).
CD
Are you still planning on buying real estate without professional status? You can get a property manager or further optimize your system without spending 750 hours a year.
Author
Hey Rainbows,
At present that’s the plan – forget about REPS but still invest locally in a multi-family property, hire a property manager, and learn from the process to see if it would be something that I could enjoy going forward. A light touch initially while my kids are at home and we have the health and will to travel, with increasing involvement as I become more of a local homebody over the years.
Which is, admittedly, an absurd plan since I cannot know the person I’ll become in five year’s time.
Will keep you posted on the experience,
CD