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Let’s Get “Real”: Why Real Estate Should Be A Pillar Of Your Financial Portfolio

Articles, Business Life

The real estate industry might be very different from the dental industry, but I truly believe it should be a part of every dentist’s financial portfolio.  The returns are just too good to pass up, and most times with a good team, it is able to run itself with minimal input or time. My rental portfolio of 54 units takes 2 hours a month to meet with the property manager and manage. Of course, when I am managing full remodels, those take significantly more time, but that’s a more involved investor and not applicable to most who read this. 

The path of dentistry often draws high achievers who are always hungry to grow—both personally and professionally.  When it comes to the prospect of creating a profitable secondary income stream using real estate, the majority of us are interested—but not without some hesitation. Maybe you resonate as this as someone who wants to dive into the real estate game but doesn’t want to make that leap blindly without a sense of security or know-how.

I’m here to give you some insider information on real estate investing on some common themes I get asked about from dentists.

1. “Dentistry is hard enough, why do I need another job?”

      Dentistry is tough. It can be tiring, mentally exhausting, and literally backbreaking. However, if you can do dentistry, you can do real estate. We go through a grueling process to become a dentist and completing that rite of passage means you have the ability to handle easily just about any stress real estate can throw at you.  While you can’t drill into a tooth without a dental degree, success in real estate only requires the willingness to learn and act. It starts by reading the right books (I recommend the books by Brandon Turner), connecting with the right network, being savvy to the right strategies, joining the right social media group, attending the right seminars, etc. Most importantly though, it takes action. Most dentists I’ve talked to fall into the category of wanting to invest followed up by learning how to invest… and then never pulling the trigger.  Taking that leap of faith the first time is the hardest, and the most crucial. For me, buying a house is just like seeing an implant or crown prep on the schedule. I’m excited, but not afraid. After taking that first step, the next becomes easier, and the next becomes even easier, and so on. Whether it is dentistry or real estate, having done reps is your best source of confidence. Believe it or not, there has been a time I forgot I was buying a house and had to rush to the title company late to make sure I did end up buying the house! Buying another property has become enough of a non-event, I can even forget that I am doing it. And if you do enough real estate investing, it will happen to you too, just like forgetting you’re doing a crown or an implant that day.

So why should you invest in real estate? Simply put, you can scale real estate to make money without you being in the business. Contrary to popular belief, you don’t have to learn how to lease your houses or how to unclog a toilet. The right system and the correct property manager will make sure that all you see and do is exactly what you want to do.

Dentistry is scalable in the same way. In fact, dentistry will make you even more money if you can scale it to the point you are not in the business. Did a real estate guy just say you can make more money in dentistry?  Absolutely I did. With general practices selling at a 7-9x EBITDA, taking home $500K to $1 million as a dentist means your practice may be worth upwards of $5 million! But (and it’s an important but) scaling dentistry is exponentially more difficult than real estate. Dealing with staffing issues, credentialing and insurances, opinionated dentists on something as silly as only wanting to use a diamond 330 bur vs a carbide 330 bur, the list goes on. Most of you scaling your practice have already learned to deal with these and even expect them.

On the other hand, when you scale your real estate empire, your job actually becomes easier. So what if you had a unit with an AC system go out? You have 10 other houses to cover that bill. When you only have 1 house, if it goes vacant, you have 100% vacancy. But when you have 10 houses, and 1 goes vacant, you don’t stress because you are still getting 90% of your overall rent. In this way, scaling a real estate empire is not only easier than scaling a dental empire, but it actually gets easier the bigger you get. The inevitable problems are lessened because you have scaled.  Compare staffing problems if you scaled a dental business. If you have multiple offices, you probably have dealt with headache and migraine-inducing staffing issues over the last few years. To top it off, your overall costs have skyrocketed and insurances are even lowering reimbursements. But you know what hasn’t changed, even with people not working as much and demanding more money? The fact that they need to live in a house and need a roof over their head. In fact, there are really only 3 necessities in life: Food, Water, and Shelter. Food has incredibly low margins, I have no idea how to invest in water, which leaves shelter as the last necessity. I like to invest in something that people require, not want. It makes Recession/Amazon/Internet/War proof.

Ultimately, the beauty of real estate is you do not have to directly be involved to make money. Imagine if you made enough money to match your dental income through real estate, what kind of freedom would you have? You could change your practice to implant or cosmetics only, you could drop insurances, you could cut days down and spend more time with your family, you could practice exactly the way you have wanted to in your dreams. You could do all of this with no lifestyle change. Or if you’re like me, you can decide that you want to travel the world and no longer want to hold the handpiece. I would much rather try new foods, explore my hobbies (I’m an avid foodie, traveler, and adventure junkie), and learn new skills that may be completely unnecessary but could be fun like pottery making. These things bring me more happiness than working in a moist cramped cave of a mouth explaining for the millionth time why flossing is beneficial.

Whether you like dentistry or not, the point of real estate is freedom. Freedom to do what you want, with whom you want, how you want, and where you want. And once you get the right setup, it doesn’t require much action—a relatively semi-passive income is effectively created. So instead of asking yourself why you should get into real estate, ask yourself what kind of life are you giving up because you are not in real estate.

2. “How fast can I make money?”

If you are asking this, you have the wrong mindset. As a dentist, you know that success doesn’t happen overnight. Just like managing a dental practice, a truly successful real estate approach requires a years-long strategy there’s no reliable winning in the short term. While there are times that markets are being sent to the moon, so to speak, real estate has—historically—always been a “slow and steady” kind of deal.

So, know this: If you’re trying to just get in and get out with a wad of money, then odds are that you’re better off going to Vegas. Keep the big picture in mind, because real estate requires a commitment. However, that commitment is extremely well rewarded.

3. “How do I make money in Real Estate?”

There are actually four ways to make money in real estate: cash flow, mortgage paydown, depreciation (tax benefits), and appreciation. While I always recommend you focus on cash flow, the benefits of the other 3 ways can not be underestimated. In the past 2 to 3 years, housing prices have been on a rip and have gone up in value by 30 to 50%. Imagine if you had 10 houses that all appreciated by 30%. You likely will have gained more net worth just via appreciation than working as a dentist for the full year.  And unlike the stock market, there are two major advantages. The first is tangibility: unlike an investment in the stock market or funding a business idea, you can actually touch real estate—it’s a physical property. The second is leverage: you’re only putting 0 20% for a downpayment, but you’re getting 100% of the returns. If a house goes up in value and you only invested 20%, the bank doesn’t take 80% of it—it’s all yours. To be fair, the biggest negative compared to the stock market is that real estate investing is a much more involved process. There are no set-it-and-forget-it index funds. But the pros far
outweigh the cons.

4. “What kind of legacy can I create?”

Real estate is something you can handle, while also being a full-time dentist. Sure, it requires grit, but that isn’t something too new for most of us dental professionals. As a dentist, every day is a delicate dance between managing multiple patient appointments, addressing unexpected dental emergencies, and ensuring the smooth operation of your team amidst the ever-present chaos of running a busy dental practice.  So if you know you can handle it, how far can you take it? That’s totally up to you! For me, my financial freedom is secured. I no longer need to work at the office, and in fact, I am selling my office. I am now considering what I can do to pass my hard work on to future generations. I have set up such a huge trampoline that my successors can soar as high as they want and literally do whatever they want. With a few guiding principles (namely, hold onto assets and don’t sell them!), my heirs can do whatever they fancy. What if someone wants to be an artist, but there is no money to be made in oil paintings? Well with their financial backing, they can be a true renaissance man (or woman!) and follow their passions.  What kind of accomplishment or benefit can they provide to humanity, given that money is no longer a factor, and they are doing what they were put on this earth to do? I also want to show dentists how they can achieve financial freedom in ten years or less! That’s why I have a Facebook group called Real Estate Investment for Dentists and hold an annual live conference in September. I want to not only enjoy what I’ve worked for but also show you and others how they too can achieve their financial freedom. And ultimately, that’s the legacy I want to have – one of empowering my heirs and my peers. If you had the true freedom to do what you want, what kind of legacy would you like to leave behind?

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