What would it look like if you bought one investment property a year?
There is a physician I know, Dr. C, who is considered a very savvy real estate investor. Everyone thinks he lives the good life, and he’s at the age that most doctors start thinking about retirement. In one of our conversations, he informed me that he had technically retired years ago but had continued working simply because he enjoyed it. What doctor wouldn’t want that? So of course I asked how he accomplished this.
He readily admitted that he’s not particularly savvy or smart when it comes to investing. He just listened to the advice of a mentor: "Buy one real estate investment property a year."
I tried to nail down some specifics (ie. condo, house, or apartment building). He simply stated, “It doesn’t really matter, whatever you can reasonably afford, just do it.”
So I went home to see what that might look like and tried to model it out on paper.
Here’s my disclaimer: this is my N=1, my one simplified example.
This might be a good time to quickly address the oft-debated
simple vs. complex model
argument. I think the answer is that no one can definitively state which model truly has a better predictive value. This quote by a well-known British statistician, George Box, sums it up perfectly, "All models are wrong, but some are useful."
I believe this pertains to both real estate and stock market models. However, what we do know is that
simpler models are easier to apply and to take action on
, mostly because you feel you can replicate it.
With that in mind, here is what it might look like if you tried to buy a rental property every
year for 10 years. Here are the
of this model:
taken into account in this model:
After all that, here it is. If the details become excessive, skip below for the summary.
Summary after 10 years:
By year 20, equity in your properties would be 2.8 million and your cash flow would be $172,800 a year.
At this point, I think it’s pretty safe to say that working is relatively optional and total retirement is a possibility. That's some serious passive income, doctors! Imagine starting this when you’re in your early to mid 30’s when you first became an attending.
So did I follow this advice?
Find out more and see the fully detailed analysis here.