Doctor Investing: How To Become a Millionaire in Real Estate

Research shows that 90% of millionaires do something specific to create wealth….invest in real estate.

Even though doctors get a late start with tremendous debt, they still have an easier time reaching millionaire status due to a six-figure income. 

So good news, if you’re a doctor or other high-income earner, then the likelihood of becoming a millionaire is much higher than the average Joe. 

And you can accomplish this MUCH faster by putting your money in real estate investments. But you must understand that having success takes hard work and self-education (as with anything in life). Also, real estate investing has risks associated with it similar to investing in other assets. 

But, if approached the right way, it can be a tremendous source to build wealth if you take the time to educate yourself about the process and the best ways to obtain great returns.

Becoming an overnight success is not likely such as what’s pitched on late night TV, “Become a millionaire with no money down in less than a year!!). I don’t think so. 

But the reality exists: Real estate is a powerful wealth building tool that has made (and continues to make) thousands of people millionaires.

Knowledge is the key to using real estate as a vehicle for wealth building.

In a nutshell, I’ve found the secret formula passed on from successful investors: Capitalize on property in areas with high growth which can provide a steady cash flow and long term appreciation.

That’s it. Not too difficult.

But let’s also not forget about the incredible tax benefits (i.e. depreciation) which allows you to keep more of the money you make.

These advantages make becoming a millionaire in real estate easier than doing so with any other type of investment.

Now the question remains, “Are you ready to become a real estate millionaire?”

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5 Ways – How To Become a Millionaire in Real Estate

#1 Break the debt cycle

The Debt Free Dr. would be doing you a disservice if debt repayment wasn’t the first step discussed. I can’t begin to tell you how many doctors in their 30’s and 40’s have little money to invest due to their out of control spending.

Nothing keeps you in the poor house your entire career than consumer debt focused on buying items that depreciate (liabilities) such as:

• new cars
• cell phones
• electronics
• boats
• ATVs

I’m not sure who quoted it, but I once heard the phrase that, “You can have ANYTHING you want in life, just NOT everything.”

Too many doctors finish training and think their newfound income boost entitles them to go out and buy any “want” they desire. Unfortunately, this is a great way to stay broke until they change their spending habits. 

At least once a month, I’ll encourage a new Passive Investor Circle member to put off investing in real estate until they clear up their mounds of consumer debt. Why? Because if they don’t do it the first 3-5 years after training, then they’ll drag it with them their entire career. 

#2 Set goals

Colonel Hannibal Smith on the 80’s show “The A-Team” was known for saying, “I love it when a plan comes together.”

There’s nothing like developing a plan and setting goals to help you hit the target you’re aiming for. This includes both short and long term goals. 

Without one in place, you’ll never know what you’re working toward.

Many new Passive Investor Circle members either don’t have real estate goals or if they do, they’re very vague.

Examples I’ve heard are: “I want to get into real estate because other doctors in my area are too.” or “I want some passive income because it seems like a good idea.”

When developing real estate goals, try to be specific as possible.

Here’s a few examples to get your started:

• What exactly you want to accomplish
• Why you want it
• When you reach your goals, how will that change your life?
• A set date to reaching your goals
• How you’re going to accomplish it

#3 Self-education

I can’t stress this step enough to newbie investors. Becoming a successful real estate investor depends on your learning curve.

Never stop learning. Focus on reading other blogs, books and listening to podcasts.

Also, consider connecting with other like-minded investors at events/seminars. 

Focus on learning about each different type of investment and especially the 4 wealth generators we’ve discussed in the past which are:

a. Cash flow

Cash flow is the income leftover after all of the expenses have been paid. It’s the money you can pocket at the end of the day while owning the property. 

Cash flow is something that author Robert Kiyosaki talks about quite frequently in his books such as:

• Rich Dad Poor Dad
• The CashFlow Quadrant

“Buying or building assets that deliver cash flow is putting your money to work for you. High-paying jobs mean two things: you’re working for money and the taxes you pay will probably increase.” – Robert Kiyosaki

Here’s a couple of basic formulas you should know regarding cash flow from rental property:

• Rental income – expenses = Net Operating Income (NOI)
• NOI – debt – long-term repairs = Cash Flow

When you invest properly in a correctly managed apartment building or complex, it produces a positive cash flow in excess of expenses.

• Positive cash flow = a surplus
• Negative cash flow = a deficit

Example: If you’re invested in an apartment syndication that collects $10,000 a month and expenses are $6,000, then your cash flow is $4,000 each month.

b. Tax benefits

The tax code was written to not only inform us how to pay taxes but also how to receive benefits and tax breaks too.

The U.S government encourages citizens to start businesses in order to employ others which benefits them as they now have more tax payers available to collect from.

They also love it when we purchase real estate and give tremendous tax breaks such as depreciation and 1031 exchanges which help to build greater wealth.

c. Loan paydown

When investing passively in syndications, the sponsors of each project involved typically use debt to finance them.

This is similar to using mortgage payments to finance your primary residence except for one main difference: You’re the one responsible for paying off your mortgage. 

But in a multifamily investment, the tenants pay if off for you. This allows you to build wealth automatically and who wouldn’t like that?

d. Appreciation

Appreciation is the increase in the value of an investment property over time. It’s an important variable which plays a key role in defining the profit from a property for a real estate investor.

While appreciation is not always guaranteed (think back to 2008 crash), historically real estate has always increased averaging 3% per year over the past century.

Another type of appreciation that can come into play is known as “forced appreciation,” the concept of increasing the value by physically improving the property. This is the main business model of the syndication investments we invest in (known as value-add property).

Forced appreciation is caused by improvements made such as:

• painting
• landscaping
• remodeling
• parking lot repairs/replacements
• addition of new facilities (i.e. swimming pool, playground, etc.)
• addition of new services such as a laundry room, covered parking, internet, cable/satellite, etc.

By making these improvements, rent can gradually be raised over the normal 5-6 year hold period  before the sponsor sells them usually for a higher price than originally paid.

#4 Avoid procrastination

A few months ago, I spoke with a physician that was interested in real estate. After speaking with him for five minutes, I was sure that he was one of the many successful real estate investors I frequently speak with.

Honestly, he seemed to know as much to own several properties himself but he had yet to start investing. 

He was the type that overanalyzed everything and suffered from “analysis paralysis“. 

He wasn’t the first nor will he be the last that also suffers from this as well. He failed before he ever got started because he NEVER took action.

Once you have your plan in place and you’ve educated yourself then it’s time to start looking at properties to invest in.

I get that it’s easy to initially get stuck and hung up on each and every detail. But most of these aren’t going to move you any closer to investing in your first rental property either. 

#5 Stick with what you know and keep growing

If your plan is to become a millionaire with real estate, then you’ll have to focus on investing in several properties with multiple units. 

Real estate mogul Grant Cardone was asked how to become a millionaire in real estate.

He answered, “All real estate is not created equally.  Anyone who thinks they can become a millionaire simply by single-family residential properties will be greatly disappointed. Do the math; how many $50,000 homes do you think you would have to buy to make $1,000,000?”

Cardone feels that the number of units is the most important number in real estate. 

For example, he states it’s much easier to buy one property where there are 32 units instead of a single family home. Then if you increase the rent by $125 and you add $1 million in value, you can obtain extra cash flow while you wait.

In our experience, after investing in a passive syndication deal each year (or more), it makes buying additional rental properties easier due to the increase in cash flow. Now granted this starts out slowly but soon builds momentum similar to the debt snowball…except we’re now going in a different direction. 

The larger your real estate portfolio is, the better protected you are from the losses you’ll experience on certain deals.

Bottom Line

Even though it’s not easy and won’t happen over night, becoming a millionaire in real estate is an obtainable goal especially for high-income earners.

As previously stated, the majority of millionaires have built their wealth with one common thread, real estate. 

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