Summary: The goal of our Investor Spotlight series is to provide you with stories of fellow physicians on their journey towards Fast FIRE through real estate investing. In this series, we interview a range of investors from those who are just starting to those who already own large portfolios. We hope that these stories will inspire you to aim big and take your first steps to achieve Fast FIRE. In this month’s Investor Spotlight, a primary care doctor shares how she and her husband are taking real estate investing to a whole new level through land development.
In our Investor Spotlight series, we interview a range of investors, from those who are just starting out to those who already own large portfolios.
Through this process, our hope is that you will gain applicable insights and inspiration that you can use on your own journey to Fast FIRE through real estate investing.
Today’s Investor Spotlight features Thuy and her husband, Jesse. Thuy is a primary care doctor and Jesse is a stay-at-home dad. They’ve been investing since the end of Thuy’s intern year of residency in 2011, and they currently own three doors in Seattle. Thuy and Jesse are currently using a unique investment strategy of investing in land development in Seattle upzones.
As some of you will notice, Thuy and Jesse’s investment story is a little different than ones we usually feature about investors who are focusing on buying B/C class cashflowing multifamily properties. There are three main points we hope that you’ll take away from this very-different investor spotlight.
First, we wanted to provide you with an example of how physicians and other investors often get into investing in real estate by purchasing a primary residence. We see that many of our readers have entered the world of investing in real estate using this pathway, and we hope that you’ll be able to see how Thuy and Jesse actually leveraged their first property by taking money out of it and then using those funds to start building their portfolio. We know some of you are in a very similar position as Thuy and Jesse were in, so we want to get you to start thinking about the different ways you can leverage your current assets to grow your real estate portfolio. The key is to know when to sell vs cash-out-refinance vs get a HELOC on a property, something we’ll cover in a future post.
The second thing we wanted our readers to get from this post is to see what an interesting niche Thuy and Jesse have chosen/created for investing in real estate. Though Kenji and I believe that investing in B/C class multifamily cashflowing properties is lowest risk way to build a stable source of lifetime income, we recognize that in practice people invest in real estate lots of different ways, whether it’s using their skills to expand into niches such as AirBNB, supported living or even real estate development, like Thuy and Jesse. By introducing Thuy and Jesse’s story, we wanted our readers to be able to see an example of the really creative ways that some fellow investors are planning to build up their real estate portfolios, one property at a time.
The final take away we believe readers can get out of hearing Thuy and Jesse’s story is the importance of having multiple exit strategies. You’ll note that Thuy and Jesse have multiple ways to sell their more recent purchase including selling it to developers or tearing it down and building. Similar to Thuy and Jesse, Kenji and I always have a back up plan for our properties. Whether it’s being able to condo a property, subdivide off a piece of land and sell it or it’s simply being able to use a property as a regular rental instead of being dependent on supportive living to pay the mortgage, we always look for an alternative way to be able to walk away.
In addition to the three points we’ve chosen to highlight, Thuy shares several other really useful nuggets of teaching over the course of her interview. Read on to hear her story and to learn about to turn a primary residence into what I’m sure will be an even more successful real estate investment business in the future.
How did you and your husband get interested in real estate investing in the first place?
It was something that I’ve personally always been interested in. I just never had the capital. I watched the market rise and fall in 2008. My family bought some rental properties around that time. I was never able to because I was in medical school. Once I got out, I started looking at properties. I bought at the bottom of the market and it grew from there.
Once you decided to pursue real estate investing, how did you get started? What was your first purchase?
My first purchase was the house that I lived in during residency. When I started I had 10% to put down. Towards the end of my residency, I was paying less on my mortgage than my colleagues were paying in rent. That was a big incentive to keep going. After residency, I volunteered abroad for seven months. The rental income from this property supported our living expenses overseas.
After coming back to the United States and starting a regular job, I was able to get equity out of this first home to use as a down payment towards our second home. Due to the Seattle housing boom, I was able to rent that first house at over 50% annual cash-on-cash profits. I sold that house last month with a net profit close to $300,000. That’s not counting the passive rental income we’ve made over the years on it. This was by far our best investment to date.
What kind of resources did you initially rely on to educate yourself? Mentors, books, meet-ups?
I went to a first-time home-buyers class. It was very useful in terms of teaching me about credit and what to look for in a house. I also did a lot of self-education. I looked at a lot of listings in the area and also talked to my sister, who has the same interests.
What type of properties make up your portfolio?
I initially bought a townhouse, then I bought another townhouse. They were purchased as family residences. They could be kept as a rental or sold for profit because of the location. Then I moved to single-family homes, because I wanted to use them for land development later on.
How are you balancing your real estate investing with your career(s) and your clinical work?
Unfortunately, right now they’re not that balanced. The goal is to work less clinical hours, so I have more time to invest in real estate.
How did you balance investing with student loans? Did you wait until after you paid them off or did you start investing while you still had loans?
I started investing while I still had loans. The interest rate at that time was not as high, so it wasn’t as hard to do both. I didn’t contribute as much to my retirement savings plans, though. I contributed the minimal until I could purchase the next property. Fortunately, I went to a state medical school and did not owe as much student loans as my colleagues, so I was able to pay them off within a couple of years of full-time work.
What things does your husband do that make this journey possible? How do you divide up work and responsibilities? Any insights as to how a couple can successfully work together in growing a real estate business?
My husband only recently got involved. It’s made it easier for me because he takes on most of the responsibility with childcare, by being a stay at home dad. Once he got involved with real estate investing, the deal was that I would find the properties, and he would manage them.
The next step is development. He has a lot more bandwidth and a better skill set for organizing and working with contractors. He’s going to be the general contractor in charge of contacting landowners and managing project constructions.
Can you tell us more about the decision to get into land development? It sounds very different than investing in properties that have already been built.
It’s very different. This was prompted by my sister, who was flipping houses and investing. She had a lot of contacts in that world telling her that development is a lot more lucrative. Once she got enough cashflow, she started looking into development. I followed her example once I had the money.
In Seattle, there’s this big zoning upgrade, which was meant to address our affordable housing problem. The proposal was to increase housing density in the city, with developers contributing to a general housing affordability fund, in exchange for upzoning. This proposal passed several months ago. Over a year before the legislation passed, the neighborhoods that would be upzoned were published in their proposal. I based my purchases on this proposed map.
My current project is to demolish one single-family rental to build a total of five modern homes: three town homes and two stand-alone homes. My sister also bought a couple of properties in that upzone, so I’m learning from her as well.
The backup plan, if we can’t find financing for this construction, is that we can still sell to developers once the permits are obtained for a large profit margin.
Can you tell us about any difficulties or failures you’ve had in investing? What has been your biggest challenge? Any big learning points you’ve taken from these experiences that you can share with us?
I bought outside the proposed upzone because I was impatient, so that property is collecting just enough to cover a mortgage, but it’s not cashflowing. It’s just hanging out there until the zone change. I don’t know what I’m going to do with it.
I’ve also experienced a management issue: one of the town homes had a homeowners association. There were fees, but they weren’t that much–mostly, the board just had a lot of communications and restrictions that limited what I could do with the property. I still made money when I sold it, but one of the reasons I wanted to sell it fast was to get rid of that headache.
How about any big successes? Anything you learned from these good outcomes that you can share that might help other investors?
My method may not apply to everyone. I’m fairly risk-tolerant and do not invest in the conventional sense.
I happened to be well-situated to take advantage of the Seattle housing market boom. But I bought at the risk of paying off my loans and retirement. Luckily, though I had to delay contributing to my retirement by two to three years, I was still able to pay off my loans within a relatively short amount of time.
I did more of a speculation investment route, but it paid off pretty well. I had the security of living in a changing city that’s increasing in density, so even if the individual properties didn’t do well as I thought, it still wasn’t going to crash, and either way, I could still rent it out and cover my expenses.
I sold two properties to cash out my equity, and that equity will be put into the development project for next year.
How has investing in real estate affected your lives? The good and the bad.
It hasn’t done much to negatively affect us. It’s provided us with a passive income. We were almost living mortgage-free before I sold the rentals, which was a nice step towards financial freedom.
Once my husband got involved, we could talk about it together, and it became a bonding experience, a way to plan for the future. He’s my business partner, so now we run things by each other. We’re learning how to set boundaries and be conscious of time management. We try not to talk about work too much at home.
Once this development project happens, we should be financially free enough that I can work less. We can travel more and maybe volunteer. We’ll have the freedom to choose what we do, so this has benefited us quite a bit.
So right now I’m not at that point of financial independence. However, I’m already at a point where I’m secure enough that I can quit my job in the next few months and move to a job that doesn’t stress me out as much.
Where are you now in your journey? Do you still want to grow? What are your goals of where you want to be in one year, five years or 10 years from now?
I’m still in the growing stage, so the goal in one to two years is to be financially independent. In five years I want to work less, and then in 10 years I’m not sure. Maybe I will want to be in more of a “giving back” stage. We have the goal of living in the middle of Africa, so I can do my clinical work there.
Any final words of advice for doctors interested in starting in real estate?
Just do it. Just start somewhere, anywhere, because the great thing about doctors is that yes, we have lots of debt and we get behind in savings, but we have such a high income and job security that it’s really easy to leverage that to get loans. People love giving doctors loans. Just pick the right projects for yourself. There’s so much opportunity!
The first step is just to take the first step, there’s no good time to start. Just start.
Author’s note:
We are grateful to Thuy and Jesse for sharing their real estate investment story with us. Hopefully this investor spotlight has shown some of you how a couple, just like you, can achieve such big results with focus, working as a team and leveraging assets you already had in place. If you’d like to reach out to them, please feel free to email us at leti@semiretiredmd.com, and we can forward your email to them.
