When it comes to building wealth, the process takes time. But what if it doesn’t have to take as long as you might expect? Though it may take decades to realize financial freedom from your stock market investments, you can grow your wealth much faster with real estate.
In this episode, I sat down with cash flowing real estate expert Dr. Letizia Alto to learn how women physicians can incorporate real estate into their financial plans. Letizia busts common myths and shares strategies for growing your real estate cash flow. Plus, she unpacks the unparalleled tax benefits that come from Real Estate Professional Status (REPS).
One of the most important things to understand as a physician is the fact that you need to cultivate multiple income streams. Letizia emphasizes that life in general and our profession specifically can be unpredictable. While you may be earning a good income now, building multiple income streams into your portfolio can help you weather any financial storm.
Cash flowing rentals are one way to do that. A cash flowing rental is a property that generates the landlord a steady income each month. These properties might be single-family dwellings and they might also be multi-family properties. By investing in multi-family properties, you are better able to withstand vacancies. In either case, though, you can generate income much more passively than you can as a physician.
As you start to grow your portfolio and possibly even scale back your physician hours, you may be eligible for Real Estate Professional Status. To obtain this status, real estate has to be your primary profession. You also have to clock 750 hours a year on real estate, with at least 500 of those hours being work on your own real estate portfolio. With this status, you can then use your paper losses in real estate to shelter the income you earn as a physician. Even without the Real Estate Professional Status, cash flowing rentals can be very valuable because that cash flow income is tax-free.
When your real estate portfolio grows, your income and your tax benefits grow as well. This is one way that you can invite more financial security into your life on the path to financial freedom.
In this episode, we also explore:
- The key differences between market appreciation and cash flow real estate
- How property managers can make direct real estate much more passive
- A comparison between the relative risk of being a physician and owning real estate
- How Letizia has been tax-free for five years
- Examples of how Real Estate Professional Status can shelter your income
- How to get started with cash flowing rentals with limited funds
- When the BRRRR strategy might be right for you
- Overlooked strategies to find investment funding
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Featured on the episode:
- Learn more about Semi-Retired MD and enroll in their free video mini-course here.
- Check out this guide to understand how women can use real estate to achieve financial independence.
- Understand how much money you need to start investing in active real estate with the breakdown in this post.
- Learn more about how to manage your mindset with Wealthy Mom MD.
Welcome to The Wealthy Mom MD Podcast—a podcast for women physicians who want to learn how to live a wealthy life. In this podcast, you will learn how to make money work for you, how you can have more of it, and learn the tools to empower you to live a life on purpose. Get ready to uplevel your money and your life. I'm your host, Dr. Bonnie Koo.
Welcome back to another episode. Today, I have a special guest. I have Dr. Letizia Alto, a Semi-Retired MD to discuss all things direct real estate. She and her husband, Dr. Kenji Asukua run Semi-Retired MD, a website/blog, and they also have an amazing course called Zero to Freedom, where they teach physicians like you and I how to create financial freedom by investing in cash flowing rentals.
Now, as you know, there are many ways to invest in real estate and they teach a specific method to buy real estate that only makes sense if the numbers make sense. Specifically, if it cash flows. They also teach something called attaining Real Estate Professional Tax Status, which is a powerful, powerful way to supercharge growing wealth by lowering taxes. So listen on as we hear more about real estate, if it's something that you should consider as well.
- BONNIE KOO: Welcome Dr. Letizia Alto, welcome to the show.
- LETIZIA ALTO: Thanks for having me Bonnie. I'm excited to spend some time with you.
BONINE: Yeah. So today we're talking about real estate and so for those in my audience who don't know who you are, I just thought you could introduce yourself briefly and kind of give your story on how you and Kenji got started in real estate.
LETIZIA: Sure. So I'm Letizia Alto. I'm a hospitalist currently half time. And then I also invest in real estate, direct ownership of castling rentals. And then I also blog at Semi-Retired MD. And so as Bonnie alluded to, my husband, Kenji and I both started investing in cash flowing rentals back in 2015, and the story is actually that Kenji had been investing in real estate since 2001, but more doing appreciation plays, which we now consider gambling.
And then when I met him, he actually had pieces of raw land and a couple of condos in Seattle that he hadn't been able to get rid of after the 2008 crash, and we didn't actually start investing together for several years. And what happened was we actually were on this vacation, and I just happened to read Rich Dad, Poor Dad, which totally changed my mindset and made me realize that I really wanted to be an investor, not be a physician who is trading time for money all the time and not have any options.
I wanted to have the option to create another type of income, another, like, something that wasn't directly trading time money. So something that was more passive. So Kenji and I actually ended up reading Rich Dad Poor Dad together and deciding on that trip that we were going to be real estate investors, and we're going to put all of our money into it and all of our energy.
BONNIE: I love that. I love Rich Dad Poor Dad. And actually the concept of having other streams of income that aren't tied to your job or trading time for money is something I talk about in an earlier episode. And that kind of goes perfect with why we're talking about real estate because I think most of us are kind of conditioned to just think, “Oh, we're going to work until we die.” And some of us do, and that's totally fine. And then a lot of people just do stock market investing, but a lot of people don't think about anything else. And in some ways I feel like, you know, for the most part physicians haven't had to really think about anything else because their jobs were so stable, it paid very well, and the stock market always historically did well. So I think for most doctors, it was kind of fine to not do anything else.
I feel like nowadays though, it kind behooves us, not just physicians, but other high income professionals to also consider real estate. And so that's why I wanted to have you on the show, so that people can see that it's realistic. It's something people can learn and be successful at. Because I think a lot of people feel scared. At least that's how I felt about real estate. So that's why I'm so glad that you guys are here cause I think you guys make it really accessible.
LETIZIA: Yeah, I think you're right. A lot of people see real estate as a black box, but it's really not, you know. It's like anything. When you initially start it, it seems like there's so much information, and it's a little bit overwhelming. But, you know, a month or two later, you look back and you see that it really wasn't that hard.
And especially after you put in your first couple offers, it's like you get it. And oftentimes my students, I mean, sure, there's still more they can learn, but after they bought a property or two, they are 90% there because it's not going to med school. You know, it's much, much easier. And I think that's interesting. Also what you said about having multiple sources of income. I think before--I don't know if you agree with this--I think before physicians were almost like upper-class in a way.
And I think, in a way, we are more middle class now, and in that middle class, I think we have more security and we have higher paying jobs. But in some ways, life has just gotten to the point that we have to think about not just having one source of income. We have to think about multiple sources all the time even when we first start out. I wasn't like this at all, you know, seven or eight years ago. You know, I thought I’m going to be a doctor forever. I'm going to work until I retire and put my money in the stock market. That's exactly how I was. So, I think, you know the norm.
But I look at it as having a table, and you have multiple legs on that table and those are your sources of income. And so even within clinical medicine now I have, you know, my hospitalist income, but then I also have created my way to get telemedicine income. So now I have two legs on my table just in clinical medicine. And then you can have a book as one leg or you can have a blog as the leg or you can have real estate as like the more legs. If you have one or two that get taken out, you're still okay. And especially with the downturn, it's so important to have multiple legs.
BONNIE: Yeah. I give a very similar analogy. I like the table one. Yeah. I talk about having a makeshift building with four columns, but I like the table analogy better because you can stuff a lot more columns under a table. I think that's a great point.
Yeah, I understood what you're saying about physicians being sort of not upper-class anymore. I think it's also probably because most of us are employees now. Before pretty much every physician, except for certain specialties, which are only in the hospital, we all opened our own shop, and we were all business owners too, right? But now, most people graduating now just become employees. There's nothing wrong with that, but it's just a very different mentality, right?
LETIZIA: You're right. Yeah. Maybe that's the big difference, but I think it's definitely changed in the last 10 or 15 years for physicians.
BONNIE: Yeah, so that brings us to a question that I hear a lot. Why should a physician even consider real estate? Like, why bother? Why do this versus some other ways to make money?
LETIZIA: Yeah, that's a great question, and I can tell you why. I find real estate so much more interesting. But also it's really a value of time to money and risk for me. One way I kind of think about decision making is I literally almost think of a chart, and it's like, How much risk is this going to be to me? And so my comparison, of course, is physician income, but then also startups because I worked in a couple startups. So, for me, the startup has the highest risk, right? And being a physician actually has some risks because you're very likely to be sued. And then also you have the risk of losing your job, which I think has become larger over time for physicians.
For me, real estate is actually lower risk because what I'm buying is cash flowing rentals. I'm not betting on appreciation. I'm not hoping the market's going to increase. I'm actually buying properties that are going to put money into my pocket every single month. And so you're not getting massive returns like you can get with market appreciation where you buy a property and two months later it's appreciated 200,000 in value when you sell it and that's a phenomenal return, right? These are more bread and butter, like, cash flowing rentals that are paying you, let's say like 500 bucks, in your pocket every single month. So they're lower risk in that way. And especially if you buy a multi-family instead of a single family home, you have the ability if you have some vacancy to still do well.
And so I'm choosing very low risk, a low risk class within real estate even that I'm investing in. But I think in terms of risk, I think about time and money. So when you're a physician, you're trading your time directly for money. It's true. You're getting generally a fair amount of money, which is great. And then I think about real estate, the amount of time that I trade for the amount of money I get is actually better in a lot of ways than the time I'm trading for money in physician work, especially as I grow. Because as I grow for, you know, each hour I put into real estate, I have all these income producing properties that are just making me tons more money than my time is worth.
Initially when you start out, it's not that way, but as you grow your portfolio it becomes that way. So I think about time to money. I think about risk. Then, I think about freedom and that's my last one. When I'm a physician, I have zero freedom. I'm trading my time for money. You know, I can take a week off or two weeks off, but I'm, like, you know, gotta show up to work.
To earn money with real estate, I have ultimate freedom. I can do it anywhere, anytime I want to. I fit into my schedule. You know, I have property managers, so it's not like I'm tied to my email or tied to my phone all the time. I can travel for a month or two at a time and I'm still bringing in money. And so when I put all those three together and then of course there's the tax breaks of real estate and all those other, you know, ways you make money in real estate. It just was so clear to me that that's what I wanted to be doing.
BONNIE: Let's talk about that a bit more because I think when someone first hears, at least, you know, when I first heard about, Oh you buy a property number, but look at the spreadsheet and it brought in like 500 bucks a month. My first thought was why would I do that for $500 a month? So I think this is kind of like one of the myths about the type of real estate that you're talking about, the cash flowing. So this is where we're going to talk more about Real Estate Professional Status. And so many people don't understand or don't even know this thing exists. And at least I think this is sort of where the real gold is. Do you agree?
LETIZIA: Yeah, I would say the tax benefits and then forced appreciation are the real ways you build wealth. The cashflow is phenomenal and it supports you once you get your portfolio big enough. So now my portfolio is big enough, you know, that I'm going to be over 300,000 in cash flow this year, and that's tax free cash flows. So that's probably more equivalent to 450,000 in a salary, right?
So now it's become really significant, but when you first start out, it's not that way, right? You're buying a property, and it’s going to cash flow 10,000 a year. You know what's $10,000 even tax-free to a physician? It's really not that much money, but there are so many other ways that you're making money in real estate that you don't see that's not related to cash flow.
So you have your cash flow, of course, but then you have the tax benefits. So if you don't have Real Estate Professional Tax Status, the tax benefits are that your cash flow is tax free. If you have Real Estate Professional Tax Status, which is you have to meet two criteria and it's self elected. The first criteria is that real estate has to be your primary profession. Now for those of us who are working full time, you know it's really hard to make your real estate your primary profession. That means if you're working 2000 hours a year as a physician, you've got to work 2001 as real estate. And that's a lot to be working two full-time jobs.
Oftentimes this will work well for a physician who's part time or a physician who has a spouse who's part time or stay-at-home. And then the second criteria is you have to do real estate at least 750 hours a year, and 500 of those hours has to be on your own portfolio doing material participation. And so the key to that one is you actually have to own enough real estate that you can justify that you're spending 500 hours a year on your own portfolio. And so that's about 10 hours a week.
So for us, for Kenji and I, what we did was the first year we actually had Kenji cut back to half time and we bought twelve doors and we did rehab projects. That really allowed us to claim this Real Estate Professional Tax Status, which then allowed us to take all of our paper losses in real estate and write it off and shelter all of our other income.
So paper losses are not real losses. Okay, you're cash flowing, you're making money every month, but you actually are able to show that you're losing money on your real estate portfolio on your taxes and that way you can shelter other income. And so that's why we haven't paid any income tax for five years.
BONNIE: Oh, I didn't know you guys were tax-free for that long. That's pretty awesome. So I want to just go over a few questions just in case some folks that don't quite understand. So the first part you mentioned is that the cash flow from the real estate, whereas initially might not be a lot, can become significant. And like you just said, now you guys have over $300,000 in cash flow. I want to highlight that the cash flow, even though it might be small at first, it is tax free. That's because of the paper losses, correct?
Okay. So that's kind of step one of us building like a little leg on that table, right? And then let's say someone then decides to go for the Real Estate Professional Status. So a few questions about that. So how long does it take to get that status? Is that something that can take a year? Is it five years? Is it 10 years? What's “realistic”?
LETIZIA: Yeah, I think it depends on you and what you want to do. We achieved at first year and we achieved it, making those two big changes in our lives, which were having Kenji cut back and then buying enough real estate that we could justify that we had the hours.
And there are a couple of ways to buy that real estate. I mean, if you don't have a whole lot of money, you can actually go to a cheaper market, like, let's say for example, Oklahoma City. I have friends who bought a 12-plex for $570,000. So you can actually get a lot for your money if you go to cheaper cost-of-living areas rather than, let's say you're in California, and you're only going to invest around you. You know, a duplex might cost you $600,000 or $700,000, whereas you could take that same down payment and go buy yourself 10 units somewhere else and have that many more units that you can justify your time with.
So I think it's a matter of how much money you have to start is important, but not that important because you could do things like BRRRR, which I know we've talked about before, which is buy, renovate, rent, refinance, repeat. And basically what that looks like is you buy a house that needs some work, you fix it up, you rent it, and then you get a bank to give you a traditional loan. You take all that money and you reuse it. And so that gives you a lot of hours right there that you've spent a lot of energy and effort, but you can reuse that money over and over and over again. So you don't need as much money to start your portfolio.
So I would say it depends somewhat on the amount of money you have, but you can even do this with a little bit of money. It also depends on how much sacrifice you’re willing to make. You know, for us, we haven't owned a primary residence for the last five years. And the reason is we wanted all of our money to be making money for us. And so we've given up having a primary residence in order to purchase rental properties instead. Those kinds of choices.
Sometimes people also make choices to cut back on their lifestyle to be able to buy properties, and we definitely did that too. You know, when you look at something and you're like, Do I want to buy a nice car? It's going to cost me $40,000, or do I want to put that $40,000 towards a duplex that's going to make me 10,000 a year? Plus I'm going to have, you know, my renters are paying down my rent, plus I'm going to have the tax breaks. Plus I'm going to have, you know, market appreciation potentially.
It becomes very easy to make those decisions. They're not even almost sacrifices anymore. It's like, Do I want to use my money this way? And it's going to lose money over time because my car is going to be worth that much less as soon as I drive it off a lot. Or do I want to buy something that makes me money? Those choices, it becomes so clear.
BONNIE: Buy the Tesla later with the money from the real estate.
LETIZIA: Right. I mean, we don't own a Tesla and there's a reason, right? That's the choice we've made.
BONNIE: Yeah. So for the folks who, you know, don't work part time or don't have a stay at home, should they still do this? Is this worth doing?
LETIZIA: I think so. Again, you know, we have a ton of students in our class who are actually single parents or they're in a situation where it's a couple and they both work full time and they love their jobs. The reason I would suggest still doing this is again, just to have that leg, you know, even if it's only 30 or 40,000 a year, that leg of income that's uncorrelated to the stock market and uncorrelated to you working your day-to-day job, it adds that much more strength in times of turmoil like now. Right?
And the skills that you learn investing in real estate, it's something that nobody's ever going to be able to take away from you. I think that's really powerful to have those skills. I know that, you know, two years from now if I lost everything, I would know how to get back on my feet and do this again, and I would do it better the second time. I also know that not only are those skills for me, those skills are mine next generation too because I'll teach my kids how to do this. And so I think that's just really, really valuable to know how to invest in real estate to be able to build that source of income, but then also to be able to train your kids and your future generations to make sure they can stand on their own feet and have multiple sources of income too.
BONNIE: Yeah, I love that. You know, in the earlier episode I actually talked about sort of uncoupling making money from your sort of passion, whether it's being a physician. And it's kind of strange and it's how our society, we're sort of trained that your job is everything and that's your only source of income. And so I like the idea of uncoupling it so that you can kind of separate that. Like what you do in terms of like your calling, whatever you want to call it doesn't necessarily have to make money because a lot of things don't make money, but they're valuable things to do for society. For example, like being an artist or something like that. But if you're an artist and you have real estate, then you could still be an artist, right?
LETIZIA: You can find what fulfills you and I have a 17-year-old stepdaughter and she's learned a lot of the skills from real estate investing. She'll be able to apply those, you know, buy herself a portfolio and have that be her source of money and then spend her time however she wants.
You know, maybe real estate isn't her passion. You know, maybe it's actually being an artist, but how nice would it be to be an artist and have a hundred thousand coming in from your portfolio every year at cash flowing rentals and be able to be an artist and make whatever money you want.
BONNIE: Right. Yeah, it definitely gives a lot of freedom. Another thing I think is good to point out is even if you're, let's say, you said single parent or you're both working, if you're a married couple, even if you can't claim that Real Estate Professional Status because of the requirement for it to be your primary job, I just feel like it just gives you choices down the line.
What if, at some point, you both don't want to work full time anymore? I think a lot of people think they're going to feel the same way about their work, but you know, I’m only five years out, and I've already changed a lot in terms of what's important to me. So it just gives choices because if you build up that portfolio. Let's say in 10 years, maybe one spouse wants to go to part time, but the income will drop because they can claim this tax status and they can kind of keep all the money, right?
LETIZIA: Yeah. It's insurance, right? Because even if it's not you, but it's actually your work. Your hospital gets bought out and suddenly the people who come in and rehaul the quality metrics and your income's going to drop by 50% and your job isn't great anymore. I mean that's not something that you did differently, but you can't control that. But if you have another source of income, you can say, I'm walking away from this job, it doesn't suit me anymore. I'm going to find something else, or I'm not going to find something else. I'm just going to rely on my real estate income. It's your choice now. You're not forced into decisions.
BONNIE: So let's go over some sort of fears or myths about real estate. So what do you tell a physician? So let's think of a busy woman physician who has kids. Let's say a single mom, because I think you know some single moms. I think the fear I hear a lot is I don't have time for this. So what do you say to that?
LETIZIA: Yeah, we hear that a lot. And it's not just single moms. Everybody feels that way. I mean, at some point, you know, and we've even felt that way and definitely even maybe like a year ago I was battling that with Kenji.
I would say it's simply about priority honestly. Because you know, if something's important to you--I mean if you're a single mom and you have a kid, right? The kid is your priority, one of your priorities, right? And it doesn't matter what's happening at work, you're going to make time to be there for your kid.
Real estate is kind of the same way. Sure. There may be some things that kind of fall off that are less important. Like maybe the laundry won't get done every day. Or maybe your journals won't get read frequently, but you know, whatever you make your priority, you will have the time to have it happen.
Here's another example: working out, right? Working out is a priority for some people, right? And it doesn't matter what's going on in their lives, they will be chiseled, right? And there are other people, like, I'm one of those, like working out is important to me, but it's not the top priority. There are 15 other priorities in front of it. And so if I make it to work out that day, that's awesome, but I'm not always going to make it to work out. I'm just never going to be like really super chiseled. And that's okay because I realized that I have not decided to make that my priority. And so for me, real estate was and is for a long time, it's been my priority because securing that financial freedom and having that peace of mind that comes from knowing I have now the freedom to work however I want, whenever I want was so important to me that I made it a priority. And so it's just a choice.
I don't want to say that it's not going to be hard because there are hard times, right? There are hard times when you're juggling 15 things and you're like, I mean, you feel overwhelmed, but it's all about what you choose to make your priority.
BONNIE: Yeah. And I guess, you know, one thing, I don't mean to pick on single moms, but I think of them as being super busy, you know, compared to some other folks out there. But I also feel like just like you said, it's peace of mind, security. Y
ou're putting in time now so that you can have the freedom a little bit later.
So that actually leads into my next question. Like how long does it take? Well, I'll preface it by saying that I think more people should look into real estate because the stock market? It works, but It just takes so freaking long, right?
LETIZIA: Yeah. Stock market, you can certainly put in your stocks and leave it and forget it. And it doesn't take that long that way. But it takes years for your money to grow because you don't get the same tax benefits as real estate. And there aren't those many ways to make money that you have control over, right? You're just putting the money in and however the stock market goes, it goes. It's not in your control.
Where you own your own property, you own your own asset. You can choose how it's run, and if you want to think out of the box, if you want to put more time in, or you want to think of exponential ideas that only require a little more time but give you huge results, then you know, then the money that comes out of that goes directly to you and it's all yours.
And the exponential ideas I'm thinking about, for example, we have $150,000 duplex that cash on cash--which means the cash flow for what money we put into the property--it's 40% return, meaning that in about two and a half years, we basically pay off all that money that we put into the property. We've already done that. And the reason we have such a high return on that one is because we have supported living in there. Supported living is individuals with intellectual disability and the state pays their rent. So in this downturn, the state's paying their rent. We don't have any vacancy, we don't have any additional costs, and the rent comes in every single month and that rent is per bedroom. So it's much higher rent than we previously got with just normal renters.
And so coming up with this idea, making this contact with this group, and getting them to move their tenants into our building, it took some upfront work. But now we just harvest all that return for ourselves.
BONNIE: That's awesome. So the next question I have for you is a lot of people think that it requires so much money to get started. And we kind of alluded to the fact of, we talked about leverage, although we didn't call it leverage, but I think this is kind of where a lot of people will say, well, I don't have a ton of cash to invest.
LETIZIA: Yeah. So I think there are two ways to handle this. So let's quickly talk about leverage and let's talk about how real estate is different from the stock market. And then we'll go talk about how much money you actually need to invest.
So you know, when you put money in the stock market, you make money on the money you put in. But leverage is when you buy a property, you put in a portion of that, right? And the bank puts the rest in and you make money on the bank's money. And one of the big ways you make money is something called depreciation. And depreciation is when the government considers your building to lose value every single year. Okay? And it may be that your building is actually gaining value, which is usually the case, but in the government's eyes, every year you write off a portion of that building as losing value as a loss.
With Trump's tax law changes in 2017, you can actually take the first 15 years of the building's loss in year one. And so what that looks like is, let's say you buy a $400,000 building, you put in a hundred thousand of it, a bank puts in 300,000, right? But you get to write off the first 15 years of losses in year one. Roughly, okay, this is total back-of-the-envelope, but roughly that is equivalent to about 25% of the value of that building.
So that year, you buy this $400,000 building with a hundred thousand of your money, and you create a hundred-thousand-dollar loss on paper. It isn’t a real loss; it's a loss on paper. And if you have Real Estate Professional Tax Status, that hundred-thousand-dollar loss shelters a hundred thousand of your taxable income. So suddenly--let's say you're paying 25% on your taxable income--you say you made an additional 25,000 just in tax savings, right? And so that's the leverage part is you're actually getting depreciation on what the bank loans too, right? Not just on depreciation on the hundred thousand dollars.
Now how much money do you need to invest in real estate? You know, I would say that if you have a ton of money sitting around, sure, it’s easier, right? Because you don't have to get creative. You can just say, you know, it's 25% down and just take that money and buy, you know, 10 buildings or one big building or whatever you want to do. So it is easier because you can get traditional loan financing and just put it down 25%.
If you don't have much money. Let's say you have like 20,000 or $30,000, what do you do? Well then you can do things like the BRRR, which we talked about, which is you buy a property, you use hard money loan, which is from private lenders. It's not from the traditional bank lender. And you can rehab the property and then take out that money and go do it again. You can do it that way. Or you can start with one small building, you know, and fix it up maybe a little bit and wait it out and slowly build your portfolio too. So it may take a little bit more time if you have only a small amount of money.
Or lastly, you can go find money. So there's a lot of places to find money. I mean, places you don't think about. You can get a HELOC out of your house and get money there. You can go harvest it out of your 401k, right? With the new CARES Act, you can take a hundred thousand out of your 401k. You can get seller financing on your property. I mean there's a lot of ways we have money that we don't think about too. And then saving money of course is another way you can get money.
BONNIE: You can get creative with how to get money for real estate. And actually this is a good time for me to talk about actually having no money, it was actually my excuse for a very long time if you remember. And so a lot of people have money, it's just not like “accessible.” So a lot of us have money in retirement accounts and we just have been taught to think, Oh you can't touch those. And I'm not telling people that they should raid their 401ks but there are ways to use that for real estate and I'll talk about that on another episode. I created a special retirement account where I can use it specifically for real estate. Traditionally, you can only do index funds or stocks depending if it's tied to your employer. But I think the take home point here is that you probably have more money than you think. And if you don't have it, let's say you really don't have any money, then what she said earlier, hard money loans or commercial loans or even seller's financing.
And so I think also it's important to remember that you know, a lot of real estate investors, you know, aren't physicians. Most of them aren't, meaning that they probably had lesser means, I'm assuming, right? And so I kind of just say, Hey, if they could do it, I could do it. Like that always helps me when I think about that.
LETIZIA: Yeah, that's a great one. And I think also about, I have a friend who's a single mom by choice and she works .75% as a hospitalist. She had student loans and she still managed to start investing in her own duplexes. And she did a BRRR as well with a single family home in Oklahoma City. I think she started about three years ago now. And I'm really hoping this year she'll get Real Estate Professional, you know, single mom 0.75%. I really think that she could potentially get her hours this year because she's turning over properties now that have appreciated and buying bigger properties and that all takes work and that all adds up the hours.
So you know, she decided that the real estate income was going to help her pay off her student loans. That's how her mindset was. So yeah, a lot of this stuff is just thinking creatively. And I think more than anything, setting a goal and then working backwards because if you get so involved in “How can this happen?”, then, oftentimes, it paralyzes us and we stop moving because we can see all the ways it won't happen.
But if we say, “This is where we're going. How do we get there?” It just changes. And you start looking for solutions once you've changed your mindset by thinking differently.
BONNIE: What you just said a few sentences ago? You said she did this in three years. So I feel like we should talk about that because three years is like nothing. You know what I mean? Compared to the stock market. I feel like we meet so many people where, I'm not saying people want to retire faster, but people just want choices and freedom. You know? I think many of us still want to see patients, still be a physician, but we want to do it on our terms, and it's just getting harder to do that.
And I know you and Kenji achieved financial freedom in five years, but three years as a single mom? That's amazing.
LETIZIA: Well, she doesn't have financial freedom, but if she gets Real Estate Professional and she gets to the point that she's not paying taxes, that's going to really exponentially grow her wealth and get her to financial freedom much faster.
For her, it started out with, I think, she bought two duplexes next to ours. We bought a duplex and then there was actually a three-package. We bought one of them and she bought two of them, and then she's just traded those up now for a couple other duplexes that are nicer, higher priced. I mean if she gets REPS this year or next year, it's just going to change her trajectory. If you don't pay taxes with our incomes, the amount of money you start bringing in that you can then reinvest in real estate gets you there so much faster.
BONNIE: Yeah, no, totally. So who would you say this is not for?
LETIZIA: I would say this is not for somebody who isn't willing to do a little bit of work because you have to educate yourself. This is not about putting your money somewhere and letting it grow for you under other people's watch. This is about taking control of your finances, making sure that you understand what's going on, putting yourself in a seat of power. But that means that you've got to do a little bit of work both to educate yourself and then also to make sure everything's run well.
Nobody will ever look after your money like you do. And so even with property managers, we still oversee their work, right? Because if you just let your property manager do whatever they're going to do, you're not going to get the returns that you would if you were overseeing their work. So I would say this is for somebody who's willing to put in a little bit of work, who's motivated, who wants to get to financial freedom. Somebody who has goals.
Because if you walk into this and say, “I don't know what I want but I'm just going to buy a couple of properties and see how it works out,” you're going to hit a challenge and you're going to give up. But if you go in there and you say, “I am going to have you know, 30,000 in cash flow by the end of this year coming in from my real estate,” you will accomplish so much more and you will be that much more likely to keep going when there are bumps along the road, which there will be.
So I think be willing to do some work and then yeah, be directed and know what you're aiming for.
BONNIE: Having the end goal in mind I think is so important. When I look at some of the Facebook groups that I'm in, so many people talk, well, they just say negative things about real estate saying that they tried it, it didn't work, or they had bad tenants or what's the famous sort of thing everyone says? That they don't want to fix toilets.
LETIZIA: I don’t want to be up in the middle of the night unclogging a toilet, right?
BONNIE: That's, we have property managers for anyway.
LETIZIA: That's what we have property managers for. But you're right. Things will happen. I mean, things happen with everything in life, right? There are always going to be challenges. Nothing's ever going to be perfect. And again, this is why you have to have that why, that reason that you're doing it, really, really clear in your mind, so you can overcome those bumps because you're going to hit challenges along the way.
And you know, a lot of people will say, “Oh so-and-so had a terrible experience and it didn't work for so-and-so.” You know, you don't know how that person invested. A lot of people think that investing is actually just buying a property and hoping it's going to appreciate. That's totally not investing; that’s gambling.
And so a lot of people will pull on worst-case scenarios around them. And you know this, of course, it's always your primitive mind looking for all the reasons it won't work and looking in fear for every bad outcome out there and ignoring all the positive. So you can say, “Yeah, this person had a bad outcome.” But you could also point to people who have good outcomes and learn from what they did to make yourself have a good outcome instead of focusing on all the bad.
BONNIE: Yeah. And if you think about it, becoming a physician, there's a lot of cons. There's a lot of reasons not to do it, right? I mean, it's a decade or more of training. So you're in your prime years. It's expensive. We get sued. Patients can write bad Yelp reviews. I think, you know, our sort of control factor has gone out the window unless you know you’re the owner of your practice. But even, you know, that's been, we're recording during the pandemic. So a lot of office private practices have had to at least close temporarily and it's going to be tough for them to recover. So anyway, all the more reason to kind of, I think of those other legs of the table.
LETIZIA: For me, my income from my rentals has become my insurance, and I actually got rid of my disability insurance, and I don't have life insurance because for me, I know that that's my insurance policy now. I mean that's why we buy insurance--because anything can happen any time.
BONNIE: Yeah. Oh, I'd love to not pay--my disability premium is $7,000 a year. So expensive stuff.
LETIZIA: Yeah, mine was expensive too.
BONNIE: So tell us more about the Zero to Freedom course that you and Kenji do.
LETIZIA: Yeah. So Kenji and I last year created this course where we take people basically from knowing very little or even nothing about real estate investing all the way through buying their own first property. And we have a lot of students in there who have actually purchased our first properties during the training or immediately after. Six modules--plus a bonus module--program. But then there's a pre-course too. So I like to say like it's a two month program, but it's actually a little bit longer. When you add in the pre-course, it's more like 10 weeks. We're basically teaching the course online, but then we're in the Facebook group and we have an incredible community of people each course. Both the students who purchased the course, but then also we allow significant others into the course as well.
So, you know, last time I think we had about 250 students plus their significant others in this Facebook community. And it's a really run with the spirit of abundance of everyone helping each other. And so somebody will go from knowing nothing to having a whole team in place because we introduce people to our vendors that we trust that we've used to having a community of like-minded investors who are looking at deals with them and helping them and giving insights. I mean, you went through it. It's really incredible to see the transformation to go from knowing nothing to feeling confident and owning your own first property. It's amazing.
BONNIE: That's definitely a very, very positive, you know, community. I think it's so different than sort of what we're used to. I'm not trying to bad-mouth physicians, but I think a lot of us tend to be competitive and that's, you know, unfortunately I think our training kind of cultivates that kind of mentality. So it's really nice to be in a sort of the opposite type of environment where everyone is supporting each other. And because we all have, I think most people who take the course, we all have kind of the same goal of, you know, financial freedom. Right?
LETIZIA: So, yeah. And it's beautiful to see people share their why, like why they want to invest in real estate. And what their goals are with each other and then cheer each other on.
BONNIE: Awesome. Yeah, that's awesome. So I'll be sure to link in the show notes how they can find out more about the course and when they can sign up. So thank you so much for being on the show today, lady.
LETIZIA: Thank you, Bonnie.
Hey, if you're a woman physician who is ready to take control of your money, you've got to check out my program Money for Women Physicians. It's part course and part group coaching and a hundred percent guaranteed to put more money in your pocket. Go to wealthymommd.com/money to learn more.
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