Guys, welcome back to the podcast. I'm Amanda Laura. And I'm Kendra. And today we are thrilled to welcome two guests, Dr. Leticia Lati Alto, and Dr. Kenji Asura of Semi-Retired MD. Both Lati and Kenji are board certified physicians, hospitalists by training, who have quietly built impressive real estate businesses alongside their medical careers.
We love that. There is so much freedom in having other streams of income, so we want to talk about it. Over the past several years, they have assembled a portfolio of more than 175 rental units, along with 2100 syndicated units, using that massive income to gain flexibility and cut back on shifts. I think that speaks to a lot of us.
They now blog, podcast, and teach other doctors through semi-retired MD.com and have helped thousands of doctors and high income professionals learn how to invest for financial freedom. In fact, Lati and Kenji just published a new book called Life on Your Terms to share their roadmap for doctors who want to use real estate to set themselves free.
What's really inspiring is how this has changed their own lives after they started investing together in 2015. To be fair, Kenji started in 2001, but they achieved enough passive income by 2018 to spend six months traveling Europe with their kids. They were living part-time on their own terms instead of the rigid hospital schedule, and now they split their time between investing and running courses that have guided over 3,500 physicians to financial freedom via real estate.
Thank you so much for joining us, having us here. We're excited to get to speak to all of you guys. Yeah, we're super excited.
And so as you guys began, as busy hospital physicians, what actually inspired you to explore real estate investing on the side? And how did you get started? You know, we're some of those people who read books and actually implement them. So it actually all started with us reading Rich Dad, Poor Dad by Robert Kiyosaki together, and we were on a trip.
And when we were reading that book, it just like the ideas that came out of it. And luckily, you know, Kenji already had a little bit of real estate experience, which you alluded to, and he had grown up watching his dad, who was also a doc, have real estate. So he already had a little bit of background.
I didn't, and when we read that book though, we could see the way that Robert Kiyosaki had gone around and bought these properties that cash flowed. And we got that, you know, cash flow was actually the way to be able to free yourself and work in medicine on your terms because you had, you know, $100,000 or $200,000 coming in a year from cash flow that gave you options. Yeah. I think the other thing is, is that just looking at different options of side gigs and whatnot, we just decided that real estate gave us enough income - a significant amount of income to replace a high income earner salary. I think that's one of the big things is that a lot of the things out there just didn't seem to make a dent or a difference.
And what we wanted was something that would create that freedom for ourselves. You know, replace at least one of our salaries, pay for our expenses. And the other thing is we were really looking for something that was tax efficient. We were looking for something that would actually lower our taxes as well, and real estate...
Smart. Yeah. I think that's a common theme - the tax benefit. Do you have to be a real estate professional? What are some of the things? So we'll get into that in a little bit, but can you describe how building this rental portfolio affected your own stress, work-life balance, career choices, et cetera?
I definitely want to say initially it was more work. Okay. Because we were both working more than full-time and we started doing this as well. And luckily we were hospitalists, so we had kind of an advantage because week on, week off, but it still was more work to, you know, go out and build our team, start buying properties.
It was a process, but what we had decided was, hey, you know, what's important to us is three years from now, five years from now, 10 years from now, we're going to have absolutely so much more freedom. So let's put in a little bit harder work now to be able to build that. And so what we did was we actually had Kenji get real estate professional, which you alluded to, and he cut back that first year so that he could get that status.
So that allowed a little bit more freedom. But we did a lot of work-life integration and, and I will say that's what we still do now is work-life integration. So we did a lot of work life integration, which is, for us, it means we basically have all the pieces of our lives together. So we don't try to separate like, oh, we're only doing work or we're only spending time with our family.
We kind of mix them at times. And so we would bring our little kids, you know, onto the contracting scene and like, you know, make them part of the experience of just building our portfolio. So we didn't try to draw the boundaries I think that a lot of people do. You know, I think in terms of the feelings of burnout and that type of stress.
What I can say is that certainly for us, you know, I'd cut back. So that made a huge difference. But what I can say is that for a lot of the students that take our courses just knowing that they have an alternative, and I think you brought it up in a previous episode about having a multifaceted identity, just knowing that they could have another identity, another option for generating income that they don't have to solely rely on their doctor's salary makes a huge difference. And this is actually somebody who hasn't actually even gone out and bought a property. It's simply knowing that they have the knowledge to go out and do something different to supplement their income or even maybe potentially replace it. Although, most people who take our courses continue to work as clinicians, but more on their terms. And so I think that's what we see is that the burnout seems to go down significantly.
Another aspect of what we do is we create a community, and I think that's another important aspect of it, where people are coming in, they feel isolated, and they actually meet some other people who have similar interests, similar backgrounds, for sure. But similar interests in terms of investing in real estate and creates this like camaraderie and community.
And I think that's the other thing that we've seen makes a really big difference in people's lives when they have, again, different identity, but also the community. That's such a good point. It's so fascinating to me when we work with our really, really burned out clients. They're along the way somewhere.
We picked up this story that we're stuck. We can't do anything else other than medicine. But the fact that we're all doctors means we can work incredibly hard, we can delay gratification. We're usually very smart people. And that's so fascinating that somewhere we got this story that we're stuck when we could use that for any industry.
But especially you're going to tell us about real estate.
Yes, exactly. And it's so powerful to say, hey, I can work in any job, I can make whatever amount of money because I know I'm going to have the freedom because I'll have another source of income that I can always have there, right?
Yeah. And then another thing that I think really helps with that burnout is having that compelling future and your kids and your legacy are a big part of that. It's a big part of the why. It's a big part of the reason why people go into real estate investing and, you know, work hard and make the sacrifices.
And it's part of what led us to real estate, you know? Absolutely. Because we wanted to be around to watch our kids grow up. Yeah. And that type of freedom and that vision of like, you know, being able to be there for your kids growing up, soccer games, those types of things is a really compelling vision that a lot of people carry with them, and it really kind of propels them and helps them on their journey, and as well as helping with the burnout and the feelings of burnout. Yeah. I love that.
So we talked about getting into the real estate mindset, but what fears or misconceptions did y'all have at first, and what mindset shifts helped you overcome them? Hmm. Well, we didn't have a lot of the common ones I think that our students have, but one that I definitely had was about our ability to scale up and grow our portfolio.
And so at one point we had grown our portfolio to 40 units, so four zero, and it was enough at that point - it was enough cash flow to pay for one of our salaries, pay for our expenses. So we really felt free at that point. And I said to Lati, I said, well, why don't we just stop? You know, why don't we just pay them up, pay off the loans, and then we'll just kind of like kick back and relax and those types of things.
And so, you know, after talking about it and after thinking about it, it hit me, and Lati already knew this, but it hit me that a lot of what I was saying was out of fear - out of fear of scaling up and not having the ability, the connections, the experience, the... And it was actually getting into something new that I was not used to.
I felt very comfortable with real estate investing, but with smaller properties. But then scaling up seemed like something for somebody else. It just didn't seem like it was something for me. Interesting. And what happened was, what I realized was that I was pushing and encouraging people to get into real estate investing, saying, hey, you know, you got to overcome your fears.
Not realizing that I had those same fears when it came to these bigger properties. And that's when it clicked and I said, I got to stop this, right? I got to overcome this so that I can show our students that, hey, I can also face my fears, push through the discomfort and grow our portfolio.
And that's when we actually laid out a plan to go buy a 100 unit property and it took about 18 months. But I laid out this whole plan and literally followed that plan and about 18 months later, we bought a 160 unit. Wow. Wow. Yeah. I have to say that's inspiring. Thank you. I have to say fear is, you know, part of the journey.
All of us have fear. We still have fear. Whenever we try something new, we still have fear. So I think it's something you just kind of get used to. And, you know, I don't think we had some of the most common fears that we see, which is, I don't have enough time and I don't have enough money.
Well, actually we probably had the, I don't have enough money because we didn't really have a whole lot to start. But I don't think we thought forward enough to be scared about the money. We were just trying to get started in our next step. So we actually were really just like, okay, let's just take the next step.
Let's take the next step. And so I don't think that we probably had enough fear of running out of money because we didn't look that far ahead. But time-wise, even though we're both really busy, we were just so devoted to like, hey, this is what we're going to do. Like, it just allowed us to kind of not even have that as an option or a fear to hold us back, and I can't explain why, but it just shows you the ways that what you focus on is what you experience. And so if you focus on, I don't have enough time for this, like you will see lots and lots of examples along the way of how you don't have enough time.
Like life gives you exactly what you're looking for. Right. And just like if you're looking for red Ferraris, you're going to see red Ferraris everywhere. And so we didn't focus on not having enough time. We just were like so certain we were going to find a way. So it never really actually was an issue for us.
Gosh, I love that. It's the same theme. We have the same thing over and over with our clients too, with ourselves. It's a human theme, right? And when we can let fear become our friend and notice that that's an opportunity for growth, then it opens so many new doors for us. So that's so cool to hear it from that perspective. So from your experience, what are the common mistakes that physician beginners make when entering real estate and how can others avoid those pitfalls?
So most of the time, all the mistakes, all the fears, it comes down to mindset stuff. Mindset issues. Even, you know, now with the portfolio that we have, like if we're going to make a mistake, it's often due to mindset issues.
Right. And when I say mindset issues, I mean, you know, looking only at what's going to go wrong and not looking at the other side and the potential and spending more time focused on solutions and how to make the things you want happen versus getting mired in the fears and the worry about what the potential downside is, or something happens to you.
Like, we've had so many things happen from, you know, being sued to you know, we've had graffiti tagging of buildings, like all kinds of stuff. You can't even imagine has happened. Fire in one of our buildings. And so things will happen along the journey and when it happens, you can really suffer about it, right?
Or you can decide, okay, this happened. It is what it is. Let me move forward. And what we learned a couple years into our journey, which was super helpful to us, is the thought that life is not happening to you. It's happening for you. Yes. And so when we have those episodes where something happens, we say to ourselves, okay, how is this life happening for us and how can we find a way to make it definitely life happening for us?
So how can we help facilitate, are there any opportunities here? Are there ways that we can act that will make it even more likely that we have even a better outcome than we can anticipate? And that allows us to both be active participants in helping life happen for us, but also realize that sometimes you can't anticipate the good things that are going to come out of a situation, but good things ultimately do.
And I think it's tied to the saying, you know, you either get what you want or you get what you need. Right. Yeah. You got a lesson you need. Sometimes you just need the lesson. Right. And that lesson is going to be so great for you down the road in some other way that it's going to have such awesome consequences.
You just can't see it right now. Yeah. So what we see is that because of those fears or some challenge that comes up, they stop. Right? They quit. Yes. And I think that's probably one of the biggest mistakes, which is that you got to keep going, right? And you have this vision.
And you got to go after it. And you can't let something like that get in the way. Persistence is like the number one, you know, basically of successful entrepreneurs. I'm reading this book called B 2.0, which is Business and Entrepreneurship. It's a really good book, but it's talking about Steve Jobs and how Steve Jobs was like fired.
And then he went and he started another business and it wasn't actually that successful, but they created a product that when Apple was about to go bankrupt actually, they saw that they needed the product that his other business was, and that's how he got to go back and, you know, they named all the times he was persistent and he kept going.
You know, he got fired. He went and started another business, but he had a payout. He could have just gone home and not done anything. Yeah. Then he was starting this other business. It wasn't going well. He persisted right then Apple needed that product. And then he made it contingent that he got to go back into Apple.
He persisted again. Just persistent, persistent persistence. I think the other thing and hopefully this doesn't sound self-serving, but the other thing is not going out and doing it on your own, like getting that mentorship can save you so much time and money.
And we've just seen it over and over again and this is actually how we did it. We went out, we made mistakes, you know, it cost us and, you know, we learned from those mistakes, which is great. But the idea is that if you can avoid the mistakes, if you can avoid wasting that time, and I would say even time is probably more valuable than the money, the lost money.
You know, you guys, doctors, you're so busy, right? And you don't have the time to, you know, go down the wrong path and then back up and then go down a different path, right? It's like just, it's so much more efficient if you could just have somebody say, well, you know, the gold is here, X, you know, X marks the spot.
And now we've learned that lesson and now we, you know, we pay for multiple six figures of mentorships and masterminds every single year. That's right.
And it's our biggest expense. Yes, for sure. Yeah. I don't think that's self-serving at all. I think there's so much wisdom there because I'm thinking about all the doctors listening, and I know that there are lots of them who want to get into real estate but don't have the confidence.
And it's just like, Lati, you said, we go into this profession because we want safety, we want this guaranteed income, we want to have a job. And so that mindset sticks with us, a lot of us. And keeps us from taking even, you know, well calculated risk to help us grow our money. So first steps for somebody who's just interested, like that person I just mentioned, maybe a little apprehensive, what are the practical first steps that you would recommend, like saving up a down payment, educating themselves on basics, finding mentors? What would you recommend?
For me the first step, which was really important that we did, was sitting down and saying, hey, what's the life I actually want? Like, without any limitations, you know, what does that look like? And mapping that out, like really having a good, strong image of what that looks like and a why. Why is that so important to have that life for you, for your family, for, you know, others?
Once you have that, then you figure out the vehicle. And so for us, the vehicle was real estate because you know, it was really easy to learn. It was a tangible asset. We would have control. I think a lot of us like to have control and then it would produce cash flow and it already had all the systems and processes in place, meaning there were already property managers, there were already contractors, so like real estate made a lot of sense because it was something we could do as well as being doctors. And so once we had the vehicle identified, which was real estate, yeah, then the next step if I were doing this over is I would go find a mentor and I would find community because we didn't have community, so we had nobody to look at our blind spots or to bounce ideas off of, to know if we were going the right direction.
We were just reading books. And then we didn't have mentors. We were relying, you know, on stuff that our agents told us, or our contractors told us and what we were reading. But boy, it could have been so much faster if we had a system, if we had it really structured. We had a process to keep us moving and accountable, and we had that community to support us.
Because most people will be naysayers because they have a lot of fears and they're not - they're not going out there and doing something different. Right. They're investing in their 401k and hoping that someday, they're going to have a comfortable retirement. And so just understand, like, you got to find a community that's doing this too, that's like minded, that's like, hey, I have a bigger dream and I'm not looking to someday have a comfortable retirement when I'm 65.
I want more now. You know, I want to be present with my kids. If you find that community, then it's going to help support you through those challenging times, which will come. Yeah, I agree with all that. I think I would actually even take it a step before the why and the compelling vision is really, I think that there are so many doctors who are, you know, suffering or they are, they're just numb, right?
Yes. It's just almost like, lifting up your head and just looking around and seeing all the, just amazing things that are around you, right? And all the possibility and dreaming again, right? So I think that it's more of just like an awakening or a realization that hey, you can actually do something different.
And what's amazing about doctors is that once they realize that they want something. Right? Once they realize that they have this vision that they really want, then the rest of it, you know, to me is like easier. Like, it's almost like kind of like that first step of like, okay I want a different future.
I want to do something different. And then kind of saying, okay, then laying out the why, and then what is it that you really want? All those things, you know, then mentorship and then whatnot. But I think it's that first step of kind of like, hopefully somebody listening to this, maybe they're feeling burnt out and just kind of like lifting your head up and looking around and saying like, okay, I really want to just appreciate all the beauty around me.
I really want to just go explore the world, you know, travel. I want to do these things and start to dream again. That to me, that's that first step is like, you know, just that awakening step. Yeah. I do see that's what we do is we help people dream again.
For sure. I love that. I love that. That's beautiful. So how much time and money do busy physicians really need to start? And is it realistic to begin with a small investment or a single rental unit, even on a doctor's schedule? Yeah, so there's a range. It kind of depends on how intensely you want to go into it.
So let's say you just want to buy one short term rental, which can create significant cash flow and definitely build your net worth pretty significantly. You know, it's not probably as much time as people think because real estate basics are pretty easy to learn and, you know, depending on the size of your short-term rental, you know, you could buy a $200,000 short-term rental or you could go buy a million dollar short-term rental.
So there's a range of what you need to save up. But there are second home loan options that are 10% down. Right. So again, there's a lot of range and then when you have long-term rentals. We have people house hacking who are in residency, meaning that they're buying a house, a duplex or a fourplex, and they're living in one of the units and they're renting out all the other ones, and they're living rent free and they might even be cash flowing.
So there's such a wide range to do it, or, you know, we had some students and they started and their first properties were 20 units or 30 units. You have an opportunity to do whatever fits you, right? If you only have a limited time, you're like, okay, I'll put aside five hours a week, or I'll put aside 10 hours a week.
You're going to take a different approach probably than somebody who's like, okay, my spouse is a stay-at-home spouse. They're going to completely devote themselves to this. Somebody who has, you know, $50,000 in the bank versus $500,000 in the bank are going to take a different route too.
It's all to say that no matter how much time and how much money you have, there is a way to make it work with owning your own rental properties, in my opinion. Yeah. Yeah. And I'm going to approach it a little bit differently in terms of, you know, what you said about realistic. And I think that a lot of people come into our course thinking about what's realistic for them, and there's limitations based on their past and their beliefs and their thoughts. Right? And so different people are going to come in with different limitations and different perceived limitations. Perceived. Yeah. Like, yes. Different perceptions about what's realistic for them. And so that's really kind of one of the first things that we talk about is first of all, like what if you could go out and build a bigger portfolio than you think is realistic, right?
And there's a book 10X is easier than 2X, which I think is a 10X goal. Then that's actually in a lot of ways easier than a 2X goal, and the book explains why. But the 10X goal, you're going to be doing completely different things than if you had a 2X goal. And just as an example, you know, we have some students who go out and buy hundreds and hundreds of units using other people's money, not their own money. Right. And so, gotcha. They're growing their portfolios. This limitation of there's, I don't have enough money. Well, if you can go out and figure out how to find money, then you can actually grow your portfolio in an unlimited way as long as you can go out and find the money for it. Right. And so, and we even have students who are doing these creative financing things where, you know, they're buying sixplexes for like $9,000 down. Like, I mean, there's so many ways to do this that once you get the skillset, you kind of figure it out and just keep in mind, Kenji and I, you know, we didn't start this with, you know, millions of dollars we started this with $200,000 and then we just got more and more savvy and more and more creative and got more and more of those relationships.
And we got, we had some luck too, right? Because the real estate market was kind of crazy from 2015 to 2021 and. But we took the actions to take our small properties, add value, turn them into bigger properties, and that allows you to reuse the same money over and over again to grow your portfolio. And that's really how we were able to grow our portfolio because, you know, saving up for a down payment takes time.
But if you're able to take a property, increase its value and use that as your next down payment, you can move much faster. Could you please speak to the real estate professional spouse tax advantage because I know I've spoken with several doctors and they're like, oh, that doesn't sound real. I'm pretty sure that this is how it works.
Would you guys mind just speaking to that for a minute? Oh, sure, sure. Yeah. Yeah. So, we didn't pay income taxes for seven years using real estate professional and using the... So it's absolutely real because we used it and we only... we moved to Puerto Rico, we start paying taxes. So there's three ways to shelter W2 income or 1099 income using real estate.
And so the first one is real estate professional status, which you were just alluding to. And that's for long-term rentals. So long-term rentals have a stay length of eight days or more. So like if you have a rental that you're renting out to traveling nurses, right? And they're there for 30 days, that's considered a long-term rental in the IRS's eyes. And so the criteria for getting real estate professional, first of all, this is the most challenging one to get. And you basically have to spend more of your time in real estate than anything, any other job. So for example, the first year we had Kenji cut down to halftime as his hospitalist, and then we eventually had him be a moonlighter because he needed to spend more time in real estate than being a doctor.
And then the second part of the criteria there is material participation. So we had to buy enough rental properties that he could justify that he was spending at least 500 hours that year on our rental properties. Yeah. And so, there's some extra general real estate hours. So in total, he had to spend over 750 hours in real estate that year, and if he had worked as a doctor for 1,000 hours, he would have to do 1,001 hours in real estate. So that's why it's such an ideal thing set up for somebody who has a stay home spouse or somebody who really doesn't like their job and wants to go down to halftime.
That's why Real Estate Professional is such a great option. The easier one to get is a short term rental tax loophole. And the short-term rental tax loophole pertains to short-term rentals. So they have an average length of stay of seven days or less in a calendar year. So what you do is you look at your short-term rental and you average out, how long did people stay?
How many stays did I have? Okay. Over the calendar year, it needs to be seven days or less. So shorter term. And that one, and what people do in our community and what we've done before is the easiest thing to do is buy one property and do 100 hours that calendar year and more than anyone else. And so that means that you have to do more than a cleaner or more than a property manager or whatever.
And so we'll have people go and buy short-term rentals out of state, for example. And there's some hours that you get from the buying process. Maybe you fly out there for a few days and set up your short-term rental. Now you get more hours, then you go home. Maybe you do some self-managing. You got a lot more hours.
It's pretty easy to get over 100 hours that calendar year. And the reason it's so important to do this the first year only, you don't need to do it other years because you have this ability to take depreciation. So depreciation, sorry, I know this is a lot of terminology, but I love it. You listen, you can listen to this multiple times to get this. So the government looks at a building as losing value every year. That's called depreciation. Your building may be gaining value, right? You might buy a property, it might actually gain value, but in the government's eyes, the building is losing value every year, and that's called depreciation.
And the government allows you to write off depreciation as a loss. It's not real. It's not a real loss. Again, it's a paper loss is what we call it. So it's a loss on your taxes, but it's not a real loss. And there's something called bonus depreciation, which allows you to take, you know, first 20 years of losses on your property and shift them to the first year when it's 100% bonus depreciation, and we're thinking that's going to come back this year.
Right now it's 40%, meaning you can take 40% of that first 20 years worth of losses. What that means is that first year you can take a big loss on your tax form, even though you just bought your property. So, to give you another example with a short term rental, just to make this based in reality for you guys, we bought a short term rental.
Little cabin in the woods in Washington, we bought it for $660,000 and that first year, we bought it in September. So we had three months. We had to make sure the average length of stay was seven days or less and we had to do 100 hours and more than anyone else. So what we did was we had a contractor do a very small project.
They did a lot of painting and they helped rehab the kitchen because we wanted to make sure we did more hours than them. And we self-managed it and put it up to rent in December and we rented three times and it was under seven days. So now what allowed us to do is we wrote off depreciation. Back then there was 100% bonus depreciation.
So it was about $200,000 that we were able to write off then. And then we were able to write off most of our rehab that very first year. And then we were able to write off our furniture too. So we wrote off $270,000 as a loss that year, and that shelters $270,000 of income from taxes. Wow. So that's how you create a loss and you completely wipe out your income with just one short-term rental.
You know, wipe out your income from taxes with one short-term rental. And of course then, you know, you should be cash flowing the next year and you should be getting all these other ways that you're increasing wealth. Like when we rehabbed that kitchen, we increased the value of that property. And so it's just I think that hopefully gives you a sense of the short-term rental tax loophole. The other way you could do it is you could go buy multiple short-term rentals and you can group them together and do over 500 hours across the portfolio. And the reason you might want to do that is if you don't want to do more than anyone else.
So that's a really great one for our students who are like, I'm just going to buy a couple short-term rentals, but I want property managers and I want to be contracting projects, and I just don't want to have a lot of hands-on. I'm going to just buy multiple and I'm going to group them together and do over 500 hours for my portfolio. And then the last one is medical office tax loophole. And so with that one, what you do is you buy a medical office building and you put your medical practice in that office building and you can actually use the depreciation from the building, the medical office building to shelter your medical practice income.
And you don't need real estate professional or the short-term rental tax loophole for that. So we've seen more and more people in our community start their own practices. It's actually a reverse of I think, what's happening in the trend. Wow. In, you know, the greater US physicians. Yeah. Because first of all, they get that sense of like, hey, I know how to buy real estate and get that confidence and see cash flow.
And then they also understand, I know how to run a business. Yeah, and because each building is a little mini business and I think it gives them a lot of confidence. And then they understand that they can actually shelter the medical practice income and have tax-free medical practice income if they buy the building.
They understand how to do the cash and cash analysis and then they're empowered to do things differently. Yeah, I think the only other thing I wanted to add about your question is this real? Is that you know, the tax code is a series of incentives and it just really makes sense for the government to incentivize people to go out and invest in real estate because it generates so much economic activity that it generates more tax revenue for the government than the amount that they would collect from you as an individual taxpayer. And I actually even did the analysis on this one time where I compared what we would pay as individual taxpayers compared to all the other tax revenue that we generated. Because you know, we're paying people salaries, we're paying property managers and contractors.
We're spending money on renovations, you know, so we generate so much economic activity that the amount of revenue that we created for the government was far in excess of what we would have paid as individual taxpayers. And so that's the reason why they do it. And the second reason they do it is, is that the government doesn't want to be in the business of providing housing.
We've seen examples of that where, you know, that's just been a disaster where the government housing has been compared to what the private sector could do. The private sector can do a lot better with housing and creating, and that's what we do, right? We actually buy these houses, and we make them beautiful.
Like we actually make them great living spaces and that's really important. I would say that's an important part of something that our community really prides themselves on is providing great quality, quality housing. Quality safe housing. Right?
So a technical question. If you're saying that you have to put more hours in than anyone else, including the contractor.
Like what sorts of, like, are you mowing the lawn or like what, like what counts as an hour? Yeah, it's a great question so first of all, the IRS doesn't specifically define what counts as an hour. Okay. So we always get these questions about, you know, oh, does the driving time to my property count?
And, you know, it's really unclear, but there are certain activities like acquisition, renovation-related management. So if you're self-managing your property, there are specific categories that count. And yeah, certainly if you're gonna be mowing your own lawn, that would count. But you could, you know, again, you could count the hours of somebody, a landscaper for example, who's spending, you know, that time on your property and make sure that you're doing more hours than them, especially if you do choose to self-manage, then you do way more than pretty much anybody else. Okay. I think the cleaner is the one where if you have a lot of stays, the cleaner is one where they could potentially do more hours than you. And so again, that's something that you need to kind of watch closely. And again, it's the calendar year. And so what a lot of people in our community do is they do tend to buy a property towards the end of the year.
So it's the last several months where they have to do more hours than anybody else. Yeah, Kenji wrote a good blog post on this actually, on what counts as material participation hours. So people can just Google that, that will also lay it out. But this is a time to remind you guys having a really good real estate savvy CPA makes such a difference because you wanna be able to ask these questions to your CPA, and also to kind of create a strategy, sit down with them and say, okay, I'm thinking of doing a short-term rental.
I'm thinking of doing this. Does that work? You know, and make sure that they're on board with your plans to, you know, go into real estate and how you're gonna go into real estate. So they're looking to maximize all your write-offs all the time. A good CPA won't be scared of the IRS. They're gonna know the tax law and they're gonna be able to help you optimize your tax savings.
Okay. That sounds good. I'm just trying to avoid laying the flooring myself. Yes. But it sounds like there's lots of other— Do that again. We have never done that. Yeah, we have never done that. Well, what I do wanna say, just to answer that one directly, if you're planning a major renovation, then what a lot of people do is in the first year, they'll rent it out and the short-term rental needs—they'll buy a property, they'll set it up, they'll rent it out.
And then they'll plan, they'll plan the renovation the following year. And what that allows you to do is you can get those big losses that first year from the bonus depreciation. The second year, you can actually create losses from the renovation because you can typically write off a lot of your renovation again, using bonus depreciation on the renovated materials.
And so you could, you could actually get two years' worth of losses from that strategy of buying the first year and waiting. And holding off on the renovation till the second year. Now, that second year, yes, you do need to be careful and you need to make sure you're doing more hours.
That's where the second year people will add a second short-term rental, maybe even a third short-term rental, and do the 500 hours. Then you don't have to worry about the more than anyone else piece, or they'll make their short-term rental active the first year. They'll take bonus depreciation.
The second year it's property so they're not claiming the 100 hours and more than anyone else. They're doing the rehab, they're getting all these losses. The losses will cover any income you have coming in. So it's gonna be tax-free income, and then you could buy a long-term rental, which is passive 'cause you don't wanna get real estate professional that year and use depreciation from the long-term rental to shelter the short-term rental's passive income.
So you see, you can use different properties and you can add different types of properties when you have the skillset to play the tax game even better. Okay, well this is exciting. This is exciting. I'm like, ah, we're gonna all be in your course and then you're gonna come back off because— Oh, a hundred percent.
Yeah. Yes. So okay, so I am a baby. I have land and I have, you know, another, but we're not like using it as income. We just use it for ourselves. So what I'm specifically needing to know, like what sort of real estate deals or strategies do you think work best for beginners in medicine?
Like does your average person start with a single-family home that they rent out? Or like short-term rentals versus long-term? Or do they do a multi-unit building or real estate partnerships? Like what's your, what's a common first step? So first of all, I have to say doctors are very smart, driven individuals, and you can absolutely do any combination you want.
Okay. Like, there is, there is no limitation of what's possible for you. Mm-hmm. You know, people start—gosh, people start from single-family home, long-term rentals to single-family home short-term rentals to—a lot of people buy small, multi-family long-term rentals. I will say a lot of people buy fourplexes or duplexes to start, kind of depends on, you know, their appetite, where they're buying, right?
Because if you're buying in California and you're buying a duplex, that's a different story from buying in Oklahoma City, right? Mm-hmm. So it's a different price point. Some people will go bigger right off the bat. That is not the norm. I would say majority of people start with small multi-family, or if they're doing short-term rentals, they're starting with single-family, but—
Short-term rental multifamily is actually a really good way to go too, because you could buy something commercially zoned and be able to run it as a short-term rental. And actually, if there was a short-term rental ban, that might actually work too. That you can actually have it there because it's commercially zoned.
So, you know, this is a difficult, difficult question to answer because you can, you can choose to do whatever you wanna do. And I wouldn't like limit yourself, and I don't wanna limit you by answering this question in a limiting way. Yeah. Well, but I will say that a lot of the decisions are driven by taxes—are motivated by taxes, I would say.
Yeah. Motivated. Which we caution. Anyone that we often say don't let the tax tail wag the dog. Meaning that don't let the tax decision drive your decisions, right, or, or 'cause you might buy a bad deal and have great tax outcome, but you still have a deal that's not cash flowing.
Right? And if you have a deal that's not cash flowing in the end, you're paying out to support that property. That's a liability, not an asset. Yeah. So what we see is that they're motivated by taxes. So if somebody is a dual-income physician family or both—both spouses have jobs or if they're single or divorced or widowed, whatever it is then, and they want the tax benefits—
A lot of them will go out and buy a single-family home short-term rental in that situation. Mm-hmm. Would you say? Yeah. Okay. And then if—if somebody's going for a real estate professional, then they oftentimes will start, start out with like a small multifamily property. But again, like you said, yeah, there are some people who do completely different things.
Right, but if you're going for real estate professional, you have to get over 750 hours that calendar year. You're gonna wanna buy multiple, multiple properties, right? Because just with one duplex, are you gonna be able to get those 750 hours? It's gonna be challenging unless you're actually doing a lot of the work, and a lot of us don't do the contracting work.
We hire contractors. So you go and you buy multiple properties and that's also gonna allow you to create those larger tax savings if you have lots of properties because the depreciation amount—the purchase price of the property. So, and then we have, you know, we have a mastermind where people are absolutely focused on just going bigger.
And we have people who will take our course Zero to Freedom, and then they'll join our mastermind that same year and they'll be built—you know, start out going bigger right away. Yeah. We bought an 86-unit along with six other members of our mastermind. And so it was like a, for a lot of them it was their first purchase in common.
Yeah. And so can do lots of things. Yeah. Yeah. I love it. That's exciting. So I want you to tell me what are your course offerings? How do we get to know more? What are the resources a newbie should look at to get them—it's just like I was thinking when you were mentioning this, you know, Laura and I, when we trained.
We didn't have ultrasound-guided procedures. We just flailed around and stabbed at a vein and eventually put the central line in. But why would you do that when there's something available? I feel like your courses are gonna be like the ultrasound to just show us the way. So tell us about 'em.
I love that. That's a good analogy. It's a great analogy. Yeah. Okay, so we run Semi-Retired MD so there is a free blog in there where Kenji has written a lot of beautiful articles, kind of answering most people's questions. So if you, you know, any of the content you wanna dig deeper in, I would go to our blog or I would go to Doctors Building Wealth, which is our podcast.
Now if you, if you're saying to yourself, yes, I absolutely wanna learn how to do this, we have Zero to Freedom, which is our course that takes you from knowing nothing about real estate. And about 75% of people come in knowing nothing about real estate. And then about 25% already own a rental property.
And it takes you from not knowing anything all the way through buying your first property. So we teach things like how do you assemble your team? We help you actually assemble your team. We have a lot of resources. We talk you through the mindset you need for success. We get you through due diligence.
And then people tend to go into Empire Builders, which is our membership, where they stay with us long-term, and that's where we teach you how to scale your portfolio and build your empire, basically build that source of income. And then finally, people will end up in our mastermind, which is really focused on accelerating your journey and getting there faster.
And in that we're teaching how do you buy any property of any size, anywhere. Like taking away all the limits because you have the skillset and you have the connections and you have the ability to be able to be at that point where you can buy any property, any size, anywhere. Money is no longer an issue.
Right. So the place to really start is Zero to Freedom if you know you wanna build this portfolio, if you know you wanna save on taxes 'cause there's a whole section on taxes as well in there. Yeah. I wanted to mention just if I were to kind of sum up the Zero to Freedom in a one-liner, I'd say that we're teaching you how to confidently
go out and buy great deals. And the great deals is really important because you know, as we said earlier, you can buy a bad deal or a great deal, get the same tax benefit. Might as well buy a great deal, right? Mm-hmm. So, and the great deal part, I think is the, you know, is the harder—it's, anybody can go out and buy a rental property, but what you wanna learn is you wanna learn the skill and, and, and learn how to build a network of people who can help you get those great deals.
And that's the real key because that's what allows you to grow your wealth significantly. One of the keys to scaling our portfolio was buying good—buying great deals, and then trading them out for bigger properties. So we would sell them, we would build up a lot of equity in them. That's part of the great deal.
And then you would take that equity and put it into a bigger property, allowing us to scale up to bigger properties. The bigger property, as Lala was saying earlier, allows you to shelter even more income. Mm-hmm. And so it's just all kind of, it's all—you know, these are puzzle pieces that when you all put it together, it makes sense.
But the fundamental key I think is you gotta learn how to buy great deals. Not just average deals, not just good deals, but great deals. And that's what really what we're teaching. Okay. Awesome. Now I am cheating a little bit because it looks like you were gonna give our listeners a little bit of a discount with the free Ignite Your Journey, which normally is $200, but if they scroll down in the show notes, are you able to tell us about that?
Yeah, Ignite Your Journey is great for people who are like, you know, this sounds good, but I really wanna see what it looks like in action. Like, let me go a little bit deeper. And so what it is, it's a mini course and yeah, normally it's $200, but we are giving you a link to give it to your listenership for free.
That basically shows you our Fast Fire system, which is our system for how we created the portfolio we did today. It's got a little bit about the mindset. It teaches about the strategy that we use. It teaches about the tax savings and then it teaches about how to scale.
And it has some real-life examples from students' portfolios. So you get to see properties, you know, before versus after and see how all the pieces kind of fit together with real-life examples. So I think it's a really great way if you're like, kind of on the fence right now and like, I don't know if I wanna jump right into Zero to Freedom right now.
The Ignite Your Journey is where I'd start just to see a little bit more about what it's about. Well, thank you for doing that, and thank you for joining us. Before we close out, is there anything else that we forgot to ask or anything you'd like to add? I just hope your listeners remember that you are never stuck.
You always have choices and you are capable probably of a lot more than you give yourself credit for. It's gonna be scary. Anything new is scary when you initially start doing it and then you build some competence and then it is no longer scary, right? Like learning that first central line, right? It's scary the first time—by the 10th or 20th time you, you feel like you know it, you know, physically it's just, it's already built into your body and that's what real estate is.
It literally, you learn the skillset and then the skillset is yours forever. It's nothing anyone can take away from you. Kenji and I are really passionate about teaching people to fish for themselves. So you don't rely on a financial advisor to know how to make money. Yeah, and you know, have to pay them.
It's actually, you have that skillset to make money, get to hand that skillset down to your kids. That changes generations. That increases your wealth generationally when people have the skillset to know how to make money in multiple ways, and that's really why we're so passionate about this. Yeah. Just to build on that the part about learning how to fish, a lot of people are focused on what they're getting out of a course or a coach or whatever it is.
And I think one of the things that I think helped me really get the most value out of those experiences or those courses or whatever it was—really focusing on who I'm becoming as opposed to what I'm getting. And so it's actually a Jim Rohn quote. He says, the value in whatever you're doing is in who you become, not what you get.
Right? And so, so really focusing on, you know, building the skill, going out and doing things that are, that you're afraid of maybe. Because on the other side of that is this incredible confidence and that confidence is one of the best feelings. Like I'd say it's on par with joy and happiness and all those things.
That confidence is a really amazing feeling and you get confidence from doing hard things. And so I think real estate is a great example of one of those things that people, I think, perceive as very hard. And when you get on the other side of that and you feel like you're a competent real estate investor, it is a great feeling.
It's a huge confidence booster. And then you feel confident—so confident you're going to teach your kids, right? It becomes a generational thing. And you pass that skill down to your kids and I think it's a beautiful thing. Nice. Yeah. You guys are so awesome. I just, I wanna just say one other thing for our listeners is that, honestly, we are so enthusiastic about this.
It literally sounds like this has been an infomercial, but it has not been. I personally have stumbled into a couple of short-term vacation rental deals that literally doubled our net worth. And we didn't know—like I am just so pumped to find out what these guys actually know, because we didn't really know what we were doing.
There's so much potential for increased freedom with real estate. And so anyway, it was not an infomercial. We were just excited.
Thank you so much for coming on today and sharing all of your personal experiences and for inspiring our listeners. 'Cause just like Amanda and Laura said, we've been inspired today.
So clearly I'm gonna have to listen to the podcast three or four more times to get everything down. But thank you so much for taking time out of your busy lives to share with our listeners and also to inspire our brotherhood and sisterhood of physicians that really are looking to take the next steps and to get zero to freedom.
And freedom looks different to everyone. It's not just financial freedom.
If you have any personal experiences of real estate or anything, you know, taking your first steps, email us and we would love to hear from you. [email protected]. Follow us on the socials. We'll be dropping this episode and we'll also include all the links to get ahold of Leti and Kenji, and we also have a new free video.
How to Crush Physician Burnout for Good without Cutting Back Hours, Quitting Medicine or Sucking It Up in Silence. Scroll down in our show notes. We got a lot of good information and check it out today. So until next time, you are whole. You are a gift to medicine and the work you do matters.
