MtoM #221: Pharmacist Builds a Real Estate Empire and Punches Out in 10 Years and Finance 101: 529s

This is the White Coat Investor podcast, Milestones to Millionaire. Celebrating stories of success along the journey to financial freedom. This is Milestones to Millionaire podcast number two. Pharmacist builds a real estate empire and punches out in eight years. Full disclosure. What I'm about to say is a sponsored promotion for locumstory.com but the weird thing here is there's nothing they're trying to sell you. Locumstory.com is simply a free, unbiased educational resource about locum tenants. It's not an agency. They simply exist to answer your questions about the how to's of Locums on their website, podcast, webinars, videos, and they even have a locums 101 crash course. Learn about Locums and get insights from real life physicians, PAs and NPs@locumstory.com. all right, welcome back to the podcast. As you know, this is the Milestones to Millionaire podcast. If you've accomplished a milestone, we want to highlight it and use it to inspire others to do the same. You can apply@whitecoatinvestor.com Milestone. All right, our annual survey ends tomorrow. We use this to guide our content for the next year. We use it to determine who we partner with and where we refer you to. So please fill out the survey. It's at whitecoatinvestor.com WCISurvey. We'll bribe you to do it. We're given out. If you fill out the survey, you can enter yourself into a competition, win some T shirts or even free White Coat Investor online courses. Right. These have value of as much as four figures. So go ahead and fill out the survey. And I think you have to give us your email address if you want to enter the contest, but we probably already have it anyway if you're filling out the surveys. So thanks so much for filling that out. We do use the results. They really are important to us. I think last year, 1900 people or something filled out the survey and the entire team went over it and we made a lot of changes based on that survey. So thanks so much for those of you doing it. All right. We got a great interview today. A pretty impressive accomplishment, actually, by a pharmacist. But stick around afterward. We're going to talk for a few minutes about 529s. My guest today on the Milestones Millionaire podcast is Ryan. Ryan, welcome to the podcast.

Hi. Thanks for having me on.

Jim, tell us a little bit about you, what part of the country you're in, what what you do for a living, how Far you are out of school, et cetera.

Yeah, so I'm in Sacramento, California. I used to work at the Kaiser in Roseville as a pharmacist and I slowly built up this rental portfolio on the side of doing that full time job. I did that for about eight years. At first I just kind of bought one property a year, and after four years it was making $10,755 a month. Then I scaled further. I bought some properties out of state and now it's making over $50,000 a month in rental income.

That's pretty exciting. So what has that done to your pharmacy career?

I was able to retire actually in August of 2023. So I worked pharmacy for eight years and then was able to retire from the rental income, being able to replace the full time pharmacist pay.

So presumably you're financially independent at this point. So. So congratulations on that. And let's talk about your journey. I mean, were you always interested in being a real estate investor or what turned you on to this initially side gig slash investment now lifestyle? How'd you get interested?

Yeah, that's a great question. So I actually had a grandpa who got into real estate investing back in the 50s. He bought a couple properties in the San Francisco Bay area, and he was not only able to retire early, but also helped cover part of my college tuition and that of my brothers as well. So I realized that real estate is the best way to create generational wealth. So I wanted to get started as soon as possible. At the age of 23, I graduated pharmacy. And then one year later I bought my first property for $262,000 in Stockton, California where I went to pharmacy school. And what was cool was I rented out by the bedroom. I kind of did what my college buddy did. He lived at nearby the college and rented out each bedroom. So he lived for free and was able to make cash flow on top of that. So I kind of just copied that model and obviously I optimized it and everything. And usually I'm able to double or triple the typical rental income on a property by doing that. In fact, my top Property makes about $6,550 a month.

Yeah, very cool. Okay, so there's some, some risk of being a house hacker, right? There's risk that you're doing it at a time when you don't have of other income, you know, particularly if you're still in school. How did you deal with that risk? Did you just get lucky or did you have some family money to put down to you know, have a lower mortgage or what. How did you deal with that risk?

Well, I started at $0. I didn't, I didn't have any money prior to that. I did do some tutoring in high school, so I saved that up and put that into stock stocks. But it was all my own money. I worked actually a lot of overtime, probably like 7:30am or 8am until pretty much 11pm at night. I was working these double shifts at the hospital at Kaiser. And so I just saved up a whole bunch of money and I actually. And I lived with my parents for the first, I think four or five years of investing. So I bought these all as investment properties. My debt to income ratio was pretty much zero because again, the student loans were covered partially by my grandpa and partially. My parents helped out after that. I was starting from zero though. So I just continued to just buy one property a year. And I guess, you know, a lot of people are worried about the privacy aspect of renting by the room. I actually live at a house hack right now. I guess the most important thing is really having the right tenants, right? So I rent out to graduate students, typically people in like medicine and pharmacy, dentistry, because that's where I started. You know, they're my alma mater, college. And because I rent out to those high quality tenants, it really minimizes the conflict because you have to think these students are really studying for their midterms or their finals. They're there throughout the whole year and they're very serious students and also a lot more responsible compared to, let's say like freshmen and sophomores.

So did you consider, you know, doing a more traditional, you know, apartment complex, duplexes, et cetera, or getting into industrial or retail or anything else? Or were you always, you know, student housing is the way I'm going to do it.

There's always student housing for me. I do have some duplexes. I do have a quadruple, but mainly single family homes.

Very cool. So what's the worst thing or the scariest thing that happened to you while you were building this portfolio?

There's definitely a couple things I would say. The first thing that happened was, I think it was only four months after I bought my first property. That first property was 100 years old and it had a broken sewage line, which I didn't know about. So as you can imagine, I got this call at 11pm at night saying, oh my God, there's sewage coming out of the kitchen sink. It's all over the kitchen floors. It's backing out into the showers into the bathrooms. And it, you know, obviously smells like you know what it is. So I had to call out sanitation crew to go out there, clean up the whole place. And I had a plumber stick a camera down the sewage line. And it turns out the whole line was broken because the roots from the trees in the backyard were sticking into it. So I had to replace the whole line. It cost about $9,000 to clean it up, replace the line with PVC pipes. And that was, you know, that was just the first thing that happened to me. I also had to replace the AC system because, you know, California is like 100 degree summers and our AC was not working. That one broke down too. So it cost $15,000 to replace that. And there was just all these problems that happened on the first property just by virtue of me not doing my due diligence, really looking through all the inspection reports and it cost me over $30,000. Since then, obviously, I've learned to do the due diligence. For the sewage line. For example, you can get a sewage lateral line inspection on the house before you buy it so that you can negotiate with the seller if you find any breaks in the pipes, which is actually very common. I would say about 50% of the houses I bought had breaks in the sewage line or some sort of cracking or something that had to be repaired.

Yeah, almost a little bit of a negotiation technique anyway.

Yeah, definitely.

Okay, so tell us a little bit about how you've managed debt. How much have you typically put down on these properties? Are you doing cash out refinances to buy another one? Are you trying to pay these off? Are you trying to deliberately maintain a certain debt to value ratio or tell us how you're managing debt.

So I go 20% down. Typically. I do have some houses on a 15 year mortgage and I have other houses on the 30 year mortgage. The ones for the 30 year mortgage, they're more of a cash flow play. I obviously will maximize the cash flow there. And the ones on the 15 year mortgage, well, they're all going to be paid off by time. I'm in my 40s, basically because I bought the first one while I was, I think 23 or 24. So yeah, 15 years from there is actually, you know, the first one would be paid off around 38, when I'm 38. So I have those cooking in California and then I have a bunch in Ohio that are on 30 year mortgages. As far as debt, they're all conventional financing except for when I hit my 10th property. I couldn't use conventional financing anymore, so I started using DSCR financing, which is debt service coverage ratio loans, which actually don't require you to have a W2 income. You can buy those as long as you have the down payment, and as long as the estimated rental income on the appraisal report covers the estimated mortgage payment, then you can, you know, the ratio is. Usually it has to be 1.25 times the coverage, but, yeah, you will be able to get qualified even if you don't have a W2 for that.

Yeah. Now, I'm curious. Now, this is what you do. I presume now you would qualify for real estate professional status. Did you ever qualify for that while you were practicing pharmacy and use that to offset your earned income?

Yeah, I only qualified that the last year because I retired in August. So I basically had four months where I was just like, full on real estate. The tricky part about the real estate professional status is you have to work more hours in the real estate than the W2. So if you're working 40 hours as a W2, you have to be working 41 hours as your real estate professional. So, you know, I was only able to qualify for it in the last year, but I was able to get a $40,000 check on the 2023 because I qualified for it.

Yeah. Now, let's talk a little bit philosophical, right? I mean, you spent years in college and pharmacy, pharmacy school, learning how to be a pharmacist. And then, you know, eight years into your career, you're kind of done. You're kind of out. Were you happy about that? Were you a little bit bummed about that? Did you stop enjoying what you were doing? Tell us a little bit about how, you know, this success you've seen with real estate has meshed with, what's more of a traditional career. Sure.

So I got into real estate investing because I wanted financial freedom, financial independence, the ability to do what I want, want where I want with whomever I want to do it with. Right. And just having those options available and that freedom is really what drove me to doing real estate. I saw all of these pharmacists who are in their 50s or 60s, and they were just not liking their job anymore. They're like, I wish I could have quit 10 years sooner, but I have to pay the bills. Right. I have a mortgage payment. I've, you know, maybe I have children to pay, cover and pay for. And so they're just working nonstop, and they were kind of tired of it, and I didn't want to Be in that position where I'm in my 50s and 60s and looking back saying, wow, I could have done a lot more than just stick with the same thing every day for 30 years. Right. And so that's kind of where I was at. At least my headspace and having financial freedom. It allowed me to, like when I wake up in the morning, I get to set my own schedule. I get to decide what I do. If I want to work like one day or two days as a pharmacist, I could, but it's not necessary. In fact, I haven't been working since August. I haven't been practicing since August of 2023 so far. But yeah, I mean, I can always go back to it if I want to pick up a couple of shifts here and there. I did enjoy the aspect of always being able to help people in that sense by improving their health and, you know, optimizing health care and all that. But I also help in a different sense by providing really good quality student housing. And that's kind of one of my passions as well. Because, you know, when I first started out, I, I was recently removed from being a student and I really could understand what the students struggle with and relate to that. I've, I've even helped some of the students and given them advice for pharmacy school. So, you know, my, my goal is to provide the best housing so that they can just be stress free, just focus on their studies.

Yeah. I mean, you must not miss it too much. It's been 18 months and you haven't gone back to it. Right?

Yeah.

You must be okay with being retired essentially at this point.

Right, right, right.

I'm curious if you have defined what enough looks like in your world or do you expect to have 2,000 doors under management in another 15 or 20 years?

Sure, that's a really good question. I would say if you're making maybe 25k or 30k a month or so, it's pretty much it'll cover everything you ever need. With that being said, I don't see any reason not to grow. The more we grow, the bigger the reputation I get in that local market as being one of the best student housing providers. So my goal is to eventually get to 100 houses. I'm at 14 right now. It's just a goal. I don't have to, I'm not really attached to it to necessarily have to hit it. But I do like to reinvest the gains that I make or the cash flow that I make from the real estate to continue to Grow.

Now, it doesn't sound like you've inflated your lifestyle all that much. Despite bringing in 50,000 ish a month of what ought to be pretty tax sheltered income, I presume you're still, you know, sharing a place with others. House hacking, you said. I mean, you lived with family for five years while doing this. Do you anticipate increasing your spending at some point?

Not too much until I have children, I suppose. I'm a very. I'm. I'm very frugal. Well, I mean, I guess it depends on your definition of frugal. But like last year I think I maybe spent like less than $40,000 a year for the whole year in personal expenses. And that includes like travel and everything. So, you know, I'm not a big spender or anything like that.

Any regrets about going to college in pharmacy school and starting your career that way?

No, no, definitely not. This is what helped me. That high income is kind of what allowed me to build up so much capital to be able to invest in this vehicle. Real estate is, as you probably know, capital intensive. You generally need to have a 20% down payment. Unless you're going to choose to live at the property. Once you get started, you can use leverage, you can use HELOCs, cash out refinances to really expand a little bit quicker. But with that being said, I think it's very important to have a baseline high income or a decent income, I would say to invest into real estate.

Yeah. Awesome. Well, Ryan, congratulations to you on your success. I have often talked about, you know, particularly with short term rentals, that this is likely, especially with a healthy dose of leverage, the fastest route to financial independence out there. And I think your experience demonstrates that particularly well. So thank you so much for being willing to come on the podcast, share your experience and inspire others that want to do something similar.

Yeah, of course, no problem. I do have a website for anybody interested www.newberealestateinvesting.com guide and Nubia spelled new die.

All right, that was fun to hear. Somebody that just smashed it out of the park, right? I mean, it may not be the classic thing for somebody who wants to have a full career as a doctor, a lawyer, a pharmacist, or a veterinarian or whatever because he's basically out in eight years. He does a little bit of real estate coaching now, mostly just kind of builds his real estate empire and sounds like he's just kind of getting started despite already having far more income than he needs. The reason I asked him that last Question about regrets about coming there through a pharmacy door is he spent a lot of time learning how to do that. I don't know that that's the most efficient way to do it, but it certainly does make it easier to be a real estate investor when you have a great source of capital, such as the income that you can have in a high income profession like pharmacy or medicine or whatever. So it's pretty cool. If you want to try doing something like that, I certainly encourage you to do it. Be careful with your risks, learn how to manage leverage, learn how to do due diligence, all those things that it takes. This is not as simple as just dumping money into mutual funds and forgetting about it, but it can also be very, very effective. Some of you may know this, but one of the things I told myself 15 years ago was if I couldn't get White Coat Investor to take out off as a business, I was going to start a real estate empire. And, and luckily White Coat Investor did, so I didn't end up doing that. Our real estate investments now are all totally passive, but we certainly considered it. I don't think it's some crazy route to financial independence. And I met lots and lots of docs and other high income professionals that have gone down that route. Okay, I told you at the beginning, we're going to talk a little bit about 529s. 529s are the premier savings vehicle for college savings. It's not the only thing you can use. I mean, it's possible to save up for college using just a taxable account. You can do it using a custodial account, a UTMA account. You can save for college via real estate. Right. And if you have the real estate paid off by the time they get to college, they could, you know, just use the cash flow to cash flow their way through college. Or you could sell the real estate and use that cash to pay for college. There's lots of different ways to pay for college. One of the more common ones of course is encourage your kid to get scholarships and to work during the summers and during the school year and you help to cash flow. It's actually not a requirement that you save up for college in advance, especially if you're a high income professional. I could easily cash flow my children's college education, but they're at a relatively cheap school and school selection is so important. Which brings us to the first point, about 529s. 529s are the most tax efficient way to save up for College. Right. Once you put the money in the account, as long as it's only used for legitimate educational expenses, which is basically everything but their transportation, it comes out tax free. So everything it earns for the 18 years or whatever you're putting money in there comes out tax free. And it's got much higher limits than Roth IRAs. In fact, it's basically unlimited. How much money you can put into 529s? You know, the gift tax rules apply. I think this year it's $19,000 a year each of you can give to your child before you got to file gift tax returns. But you can open a 529 in every state and you can get as much as like a half a million dollars into each of these. And your spouse can as well. I mean, literally, you could probably leave a billion dollars to your kid for college. And thankfully college doesn't cost that much these days. I'm actually surprised how much some white coat investors are trying to get in the 529s. I don't know what their plans are. It's like finding the most expensive school in the country and paying full freight there and then having their kids go to dental school. I don't know what their plan is when they're saving up 400 and 600 and $800,000 into each 529 for their kids. But for most people out there, just putting something in there is probably a good idea. I think what we anticipated when we were first starting to save for college is we probably anticipated giving them something like 20 or 30,000 and we were able to be a little more financially successful than we expected. So we ended up having bigger 529s than that. But by the time they're done with school, given where they're going and how they're spending from it, I've got really two into college now. One of them graduates from high school this year. They're going to have significant 529s left over. And there's lots of things you can do with overfunded 529s like that. Probably the best thing to do is to just change the beneficiary to their kids. Right? That gives you another 30 years or so for that money to compound tax free. And you may have some gift tax implications there as you change generations. But the interesting thing is those gift tax implications are going to your kid, not to you. So if you're the one with the estate tax problem, that's okay. This is not your problem. It's their problem now, I guess if you're wealthy enough that they're going to have an estate tax problem too. That might not really be a fix, but for most of us it's probably a one generation issue, so very cool. How should you invest your 529? There's a lot of schools of thought on this. Some people treat it kind of like retirement, take less risk as they go on through the years and try to have it mostly in cash by the time they start college. I've looked at it differently because I figure I could cash flow college if I needed to. So there's really little downside. And the market's tanking right as they start to spend that money. So I've invested aggressively the whole time, including while they're in College. I've got 529s for each of my nieces and nephews. I think we have like 35 529s or something. And I've got eight or 10 of them withdrawing from it right now. And they're all still fully invested. They're 100% stock 529s. And that worked out really great in 2023 and 2024. Right. Because obviously whatever's still in there after those two years was 50% more than what it was when they started. Didn't work out so great in 2022. Wouldn't have worked out that great in 2020 either. So you've got to consider both the possibility of a decrease in value in the 529 as well as the consequences of decrease in value in the 529. As a general rule, you should use the 529 in your state, at least up to the limit of whatever your state's going to give you as a tax break, as a deduction, or as a credit. But above and beyond that, you can use a good 529. The good news is there are more and more good 529s every year. There's probably 10 or 15 of them now. Some of the classic ones tend to be New York's and Michigan, I think is when I ranked number one the last time I did this. Utah's always in the top five. Nevada is always in the top five. You know, these are good 529s. And if your state's not giving you any benefit or they don't care which state you use to get the benefit, you can just open one up at Utah. Utah's is my529.com or Nevada, especially if you already have a Vanguard account and you see the 529 when you log in to your Vanguard account, but there's plenty of other good 529s out there. Don't feel like you have to use a Utah one or a Nevada one or a Michigan one. You know, probably a third of them now are pretty darn good. So that's a nice benefit of the 529 system, where the states compete against each other to provide the best possible 529 out there. Maybe we ought to do this with 401ks, you know, have them run through the state instead of individual employers, where people often get kind of a bum deal all right, our sponsor for this episode is locumstory.com and this is obviously a sponsored promotion for them, but the weird thing here is there's nothing they're trying to sell you. Locumstory.com is simply a free, unbiased educational resource about locum tenants. It's not an agency. They simply exist to answer your questions about the how to's of Locums on their website, podcasts, webinars, videos, and they even have a Locums 101 crash course. Learn about Locums and get insights from real life physicians, PAs and NPs@locumstory.com all right, our time's up. Hope you enjoyed the episode. Keep your head up, shoulders back. You've got this. We're here to help you. See you next time on the podcast.

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