MtoM #58 - Physician Assistant Millionaire

This is the White Coat Investor Podcast, Milestones to Millionaire. Celebrating stories of success along the journey to financial freedom. Here is your host, Dr. Jim Dali.

This is Milestones to Millionaire podcast number 58, Physician Assistant Millionaire. If you're looking to boost returns, lower taxes, and build wealth, join the WCI monthly Real Estate Opportunities list for tips and strategies to maximize your real estate returns. And for introductions to exclusive investment opportunities, expect educational emails that introduce you to syndicators, fund companies, online courses, and online real estate platforms. Go to whitecoatinvestor.com reopportunities to sign up today. You can do this and the White Coat Investor can help. Welcome back to the podcast. This is the podcast where we share your stories, we share your achievements and accomplishments, the milestones you've reached, and and congratulate you, while at the same time inspiring others to do the same. If you'd like to come on this podcast, you can apply. Whitecoatinvestor.com Milestones is where you do that, and we'd love to celebrate with you what you've accomplished. I assure you there's somebody else in the audience out there that is trying to do the same thing you are trying to do or that you just did. And your experience will be inspiring to them. Let's get our guest today on the line and learn a little bit more about how she became a millionaire. Our guest today on the Milestones to Millionaire podcast is Lauren. Welcome to the podcast.

Hi. Thanks for having me.

Let's start with the beginning here. Tell us what your profession is and how far you are out of school.

I am a dermatology PA and I graduated from PA school in 2008. So I'm 13, coming up on 14 years out.

Okay. What part of the country are you practicing in?

I'm in Texas.

Texas. Okay. And what's your approximate net worth?

Our approximate net worth is sitting at right around $2,600,000.

$2,600,000. Congratulations. And you say R. It sounds like you're married, is that right?

I am married and I've got three kids.

Okay. And what does your spouse work as?

Well, he does work. He is in software development. He's actually in a manager position. He works at a large corporation, so that helps as well.

Okay, so what's your net worth divided up into? What's this 2.6 million. How much is home equity investments, real estate, retirement accounts, whatever?

Sure. So our retirement accounts sit a little under 400. Cash assets, around 150. We've got about 400 in our personal home and then where most of our net worth is in our investment property. So We've got about 1.7 million in investment property right now.

Okay, and how much debt are you carrying on the investment property?

So our total debt between our house and the Investment property is 1.7 million.

Okay. So fairly leveraged on it.

Fairly leveraged right now? Yeah, we're making some moves to kind of change a little bit of that, but we are fairly leveraged right now.

Okay, so let's talk about your range of income throughout your career.

Sure. My first job out of school, I took sort of a training type position. Made about 75,000 that year. Kind of worked my way up over the years. But since I have, since my first was born, I've worked part time. So our best year was actually this past year and I made about 175,000. We were at about 300,000 combined.

Okay. You may or may not know this. When did you become a millionaire? Do you remember?

Somewhere in 2020. I couldn't give you an exact date. Somewhere where that investment property kind of crossed that threshold where we had enough equity to put us over that 1 million mark.

When you realized it, did you do anything to celebrate?

We honestly didn't realize it until much later, sometime in 20. So I kind of do this year end financial thing in my planner, my notebook that I live by. And every year I kind of add up our net worth as part of that as I'm setting goals for the next year. And so somewhere at the end of 2021, I realized, oh, we've like, well, crossed the millionaire status and we had no idea. So that was kind of fun to see.

Yeah. Congratulations. That actually happens to a lot of people and I kind of feel bad. I kind of wish I'd celebrated a few more milestones as we hit them, but we blew through a few without realizing them for sure.

I feel like we celebrated the back to broke milestone a little more than like, that felt really good. And now it kind of, you know, because it's all tied up in equity, I joke that it kind of feels like monopoly money. So we know it's there, but it's hard to really feel that in the same sense.

Yeah. Especially with the leverage. It can feel easy come, easy go sometimes, but yeah. All right, well, let's talk about your secrets to success. How did you two become so wealthy?

You know, it's really just been in the last three years that we've had as much success as we have. I think there was a lot of background to that. We early on in our marriage saved a lot. Even before we were married, I had bought my first home. I house hacked to pay off my student loans. I came out of school with a good amount of debt, just like most of us. So I rented out the rooms to friends. I lived for free, and I aggressively paid off my student loans. So I think starting at a good place and having our loans paid off kind of set us up to get there. We started saving and then somewhere in 2019, we'd saved a good chunk of money and we were trying to figure out, okay, it's not doing us any good in our bank account, so what do we want to do with it? And we had kind of three options. Option one was to spend it. We needed some house updates. And so option one was new kitchen, new windows, you know, update the house that we're in.

That sounds pretty good. A lot of people would choose that.

Yeah, I sometimes wish I had, but not really. I still waiting on that kitchen. Option two was put it into VTS X. So right now all of our retirement funds are in Roth accounts, Roth 4.1ks and Roth IRAs, which is feels great, but we can't access that money. So we want to retire early. You know, aside from doing some strategies, it's not really accessible to us until we retire. So we thought, well, maybe we'll do a taxable brokerage account. Brokerage account, you know, BTS X and chill, do that. That was my husband's big push. But then we had dinner with some friends and they had an Airbnb and they said, you know, why don't you guys think about buying a short term rental property? They gave us their numbers. They were really open and honest with us about their leverage, how they were making it work. And so In November of 2019, we, we bought a short term rental property in Tennessee. So we jumped in, had no idea what we were doing. Still sometimes feels like we don't. But we, we jumped in, we started doing that. I managed that myself. Since I work part time, I had the freedom to do that. And that's really been. The secret is we took a risk, we took a big risk. And we've made a couple of moves since then. We went from one property into three, and that has been amazing for us.

So all short term properties, all three of them.

We have two short term rental properties and then we also own 22 acres of raw land.

Okay, are you renting that out at all or is that just a speculative investment at this point?

It was a speculative investment. We had Originally planned to develop the land, we'd still like to, but I think we're going to end up, it's about doubled in value, so I think we'll end up selling that and moving that money into maybe some syndications.

Probably not going to develop it yourself then, huh?

Probably not. That was the goal. That was a dream. We still come around to it sometimes, but it takes a lot of capital to do that. We're already fairly leveraged and a lot of time and there's always, even though there's money to be made there, there's also opportunity cost of that money being tied up for a couple of years and not really being able to see the profit from that for a while.

So tell us about your decision to borrow money for these investments because it sounds like you wiped out your student loans pretty quick, that you kind of wanted those out of your life, but at a certain point you decided you're going to use some leverage. Tell us about that decision.

Sure. Well, I graduated college in 2005, grad school in 2008, so a big chunk of my loans actually had a nearly 7% interest rate. And now it's really easy to refinance and people are getting these great rates. But that wasn't the case at the time. So I was wanting to aggressively pay off that 7% interest rate because that was not a great interest rate obviously to have. So I was sort of debt averse for a long time. There was a big push to be debt free completely. We paid off cars, we paid off loans, we did all of this. All we have is our primary mortgage. But then I started to realize that without debt we weren't going to be able to grow anything. My husband is not debt averse, so he was all for it. And if I could go back and do anything differently, I would tell myself to not be so scared of debt, of good debt that can make you money. I think people in medicine are naturally risk averse. Right. Like we kind of naturally want to take as few risks as possible and that sometimes slows down our financial growth.

So tell us how much you put down on the properties you bought.

So we put down $80,000 on the first property. So very, very minimal investment to do that. We bought a five bedroom property we bought basically as the realtor we were working with said, you know, your best bang for your buck is going to be to buy the biggest property that you can afford. So of course they always say that, but.

Right.

She was right. So we bought the long as it.

Goes up in value that works out great.

Right, right, right. She's like, basically I would recommend rather than buying like two two bedroom properties or five one bedroom properties that, you know, she's like, it'll be less headache for you if you can buy one five bedroom property or one four bedroom property. So we took our advice. We put about 80,000 down. We had another 20,000 we had invested just as operating costs. And we operated that for a year and a half. The market went up quite a bit and we decided to capitalize on that equity growth. And we kind of realized it's not doing us any good sitting there. The equity is not really helping us. Even though it was cash flowing quite nicely, we wanted to grow. So we sold that property. We did a 1031 into two more properties. And so that's how we ended up with two. And so those we put quite a bit more down. The 1031 ended up with a little over 400,000 in it. We split, split that in half. And so we put a little over 200,000 into each property and we bought, you know, obviously the market had gone up so we had to pay more, but we bought two properties and then we just used profits from the rental to buy the land.

So you put 80,000 down or 100,000 into the business. How much was that first property worth?

Was that a $500,000 property or about 550? 555 somewhere in there.

So you put down 15 to 20%. And the other ones, what the ratio end up being when you bought those?

We put down a little low with 20, 20% on one and 25% on the other.

Okay, and you found that with short term rentals, they were cash flowing just fine at those percentages?

Oh yeah, they cash flow really well. Each property has made us somewhere between 50 and 60 thousand dollars a year. So the cash flow is great. And of course the growth in equity has been very really game changer for us.

Yeah, for sure. The last couple of years have been great in almost every part of the country. What about your time? How much time are you putting in there? I mean, you're in the hotel business now, right? It sounds like you're managing it yourself. Are you doing the cleaning too?

I'm not doing the cleaning. So we're remote, you know, we, they're in Tennessee. We manage from Texas. So we've got a handyman, we've got local cleaner who takes very good care of us. We, we pay her very well. So honestly, time wise, it takes a couple hours a week of my time it's, it's mostly just.

It's not bad at all.

It's really not. I need to be available to answer questions for people who want to book, make sure that they're booked, send, send them, you know, check in, check out information, which honestly a lot of that can be automated and then being available if something goes wrong. So that's the only stressful part is if something breaks while a guest is there, having to kind of scramble to get somebody over there to fix it. But all in all, it's not a large amount of my time. I have found that I like real estate a lot more than I like being in the hospitality business. So I think we will eventually push into more passive real estate. But it's been fun.

Tell me about the decision to go to Tennessee instead of Texas.

That was my husband. Just a market thing. We looked at short term rental markets all over the country. We used air DNA to look at different markets. We talked to friends, we talked to realtors, and every single time the Smokies came out on top. They have been one of the highest areas for tourism for the last several years. Tourism continues to grow there and that's what kind of made us decide to buy there.

Okay, all right, so we're getting short on time, but I want you to have a chance to give advice to those who are, who are behind you. You know, maybe it's a pa, an np, a doc or whatever that's thinking about doing Airbnb, that's thinking about doing vrbo, that wants to get into short term rentals. What advice do you have for?

I mean, my biggest piece of advice is just to not be so risk averse. You know, most people in the White Coat investor group that listen to this podcast have fairly high paying jobs, they have a good income and they're intelligent. You know, if you have those two things and you've, you've got some intelligence behind it, I think you can be successful at really anything that you put your mind to. It's not hard to be better than most people at whatever you're doing. If you're willing to work harder than them, if you're willing to learn and to grow and to be open minded, you can really outperform almost everybody. And that applied for me for being a short term rental host. You know, I really dug in. I jumped into Facebook groups, I talked to everybody I could talk to. I networked as much as I could. And then I learned and I started seeing how other people were being successful, what they were doing to be successful. And I started doing those things and that has made my rental a lot more successful than the rental next door to me. And so really, my best advice is just to learn everything that you can learn. But don't be afraid to take a risk you're never gonna have. You know, no risk, no reward. You've. You've gotta be willing to put it out there. But also understand that you're capable, you're an intelligent person, you've got the cashflow behind you to do some of these more risky investments and you can make it work.

Awesome. Well, Lauren, you've quadrupled your net worth in two years. You've become millionaires. Congratulations on all your success.

Thank you.

And thank you for coming on the podcast to inspire others to do the same.

Thank you so much. It's been an honor. Thanks for having me.

I hope you enjoyed that interview as much as I did. One of the fun parts about doing these milestones podcasts is everybody's pathway is a little bit different. Our last one last week was a doc who had a windfall, basically sold a practice or a big chunk of a practice just a few years out of residency. Today we have someone that did short term rentals, was responsible for a huge portion of their success and used a fair amount of leverage in a very opportune time in the real estate market. So lots of different pathways to get there. You've got to figure out what your pathway is going to be and make sure you balance your life. You need for income, need to build wealth along with everything else you're doing in your life and find that pathway that's right for you. I think that's the main takeaway to get from this particular interview. Certainly there are lots of docs out there who've had success in real estate, short term rentals becoming more common. And I think you can get a lot more cash out of a short term rental in return for putting in some more time, effort, and maybe even risk. I remember at the beginning of the pandemic when everybody stopped traveling, short term rentals were not as awesome as a lot of people were hoping they'd be. Luckily, that was a pretty short term thing for most people and they were able to weather it. But there are risks there when you go into the hotel business. If you're looking to boost returns, lower taxes and build wealth. Join the WCI monthly Real Estate Opportunities list for tips and strategies to maximize your real estate returns. And for introductions to exclusive investment opportunities, expect educational emails that introduce you to syndicators, fund companies, online courses and online real estate platforms. Go to whitecoatinvestor.com reopportunities to sign up today. You can do this and the white Coat Investor can help. We'll see you next time on the Milestones to Millionaire podcast. In the meantime, keep your head up, shoulders back. You've got this. We can help you.

My dad, your host, Dr. Dahl, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney or financial advisor. So this podcast is for your entertainment and information only and should not be considered official personalized financial advice.

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