Cory's an unusual combination of a down-to-earth personality with an entrepreneurial spirit that continues to impress me, and we've stayed in periodic touch via email since the conference.
I follow his blog, have reviewed his books, and even tried online locum tenens course (we have an affiliate relationship pertaining to the course). He agreed to be interviewed for my Docs Who Cut Back Series.
Docs in finance help one another in that way.
Cory kindly sent me a copy of his recent book, The Doctor's Guide To Real Estate Investing for Busy Professionals (Who Don't Think Real Estate Is For Them). Reading the final parentheses of an already lengthy title caused me to stop and take note: he wrote this book for real estate chickens like me.
I'm not handy by nature, although cutting back has made it so that Click and Clack no longer laugh at me the way they once did. I can login once a month to supervise an investment portfolio, but the thought of supervising an apartment complex makes me nervous. What about the dreaded 3am toilet call?
I am precisely the real estate chicken he had in mind. Lots of real estate books target newbies, but most swing and miss.
The majority tend to reek of sleazy hucksterism (Tom Vu's famous entreaty, "Come to my seminar!" on his late night infomercial was my childhood staple).
Kiyosaki's Rich Dad, Poor Dad is often cited as life changing from a mindset perspective, but I found it painful to read - he'd make a reasonable point and then proceed to pound it into your head with all the subtlety of a sledgehammer. The prose is repetitive and unsophisticated.
Cory realizes that if you made it through your professional training, you'll grasp his points quickly and can build a decent foundation from those lessons. He respects his reader's intelligence.
He starts by systematically dismantling the myths that cause doctors to view real estate investment as a fool's errand. He illustrates the important distinction between investors and reluctant landlords, and demonstrates how the latter are those that loudly discourage others from pursuing opportunities. Negative recall bias affects taints the asset class based on what we hear in the doctors' lounge.
Inexplicably, while terms like gubernaculum rolled off my tongue as a first year med student (and, in fact, became the name of an intramural team I played on!), some of the terms thrown around in real estate tend to feel intimidating.
Cory's explanations of commonly used terms like Net Operating Income and Cap Rate are intuitive and demystify the underlying concepts. His discussion of how to screen for a good property, determine a maximum purchase price and use information from an appraisal in the proper context were illuminating, and the pieces of the puzzle fell together nicely.
It's All About The Cash Flow
The biggest surprise in the book is his detailed explanation of how he was able to make a no money down purchase with cash back at closing. From any other author, such claims would be immediately suspect. From Cory it came as a complete shock.
Cory's blogging and writing can come off as decidedly anti-debt bordering on scolding. He has good reason to worry that a big mortgage or a lifestyle purchased on a credit card is more likely to be a yoke around the neck of a typical physician.
His rationale is easy to understand: Repaying a 2% educational loan over a full 30 year term can make sense if you are investing the money you'd otherwise use to pay it down in a place where it will earn higher returns. Most physicians fail to invest the difference, and instead spend it to further inflate a lifestyle built on an unsustainable foundation.
While he'd be loathe to assume debt that takes money out of your pocket, Cory is a strong supporter of assuming debt when the math supports cash flow that deposits money into your pocket. It's the attention to numbers in a detailed cash flow analysis, combined with a flair for creative nontraditional financing, that enables him to see opportunity for positive cash flow where others cannot.
Cory spends a decent amount of time giving real examples of situations he has encountered, and subjecting multiple scenarios to rigorous but not terribly difficult cash flow analysis that underpins evaluating any deal. If Cory were a hip hop artist (he's already released a rock album), he'd have a tattoo in enormous gothic font across his chest reading It's All About The Cash Flow.
As a result, my 4th grader and I have been spending the past few evenings looking on redfin.com and loopnet.org to practice our newly acquired skills screening properties to see if they pass the screening tests I learned from Cory's book. Getting comfortable performing the cash flow analysis is a critical step in preparing to become a real estate investor.
Your Time Matters
Another facet I appreciated was his direct approach to making fair deals (not solely emphasizing distressed properties sold below market value) and limiting time for nonsense. Cory has a strong desire to control all variables in his real estate empire. It's a chicken and egg argument whether this trait reflects his baseline personality or was cultivated by a career in general surgery. He advises delegating tasks while maintaining close supervision, and bypassing any unnecessary time sinks as a matter of principle.
To this end, he covers:
- How to identify the right realtor and "train" him or her to bring you the right deals and to follow your instructions explicitly.
- How to design redundant systems to ensure problems are solved in a timely manner whether or not you are immediately available.
- Why showing prospective tenants a vacant unit immediately should be a priority, and how to entice tenants to sign a lease without sacrificing income.
- How to train tenants to distinguish between emergencies and repair issues that can wait until morning.
- How to reduce the go-between interactions by realtors and make direct buyer to seller handshake deals by understanding the seller's needs.
- How to become adept at quick bread and butter maintenance issues while hiring professionals for complex tasks. (You might not be willing to rent a jackhammer or pour concrete as Cory and his wife once did to speed up a repair!).
As a final teaser, this will be the only real estate book you read that compares a standard screening test for blood in the stool to an evaluation of real estate deals.
From Chicken To Chicken Hawk
If you are a real estate chicken who is looking to diversify beyond passive index fund investing but has been making excuses, you will find The Doctor's Guide To Real Estate Investing for Busy Professionals (Who Don't Think Real Estate Is For Them) engaging and relevant. It's written in your language, the author is looking to empower you rather than sell you a program, and the writing is plainspoken without being patronizing.
The book eliminates your excuses: As a small town general surgeon covering everything, the author was likely busier in his career heyday than you are now.
I learned a ton, it was not at all intimidating, and the concepts fit well with my growth mindset approach: I can master new skills if I study and practice sufficiently.
I'll be working when this post appears Christmas morning, but if you happen to get an Amazon gift card, now you know what to spend it on.