Welcome back to our monthly fireside chat with a physician to get to know their journey, their joys, and their struggles with finances and outside of finances.
This show is not always about actionable content. It is however a chance for you to see behind the curtains, to walk in another person’s shoes and experience their lives.
Our next guest is a man on a mission; to teach doctors how they can live healthy, happy, and debt-free lives–to regain control of their practice, their time, and their finances. He is making an effort to improve the lives of his colleagues.
His first book, The Doctors Guide to Starting Your Practice Right, is all about this mission. Helping doctors find their dream practice and get off on the right foot. His mission continues with the release of his second book, The Doctors Guide to Eliminating Debt.
The lack of surgeons in rural areas and his desire to work less led him to the decision to retire from his twenty-year practice, in a town with ten general surgeons, and assist in underserved areas. In February 2014 he began working part-time in rural Oregon towns with only one or two surgeons. With just one surgeon in town, the call burden of 24/7 availability is unsustainable. Dr. Fawcett provides them with a needed break from their pager, helping to keep rural surgeons healthy.
I can’t wait to hear about this journey!
Please help me welcome Dr. Cory Fawcett. Welcome Cory!
In this podcast, you will…
- Discover why his parents didn’t talk about money, but yet had an influence on being debt free
- Learn how his grandparents inspired him to invest in real estate & the journey they had with debt
- How he automated the process of real estate investing and managed 64 units while being a full-time practicing physician
- Why he decided to turn over the properties to a property manager
- The downfalls of property management (Hint: There’s some activities that they can’t do! Discover which ones inflated his costs)
- Discover why he doesn’t think residents should NOT get in real estate and rent instead & why he believes they will lose money
- How he purchased properties with no money down and what he would do if he started all over again as a resident with $300k of student debt
- Learn about the biggest financial mistake he made and how a real estate agent talked him into it
- What he does with ‘penciling it in’ and how he makes good decisions about real estate that cash flows
Resources Mentioned In This Podcast
Dave: Hello my friends, this is Dave Denniston and welcome back to the latest episode of the Freedom Formula Four Physicians Podcast. Welcome back to our monthly fireside chat with a physician to get to know their journey, their joys and their struggles with finances and outside of finances. And has you know this show isn’t always about actual content it is however a chance for you to see behind the curtains, to walk in other person’s shoes and experience their lives. Now, our next guest he is a man that is on a mission, he is all about trying to teaching doctors how they can live healthy, happy and debt free life to regain control of their practices, their time, and their finances. That’s a really cool thing and I know he is constantly trying to make an effort to improve the lives of his colleagues, he is of course a doctor, he is an author, he wrote a couple of books “The Doctors Guide to Starting a Practice Right” and “The Doctor’s Guide to Eliminating Debt”, things near and dear to my heart. And where is he from? He is from Oregon and he really got this passion for wanting to help in rural areas, and at the time there was only one surgeon in town and now he is giving some of that person a needed break from their pager to help keep real surgeons healthy. So I can’t wait to hear about his journey and his wisdom, please help me welcome Dr. Corey Fawcett, welcome Corey.
Corey: Hey, thank you, it’s great to be with you.
Dave: well I’m so glad you’re here too. I think what I really love about these physician fireside chat it’s such a great way to share wisdom with us, to get to know your journey. This podcast is about empowering physicians with knowledge on how they can slash their debt, slash their taxes and live a liberate lifestyle. But before we get into the content and the awesome advice, tell us a little bit about you, where did you grow up and what was your childhood like?
Corey: Well, I grew up in Medford, Oregon just over the California border, a little town about 30,000 people. My father was a butcher, my mom stayed home and raised us until we were older and then she became a hair dresser, she went to school. So I live real close to my grandparents from both sides and we had a pretty great childhood, I played three sports: football, basketball and baseball. I was a referee for baseball, umpire actually and assistant coach for Babe Ruth baseball, when my father start doing that I helped him a little bit and I had a pretty fun life. We didn’t have a lot of money, my parents and grandparents never really talked a lot about money, but I could see in their lifestyle, they never borrowed money, if we didn’t have the money for something we didn’t do it, they weren’t there whipping out the credit card and just charging it, we paid our way as we went. And I went to college and worked in the summer in the plywood mills, it was a pretty good job for a kid, summer job and I kind of work my way through school.
Dave: interesting, so tell me about- you mentioned this, I’d love to get into this now that, they didn’t talk a lot about money but they never borrowed money it sounds like…
Dave: Was that something your parents talked about with you? What was that influence on money that you know that they didn’t barrow money, how did you know that?
Corey: You know, as a kid you can kind of hear in the background when they’re talking to each other, they never really talked to us about money. But I did learn just from hearing them talking to each other occasionally, and then my grandmother and grandfather bought rental houses, so I was one of their, basically chief maintenance helper, if grandpa goes to fix something, I’d go with him and we would work on the properties together and I kind of learn from them about buying properties. It’s a great investment because they’re not making any more land and everybody need some. And so grandpa- he worked at the mill too and he would save up a little money, put it a down payment on the house and then the rental paid the house off; and they would save a little more money and put a down payment on another house and pretty soon they had close to a dozen houses. So I saw that from them and they grew up in a depression, so they were very careful with money and again they never barrowed money but that’s something missing, I think in America, we don’t just sit around and talk about finance, we don’t tell people what we’re doing or teach our kids how we are doing it you tend to not ask people about their money, and we tend to not ask them about their weight. How much do you weigh? How much do you earn? Those are questions people don’t talk about and they really didn’t talk about it much at my house. I did have an uncle though who was a banker and he talk to me a lot about money and he got me pointed in the right direction early on. I actually started a Rock-and Roll band when I was a teenager and I was a manager of that so I kind of got a feel how to run a business, and then my uncle help me out with ideas on how to run a business, and how to be successful at what you do. So, he was a big influence as well, he gave me a little book call “Common Sense” and that book probably more than anything else in my life pointed me in the right direction when I was very young.
Dave: Interesting, I want to go back to what you were saying about your grandma and grandpa that they had rental houses because you said that they save some money aside and put down a down payment so it sounds like they didn’t buy it all in cash so they weren’t completely averse to debt necessarily it was just maybe certain kinds of debt.
Corey: I think- I didn’t really know the details, that was how I thought they were doing it, later on somebody mentioned that “no, I think when they bought them they bought them all cash” I know they bought one of the houses for $1,
Dave: Oh wow!
Corey: I found out later; you paid a dollar for this house? Yeah, a friend was moving away and basically sold the house for a buck, it was the next door neighbor’s house and they left and they sold the house for $1. They had a house for 50 years, they kept collecting rent on that house they bought for $1, so I think they did have some debt when they when they were buying the houses, but they were making a substantial down payment so that the debt was safe and we get the tenants, the tenants would then payoff that mortgage.
Dave: How did that that influence you then, it was real estate something that you got into yourself then early on before medical school, after medical school? What did that look like for you?
Corey: We started a practice, my wife and I when we moved here, we start out like normal we accumulated a whole bunch of debt in the first chapter of “Doctor’s Guide to Eliminating Debt” I actually told my story about how I accumulated a bunch of debt and then decide to pay it off. But when we paid it all off I had been in practice for about eight years and then we became debt free, and we were saying, “okay, what are we going to do with this money now?” because we’re going to have a whole bunch of extra money every month, what are we going to do with it, and then we decide to get into real estate. And so I started buying properties, I now own 64 rentals and up until a few years ago I also manage them while I was a full time general surgeon, and so when you learn how to do it well and you automate everything it doesn’t take very much time. I manage 64 units on about 10-15 hours a month of my time while I was a full time general surgeon; and then you mentioned earlier on that I became, you know working in these rural areas helping solo doctors get some time off, when I started doing that and traveling around I could no longer manage the properties because I wouldn’t be here and so, then a few years ago I had to turn then all over to a property management company. So, I hadn’t been hands on property manager now for I few years, but for probably 12 years I was the manager.
Dave: Talk about the experience of turning that over, I’d love to delve a little deeper into that, so you’re doing locums now, it looks like, locum’s income or…
Corey: I was; I decide to leave my practice after 20 years. I wanted to work part time, and there was no way to do that in my practice we just didn’t have a mechanism to part time with work. So, I sold out to my partners and then began working this, kind of locums, and then shortly thereafter, one hospital system hired me to do two of their little hospitals one week a month and give their doctors a break. And so, while I was doing that I actually hire a manager to manage my properties, because I didn’t really want a property management company. That’s a different environment than a solo manager and I wanted to still be hands on and have this manager and one of the local property management companies ran into my manager , was talking to him and they decided to hire him, so while I’m away my manager goes to this company and he says “hey, I made a deal for you, agree to take all your properties and they’ll just manage them for you, no changes, you don’t have to worry about a thing we’ll just slap them right over.” And so suddenly I have a property management company taking care of my stuff, it wasn’t what I wanted to do, I would have hired a new manager, but I was gone and I felt kind of like I was handcuffed so I had to just so that, so someone was managing the property while I was gone. It was way more expensive to have someone else manage the property; for example, property managers can’t do pests control, if somebody would call me and say they have any ants, I would go over and spray the ants. The property manager has to call a pest control company to come over and spray the ants. So, what would have cost me managing the property a trip on the way to the hospital I would swing by that apartment and spray around the house and spray the base boards in the room where the ants were, take 10 minutes of my time and no extra expense, now is a $80 call if the bug guys come out and do it-do the same thing. And then of course they’ll say “oh yeah, we need to do the whole house and we need to do the $600 treatment” and so it became way more expensive to do it that way, but still that property all by itself after owning property for only 12 years it was producing enough money to pay for my full retirement. So the property actually went faster than my 4 one K savings got me ready to retire.
Dave: It term of appreciation as well as cash flow
Corey: Hey, well I’m only talking about cash flow because you can only live of the cash flow, the depreciation doesn’t help you. It’s nice on paper but you can’t spend it and so the cash flow after just about 12 years in real estate was good enough that, that alone take care of me in retirement years.
Dave: I would love to know Corey, what a great thing you’ve built up, it’s just amazing to go from the son of a butcher, and a hair dresser, working under his grandparents, and helping with rental houses, to going into medicine. When you were in Residency did you have in your mind that you wanted to do real estate for sure? Where did you see yourself when you look back at your Residency as you were going through that time period?
Corey: Well, I always knew I wanted to get into real estate, because I saw what it did for my grandparents. Those dozen houses took care of them in their retirement years just fine, and they didn’t have to worry about social security because that money worked. But I was the only member of our extended family to get into real estate, but I always wanted to do it kind of always “I was always a little too busy and I will do it later”, Residents were pretty darn garn busy, they got no business getting into real estate they’ve got enough to deal with just to learn medicine. So, has a Resident I rented the entire time. I actually try to buy a house it fell through, and I’m glad I didn’t get it, had I got it I would have lost a lot of money, and I advise residents today don’t even consider buying a house. Just rent, you know you’re only going to be there for a short period of time and then your laving and you might leave when it’s a down market, you might leave when you can’t sell the house, if it’s a short period of time you’re not going to recover your closing cost, almost always a resident is going to lose money, they’re not going to think they lost money because every resident I ask who bought a house “oh yea, I’m making money, I bought it for a $200,000 and I sold it for $240,000” and then they kind of leave out all of the expenses that they use during those four years and only the interest they paid and the taxes they paid and the up keep they did. They leave all those numbers and just say “yeah, I made $20,000”, but the reality is they almost always lose, when I ask them okay lets, you make money I hardly ever see somebody who make money, lets analyze that so we can see it, can you gather up all your expenses, all of the taxes you paid, all of the home improvements that you did and all of the interest you paid and then let’s add them all up and let’s see how you did, because I’d love to have a positive example to show people that sometimes you actually can make money on a house. So as a Resident I didn’t get into real estate, I didn’t buy my own house, I rented and my wife and I when we got married we made a deal that we were only going to live on half of our income, I had a Resident salary, and she was an account for a carrot company and they pay her about the same has I was making and so we decided we’d live on one income and we’d save the other and so I actually as a resident was contributing to my retirement plan and fully funded both of out IRA’s all through the residency. And so, I actually write an article for “White Coat Investor” on that very thing, the money I put away as a resident is now worth over a quarter of a million dollars and if I leave it alone until I am 70 it will exceed a million dollars, just the money while I was a resident, and my fellow resident wouldn’t do it.
Dave: Well, I’d love to know in today’s world where there are so many residents that have $350,000 student debt, if you were in that situation today, knowing what you now know; how would rental real estate fit into the picture? Let’s say you’re now a practicing surgeon and you have $350/$400,000 in student’s debt when would you start real estate, would you try and start invest in real estate immediately, when would that come into the picture for you knowing that you have a huge load of student debt on your back?
Corey: Right, well, back then I would have said “has soon as I get debt free then I will ski into real estate” and that what we did. But what I didn’t know was that you can buy real estate with no money down, I didn’t know that when I began to get into it. I actually bought a course and “How to Buy Real Estate with no Money down” and I read it and I said okay and I went out and buy a million-dollar piece of property for no money down and cash back at closing. And then the next real estate book I read said, “oh well don’t believe any of that no money down stuff because it doesn’t work”. And I’m glad I didn’t read his book first because we ended up buying almost all of our properties with no money down. And so, knowing that I can do that, you can do that at any time along the way because you don’t need money. if you did it conventionally, you’re looking at a down payment of 20% or 30% for a none owner occupied piece of property and in that setting I would work real hard at getting all your debt paid off first before beginning that process.
Dave: So, you’re talking about doing like owner financing? for example.
Corey: sometimes, there are owner financing but not all of them have to be owner finance to get no money down deals. Turns out there is lots of ways to do that, I didn’t know about it until I learnt that and when I read that course they showed you, here is 50 different ways to do it and then I got the idea “oh, now I see how this works” and then I went out and did it a different way, 51 the pattern, this is how you make a no money down and be at work and always able to do that. I think most people would think they can’t do it, when you talk to people they say “oh yeah, that would have worked before but it doesn’t work now” and yet my son did it last year so yeah, it always works, you just have to find the deal that will work. It’s not a time thing, it’s not an era thing, it’s finding the deal that will work. In fact, my son he bought his first rental property last year and his accountant talked to me this week as we were getting the tax ready, he says “wow, your son sure got a deal on that” and my son just started collage, he’s already bought his first property – his first rental property and so he’s doing really well. He didn’t have a physician’s debt loan along the way, we were able to totally fund his collage for him so he was able to walk out of collage with no debt.
Dave: Oh, what a blessing.
Corey: Very blessed.
David: Well, just to keep moving on Corey, so, the 64 different rental properties and perhaps some others that you held and sold along the way. I’d love to know, and I’m sure our listeners are just sitting on the hedge of their seats just wondering, well, what is maybe the biggest mistake that you’ve made that we can learn from in this process?
Corey: The biggest financial mistake I ever made it wasn’t in the property. You want one from just general or one from the property?
Dave: We’ve been focusing on the properties, so let’s talk about the properties.
Corey: Okay, yeah, I made one big mistake. There was one of the properties that the realtor-, I found a realtor and he was really great, he knew what I wanted, this is what I’m looking for, he would look for it, he would call me two times a year with a property that fit my desires, and we bought one of the two usually, so we got 50% off the purchases of the ones we bought through him. Because he knew what I wanted. So, he came to me one day with one and I canceled it out and I said, this property just doesn’t pencil, I think I should pass, I’m not going to buy this one. But he convinced me that this is a great piece of property, it’s a great location, it’s just what you wanted, it’s right around the corner from your other property, you really got to have this one. So, I let him sway me into buying the piece of property that I already determined was not a good buy, and that was a mistake.
Dave: I would like to hear more about that, like you said pencil it, like what were you penciling in? do you happen to remember that you said “this doesn’t look good” like, what is that?
Corey: Okay. So, every time you buy a piece of property the whole purpose of this property is going to be to make you money. So, if when you pencil out your estimated expenses of owning this property and the estimated rent that it’s going to bring in, it needs to be positive; it needs to be bringing in more money than it takes out. If more money is going out, then-let’s say it’s losing $100 a month; how many of those could you own? Not very many because those add up fast and you got to be that pay out of your pocket. But what if the property is making $100 a month, how many of those could you own? You could own unlimited amount of those, so when I penciled it out, this one didn’t make money.
Dave: When I look at those kind of things, you have to factor in a number of different assumption, right? What kind of assumptions were you making, like how much vacancies for example, do you factor in any vacancies, do you factor in a certain percentage that you need to keep in the bank for maintenance and repairs and that kind of thing? How does that come into what you’re penciling?
Corey: So, property is very predictable, it’s predictable almost like in selling insurance. The insurance agency doesn’t lose money because it’s very predictable in this group how much it’s going to cost us, how many people are going to die, how many people are going to get sick, so they kind of can predict that stuff. So, property is that way as well, so you can look at your local rental owner’s association and they publish what is the current vacancy rate in the area so you know what your vacancy rate is going to be in general and I always and ii always pledge a little more. So if they say the vacancy rate is 3% I’d say let’s pencil it at 5, so I give myself a good margin there, so if it’s a little more vacancy I’m okay, when the repairs – if the place is in decent shape tends to be in the neighborhood of $50 per unit per month and I only buy apartments. So roughly, $50 per unit per month and that held pretty true for me for a long time and if they get in that expensive you know what the property taxes are, you know what the finance credit charge is going to be, you know the interest rate, you know how much the loan is, these things are all pretty accurately estimated. There’s not a whole lot of guessing in there because you can look at the area averages. And then you know exactly what the tax bill is, they post that, you can look it up and you know what the tax bill is. So, you can get these expenses pretty darn close before you purchase the place. So, you never want to buy a rental property if you haven’t fully evaluated, and you know what it’s going to do, you don’t just look at it and say “oh wow, that’s a cool house, let’s buy that one”. You want to make sure that, that house will actually put money into your pocket, and most of the things I passed on it’s because when I would pencil them out at the price I had to pay to buy that, it won’t make me a profit, and so I would pass on them; and wait for the next one and pretty soon, you just got to be patient, one will come along and then, hey, this one make money, and it really comes down to what the guy wants to sell it for. So, my son is closing on his own personal home in two weeks, his first home that he is going to live in, he bought a rental property before he bought his own home. So, the first one he’s going to live in he actually bought that house and when it was appraised because he did it with a conventional ban loan, it appraised for %15 or so, more than he’s paying for it. So he’s buying a house that he is going to walk into that’s worth more than he paid for it before he even gets rolling on a deal
Dave: That’s great
Corey: And that’s a good buy,
Corey: So, when you’re going to buy for income you got to be darn sure it’s actually going to make income. Many people who get into trouble with real estate, they just buy it because it looks good. I should have real estate that’s a nice-looking piece of property, this is a good neighborhood I’ll take it, and they lose money on it. They never bother to figure out if it would make them money and you don’t want to make that mistake. So, I made that mistake, I already figure out this won’t make any money, but he convinced me this is a great deal for my future. So, I finally gave in and I bought it; okay, well, I bought that about 12 years ago, and it is yet to make me any money, I’ve owned it the whole time and it’s cost me more every year than it brings in actually until I think, until last year was the first time it was actually making money. So, my estimate was right, this won’t make me any money and sure enough, but not only did it not make me any money, but I bought it right at the peak of the market in 2010. So, this year was the first year it’s actual value is returned to where I paid for it. So not only did it lose money every year but it lost 25% of its value of equity. I was upside down on it for 7 years, and because my other properties were making money those properties were covering it. It was only losing about $100 a month but losing is losing. if it’s not making money, it’s losing your money and you don’t want to own it if it’s costing you money. I should have stuck to me guns that this isn’t going to make me money, why did I let him talk me into that? but I fell prey to my- okay, maybe this is a good deal and that was a mistake.
Dave: that’s great mentorship advises Corey; I think that’s some really good lessons we’re learning here today so that you for that. We’re having a rap up interview here in the next few minutes and I’d just love to know from you; if you were talking with a younger Corey, that’s not a practicing physician, but a resident and he is just out of medical school, what advice would you give to him?
Corey: I think I would say two things: number one – don’t buy a house until you are three years into your practice and you know you are going to stay there; until that moment, you are a renter, because you’re temporary so don’t do that. And number two – Set up a good budget and live within your means, stop barrowing money, you spent eight years’ barrowing money to eat, now they’re going to pay you, so now quit barrowing money. And if a resident would stop barrowing money until he’s got caught up, it will totally change financially the rest of his life; but if a Resident gets into that “I’ve been barrowing money all these years” and I get to use the term you’ve got debtabeticnuropathy, you’ve become numb to the debt. You’ve been in debt so long, you just barrow the money and nothing happens you become numb to it, in fact you come out of residency and you suddenly buy a $60,000 car on payment and you shouldn’t have. But nothing ever happens to you with all the debt you’ve done so far so what’s the big deal why don’t I just buy that nice car, I can make the payment. And that attitude will get you into trouble so I would say live within your means and do not borrowing any more money, you are already- a really great quote from Will Rogers “when you find yourself in a whole stop digging” and that’s what residents need to think about, “you’re deep in a whole, stop digging” time to go in another direction.
Dave: That’s great, I love it. Well, thank you so much for being with us Corey; where can people find you, where can they find your book if they want to get in contact with you?
Corey: My books are on Amazon, it can be found there “Doctor’s Guide to Starting Your Practice Right” and “Eliminating Debt” are the two books and my next book is coming out next month, it’s on retirement and career alternatives for the doctor who is ready to throw in the towel. My website is drcoreysfawcett.com and you can get on my blog there and get some advice as we go a long, I do one-on-one coaching for people and you can contact me through that blog, I’m finable on Facebook and YouTube, and Twitter, it’s kind of all over the place, but you can head to my website and you will find everything you need there.
Dave: perfect. That was coreysfawcett.com, correct?
Corey: Yes, don’t forget that S in the middle. No! drcoreysfawcett, dr – drcoreysfawcett.com
Dave: Got it, alright Corey. well, thank you so much. That about raps it up and my friends if you would like to be featured on the next podcast I would love to know your story it will be an honor to host you, because I know that we can learn from your journey just like we learn from Corey’s today. So make sure to contact me firstname.lastname@example.org or my website www.doctorfreedompodcast.com. For the freedom formula four podcast this is Dave Denniston and remember my friends remember to slash your debt, slash your taxes, and live a liberated lifestyle. So, thank you so much for joining us, make sure to subscribe, check-in again soon, have a good one.