Investment Management

Real Estate Investments for Physicians: Pros, Cons, and Lessons from the Applesway Investment Group

Published July 08, 2023

As a physician seeking financial growth beyond the medical field, investing in real estate can be an enticing option. However, it is crucial to approach such investments with caution.

Let's start with the pros of real estate investing: 



1. Potential for Steady Income


One of the most significant advantages of real estate investments is the potential for generating steady income. Rental properties, for instance, can provide a consistent cash flow stream that can supplement your primary source of income as a physician. This additional income can be used to build wealth, pay off debts, or reinvest in further real estate ventures.


2. Long-Term Appreciation


Real estate investments have historically shown the potential for long-term appreciation. Properties in desirable locations tend to appreciate over time, allowing investors to benefit from capital gains. By investing in real estate, physicians have the opportunity to build wealth steadily and potentially enjoy significant returns on their initial investment.


3. Diversification


Investing in real estate provides diversification to your overall investment portfolio. Real estate typically behaves differently from other asset classes, such as stocks or bonds, which can help mitigate risk during market downturns. Adding real estate investments to your portfolio can create a more balanced and resilient financial strategy.



Now let's move on to the cons of real estate investing.


1. Illiquidity


Compared to other investment options, such as stocks or mutual funds, real estate investments tend to be less liquid. Selling a property may take time, and in unfavorable market conditions, it can be challenging to find buyers at desired prices. As a physician, it's essential to consider your liquidity needs and the potential impact on your investment strategy.


2. Property Management Challenges


Owning and managing rental properties comes with its fair share of responsibilities. Dealing with tenants, maintenance, repairs, and other property management tasks can be time-consuming and require active involvement. This can pose challenges for physicians with demanding work schedules. However, hiring professional property management services can alleviate some of these burdens.


3. Market Volatility and Risk


Real estate markets are subject to fluctuations and economic cycles. The Applesway Investment Group serves as a cautionary example of the risks involved in real estate investments. In April, the company lost 3,000 apartments at four rental complexes to foreclosure, representing one of the largest commercial real-estate busts since the great recession. Millions were lost by investors. The company’s overreliance on floating rate loans led to substantial losses as interest rates skyrocketed in 2022. This story illustrates the importance of physicians carefully assessing market conditions, conducting thorough due diligence, and diversifying their real estate holdings to mitigate such risks.



The Applesway Investment Group's experience highlights several lessons for physicians considering real estate investments. Let's put the lessons together:



1. Diversify Your Real Estate Holdings


Avoid concentrating all your real estate investments in a single market or property type. Diversify across different locations, property sizes, and sectors (residential, commercial, etc.). This diversification helps protect your portfolio from localized market downturns or sector-specific risks. Such diversification may be best realized by investing in a professionally managed real estate portfolio, either through a syndication or a Real Estate Investment Trust (REIT)


2. Conduct Thorough Due Diligence


Before investing in a property or a real estate fund, perform comprehensive due diligence. Analyze market trends, property values, rental demand, the fund sponsor’s investment track record, and other potential risks. Assess the financial viability of the investment and seek advice from a wealth management professional with expert knowledge of real estate investing to ensure you make informed decisions.


Summary


Real estate investments can offer significant benefits for physicians seeking to diversify their portfolios and generate additional income. However, it is crucial to approach such investments with caution, drawing lessons from the cautionary tale of the Applesway Investment Group. By understanding the potential advantages and disadvantages of real estate investments, conducting thorough due diligence, diversifying holdings, and partnering with an experienced advisor such as those on Earned’s team, physicians can navigate the real estate market more effectively and make informed investment decisions that align with their financial goals.

At Earned, we specialize in wealth management for today’s physicians. Our advisors are well-versed in the specific challenges physicians face when it comes to their finances, including those that doctors confront when considering retirement. 


Contact us today to learn more about what our team can do for you.

Earned Wealth (a DBA of NoHo Financial, Inc) is an SEC-registered investment adviser located in New York City, NY. Registration as an investment adviser does not imply a certain level of skill or training.Earned Wealth's website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publication, and links. All examples are for illustrative purposes only and may not be relied upon for investment decisions. The publication of Earned Wealth's website on the Internet should not be construed by any consumer and/or prospective client as Earned Wealth's solicitation or attempt to effect transactions in securities, or the rendering of personalized investment advice over the Internet.A copy of Earned Wealth's current written disclosure statement as set forth on Form ADV, discussing Earned Wealth's business operations, services, and fees is available from Earned Wealth upon written request. Additional Information about Earned Wealth and our advisors is also available online at https://adviserinfo.sec.gov/.Earned Wealth does not make any representations as to the accuracy, timeliness, suitability or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.Investing involves market risk, including possible loss of principal and investment objectives are not guaranteed.

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