Being a physician by day and a real estate investor by night is not easy. Just ask Jordan Frey. Jordan is a plastic surgeon in Buffalo, NY and he went from being financially clueless to increasing his net worth by $1M in one year. Sam Wilson brings him on the show to tell us how he did it. Jordan is the founder of The Prudent Plastic Surgeon. Learn how he got into real estate despite knowing absolutely nothing about it. Discover Jordan’s buy and hold strategy on long-term deals. Learn why most physicians end up spending all they have only to realize their mistakes. And, find out what his blog is about and why he does it today!
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Listen to the podcast here:
Physician By Day, Real Estate Investor By Night: How To Increase Your Net Worth With Jordan Frey
Jordan Frey, MD, a plastic surgeon in Buffalo, New York is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1 million in one year and how you can do the same.
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Jordan, welcome to the show.
Thanks for having me, Sam.
The pleasure’s all mine. Can you quickly tell our audience where did you start? Where are you now? How did you get there? Before you do, tell us maybe what you’ve been up to all night long and what it took to get you on the show.
I was up all night operating which doesn’t sound like something that plastic surgeon typically does. I am in the one area of plastic surgery that has those types of emergencies, which is microsurgery. I do a lot of reconstruction, which is moving tissue from one area of the body with tiny little blood vessels, putting them somewhere else and then connecting those blood vessels. Sometimes we have emergencies where those connections stop working so we have to go back and fix them. That’s what I was doing but I’m excited to be here.
Give us your story, the highlight version of where you started, where you are and how you got there.
Where it started was the end of my medical training. I went 4 years in college, 4 years in medical school and then my training, residency and fellowship in plastic surgery was 7 years. I was at the end of that. Everyone was telling me like, “This is great. You’re going to finally graduate from being a trainee where you make pretty meager money to being a plastic surgeon. You’re making a ton of money. It’s all going to be great.”
Real estate investing is more mathematical and analytical than emotional.
I was like, “I don’t feel like it’s going to be great because I had $500,000 in debt.” I was financially clueless. I can’t emphasize that enough. I knew nothing about personal finance. I spent money as soon as I got it because I thought that’s how it was. I had no savings. I had credit card debt that I wasn’t paying off.
I decided with my wife. We have to get this under control because I was experiencing burnout in my career and a lot of it, I realized, was due to the fact that financially, I felt behind the eight ball. We started learning a lot about it. We made a financial plan. I realized that it helped a lot with my burnout and improved my overall wellbeing.
As we’re going along, we started hearing everyone talk about real estate. We had the initial reaction that most people do, which is like, “We can’t do real estate. We don’t know anything about it. How can we do that?” We looked around and saw other people doing it. We’re like, “The people doing it are regular people. We’re regular people. Why can’t we learn about it?” We started learning about it the same way. Initially, I brought it up to my wife and she was like, “Are you crazy? I’ll tell you what, I’ll read one book with you and then we’ll go from there.”
She read The Millionaire Real Estate Investor, which is a pretty classic one. We read it at the same time. She was like, “I’m on board. Let’s do this.” We ended up in our first year, which is 2020. We bought 3 properties, 2 duplexes and 1 triplex. Our strategy for buying is we buy a lot based on cash-on-cash. We have them all running at 25% to 30% cash-on-cash. We ended up refinancing one to help buy the third one. My wife qualifies for real estate professional status this 2021, which is exciting for us. We jumped into it and found that we enjoyed it.
We self-manage all our properties, which we’ve been able to do despite both of us working as well. My wife’s a professor at a local college. We’ve jumped in and it’s been a huge source of increase in net worth. My net worth when I first checked it at the beginning of the story was negative $512,000. The last time I checked it was positive $406,000. It was a pretty big jump and real estate was a huge part of that.
What are some things you would say that helped you? Reading the book, The Millionaire Real Estate Investor, what were some of the things that you took away from that where it gave you the confidence to move forward?
Like a lot of people, we’re pretty analytic. When we were thinking of real estate investing, what you hear about is people buying for market appreciation or someone buys something then a few years later a market goes crazy and they make a lot of money or there’s some nebulous crash and they lose all their money. It sounds like a gamble.
When we read and took away, it’s like you have to establish your criteria. If you find properties that meet your criteria then you buy them. It’s very mathematical or analytical decision-making, less emotional than buying your primary house. That struck us and fit with our personalities. We also liked the idea of forced appreciation or that kind of stuff. Being able to work and optimize the “business of your rentals to increase their value.” Those were the real things that struck, melded well with us and got us excited.
That’s a commonly missed part of the equation. It’s not gambling. There’s a very mathematical approach to it. I like the way you put it where you said, “If a property meets your criteria then you buy it.”It then begs the question starting out, how did you form your criteria?
We’re pretty conservative. There’s a course run by a couple of other doctors to help people get started in small multifamily investing. We used a lot of their stuff mixed with what Gary Keller presents in that book. We looked for properties in B, C class areas that were cashflowing or had the potential to cashflow once they were renovated or repaired 10% or greater.
In real estate, as long as your worst-case scenario is to not be in the negative, you’re still fine.
Looking back, we don’t get that excited about 10% because we realized you can get a lot more. That’s what we used. We had a spreadsheet that essentially, we put in everything like what the mortgage is, how much we are putting down, what the expected maintenance was, taxes, closing costs, everything. It would spit out for us what the expected cash-on-cash is.
Honestly, we would run a worst-case in a best-case scenario. As long as the worst-case we were coming out not in the negative then we are pretty happy. We were like, “Things can hit the fan.” We still have this property that we have people paying off a mortgage for. That’s good for us but we knew that the best-case scenario was going to cashflow in addition.
Were there any surprises as you worked your way through those spreadsheets, dumping properties into it and going, “I thought this would be a great one and it’s not.”
Sometimes with the more polished ones, you think, “This will be great.” If it’s a polished one in a neighborhood where rents don’t go that higher and it’s not meeting the needs of that demographic necessarily then we realized those aren’t great ones. That’s something a lot of our friends or people, in general, come to both. My wife and I are saying, “We want to get into this. Here’s this property we saw.” They don’t realize it’s a $1 million duplex where you’re like, “This isn’t going to work.”
It was interesting looking at each component of that calculator and how much influence each out on it. Everyone talks about interest rates and interest rates are super low, which is nice. You play around with it. You realized interest rate doesn’t have a huge impact, which is what a lot of people get held upon. They’re like, “My lender will only give me this rate.” You’ll end up realizing that that’s a minor part and not necessarily what should make or break your decision. It’s fun stuff you pick up like that.
How many properties did you look at before you finally got one across the finish line?
It was probably like fifteen that we physically looked at with hundreds that we went through online or Redfin. We had a bunch of offers that we put in that didn’t get taken. Especially at the beginning, you’re all amped up and you want to get the first one under your belt but it also is nice because the same thing with the criteria, we were like, “This is how much? We’ll offer for it.” We know that in that situation it works for what we want and if not then so be it. We’ll happily move on to the next one.
Something that people overlook, especially starting out is the number of times at-bat that you have to have before you connect with the ball. Talk to us about your strategy. Are these long-term or short-term rentals? What are you doing with these properties?
They were all long-term rentals. We are talking about getting into short-term rentals and stuff like that. Our strategy is to buy and hold, knowing that the stock market over the long-term tends to go up. There’s short-term volatility. We have a buy-and-hold strategy. We’re actively accumulating more. I was and still am in a huge amount of student debt. We’re paying that off aggressively. The amount of money that we decided to set aside for real estate was more what would buy us in the small multifamily category.
As we save more, pay off those loans and have more capital then we’re actively looking to buy bigger properties. Down the line, we’ll sell and 1031, if that’s still in the auction properties for more and bigger ones. The end goal would be to have large multifamily that’s automated and more vertically integrated that is truly more passive. We’re active and we enjoy that.
Let’s turn the conversation here a little bit and go back to something you said early on. You mentioned, “I was financially clueless.” What does that mean? How does that happen to somebody who comes out of school? You’re a medical doctor. How are you financially clueless?
It’s a huge problem with doctors. That’s why I started my blog because looking back, it’s truly simple stuff. Doctors are high-income earners. If you’re making $1 million as a doctor, you’re doing well. You can be an athlete making $1 million. You spend $1 million and your net worth is zero. Your income factors nowhere in that. For me, that was mindboggling. I thought a millionaire is someone who made $1 million. It’s not. It’s someone who has a net worth of $1 million. In our whole path, we get a lot of education but none of it is about personal finance.
I had no idea. My loans didn’t start to go up to $500,000 but I deferred them throughout my whole training and everything because I was so intimidated by it or didn’t know how to manage them. Once a year, I would close my eyes and click the buttons on the loan servicers and defer another year, which was not the right decision.
I didn’t know things like how to manage a budget. It seems simple like anything once you learn about it but there are so many people in general that struggle with this stuff. Physicians, especially because you were quickly from being in training where you’re living merely and you have this delayed gratification. All of a sudden, your income goes up and people go crazy. They start buying a huge house, Tesla and all this stuff. Before they know it, they’re barely covering their expenses with their high income. There’s nothing left to grow and invest in. There are a lot of doctors working a lot longer than they want to because they have to.
Interest rates don’t really have a huge impact on real estate. That’s something a lot of people get held upon.
It’s disappointing as smart as the group of people that you are that this would be pretty elementary or at least talked about somewhere like how to manage your basic finances. In education, across the board, it’s missing 1st to 12th grade. How many times do those kids come out of high school with an understanding of Algebra and maybe even Calculus but have no idea of the terms of a mortgage? What’s one of the more surprising things that you’ve discovered while you’re blogging and getting responses to those blogs?
In general, the surprise that I’ve got was people do read. For me, when I started, I thought this would be fun to do and I told myself, “I’d write for a year. If nobody was reading then I would reassess.” It’s the fact that people have related to what I’m going through. It’s unique because I’m writing about it as I’m going through this path that a lot of people are on, rather than someone who’s already achieved it and then shouting instructions from the finish line, which is helpful and a lot of how I learned. That was surprising. The amazing part is how many people you meet. It’s so fun to learn about different people’s stories and how they’ve gotten to the points they’re at.
From a medical doctor’s perspective, are there some overlaps or similarities you see between real estate investing and what you do in your day-to-day job where you say, “This is eerily similar?”
It’s also eerily similar but handled so differently in general by physicians in the two areas. First, in terms of a career trajectory, physicians are super good at doing gratification and having this long-term vision and plan saying like, “I got to jump through this hoop and then that hoop. I can get to where I want to be.” When it comes to stuff like real estate investing, it’s the same type of thing. You have to have a long-term vision. One of the biggest roadblocks for people is they go like, “I’m not going to get rich off of one property. I’ll buy one duplex. I’ll make $25,000 a year.” That doesn’t compare to what my income as a physician is.
You go, “It’s not just that. You have to see your long-term vision.” They’re like, “I’ll have to deal with tenants or property managers.” You’ve had to overcome stuff your whole life. Nothing’s handed to you. You’re so good at that but you’re going to let it stumble you up. There’s that aspect. That also goes in terms of the medical plan if I see someone for breast reconstruction. I’m envisioning the multiple steps down the road and it’s the same thing.
Ultimately, what I like about being a physician and real estate is it’s an investment and that’s a primary reason why we’re doing it. I also like to provide a service and people who need housing. Our goal is to provide affordable and nice housing for people who need it. We pride ourselves on being good landlords. That’s something that’s nice. Dealing with the people aspect in both of those areas is enjoyable.
Are there any resources, maybe technology-wise, that you have helped leverage as you have grown your portfolio?
We self-manage but we use an online property management tool. It’s called Hemlane. I don’t have a relationship with them or anything and there are others. That’s been nice because it helps us maintain our anonymity. They know who we are but they don’t know that we own it. They think we’re the property managers.
We can handle all the financials through there. It gets more automated. It’s the same thing with repairs where we get a little ding on our phone that says, “Something needs to be fixed.” We call our handyman, plumber or whatever it is and deal with that. Other than that, at this point, we’re pretty analog rather than digital. We are pretty hands-on but that has been helpful for us.
Things like that are unique and helpful when you’re growing to maintain at least a marginal bit of anonymity where your tenants aren’t texting you at [3:00] AM going, “What are we doing with this?” What has been maybe one surprising thing that you wouldn’t have expected spending years on this journey and up on a positive note?
What I didn’t expect at all is I’m not around the house as a handy person. This goes back to your question of what similarity is. That’s one positive that got out of it because I’ve learned to do a lot of new stuff that I’ve found that I’ve enjoyed. Based on what I chose in my profession, I like to fix things but I never like to apply that to the house.
The thing that’s funny and the comparison is I can remember being a surgical intern and maybe there was some problem like someone had in the emergency department. Maybe in the middle of the night, you’re the only person in the hospital. You start to read up on it or watch a YouTube video on how to do it, then you go and do it. It’s the same thing. The tenant would call me like, “This is broken.” I’m like, “I bet I can figure out how to fix that.” I’ll watch a YouTube video and then go fix it. That’s been a fun surprise for me, something that I enjoy doing that I didn’t know before.
Jordan, I’ve super enjoyed this. Thanks for coming to the show. Before we jump into the final four questions, do you have any parting thoughts or words of advice to our readers?
The biggest parting thought or advice is I can’t overstate how normal or green we were when we started. My wife and I decided to do it and jump in. You never feel ready. If this is something you want to do, go for it. Don’t wait until you’re ready. Don’t wait for whatever landmark you’ve set for yourself to start. Just start.
The final four questions are these. If I gave you $20,000 to invest in real estate, what would you do with it? Why?
I would use it towards a down payment for a small multifamily property. That’s what I know. I could get that cash back out pretty quick and have cashflow, then start buying another property and snowballing it.
If you could help our readers avoid one mistake in real estate, what would it be? How would you avoid it?
Try to buy properties where you don’t inherit the tenants. We learned that the hard way with our last property.
Question number three, when it comes to investing in the world, what’s one way you’re making the world a better place?
I look at investing, especially these multifamily properties that’s providing good housing. I’m not trying to take as much money out of it as I can. I want to provide a service and help people. That’s a nice thing about this way of investing.
A millionaire is not someone who made a million dollars. It’s someone who has a net worth of a million dollars.
Jordan, I’ve enjoyed it. If our readers want to get in touch with you, what is the best way to do that?
You can check out my site, PrudentPlasticSurgeon.com. You can contact me right through there or my email is Jordan@PrudentPlasticSurgeon.com and you can email me anytime.
Jordan, thank you much for your time. I enjoyed it.
Thanks for having me.
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Thanks for reading the show. If you can do me a favor, subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcast, whatever platform it is you use. If you can do that for us, that would be a fantastic help to the show. It helps us both attract a new audience as well as rank higher on those directories. I appreciate your reading. Thanks so much. I hope to catch you on the next episode.
Important Links:
- Jordan Frey
- The Millionaire Real Estate Investor
- Hemlane
- Jordan@PrudentPlasticSurgeon.com
- Apple Podcasts – How to Scale Commercial Real Estate
- Spotify – How to Scale Commercial Real Estate
- Google Podcast – How to Scale Commercial Real Estate
About Jordan Frey
Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same!
