Skip to content
  • About
  • Contact
  • Contribute
  • Book
  • Careers
  • Podcast
  • Recommended
  • Speaking
  • All
  • Physician
  • Practice
  • Policy
  • Finance
  • Conditions
  • .edu
  • Patient
  • Meds
  • Tech
  • Social
  • Video
    • All
    • Physician
    • Practice
    • Policy
    • Finance
    • Conditions
    • .edu
    • Patient
    • Meds
    • Tech
    • Social
    • Video
    • About
    • Contact
    • Contribute
    • Book
    • Careers
    • Podcast
    • Recommended
    • Speaking

The gold standard of evaluating real estate investments

Cory Fawcett, MD
Finance
October 24, 2019
95 Shares
Share
Tweet
Share

An excerpt from The Doctors Guide to Real Estate Investing for Busy Professionals.

Cash flow is the only method I use to determine the value of the property to me and is my decision-making tool.

This is how I determine the price I’m willing to pay. This is the only way to fully evaluate the property as an investment, and it will take some of your time to compute. It also takes into consideration how the property is financed—which none of the other methods care about, but you certainly should.

When I buy an investment property, the idea is to make money. That’s the definition of an investment: a place to put your money so it will make you more money. There are two ways real estate makes money. One is appreciation, which I can’t predict well, and the other is cash flow, which is much more predictable.

In order for you to compute the cash flow, you will need two of the pieces of information already discussed: the income and expenses, which make up the NOI. The final piece of information is the financing terms, which I cover in the next chapter.

It is unlikely you will be buying your investment property with all cash. You will need to get a loan or mortgage on the property. It is very important that the money coming from the property, the NOI, can fully cover the mortgage payments.

This is the key to why it is OK to borrow money to make a real estate investment but not to buy a car. When you borrow to buy a car, you will personally need to earn the money to make those payments, and that means the car payments take away from your available cash flow. A car loan creates a negative cash flow.

With the investment property mortgage, the property is responsible for earning the money to make the payments. You can then put the leftovers in your pocket: a positive cash flow. So a property investment loan puts money into your pocket, and the car loan takes money out of your pocket.

Cory Fawcett is a general surgeon and can be reached at his self-titled site, Dr. Cory S. Fawcett.  He is the author of The Doctors Guide to Real Estate Investing for Busy Professionals, The Doctors Guide to Starting Your Practice Right, The Doctors Guide to Eliminating Debt, and The Doctors Guide to Smart Career Alternatives and Retirement.

Image credit: Shutterstock.com

Prev

Nicotine addiction happens quickly in vapers

October 24, 2019 Kevin 0
…
Next

A neurologist explains why delaying school start time is important

October 24, 2019 Kevin 1
…

Tagged as: Practice Management

Post navigation

< Previous Post
Nicotine addiction happens quickly in vapers
Next Post >
A neurologist explains why delaying school start time is important

More by Cory Fawcett, MD

  • Should physicians own timeshares?

    Cory Fawcett, MD
  • 4 money mistakes everyone makes

    Cory Fawcett, MD
  • Here’s the secret to establishing a great physician reputation

    Cory Fawcett, MD

Related Posts

  • Why social media may be causing real emotional harm

    Edwin Leap, MD
  • A real-life example of irrational health care spending

    Taylor J. Christensen, MD
  • Who are the real superheroes of medicine?

    Batoul Harissa
  • Taking off the training wheels and becoming a real doctor

    Nathaniel Fleming
  • The real value of high-value care

    Julia Canick and Walter Lee, MD, MHS
  • Are duty hour restrictions are preparing trainees for the real-world medicine?

    Cassandra Fritz, MD

More in Finance

  • Unlock financial freedom: The physician’s guide to lucrative multifamily syndications and wealth accumulation

    Pranay Parikh, MD
  • Secure your future today: the essential guide to disability and life insurance for physicians and professionals

    Set for Life Insurance & The Podcast by KevinMD
  • A tiny step to reduce physician burnout

    Dennis Hursh, Esq
  • Why a business education is essential for financial stability and cutting-edge medical care

    Curtis G. Graham, MD
  • The myth of wealthy doctors: Why business education is vital for every physician

    Randall S. Fong, MD
  • Revolutionizing health care: lessons from Michael Jordan’s partnership with Nike

    Chris Grant
  • Most Popular

  • Past Week

    • A physician’s typical day, as envisioned by a non-clinician health care MBA: a satire

      Jennifer Lycette, MD | Physician
    • Is chaos in health care leading us towards socialized medicine? How physician burnout is a catalyst.

      Howard Smith, MD | Physician
    • Revealing America’s expansion: the dark truth of Native American suffering and unjustified abuses

      Anonymous | Physician
    • The rising threat of lung cancer in Asian American female nonsmokers

      Alice S. Y. Lee, MD | Conditions
    • From Moscow Mule to the opioid crisis: Unveiling the tragic legacy and urgent solutions

      Osmund Agbo, MD | Meds
    • The tragic story of Mr. G: a painful journey towards understanding suicide

      William Lynes, MD | Physician
  • Past 6 Months

    • “Is your surgeon really skilled? The hidden threat to public safety in medicine.

      Gene Uzawa Dorio, MD | Physician
    • Breaking the cycle of racism in health care: a call for anti-racist action

      Tomi Mitchell, MD | Policy
    • Unveiling the hidden damage: the secretive world of medical boards

      Alan Lindemann, MD | Physician
    • An inspiring tribute to an exceptional radiologist who made a lasting impact

      Kim Downey, PT | Conditions
    • The hidden factor in physician burnout: How the climate crisis is contributing to the erosion of well-being

      Elizabeth Cerceo, MD | Physician
    • Proactive risk management: a game-changer in preventing physician burnout

      Howard Smith, MD | Physician
  • Recent Posts

    • How modern lifestyle changes are disrupting our immune systems

      Kara Wada, MD | Conditions
    • Empathy and awareness: Unveiling the hidden dangers of food allergies [PODCAST]

      The Podcast by KevinMD | Podcast
    • The alarming epidemic of physician burnout and how we can combat it

      Tomi Mitchell, MD | Physician
    • A retired physician’s battle with moral injury

      Hayward Zwerling, MD | Physician
    • Unveiling the secrets to effective resuscitation and overcoming obstacles

      Deepak Gupta, MD | Physician
    • Georgia’s new law promoting truth and transparency in health care credentials

      Carmen Kavali, MD | Policy

Subscribe to KevinMD and never miss a story!

Get free updates delivered free to your inbox.


Find jobs at
Careers by KevinMD.com

Search thousands of physician, PA, NP, and CRNA jobs now.

Learn more

Leave a Comment

Founded in 2004 by Kevin Pho, MD, KevinMD.com is the web’s leading platform where physicians, advanced practitioners, nurses, medical students, and patients share their insight and tell their stories.

Social

  • Like on Facebook
  • Follow on Twitter
  • Connect on Linkedin
  • Subscribe on Youtube
  • Instagram

CME Spotlights

From MedPage Today

Latest News

  • FDA Panel Endorses mAb to Prevent RSV in Infants
  • Novel LAA Closure Device 'Promising'
  • Acute GvHD Risk After Allo-HCT Higher With Some Antibiotics vs Others
  • TTFields Therapy Yields OS Improvement in Second-Line NSCLC
  • Mental Health Provider Disclosed Personal Patient Info in Google Reviews

Meeting Coverage

  • Novel LAA Closure Device 'Promising'
  • TTFields Therapy Yields OS Improvement in Second-Line NSCLC
  • Upper Airway Stimulation Device for OSA Holds Up in Real-World Analysis
  • Morning Naps in Elderly People May Reflect Dementia Risk
  • Extra Follow-Up Confirms Benefit of Nivolumab in Muscle-Invasive Bladder Cancer
  • Most Popular

  • Past Week

    • A physician’s typical day, as envisioned by a non-clinician health care MBA: a satire

      Jennifer Lycette, MD | Physician
    • Is chaos in health care leading us towards socialized medicine? How physician burnout is a catalyst.

      Howard Smith, MD | Physician
    • Revealing America’s expansion: the dark truth of Native American suffering and unjustified abuses

      Anonymous | Physician
    • The rising threat of lung cancer in Asian American female nonsmokers

      Alice S. Y. Lee, MD | Conditions
    • From Moscow Mule to the opioid crisis: Unveiling the tragic legacy and urgent solutions

      Osmund Agbo, MD | Meds
    • The tragic story of Mr. G: a painful journey towards understanding suicide

      William Lynes, MD | Physician
  • Past 6 Months

    • “Is your surgeon really skilled? The hidden threat to public safety in medicine.

      Gene Uzawa Dorio, MD | Physician
    • Breaking the cycle of racism in health care: a call for anti-racist action

      Tomi Mitchell, MD | Policy
    • Unveiling the hidden damage: the secretive world of medical boards

      Alan Lindemann, MD | Physician
    • An inspiring tribute to an exceptional radiologist who made a lasting impact

      Kim Downey, PT | Conditions
    • The hidden factor in physician burnout: How the climate crisis is contributing to the erosion of well-being

      Elizabeth Cerceo, MD | Physician
    • Proactive risk management: a game-changer in preventing physician burnout

      Howard Smith, MD | Physician
  • Recent Posts

    • How modern lifestyle changes are disrupting our immune systems

      Kara Wada, MD | Conditions
    • Empathy and awareness: Unveiling the hidden dangers of food allergies [PODCAST]

      The Podcast by KevinMD | Podcast
    • The alarming epidemic of physician burnout and how we can combat it

      Tomi Mitchell, MD | Physician
    • A retired physician’s battle with moral injury

      Hayward Zwerling, MD | Physician
    • Unveiling the secrets to effective resuscitation and overcoming obstacles

      Deepak Gupta, MD | Physician
    • Georgia’s new law promoting truth and transparency in health care credentials

      Carmen Kavali, MD | Policy

MedPage Today Professional

An Everyday Health Property Medpage Today
  • Terms of Use | Disclaimer
  • Privacy Policy
  • DMCA Policy
All Content © KevinMD, LLC
Site by Outthink Group

Leave a Comment

Comments are moderated before they are published. Please read the comment policy.

Loading Comments...