Can you achieve financial independence without real estate?

One of the most frequently discussed avenues for alternative revenue streams among physicians is owning real estate.  Crowdfunding, syndications, private equity, or simply down and dirty rental property are hot topics to increase net worth and provide additional income.  This fervor isn’t limited to doctors only—it seems like everyone including the average Jane has known someone with a great real estate investment story.  The amount of interest among physicians in real estate, however, is fascinating.  Decades ago, it was okay to just focus on one’s professional career.  Doctors could get to retirement relatively easily given the amount of income in their primary profession.  Today physician income is all but secure, and a surprising number of physicians even strive to become real estate professionals.  Being able to find income outside of our profession is an asset—who knows what variables in our practice would make medical practice untenable in the future?  Real estate certainly is a viable route to get to your end goal.

How do you get to Rome?
The name of the financial game is to achieve a means to survive when our primary income source is no longer viable.  Some of us achieve this by simply saving a portion of our earnings during our working years for use during retirement.  Others opt for more material income in the form of alternative businesses or real estate.  Part of this end game involves allocating to charities that support our beliefs, and also leaving a part to subsequent generations to build upon.  

Some of us aim to retire around Medicare age. Others choose to call it decades earlier.  

What is important to realize is that each person’s definition of Rome is different, and everyone’s journey there will undoubtedly take a different course.
What this means is that real estate investing is a great option for only some of us.

In other words, some of us will not do well investing in real estate.

I remember a time in the recent past that everyone including those who never cooked wanted an Instant Pot. People spoke of it so highly that I almost bought one myself.

Anyone want to buy this and turn it into a short-term rental?

Or the several weeks where no store had any stock of toilet paper, even though there was no rational urgency to squirrel away a year’s supply of it.
It’s human nature not to want to miss out on a deal or opportunity, even if the thought had never crossed your mind prior to everyone else talking about it.  Real estate investing has a similar allure for those who have never considered it, except that we all probably know someone who claims to be making “good money” on real estate.  We all know that real estate can generate fabulous wealth, but it can also cause a lot of grief.

If you don’t do your homework or master it, it can cause a bit of financial damage.

Why do people love real estate?
The benefits of real estate are too lengthy to discuss in a brief overview, but one of the more commonly discussed reasons for real estate is that it generates cash flow.  There is a real allure about having money coming into your bank account every month.  Whether you are an employee or business owner, there is generally a consistent interval where money appears in your bank account. Real estate as an investment vehicle often provides reliable cash flow that can be used for living expenses.  This is not necessarily the case for stock market investing or purchasing bond funds, where you have to sell the invested currency in order to obtain cash.

Additionally, the endpoint of real estate is that you actually end up owning a building.  Something concrete.  Something that you can physically leave to your heirs.  It sounds more substantial to own a physical building rather than something non-material.

The case for financial success
As with any task we embark upon, nothing comes for free.  In order for us to become physicians, we gave up lots of money and lots of time.  If you choose to become a successful real estate investor, then you have to give up time and money.  Even with syndications, the investor still has to spend time to do the homework.  We all have a finite amount of time, energy, and health to devote towards our interests.  

To answer the original question, it is certainly plausible to achieve financial success without real estate if you are focused on achieving financial success.  

Remember, there are many roads to Rome, and Rome wasn’t built in a day.

What percentage of your total investments are in real estate?

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4 thoughts on “Can you achieve financial independence without real estate?

  1. You’re totally right. It’s an optional asset class, and I reached financial independence without any significant contribution from real estate (although I did rent out two places where my wife and I had lived previously).

    I reached FI with a high savings rate and mutual fund investments, but I have since succumbed to the allure of real estate and “mailbox money.” Thus far, I’m allocating about 20% of my portfolio to the asset class, and keeping it very passive.


    1. As the saying goes, “Different strokes for different folks.”

      While not necessarily a problem, another conundrum in real estate is these physical assets eventually are passed to the heirs for obvious tax advantages. Sometimes the heirs have no ability or interest in managing the assets and end up selling them anyway to the next hungry investor. It might be easier for the heir to have inherited a mutual fund account instead. But having a few skyscrapers to your name sounds a lot sexier than a big stock portfolio!

      Thanks for stopping by!

  2. I actually am a big fan of real estate and it currently compromises about 2/3 of my portfolio. It is mainly through syndications because I did not want to be a hands on landlord. Plus I was interested in apartment complexes because of better metrics and efficiencies on running costs.

    1. Do you find that having taxable assets in multiple states (often in syndications) complicates your tax filing situation? As I recall, your state doesn’t have income tax right?

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