JF1805: Semi-Retired Physicians Investing In Real Estate with Letizia & Kenji
Today we have a physician couple joining us on the show. These aren’t your typical physicians, they are both semi-retired and working on their real estate portfolio both actively and passively. We’ll hear about their specific investments, how profitable they are, where they found the deals, how they balance work, investing, blogging, and life. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“The best way to invest in real estate is to focus on cash flow” – Letizia Alto
Letizia Alto and Kenji Asakura Real Estate Background:
- Two physician couple, semi-retired, entrepreneurs, and real estate investors
- Own 40 units with over $250,000 in cash flow
- Based in Seattle, WA
- Say hi to them at https://semiretiredmd.com/
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Theo Hicks: Hi, Best Ever listeners. Welcome to the best real estate investing advice ever show. I am Theo Hicks, the host today. Today I’m with two guests. I’m with Letizia Alto and Kenji Asakura. How are you doing today?
Letizia Alto: Great! Thanks, Theo, for having us on.
Kenji Asakura: Yeah, thanks a lot. I really appreciate it.
Theo Hicks: Thanks for coming on, and I’m looking forward to our conversation. A little bit about Letizia and Kenji – they’re both physicians; they’re a couple that’s semi-retired, and they’re entrepreneurs and real estate investors. Currently, they own a portfolio of 40 units, that generates over $250,000/year in cashflow. They’re based in Seattle, Washington, and you can say hi to them at semiretiredmd.com.
Before we get into the meat of the conversation, can you provide us with a little bit more information about your background and what you’re both focused on now?
Kenji Asakura: Yeah. As you mentioned, we’re both physicians, and semi-retired. What that means is that we choose to work clinically when we want to. Right now Letizia is working half-time, and I’m moonlighting, which just means that I pick up shifts whenever I want.
Most of our focus now has been on real estate and growing our own personal portfolio, and then also working on the blog and growing our readership, and also helping other physicians get into real estate investing.
Theo Hicks: Of your 40 units – are those a single-family, multifamily combination?
Letizia Alto: We actually own from single-family to a sixplex, which is our largest right now. Our portfolio is based North and South of Seattle, and then probably about three years ago we realized that it was really hard to find cash-flowing properties, so we spread out to Spokane, and now also Oklahoma City.
Theo Hicks: Do you mind walking us through the numbers on that sixplex? What you bought it for, if you’ve put in any additional capital after acquisition, and then what it’s renting for now?
Kenji Asakura: Sure. We purchased the property for $300,000, and this was part of a 1031 exchange, so we sold the property in Seattle and turned that into two properties; so this is one of our two properties.
So we bought it for 300k, we’ve put in about 40k, and we’re projected to get in rent about 42k/year, maybe up to 45k if we can tap into some hidden value – what we like to call a value-add property. This is a value-add opportunity, so hopefully we can increase that up even more.
Theo Hicks: And how did you find this deal? Was it on market or off market?
Kenji Asakura: This was an off market deal, and we went through one of our investor agents. We have over the last few years built up a network of agents that bring us deals, and so this was through that network.
Theo Hicks: Okay. And the sixplex – is it your most recent acquisition? Did you work your way from single-family homes up to sixplexes? Or you’re kind of just looking at whatever you can find?
Letizia Alto: This is not actually our most recent acquisition. Our newest acquisition is something we’re gonna close on in a couple days, which is a property North of Seattle, called Sedro-Woolley. It’s about an hour-and-a-half North. We’re actually gonna build two duplexes on that. So that’s our newest acquisition, that we’re extremely excited about.
Theo Hicks: So tell us a little bit about that… Why did you decide to transition into that new construction?
Letizia Alto: I think part of it — well, I know part of it is because as part of our blog we really are pushing ourselves to try new things, to help our readers be able to feel confident that they can try some of these things, follow after our footsteps and expand what they’re doing with investment properties as well… So that’s why we really are pushing ourselves to expand beyond our comfort zone. Building is definitely beyond our comfort zone, but we’re really excited.
We bought a property that we’re gonna actually subdivide into four, and sell off a single-family home and then sell of a plot of land that somebody can build a single-family home on, that we’ve lightly developed; we’re gonna put in some plumbing. And then we’ll have two lots in the back of the property that we basically get for free after we’ve sold off those properties. Then we’re gonna build two duplexes, get them appraised, and hopefully end up with a prolonged BRRRR, where we just end up taking all of our money out and getting infinite cash-on-cash.
Theo Hicks: And how do you find these multiple deals?
Kenji Asakura: Yeah, this one was also an off market through one of our investor agents.
Theo Hicks: So both of the deals you’ve talked about so far have been off market and through the investor agents. Do you wanna walk us through — because everyone wants off market deals, and even better, they want off market deals through agents. How did you get to the point where you were seen by that agent as someone who was trustworthy, credible, and that could close on the deals so that they would actually send you those deals and not someone else?
Kenji Asakura: Some of this is — finding an investor agent I think is one of the harder things to do. We’ve really relied on just our network, and also the blog helps as well; it gives us a lot of credibility in terms of identifying investor agents. We also provide those agents new customers as well; we bring investors to them. I think that puts us in a good position to receive some of the better deals.
But also networking, developing relationships with people has been really the key to getting on the top of their list. That’s where you pointed out [unintelligible [00:07:40].05] how do you get on the top of that list – what we try to do is we try to provide value to the agent in whatever way we can. Even if you don’t have a blog, I think just introducing them to other friends or people who are wanting to invest, bring them new customers… I think most agents will be happy to return the favor.
Letizia Alto: Also being decisive. Even before we had the blog – for example we were driving cross-country, or moving cross-country; so we’re in the car and one of our investor agents called us and said “Hey, I have this off market deal. Do you want it?” and we were like “Absolutely!” We just immediately agreed to it and signed the documents while we were on the road.
I think being very decisive, not wishy-washy, knowing what you want and making that very clear for your agents as well, so they know what you’re actually looking for, so they’re not just bringing you a bunch of deals that don’t meet your criteria and you’re saying “No, no, no, no.” Be clear with what you want, and then when they bring what you want, be decisive and follow through… That’s all.
Theo Hicks: That’s solid advice. I followed that advice too, that’s how I closed on my first deal. The second that deal came across your table, you’ve gotta jump at that opportunity, and then figure it out on the back-end… Especially for these smaller types of deals. A little bit different when you’re dealing with the larger stuff, but those usually move a little slower anyways.
So just taking a step back and zooming out… Your website’s name is semiretiredmd.com, so you’re focused — I’m assuming that site is helping others become semi-retired as well. Take this any direction you want, but what advice do you offer others who are maybe in situations that you were in – they’re working a full-time job and they don’t necessarily want to completely quit that job, because they actually like it, but at the same time they do want to supplement their income with real estate. What sort of advice do you offer to your readers that ask that question?
Letizia Alto: We see a lot of physicians who are extremely burned out with their jobs. They’re working really long hours and they don’t have a lot of flexibility, and working where they wanna work, or working the amount that they wanna work… So they’re really missing out with time with their family, and just exhausted. So our big advice to them is just that they need to give themselves options. And how they give themselves options is by learning a skill, which is real estate investing; making sure that they can build up a source of side income… More passive income; we don’t consider direct real estate really as passive income, because it does require some work… And then that allows them to be able to have the freedom to work at (let’s say) a job that’s volunteer, or work the amount that they want to, and they can spend it with their families. Really, it’s about learning the skills required to be able to have that side, passive income.
Kenji Asakura: Yeah. I think for me, just to build on that, there are a lot of docs who are burnt out. They love what they do, but… What I always say is if you buy insurance of any type – and a lot of docs buy disability and life insurance… But that only addresses the two worst outcomes – disability and death, but what about all the hundreds of other things that could go wrong?
So if you buy any type of insurance at all, I can’t think of any better insurance than to have side income coming from real estate or whatever other investment, so that you do have the option to cut back, spend it with a family member if you have to, help out your parents if you find out that they’re in debt… Whatever it is, there’s a lot of things that can happen, and you just wanna be prepared; just like you buy insurance for various things, you just wanna be prepared for the worst-case.
Theo Hicks: So being a couple — this is kind of changing the subject again… What are some of the benefits and also some of the challenges of going into business with your significant other?
Letizia Alto: I think the benefit and challenge is probably the same thing – you’re both working together all day long. The benefit of that is you can have these unique conversations over coffee, and make decisions just sitting around in your living room… But the downside of that too is it’s really hard to turn off, and it’s hard to separate yourself from your work.
We love hiking and discussing our businesses, but at the same time sometimes it would be better if we just kind of hung out and talked about something other than business, too.
Kenji Asakura: To build on that, the real positive – and we tell people who are getting into real estate investing the same thing – is that we’re on the same page, we’re going towards the same goal, so it’s much more likely that we’re gonna achieve that goal, because we’re on the same page, rowing the boat in the same direction… As opposed to so many couples that we talk to where one person is gung-ho about real estate and the other one is like “I’m not really interested/I don’t really support what you’re doing, and therefore you can’t spend money for this.” So it’s really hard, I think, for couples like that to be successful with real estate investing, or really any venture.
For us, just being on the same page, and the amount of time we invest in this… And we love it, so I personally don’t mind talking about this on hikes or on free time, because we’re really passionate about this… So I think there’s a lot of benefits to working together.
Letizia Alto: Yeah, two heads are always better than one. Just our decision-making is so much better because we’re both informed, and because we’re interested, and because we’re involved. I can’t imagine trying to do this whole business by myself, and how many mistakes I would have made that Kenji saved me from, and vice-versa.
Theo Hicks: Alright. For the money question, what is your best real estate investing advice ever?
Letizia Alto: Our best advice is focus on cashflow. Before we got together, Kenji was doing some appreciation plays, and land, that obviously didn’t have a building on it and had no backup plan; it was just hoping that the market was gonna increase and the value was gonna increase, and he really got stuck in the 2008 crash.
So we really feel the best way to invest in real estate is to focus on cashflow and make sure that every month you’re getting something, so that you’re never in a situation where you’re just negative month after month and you’re in trouble.
Kenji Asakura: I think for me it would be think of real estate investing as not investing, but as a business. What I mean by that is a lot of people will buy a rental property, it will cash-flow nicely, but then they kind of forget about it. That’s kind of what my parents did – they bought rental properties and just didn’t really pay much attention to it.
The way I like to think about it is once we purchase a property, that’s when we roll up the sleeves and get to work. What that means is, again, building on cashflow, we might buy something for a 10% cash-on-cash return initially, but our goal is to over time increase that cash-on-cash by either increasing revenue, by either tapping into hidden value, raising rents, or decreasing expenses by either eliminating utilities, by billing back to our tenants, or figuring out other ways to eliminate expenses.
We have a couple properties in what’s called supported living, which is providing housing for people with intellectual disabilities… And when you do that, you eliminate actually multiple expense line items at once. You can eliminate property management, you can eliminate utilities, and you can set it up so you have zero vacancy. All of a sudden, your cash-on-cash goes — this one property went from 10% to 40% cash-on-cash.
Theo Hicks: Alright, great advice. Are you ready for the Best Ever Lightning Round?
Kenji Asakura: Yeah, let’s do it!
Theo Hicks: Alright. First, a quick word from our sponsor.
Theo Hicks: Okay, best ever book recently read?
Kenji Asakura: We both love The One Thing. The power of focus is so incredible, and we’ve applied it and it’s been huge.
Theo Hicks: If your business collapsed today, what would you do next?
Letizia Alto: We talked about this before, and we feel so confident in our knowledge we would just rebuild it. We would build it faster, we would build it better, just because we have the knowledge and skills now to feel confident in our abilities.
Theo Hicks: And if you had to start over with little or no capital, how would you do that?
Kenji Asakura: I think it kind of depends in which direction we wanted to go. If we wanted to start out and rebuild what we have, with the single-families to the small multifamily, we’d probably just do a bunch of BRRRRs, and just be really aggressive about that. Then also maybe even consider house-hacking as well. A combination of those things.
If we were going bigger scale, I think we would just do syndications. With our network and our audience we would be able to be in a good position to fundraise for syndication, so that would be something we’d probably go after.
Theo Hicks: What is the worst deal you’ve done?
Kenji Asakura: Hah-ha! Letizia alluded to it, but I had a lot of bad deals; I actually wrote an article about it called “The worst real estate investing mistakes.” I bought a bunch of land in Florida before the last recession in 2008. Basically, I was left holding a bunch of vacant land that I actually ended up holding for about 13 years. When I sold them, I sold them for less than half the value that I purchased them.
Theo Hicks: And then lastly, what is the best ever place to reach you?
Kenji Asakura: The best place to reach us is our website, semiretiredmd.com. Also, join one of our Facebook groups, “Semi-retired professionals” is the one for non-physicians, and then we have a separate one for physicians, called “Semi-retired physicians.” If you join those groups, those communities are pretty active, and a lot of great discussions focused on building your real estate portfolio… So yeah, please join either of those groups.
Theo Hicks: We will have that semiretiredmd.com link in the show notes of this episode. Well, Letizia and Kenji, I really appreciate you guys coming on the show today and sharing your advice.
To summarize what we’ve talked about – you’ve provided some details on two deals; one of them was that sixplex that you 1031-exchanged; bought for 300k, put about 40k into it, and you’re cash-flowing around 42k-45k per year. Also, you told us about the two duplexes you’re building about an hour-and-a-half North. Both of those were off market, found through investor agents.
We talked about how to get those deals from investor agents, which essentially comes down to networking, which you do via your blog as well. Also, it’s about providing value to those agents; for your case it’s about bringing customers/clients to them, to show your value, and then in return you’ll get some off market deals.
Also, to be clear with your investment criteria – what deals you want – and then once those deals are presented to you, actually being decisive and immediately taking action, and you gave an example of that as well.
We discussed how you help physicians who are either burnt out, or still love what they do but want an additional layer of insurance, and you helped them with your blog by teaching them the skills that are required to create that side income.
We talked about the benefits and some of the challenges of going into business with your significant other. From your guys’ perspective, it sounds like it’s mostly positive. You can make business decisions at any time over coffee, in the living room; you’re both going towards the same goal, you’re both on the same page, and of course, two heads are always gonna be better than one. If one person makes a mistake, the other person can fix it before the problem grows.
The only negative you talked about was it’s hard to turn off for you, and then for other couples you worked with you said that if one person is really gung-ho about real estate and the other person isn’t, that could be an issue.
Then lastly, you’ve both provided your best ever advice. One was to focus on cashflow, and always make sure you’ve got some sort of money coming in every single month, and try to stay away from speculation and appreciation plays. And then also thinking of real estate as a business – don’t just buy a property and then forget about it; instead, buy the property and then actually get to work, increasing that cashflow after the acquisition.
Again, Kenji and Letizia, thank you for speaking with us today. I really appreciate it. Thanks to everyone who listened. Have a best ever day, and we’ll talk to you soon.
Kenji Asakura: Thank you so much.
Letizia Alto: Thank you.