Josh Mettle on Freedom Formula for Physicians Podcast

Tune in to hear Josh Mettle talk about what makes RE Investing so lucrative, what to avoid and who to assemble on your team to succeed in Real Estate Investing.

Josh Mettle: For the Physician Financial Success Podcast, my name is Josh Mettle, and this is the podcast dedicated to advising physicians how to avoid financial landmines. Today, we’re going to be doing something just a little bit different.

I was recently asked to join a friend of mine, Dave Denniston, who is the purveyor of The Freedom Formula for Physicians Podcast, and he asked me to do a little bit of podcasting with him in regards to real estate investment. Many of you know through listening to our episodes that I am a fourth-generation landlord and property owner and have been actively managing about 111 units with myself and my mother and my wife and it’s been a great family business for us.

Without further adieu, I will patch you in to The Freedom Formula for Physicians Podcast with Dave Denniston and myself.

Dave Denniston: My name is Dave Denniston, and welcome to the latest podcast of the Freedom Formula for Physicians. Well, I talk a lot in my books about how to invest, how to grow your net worth and keep it growing no matter what the conditions of the markets are. Yet it really hit me the other day. I have never addressed a really important aspect that many physicians are interested in: real estate.

About a year ago here, I had my friend, Josh Mettle, on a Google Hangout and we talked about physician mortgages. Josh is the author of Why Physician Home Loans Fail. Make sure to check out his book and a video on the 411ForFinances channel on YouTube if you haven’t been there yet.

But anyhow, what if an addition to your residence, what if you want to invest in real estate? We know that over the years, real estate has had its ups, it’s had its down, but overall it’s created billions of dollars of wealth for many, many people. Well, it turns out that Josh has been investing in real estate not just as a mortgage broker for years and years. His folks did it. They taught him the ropes. In addition, he’s worked with a lot of different real estate people over the years and has seen a lot of glorious successes and smashing failures in real estate. I thought he’d be great to bring back as a guest.

Welcome back, Josh!

Josh Mettle: Hey! Thanks for having me, Dave. I like that, “smashing successes and glorious failures.” That is pretty accurate.

Dave Denniston: Right. See everything – well, first tell us a bit about your story. For folks who don’t know who you are, tell them about you, what you do, where you’re from, and your background.

Josh Mettle: Great! Thanks for having me. Well, probably just a little bit me in regards to real estate, I’m a fourth-generation landlord, property owner, and investor. It definitely is in my blood to invest in real estate. More recently, I’ve been involved as you mentioned in mortgage financing, so I actually got started down the path of mortgage by purchasing an investment property and I got burned. I got called the day before closing and the loan officer called me in and said, “Well, we’ve got good news and bad news. The good news is your loan is approved. The bad news is you’re going to need to come in with a 10 percent more down payment and your interest rate is half a point higher.”

Dave Denniston: Wow.

Josh Mettle: That was my first lesson of investing in real estate was how bad mortgage lenders are. It’s interesting how things transpire and how things evolve and that unfortunate event has led me to want to practice mortgage and a great career. I guess I’m thankful for it now. I got started down the path ‑ go ahead.

Dave Denniston: I was going to say that you focus a lot on docs, right? I mean you’ve done a lot of mortgages for docs, you see a lot of real estate that docs invest in.

Josh Mettle: Yeah.

Dave Denniston: Let’s just keep it pretty basic first. What are the first few things that physicians should consider when they invest in real estate?

Josh Mettle: Well, that’s a good question and whether you’re attending or still in residency or fellowship, I think these are pretty much going to apply. First and foremost, I think that one ought to consider cash flow. I remember in the buildup to the crash, there was so much talk about if I can just break even on this property, which means break even with your payment and you’re negative with expenses, and I can sell in a year or two because appreciation will take me. That’s not investing in real estate. That is called gambling. There is no difference to that type of behavior or thought process than there is with putting $50,000 on black or red at the roulette table. It’s just not something that you can create a sustainable plan and not end up getting burned on.

The first thing I would say is that you have to have cash flow, so when you’re evaluating a property, you want to make sure that you’ve really got your arms wrapped around what your payment is going to be, that’s your principle, interest, your taxes, and insurance, what you’re operating expenses are going to be. I think that your management fees, if you’re going to self-manage, which means you or your spouse are going to go over and collect the rent every month, are probably going to be somewhere in the range of about 20 percent.

If you’re going to move out of town and you’re going to have a management company do that for you, you’re probably looking at closer to 30 percent. You got to know your payment, you got to know your taxes, you got to know your insurance, you got to know your management, your vacancy, your upkeep or operating expenses. Then the third thing is you really have got to pick an area that you feel comfortable in, and that you think will have a good lifespan for being easy to rent.

Dave Denniston: Three good points there for people to think about. What’s so confusing I think for a lot of folks is there’s a lot that they can invest in, right? I mean there are single-family homes that people think of, but there’s commercial real estate. There’s industrial real estate with servers and warehouses and all that kind of stuff. There’s apartment complexes. There’s even mobile homes. What do you think about all these different areas? What should people start in? What looks attractive and why?

Josh Mettle: When I start to think about what type of investment looks attractive, I even think broader than just real estate. I think how I do get paid or how do I reap the reward of investing in whatever asset class it is. I think the first thing that maybe we ought to clear up, Dave, is the fact that when you invest in real estate, you should get paid in three different ways.

The first way you should get paid is in cash flow. If you’re going to buy a rental property and this is in a primary residence – I’m just talking about if you were to buy a rental property whether it was industrial space, or trailer park, or a single-family home, or a condo. The first thing that one should be considering is how much cash am I going to have to put up front for a down payment, how much cash am I going to have to put in to cover any deferred maintenance issues because there’s always deferred maintenance issues. Just think that through. If you were going to sell a house in that last couple of years before you sell the house, you say, “Should I replace the roof or should I not replace the roof?” Not, if you know you’re going to sell it.

There’s always deferred maintenance, so you kind of want to wrap your arms around that, and then you want to say, “Okay, with my down payment, and what it’s going to cost me to get his property in the right condition, to make it the next 10, 15 years, what kind of rate of return can I get on my rental income?”

Again that is a factor of what is going to be your principal interest, tax and insurance payment, what’s going to be your operating expenses, and then you subtract that number from your monthly rent, and you have rental income or cash flow.

Now that cash flow should be thought or calculated against how much you put down. I always want to get at least a 10 percent to 15 percent return when I invest in real estate. If I’m going to put $50,000 down between down payment and renovation or to get over the deferred maintenance, I want to see a cash-on-cash return of at least $5,000 a year. First thing when you invest in real estate, you should be investing for cash flow, and you should calculate those numbers. That is not hard to do. In fact, I’ll give you a website that will give you a really good detailed process on how to calculate your cash flow before we get off.

Dave Denniston: Sure.

Josh Mettle: The second way you’ll get paid in investing in real estate is through depreciation. Depreciation is this really cool piece of the tax code that says that if you own an apartment building or a rental property and you have to qualify – we can get into that a little bit more – but if you qualify, then you can depreciate that asset. If you have a million apartment building and let’s say your land is $300,000 and they say the buildings is worth $700,000 – not the land – but that property can be depreciated. You can depreciate that $700,000 apartment building per year. That gets to be written off of your tax returns. If you are in a 39 percent tax bracket, especially as an attending and you live in the State of California and you’ve got another 17 percent of estate taxes on top of there, that depreciation is very, very, very valuable as it has been for me over the last 15 years.

Then lastly, let me just say amortization – because amortization is really compound interest in reverse. What I mean by that it is magical. It is amazing. In the first 5 to 10 years, amortization isn’t really all that important because you’re only chunking off a couple of thousand dollars per year or depending on the size of the property, maybe a little bit more. But when you look at an amortization schedule from year 15 to year 30, it is astronomical. If you looked at your balance and you plotted your balance on a graph, it would go across and then it would just like fall off a cliff for that last 15 years.

If you turned that on its inverse, the other way, it looks very similar to what compound interest would do. So, realize that each month as you’re making your mortgage payments, you have that amortization working for you. You put some money in your front pocket, which is the cash flow that goes into your checking account. You put some money in the other front pocket, which is the depreciation, which allows you to bank more money each year because you pay less in taxes, and then you put some money in the back pocket, which is the savings account and that’s the amortization.

Then I’ll just give you one more because this has been on my mind. There’s really a fourth way that you should think through getting paid in real estate. That really to me is the appreciation. I really don’t even count that in the first three ways. This is kind of a bonus for me because if you get lucky, great. But here’s a shocking statistic: inflation has been insanely low over the last 10 years. One of the lowest decades for inflation that we’ve seen in the last 10 years, we’ve just come out of.

People kind of forget what inflation does, but if you look on a longer timeline, if you look over the last 100 years going back to 1913, inflation has increased 2,275 percent, which means that things cost roughly 23 times more today than they did in 1913. Now why is that a good thing for a real estate investor? Because when you talk about things costing more, that means home prices cost more. It also means that rents costs more. The beauty with a long-term mortgage is – sorry, guys. I just had a very cool commercial popup on my computer [laughter].

Dave Denniston: It would be edited.

Josh Mettle: Yes, thank you. But the cool thing about that inflation is that your rents will continue to rise over the next 10, 15, 20, 30 years, but your mortgage payments stays the same and your amortization starts to work into your favor. What’s interesting in real estate is the first 10 years is there’s a lot of work and little pay. The last 15 years is a lot of pay and a little bit of work.

Dave Denniston: Then of course if people end up paying extra towards the mortgages every little bit helps them get to that point, right? I mean that’s when the real estate really gets worthwhile is when it’s all cash flow and no debt.

Josh Mettle: That’s exactly right. They say that if you put an extra couple of hundred bucks on your mortgage payment or I think it’s like an extra 10 percent on your mortgage payment each month with a couple of hundred bucks here, a couple of hundred bucks there, that you cut your mortgage down by about 10 years.

Dave Denniston: Now are you someone, Josh, with your experiences, there is this term that a lot of people may not be familiar out there with cap rate. We talk a lot about that on the commercial side of life. Is that something that you look at when you’re investing is cap rate or do you purely focus on cash flow?

Josh Mettle: You know the cap rate to me I think has always been able to be manipulated because the cap rate has to do – you know, you figure in expenses into that figure. For me, when somebody advertises or markets the cap rate, I always think well great, you’ve done a pro forma on expenses and you’ve come up with a net operating income and now you’re going to tell me how many years it takes me to get my money back. I just have never put a lot of weight in that and not that it’s not a useful tool. It’s just not ever worked well with me.

Here’s just a really quick and dirty formula that I use. If you can get in rents and your annual gross rate is roughly, equals 10 years of that gross rent equals the cost of that home, so let’s say that you were to rent a house out for $2,000 a month that gave you $24,000 in gross per year. If you could buy that house for around $240,000 or $250,000, that is the place that we want to start looking at a property. It’s something just a very quick analysis as to if that is something that is in the neighborhood of decent value. Then from there, I’m going to do more detailed analysis on the property based on what is the life expectancy of the big items on the house, the roof, the plumbing, the electrical systems, the furnace, those types of things.

Dave Denniston: And so, there’s what people want to be aware what cap rate, so it’s usually a lot in the commercial space, Josh. Is that right?

Josh Mettle: Yeah, that’s correct.

Dave Denniston: Is this percentage number that kind of looks like a return so they take rent, current rent minus some expenses but not all of them if I understand, right, then they divide it by the equity, I think. Is that right? Is that the typical formula?

Josh Mettle: Yeah. What they’re basically trying to tell you is that if you paid all cash for this property and then you took the gross rent, and then you minused off expenses, then you had your net operating income, how many years have net operating income would it take you take to pay yourself back? You want as little years as possible, right? If you can get paid back in 6, 7, 8 years, great. If it’s going to get you 20 years to get paid back, then that’s going to be a higher cap rate, not as good of a deal. Where I fail to see the ‑ I guess where I think that can be clouded is are those real rents you use to arrive at that cap rate or are they hypothetical future rents? What vacancy factor did you use? Are those real expenses or are those expenses that you were able to come to over the last 12 months because you deferred all maintenance and you packed it into the previous 2 years? Can it give you a rough rule of thumb to see if something might be attractive? Yes, but I wouldn’t hang my hat on it.

Dave Denniston: Got it, got it, got it. We’ve focus a lot on cash flow here. So far, we’ve talked about taking money to put down and not want to be in the negative stuff when you have property taxes, homeowner’s dues, mortgages, etc. I think for a young physician, let’s talk about residents and fellows for a second and they’ve just transitioned their practice, which I know you work with a lot of those people ‑

Josh Mettle: Yeah.

Dave Denniston: And they’re focusing on paying down their debts. They’re trying to put money away on their 401(k)s. Can they afford to buy rental real estate as they’re trying to do all of these things because we don’t want to add to their financial stress, right? How should they get going?

Josh Mettle: Yeah, and so I’m going to go back to those first couple of rules that we talked about, which is you really want to make sure that you have your arms wrapped around all the costs of a home. I would say most residents are probably going to purchase as a primary residence and they’re going to live in that home the first 3 or 4 years. Then they’re going to be up against making a decision, and they’re going to either sell that and roll the equity into another home, or they’re going to keep it as a rental property. The first thing I would say is when you’re making that decision, you really want to pay attention to those couple of things, which is where’s my payment, including taxes and insurance, where’s the rental market today, and is there a spread, and can I get a 20 percent to 30 percent spread?

If you can get a 20 percent to 25 percent spread, then my gut is in 3 or 4 years, you’re going to be able to edge up those rents just a little bit especially right now rents are really increasing quickly. You’re probably going to be able to pay a management company to manage that property for you while you’re remote. If you can’t, if you’re looking at what the mortgage payment with principal interest, tax, and insurance is and what rents are and they’re the same or rents are even lower than that, then you know that probably more than likely your only way out of that thing in 3 to 4 years is to sell it, unless you want to go in a severely negative rental situation which I would not advise.

Then once you’ve kind of done that analysis, Dave, you really want to especially when you’re a resident and cash is so precious, I mean most residents I know just don’t have another $5,000 to pull out of their back pocket and cover a re-roofing. You really want to make sure you’ve got your arms wrapped around what kind of deferred maintenance issues might you have to confront in the next 5 years. That would be just a really big one.

Then maybe one more thing that I might say in terms of neighborhood I use this barometer because it’s so simple for one to understand. I partner with my wife and my mom in our real estate businesses and we self-manage. When we make the decision to buy a property, one of my litmus tests is, could I send my pregnant wife into that neighborhood at night to collect rents and feel comfortable? If I can’t send my mom or my pregnant wife into the neighborhood to collect rents, it doesn’t go in my rental pool.

Dave Denniston: There you go. There you go. Well, you just brought a family. That’s a great transition because that would be great just for people to hear about, you mentioned at the very beginning one of your failures in real estate as you got started. Tell us about – we talked about some things people should watch out for – what about really awesome success that you’ve had as well as other real estate deals that you’ve seen the best and some of the worst. First, let’s focus on the good positive stuff. What have been good real estate deals that have turned up well for you or for a client?

Josh Mettle: Well, there’s a lot of them that have turned out well, and there’s one recently that I’d like to share with you, a really good one that’s top of mind, but to be honest, I’d love to turn that around. I’d love to start if you don’t mind with a couple of funny horror stories and the reason is –

Dave Denniston: Yeah, go for it.

Josh Mettle: The reason is I think people can learn more from what I’ve done bad, poorly than maybe what I’ve done well. Let’s start with one of my very, very first real estate investments was a little condo that we were buying and we weren’t using a Realtor. We were doing this by ourselves. My mom and I found this little condo, and it was going to sell on the foreclosure at the courthouse steps. And so, we researched all of the sold properties in that condo complex, and they were all selling for about $85,000 to $95,000, and we thought we were going to be able to get this little condo for about $75,000 and it needed only about $3,000 in work. Not a huge upside but we thought $10,000, $15,000 and carpet, paint, have it sold in 30 days, not a bad little deal.

Without any kind of help or advice other than just a few bucks and maybe some good luck on our side, we decided to go make an offer down at the courthouse and we ended up getting the bid. Now we owned the condo. We go to work and of course we weren’t able to get inside of the property because it was a foreclosure, and so when we get in, then we find out, “Oops! It also needs an air-conditioning unit and really to sell, you need to give these people washers and dryers because that’s kind of the perk that everybody is selling with and also the AC units needs to be redone. The $3,000 in renovation turns into $8,000 or $9,000 pretty quick.

Dave Denniston: Right.

Josh Mettle: And it all takes time, right? It all took longer than I thought. Now we’re about 60 days into this thing and all that’s done and we’re ready to market the property. And so, we go to list it on the MLS, and we find out that that was not the only home that was being foreclosed at the time. In fact, there were three other properties listed in the project that were all foreclosed, all short sales and pre-foreclosures and those all sold within the 60 days after we bought our unit and they all sold at about $65,000.

Dave Denniston: No!

Josh Mettle: Our first property, we were about $25,000 upside down once we figured in what it would cost us to pay a realtor to sell it. We learned some really valuable lessons. The first thing we learned was if you’re a novice real estate investor or buyer, you got to have a good team. Had we done so simply, had we been working with a realtor and said, “Hey, Real Estate Friend, can you look and see what other properties are listed because we could see what properties had sold, but from our vantage point, we didn’t have access to the MLS. We couldn’t see what other properties in that condominium project were listed. Had we just had a little bit of professional advice, we could have realized that we were trying to catch a falling knife. That was the first thing.

Then on the good side, on the positive side, we decided, well let’s just rent that property out. We’ll just stick a tenant in there. We were able to break even. We didn’t cash flow, but we did break even and that’s break-even after covering kind of the annual expenses and we’ve had that property now for about 15 years and today that condo is worth about $160,000. We get about I think it’s $1,100 or $1,200 a month in rent and our payment is like $450 a month.

I always say time cures stupidity in real estate. I have plenty of the latter. As long as you have cash flow or you can at least break even, you can wait until your stupidity expires and time and appreciation catch up with you and make you a winner in the end.

Dave Denniston: So, a lot of different lessons. I mean I learned from that. I think number 1 ‑ and I read this in Robert Kiyosaki’s recent book, which I don’t highly recommend to people, but if they’re interested and I think it was restart or reset something like that. What he said I think was really good, which I think you could relate to is you don’t want to just look at a couple of properties. You want to look at a hundred to find a gem. Don’t just hop on the first thing which it sounded like you guys kind of found something you like and you didn’t really look around a lot and using a good Realtor is a great way to do that. It sounds like you would agree with what he said there.

Josh Mettle: Absolutely, and by the way if anybody is thinking of investing in real estate, I think they have to read Rich Dad, Poor Dad, which is the first of his series. I think he also says in that book that the way he does it is he’ll look at a hundred, and he’ll offer on seventy and he’ll get one or two. That may not be practical for all of us, but I think we can learn the lesson and the lesson was if I’m going to get through 100 properties, I’m going to need some professional help. If I’m going to employ some professional help, they probably could have helped me avoid that problem in my scenario. Look at a lot, weed a lot out, and leverage your advisors as much as possible.

Dave Denniston: Absolutely. That was kind of one that looked pretty bad to begin with. What about a really good one? What’s been the best investment you made?

Josh Mettle: Okay, we’ll we’ve made some good ones over the years, but recently we had a real winner that I’m proud of. My mom and I were just reviewing the profit and loss statements this last week at my house. We were talking about this is probably in the shortest period of time been our best investment, and this was a seven-unit apartment building, and these are all townhomes. They’re all like three-bedroom one-and-a-half or two baths – I can’t recall which one they are – and they all have a garage. You get a little bit more than affluent person in there, built in the late ‘70s, and it was a guy who had built the properties and held on to it for 40 years.

Now he was nearing the end of his ability to kind of do the renovations and stay on top of things, so he was liquidating and kind of getting rid of his whole portfolio. We came in and he had really stopped working on the properties 10 years ago. What happens is when you start to trade not doing the renovations and upkeep on your property for people not paying rent on time or not paying rent at all, you get this kind of downward cycle of the worse and worse tenants taking worse and worse care of your property, causing more and more deferred maintenance issues, and causing them a willingness to pay less and less and less in rent. It’s like, “Hey, I can’t come over to fix your water today, so why don’t you just take a couple of hundred bucks off the rent.” Then the water is like cascading into the unit below it [laughter].

Dave Denniston: Yeah.

Josh Mettle: So we took this property that obviously had just not been taken care of over the last 10 years and had really rough tenants. I’m talking about it was an area that you would send your wife to at night, Dave, but in its current state, you would have asked your wife to avoid that apartment building by about a block. We could deal with that because the residents around it all had pride of ownership. It was on a good street with green grass and folks sitting out on their porches, good family area. Just a bad property, which is totally different, guys, than a good property with green grass in a good property surrounded by bad properties because you cannot affect the properties that surround your residence or your investment. You are subject to that. You’re in that ecosystem. But if you have the ugly property in a good neighborhood, you can control that.

We decided we’re going to kick everybody out. You’re all out of here. Thirty-day notices. Your leases are all on ‑ they haven’t paid for 6 months anyway, so this is a downhill battle. But once they’re on a month-to-month lease, you can just give them a 30-day notice in the State of Utah and we vacated all of them at the same time, which was really kind of scary because now you’ve got your mortgage payment and you’re forking out bucks on seven units. You have no rental income, and we haven’t employed that strategy before. But it turned out great.

So, we got them all out. We renovated the whole thing. We put about a $150,000 down on that property. We bought it for about $750,000; put a $150,000 down. We did about $75,000 renovation, which is about $12,000 per unit – new windows, carpet, flooring, the whole deal. We now today, so we were about $225,000 in that thing and we run about a $150,000 a year positive cash flow on that property.

Dave Denniston: Wow.

Josh Mettle: It give us a pretty nice rate of return there of about 20 percent, and in addition to that, our tax depreciation for last year was $23,000, so that’s $23,000 in income tax that I didn’t have to pay, and in addition to that, we had about $20,000 in amortization. We took about a $90,000 gain on that property between cash flow, depreciation, and amortization, and I’m sure we had appreciation in the last year as well but I haven’t even factored that into the equation.

Dave Denniston: Well, just by rehabbing it, I’m sure there is appreciation just by that.

Josh Mettle: Absolutely.

Dave Denniston: Let alone other stuff.

Josh Mettle: Well we –

Dave Denniston: But I think there’s – Sorry. Go ahead.

Josh Mettle: I was just going to go ahead we raised those rents. Their average rent for a three-bedroom unit was about $800. Ours are now about $1,300. Obviously, there was massive appreciation just due to the fact that the investment now yields so much more in rent.

Dave Denniston: I think what’s interesting about your story that both you and me have been talking about is you mentioned how you’ve been doing it your wife and your mother. A lot of people kind of get it seems like into a choice of either they do it all themselves or they do it as part of a big group. It seems to me that if you can partner up with one person or a small group of people, it’s kind of a happy medium between the two because I think that’s something that you just described that you’ve done so well because you’re using two people’s capital.

For a young physician if you have skills in rehabbing, if you have close connections that are good at construction or something like that, then you might be able to get some of this stuff and build some sweat equity pretty easy. Maybe that would be an easier way to get started. Don’t be part of a huge group, perhaps but maybe a physician or two that gets together and works on it together in some of the skills. What do you think about that?

Josh Mettle: Yeah, for me my skills were always in the evaluation of the property, in the qualifying for the financing, and with coming up with the down payment. That’s what I brought to the table. My mom was a retired attorney who has done landlord-tenant law, so that means she’s represented landlords against bad tenants legally for 15 years and she was retiring out of that business that had actually grown to a place that was just too much for her anymore.

She was retiring out of that business and we decided that the best possible scenario was for me to put my savings and my analysis skills and my qualifying for the mortgage skills to work and her management skills. She does all of the leases, and all of the eviction notices and all of the contracts, and all of the vendors and all of the maintenance people, she handles all that.

My wife is good at accounting, so she’s great with numbers like the first day I met her, I handed my checkbook and said, “Yeah, I haven’t used this for 3 years. Can you fix this?” And, thankfully, she did. She runs QuickBooks for all of our different entities that have the different properties in them and pay all the vendors and does all that.

Regardless of what your skill sets are, if you’re interested in this, you find someone you trust, you find someone that have collaborative skill sets, varying skill sets that work well together and you can create a really fun partnership.

It’s been one of the really enjoyable things in my life to create something that is a business that creates income that my mom has been able to benefit from, and it brings my wife into it. I mean my wife and my mom’s office is in my same office. My kids come in. My wife comes in. My mom comes in. it’s great. I’m either kind of like brought the family into the office and I really enjoy it.

Dave Denniston: And your pregnant wife can walk to good places, so she doesn’t get‑

Josh Mettle: Yeah. She’s not pregnant anymore, but when we made that rule, it was funny. The rule was born, pardon the pun, from a meeting we had one day and we were evaluating a property and I’m like, “I’m not sending my pregnant wife to that property to collect rents!”

My mom was like, “That’s perfect! That’s our litmus test! That’s how we judge properties from this day going forward, so it’s the pregnant wife test from now on.”

Dave Denniston: I love it! That is awesome!

Josh Mettle: Yeah.

Dave Denniston: Right now, to time in. I know you are so full of resources and ideas. What do you think regarding real estate, Josh, that you would turn on to residents, to physicians, what are few good books or videos that they could check out if they want to know more, get more details on how to invest in real estate?

Josh Mettle: First I think you’ve got to do Rich Dad, Poor Dad, and we’ve touched on this before, Dave. But I’ll never forget. I was 19 years old and I was back from a summer break from college and I was driving down to my grandmother’s house and – I can’t remember who had given me the book, but I had – let’s see. That was a long time ago. It was probably a tape. I probably had a tape in of Rich Dad, Poor Dad. I was going to say podcast or something. But I had a tape and I was listening to Richard describe passive income and rental properties and real estate, and I thought, “Oh, my gosh! I figured it out. I can be rich.”

I can see in my mind from where I am 19 years old to when I’m 50 and I can see how I can become rich. I buy one property with cash flow, then I buy another property with cash flow, and for me, that was a real changing moment in my life because it was real to me. I believed that I could do it, and that’s all I really needed. I didn’t need to know all the steps. I just needed to believe that I could do it. Then he kind of fills in a few steps and then you go make a bunch of mistakes and it works out. But I’d start with Rich Dad, Poor Dad.

The next thing I would do is I would read The Richest Man in Babylon because that is just a classic and these books are super simple, right,  like residents that are coming out of med school and do all the studying they’re doing, they could knock it out on a Friday night. But The Richest Man in Babylon just has some truly timeless information on finances and is applicable to anyone, anywhere either in 2015 or 2055. These are just timeless principles that one should learn.

Then the last one is a new one, and this is a really, really cool gentleman that I met. He is actually a practicing MD. He also has his MBA, and he also started a company called Vernonville Asset Management, and his name is Eric Tait, Dr. Eric Tait. Their website is What he does is he comes up with collaborative real estate investments all over the globe and then he invites a bunch of doctors to participate, so he finds the investment. He negotiates the deal. He puts his own cash into it as a partial partner, and then he brings other doctors and high net worth individuals in. is the website and when you go there, you can go to resources and then he has just a great set of information there of how to evaluate real estate properties and a bunch of other stuff like that.

Dave Denniston: Awesome! Awesome! That’s lots of stuff for people to look. You guys got to check that out and also I encourage everyone to check out Josh’s book, Why Physician Home Loans Fail. It’s really good, especially residents and fellows as you’re transitioning to practice. You’ve got to check that out and make sure to take a read because there’s good lessons in there that are specific to docs that a lot of people aren’t aware of. But anyhow, there’s so much more in real estate, we just don’t have time to cover it. Do you have any closing thoughts, Josh, that you think physicians should be aware of?

Josh Mettle: I could probably list 10, but let me just leave one more. I think the one thing that I have learned painfully is that you can’t do it all yourself, and you’ve got to grow a good team. If this is something that you’re going to do, you’re going to make a family business out of this or what have you, cultivate people who are experts in these four areas. Find someone like financial advisors/CPA, or someone who can give you really good information in regards to the tax implications and the tax benefits and have them be able to help you file your taxes because your single biggest expense of your entire life, your biggest debt is not student loans. It’s not a mortgage. It’s taxes. The great thing about real estate is that you can save a lot of money so you want to find a really good CPA or financial advisor that can help you with that.

The next thing is someone who can help you with some entity structure. You are in a highly litigious profession as a physician, and the last thing you want to do is be really successful and then have someone sue you and take all of your real estate holdings, so you got to start right from the beginning and think how to protect those assets by putting them in limited partnerships or LLCs. It does not have to be expensive. You can LegalZoom it for your first property. When you start making some real money, you can revamp things, but get some advice from an entity’s side, from an attorney friend, or something like that.

A realtor – you’ve got to find a realtor that has the heart of a teacher, not the heart of a salesman. What I mean by that is you want someone who will help you break down the numbers, contrast 10 different properties, help you with cash flow analysis, and educate you as much as sell you.

Then lastly, you want to find someone that is able to do creative mortgage financing for you because there’s lots of options out there. If you’ve got a good financial advisor/CPA, you’ve got your attorney to structure things correctly, a realtor, and a mortgage, and if you can get that team working together, it’s really hard to fail if you get that team on the right page.

Dave Denniston: Awesome and have them talking, which is even better.

Josh Mettle: That’s right.

Dave Denniston: If you can get people talking, I’d add to that because if you ever go to an island, if you can get everyone together when you start to think about this stuff, that would be awesome.

Josh Mettle: I would absolutely concur.

Dave Denniston: Well, thanks so much for being with us, Josh. If people have more questions, how can they get in contact with you?

Josh Mettle: Yeah, sure. They can email me at They can check out our website, which is, or you can feel free to call me here at the office, (801) 747-1210.

Dave Denniston: And your last name is, so people know how to spell it?

Josh Mettle: Yeah, it’s Mettle, M-E-T-T-L-E, so it’s

Dave Denniston: Perfect! Well, thank you again, Josh, for being with us. If you guys are listening out there, you’re a physician, you’re someone else servicing physicians, you want to tell your story, grappling with issues like this, you want to get on the soapbox here for a few minutes, and love to share it too on the next Freedom Formula for Physicians podcast, make sure to contact me at Or my website,

For The Freedom Formula for Physicians podcast, this is Dave Denniston. Thank you so much for joining us and make sure to check in again. Have a good one!