Home Real Estate Investment Why I’m investing in real estate over stocks – Part 1

Why I’m investing in real estate over stocks – Part 1

14 comments 124 views

For high income professionals, real estate is one of the most tax efficient investments. Read below to learn more!

This post may contain affiliate links.

Part of the “Road to Rental Real Estate” series

Want to see how our real estate portfolio has grown? Go to this page here.

I’ve talked before about how I intend to increasingly shift more of my capital and investments into real estate.  I haven’t directly addressed why I plan to do this. Is it because I think it’s cool to be a real estate investor?  

While I do think there is some extra cachet attributed to real estate investors (I’m not sure why), this isn’t why I’m going into it.  Simply put, I believe that real estate is probably the best way to grow wealth as a high income earner in the United States.

This is a pretty controversial statement, especially in the world of financial independence.  There are some prominent FI bloggers that recommend putting everything into index funds like VTSAX, and to forget about the rest.

So to understand why I plan to ignore this advice, and go for real estate investing, let’s go back to the basics.  Way back.

How to get to financial independence

There are essentially two ways to get to financial independence (or moFIRE) faster.

  • Spend less money
  • Make more money

“Duh!”  It seems so obvious, right?  

Yes, it might seem obvious, but literally thousands of blogs, books, and podcasts have been devoted to the optimization of these two elements.

As I’ve discussed previously, I have a huge number of fixed costs that (for the time being), I’m unwilling to change.  So while the Dr-ess and I certainly save money where we can, I am focusing for now on making more money and keeping more of it.  

You’ll see soon that the “keeping more of it” is where real estate comes into play.

How to make more money

As an employed surgeon, I trade my time for money.  The more patients I see and surgeries I perform, the more I’m paid.  It’s a linear relationship, and therefore there are hard limits on this, such as:

  • My base hourly salary
  • The hours in the workweek
  • Scheduling rules from my hospital administration
  • My level of burnout and desire to see my family

I currently work about 50-60 hours a week on average, and whenever I exceed this, I start feeling burnt out.  I am less friendly to my patients, I put less thought into my medical decisions, and the Dr-ess complains that I’m grumpy and less supportive.  

There are a few major things that can easily derail your path to financial independence.  These include losing your job, getting sued, or getting divorced. Working more hours makes all of these things more likely for me.  So that’s not going to be my focus either.

In fact, as soon as I can make the numbers work, I may even explore cutting back my work hours.  CrispyDoc has a nice blog series about doctors who have done this, and how it has positively improved many aspects of their lives.

Keep more of what you earn

So if I’m not going to work more hours to make more money, how do I increase my income?  

The answer is to reduce my taxes so I can keep more of my paycheck and give less of it to Uncle Sam.  

I read through an 860 page tax book to figure out how to do this, and here are my main conclusions:

  • My income is too high for many deductions
  • Being an employed (W2) earner greatly limits work related deductions
  • The US tax code rewards business and real estate owners.  

At my income bracket, even after all deductions are factored in, my overall tax rate last year was about 35%.  This means that for about 4 months of the year, I’m essentially working for the government.

The most favorable investment I currently make outside of retirement funds is stocks.  But since I live in California, my long term capital gains are taxed at over 30% when the gains are “realized” (cashed out)!   

I could just give up and accept that as a high income professional, I’m going to pay a lot of taxes.

Or I could try to emulate what the truly wealthy in the United States are already doing, and start investing in real estate.

Do as the rich do

This is a interesting graph that breaks down the composition of wealth for various net worth brackets in the US.  

What you’ll notice is that as people gain more and more wealth, their % of assets in business equity and real estate starts to grow.

It goes from 7.9% in the lowest net worth bracket, to 24.5% in the upper group, to a whopping 49% of net worth in those who are worth over $10 million.

Why is this the case?

It’s very simple.  Real estate, especially rental real estate, is one of the most tax efficient investments available. Better than stocks?  Yes. Much better.

In my next post, I’ll reveal the surprising tax efficiencies of real estate investment, and why I’m going to start moving more of my assets into this area.

— TDD

What do you think? Are you already using real estate in your investing? Comment, share, and subscribe!

Subscribe to the Darwinian Doctor newsletter and get a free copy of my eBook: “How to Control Your Financial Destiny”

* indicates required

Popular Posts


Want to support the blog?


Perhaps you’re more of a Facebook type?

Are you a physician, spouse, or professional and you’re interested in using Real Estate to gain financial freedom? Join us in our Facebook group and accelerate your journey!

Related Posts

14 comments

Xrayvsn May 28, 2019 - 11:13 am

You are preaching to the choir.

I used to invest exclusively in stocks/bonds/REITS (which are really just real estate flavored stocks) prior to May 2017. My radiology partner during that time was building a mini real estate empire and told me time and time again that real estate had so many more advantages.

At first I shunned real estate because my only experience with it has been through SFH (condos) that I rented out. Not much money and the headache/hassle factor made it even less appealing. I didn’t want to be a landlord.

Discovered passive real estate investing (first through crowdfunding and now through real estate sponsors/syndicators). It really is mailbox money for me and I have built up a sizeable real estate portfolio because of it.

Reply
The Darwinian Doctor May 28, 2019 - 3:46 pm

I love the idea of building up an empire of rentals, fully managed by property management. This is where I am going to focus for now, probably until I have 10-20 of them. Afterwards, I’ll likely branch into syndications and multifamily. But we shall see!

Thanks for stopping by Xrayvsn!

— TDD

Reply
DrJ May 28, 2019 - 12:31 pm

I’ll be interested to read Part 2, particularly your thoughts on accredited investor syndicate deals, real estate funds, or more traditional rental property purchases.

Reply
The Darwinian Doctor May 28, 2019 - 3:48 pm

Thanks for the comment! There are 1001 different ways to make money in real estate. I’m going to focus my attention for now on traditional rental property purchases, but from what I can tell, syndications offer almost all of the same tax benefits. The main difference, which I will surely highlight in future posts, is control over the asset and the exit strategy.

— TDD

Reply
Wealthy Doc June 29, 2019 - 6:09 am

Real estate produces rental income to me. I reinvest that money since it is more than I need. That allows an exponential growth in investments with no sacrifice on my part.
That growing net worth and passive/portfolio income gave me the confidence to negotiate a 3-day per week clinical work schedule.
Go For It!

Reply
The Darwinian Doctor June 29, 2019 - 7:42 am

I’d be thrilled to work just 40 hours a week now, instead of the 50-60 that is more typical for my week. If we are on track to meet our financial goals, there will be a hard choice ahead. Keep going full steam to moFIRE, or slow down the wealth accumulation but go to a more relaxed work schedule.

I suppose I’ll cross that bridge when/if it comes.

Thanks for the words of encouragement!

— TDD

Reply
Zoe Campos September 16, 2020 - 4:11 am

It’s interesting to know that real estate properties are more tax-efficient investments compared to stocks. My uncle is currently trying to choose between the two and reading your article made me realize that it is better if he’ll start buying a realty. I’ll try to tell him to look more into the specifics and see what other benefits he can have for owning properties.

Reply
The Darwinian Doctor September 20, 2020 - 6:22 am

Especially in higher tax brackets real estate can be much more tax efficient in the long run than stocks. You certainly do sacrifice simplicity though! Also — talk to a tax professional, of course. — TDD

Reply
Rose Chandler April 17, 2023 - 1:18 am

Your analysis on why you plan to shift more of your investments into real estate is informative and thought-provoking. It’s refreshing to see someone challenge the status quo and offer a different perspective on the best way to grow wealth as a high income earner. Your insights on reducing taxes and keeping more of what you earn through real estate investing are particularly compelling. Thanks for sharing your thoughts and experiences with us.

Reply
The Darwinian Doctor April 17, 2023 - 8:31 am

Thanks very much!

Reply
David July 24, 2023 - 6:24 pm

How is that you lump “business equity” in with real estate? Sorry, does not compute. I also question your categorization of ultrarich as being NW greater than 10M! I think I would add another 0 to that number. I know I don’t feel ultra, and I’m closer logarithmicaly to 100M than 10M.

Reply
The Darwinian Doctor July 24, 2023 - 7:45 pm

It’s not my chart — I borrowed it (with credit) from the great website Visual Capitalist. Same goes for the term “ultra-rich”.

I tend to agree with you, though. I personally would characterize ultra-rich as 9 zeroes: $100 million or more.

Thanks for your comment!

Reply
Gerald Harris August 10, 2023 - 10:16 am

It’s interesting. I have very little experience in the stock market and most of my experience in the real estate. This article was right on time. Thanks alot.

Reply
Faisal Town Phase 2 Islamabad August 29, 2023 - 4:38 am

Your choice to invest in real estate over stocks makes sense! Both have their merits, but real estate’s stability and potential for passive income are strong reasons. Thanks for sharing your perspective on this important decision.

Reply

Leave a Comment

About Me

Dr. Daniel Shin

Dr. Daniel Shin

I’m Dr. Daniel Shin, a surgeon, investor, and educator on a mission to fast-track your financial freedom. From a $300,000 debt to a diverse investment portfolio, I’m now just years away from financial independence. Ready to join me on this journey? Let’s go!

Featured Posts

Newsletter

Recommended Resources

profile-pic (4)

Hot off the press and on sale for a limited time!

My eBook will give you the tools to get started on the path to financial freedom. Learn about my financial journey and the shockingly simple math behind financial independence. Then find out how to define your Why to fuel your success!

Don't Miss A Post

A Darwinian Disclaimer

Since everyone is different, it may not be appropriate to generalize my doctorly advice to your own situation. Please run all medical, life, and financial advice by your own physician or financial professionals before applying it to your own life! Consider all information for your entertainment only!

Images and Copyright

To the best of my knowledge, the images used in this blog are either taken by my own camera, free stock photos, or considered allowable usage under "Fair Use" law. Please let me know if you believe otherwise.

Affiliate Policy

Affiliate Policy
As you explore the site, you may notice links to goods or services. I may earn a commision if you use a link to purchase any of these. While this blog is really just a labor of love and a creative outlet, if I can "keep the lights on" with affiliate links, all the better. Rest assured any reviews you read here represent my unbiased opinions, and there is no added cost to you to utilize the links. Please go here to read my full Affiliate policy.

Evolution Holdings LLC
All rights reserved.

@2024 – All Right Reserved.