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EP74 - Retiring Early Starting with Physician-Owned Medical Properties with Cory Fawcett, MD
Trisha’s guest this week is Cory Fawcett, MD, a former surgeon and current real estate entrepreneur. We discuss a clinician’s journey through his real estate investment path, from physician owner to retired surgeon, to investing in other income-producing real estate assets, and now teaching other clinicians the same through his coaching. He has also published several books on this topic, and you can find those at financialsuccessmd.com
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In this episode, we talk about…
[2:17] Cory’s path to real estate investing
Dr. Cory Fawcett shares that he has always been a little different when it comes to handling money. In residency, he was one of the few people who contributed to his retirement plan. When he went to buy his first house, the banker told him he was the first 20-something who had walked into his office with a positive net worth.
When the other doctors began to notice how he handled money, they would come to him for advice. From there, Cory evolved into teaching doctors about finance, real estate, and how to get out of debt. That kept expanding until he was ready to retire, and at age 50 he cut back on his practice for a few years and coasted into retirement.
Once he retired, Cory’s new mission was to teach doctors these things in a formal manner rather than while talking over a patient during surgery or hanging out in the doctors’ lounge. His business evolved from this passion project he was doing on the side, and today he actually gets paid to fulfill this mission.
[4:06] The mission to prevent burnout among physicians
Cory’s mission is to eliminate burnout, debt, and bankruptcy among physicians, dentists, and others in the healthcare industry. Right now, one of the biggest problems he sees with burnout is that doctors are converting from owning practices to being owned by someone else’s practice. When that happens, you lose control of what is happening and you have to do what someone else says. That takes you down a very different road than when you own things, you control things, and you make the decisions.
When physicians are feeling burned out, even little changes can make a difference. Something like moving your office visits from every 10 minutes to every 15 minutes can give you a bit of breathing room. If you don’t have your own practice, however, you may not be able to make the changes that you need to make.
A lot of times you have more power to make changes than you think you do, but you might be afraid to make the move. Cory shares that, at one point, debt was an issue. Even though he was in private practice, he had several hundred thousand dollars in debt. Because of that debt, he was afraid to make two changes in his practice that he needed to make. He hated doing vascular surgery and thoracic surgery. They gave him anxiety, but they also paid the best and brought a lot of money into the practice. He was afraid to get rid of them as long as he had the mortgage hanging over his head.
When Cory became debt-free, he developed the courage to get rid of those procedures. Even if it dropped his income, he would be fine because he didn’t have those debts to pay back. He went to the office manager and had all of his thoracic and vascular patients given to other partners who enjoyed those surgeries.
All the fear of an income drop was unfounded, as those partners then had to displace cases back to Cory in order to take on the new cases. His practice got better because his financial situation improved to the point that he felt confident to make the changes he was afraid to make before. This high debt load doctors face today is likely another factor in burnout, as medical education gets more and more expensive.
If you are in a practice that has a PA, an MA, or a medical scribe, but then something happens and you have to cut costs, your support staff may go away but you will still be expected to absorb the extra work. As Cory points out, assistants are never cut from the CEO. They will first be cut from the doctors because they figure the doctors can do everything themselves. When they don’t have their own practices, doctors can feel helpless. They can feel like they don’t have the power to control those staffing decisions.
In order to make positive changes, you have to leverage your power. Cory tells the story of a contract dispute that was supposed to be fixed for six months. It wasn’t done, until one day he told them that he had a contract in hand from someone else. Then something that had been unresolved for months was fixed in a matter of days.
When you’re deeply in debt and you have no reserves, you don’t have the courage to tell them that you’re going somewhere else. It’s very expensive for a doctor to change jobs. In Cory’s first book, he followed one of his friends when he changed jobs, and it cost him over $175,000 to swap jobs. Without good financial footing, it can be very intimidating to rock the boat. When you finally get the courage to do something, however, you often discover that you have a lot more power than you thought you had.
[12:17] Early retirement from the medical field
Cory was able to retire at age 54. When he was in medical school, he made a plan to be financially independent by age 50. He showed that to another doctor, who was over 50 at the time and couldn’t retire. He told Cory he would never be able to do that. Cory followed his plan, and by the time he reached 50, he was financially independent. He didn’t originally intend to also retire at 50.
He enjoyed surgery, and he had a good practice. Cory made changes to his practice as he became more financially secure. He got rid of things he didn’t like doing, and did more of the things he liked doing. He took 8-12 weeks of vacation every year. So, he had a nice thing going. When he reached 50, he worked half time and then he wanted to cut way back. In his partnership, however, they didn’t really have a half-time option due to the way the contract was set up. The real problem was how they handled their overhead, and he would still be responsible for his share of the overhead no matter how low he took his practice. As Cory’s wife pointed out, if he worked any less he would be paying them to work. So Cory retired from the practice, and then became a locum doctor so he could slow down over time and ease into retirement.
[15:15] Income-producing properties for physicians
The first three investments Cory and his wife had were physician properties that were owned in partnerships, and the first one was the building they practiced in. He thinks it’s especially important for a doctor to own their own buildings, and there are so many advantages. Some include the tax ramifications, but the biggest thing for a physician is owning your own building and setting the rent high. Then you are transferring some of your W2 type income into passive real estate income, and it gets taxed better than earned income. So when you own the building, you’re transferring some of that earned income by paying rent to your building. Your building then makes money and pays you passive income, therefore decreasing your tax bill. In addition, you get the appreciation over time rather than paying rent to someone else. You pay rent to yourself and increase your equity. In Cory’s opinion, owning your own building is a no brainer.
Unfortunately, if you work for somebody else, like a big hospital, they own the building and they don’t want to share that partnership with you.
The second building Cory owned was a surgery center they built, and there were many partners involved in that. The third one was a multi-doctor building next door to the surgery center. When they bought the surgery center lot, it was too big. They built the surgery center, and then on the other half of the lot they built the office building. It was only owned within the partnership, so he had to sell out on that, but he still owns part of the other two buildings as a partner in the group. Those are great ways for physicians to invest.
[19:59] Optimal investment properties for physician owners
Cory shares that it can be scary to invest in real estate other than healthcare real estate if you are a physician, because you are more familiar with healthcare real estate. You know what it’s like to pay rent for an office and how that runs. If you’ve never owned an apartment building, for example, that can feel pretty intimidating.
When you are a partner in a multi like that, there is definitely a pull to refer to those people because part of their success is tied to your success. So if there is an orthopedic surgeon in that building and your kid gets hurt, that is the first orthopedic surgeon that will come to mind.
Cory provides an example of one of his friends who owns a building, and Carl’s Jr. rents the building from them. When they’re going to get fast food, guess where they go? Carl’s Jr.! As long as they make good money, they can pay the rent and his friend makes money as well.
When Cory was setting up the surgery center, they used that tie to bring in other doctors in town. The surgery center is set up as two different businesses. One was the people who owned the surgery center business itself, and those were the surgeons involved in the center. The second business was that they owned the building and the surgery center would rent from the building. They invited any doctor in town, whether they would be using the center or not, to be part of it. They did that because if the doctors were part of the deal, they would want to get their cases referred to the surgery center so that it does well.
There was a competing surgery center in a nearby city. By including the local doctors on the deal, Cory’s company outdid that other surgery center in their first year in business. Having a multi-office building with different practices, therefore, can really change your practice pattern and you will involve those people more.
[24:07] Accessing joint ventures for capital
Cory’s company engaged in a joint venture for a multi-office building; they didn’t get enough capital from the doctors in the area so they opened it up to other people as well. He prefers not to have partners because they add complications, but sometimes you can’t make the deal happen on your own and you need to bring in somebody to help you with the deal.
With the competing surgery center, they didn’t have extra partners so it was less complex. They also didn’t make as much money, because they didn’t have as much business due to not involving other people. There will be times in your life where you have a project you want to do, but you personally don’t have enough resources to do the whole thing by yourself so you have to strategically pull in some partners from elsewhere.
[25:25] Managing real estate for busy physicians
Physicians are busy, and it can be overwhelming to try to manage real estate without help. When they first ventured into real estate, Cory and his wife decided to do everything involved in their 31-unit apartment complex for 12 months. After the first year, they decided to farm things out and they knew what would be best to outsource because they had done it themselves. It was easier for them to understand what needed to be done and what it was worth.
Then they were able to automate things and farm out a lot. For the next 12 years, Cory managed the property and took care of it for about 10 hours a month. He kept a few tasks that he enjoyed doing, like meeting with and selecting tenants. Some doctors want to make themselves invisible, so no one knows a doctor owns the place. They think it’s a detriment if people know a doctor owns it, but Cory believes it’s only a detriment if you’re a slumlord and you don’t take care of the place. If you get a lot of complaints, then yes it will likely impact your reputation as a doctor. If you take the place seriously, treat people well, and provide good housing, then there shouldn’t be a problem with people knowing who owns the place. In fact, Cory has even brought in new patients because they knew their landlord was a good guy.
A lot of people would ask Cory about how he was able to manage his property, so he developed a course on automating your real estate. It’s a matter of making systems, just like in your office. He tells doctors to think about their own practices – whether you are employed or you own the place. Do you answer the phone when it rings? Do you schedule the appointments? Are you on the phone with the insurance companies? Do you log the blood pressure into the chart? You don’t do everything in your office; you have things automated. Everybody knows what happens when someone walks in the door.
Why is it that, when we get involved in real estate, we think we have to do everything? You don’t give your patients your private cell phone line and tell them to call if anything goes wrong, or if they have to change their appointment. You don’t have to do that in any other business you’re involved in either, including your real estate.
You should be automating everything that can be automated, and keeping only the parts you like to do. Cory did that for 12 years, and then he retired. Originally, he thought he would pick up more work after retirement rather than hiring them out. When the time came, however, they started traveling more and were gone more than 50% of the time. He didn’t want to manage the property from a cruise ship off the coast of Brazil. So at that point, he automated what he could and turned everything else over to a property manager.
[31:32] Whether Cory misses surgery post-retirement
Although Cory was worried he was going to miss surgery and want to go back after retirement, he does not. Of course he has his moments where he misses certain aspects, like the interactions with patients and saving people’s lives. Being a surgeon was fun and exhilarating, but in the balance he hasn’t missed it. He can’t imagine going back to the life of a trauma surgeon at this point. He is enjoying his relaxed, retirement life.
[32:31] Cory’s first jobs
Before his first job as an employee, Cory was an entrepreneur and ran several businesses. As a teenager, he owned a rock ‘n’ roll band. He was the manager, lead guitar player, and the singer in the band. They made good money as teenagers. They couldn’t drive themselves to their gigs, but they made $20,000. On top of that, Cory also mowed lawns and taught piano lessons.
His first job as an employee was a bellman at a local hotel. He had just graduated from high school and was about to start college, and he needed to earn some extra money. He went around town looking for a job, and the manager of the hotel fired his current bellman on the spot and gave Cory the uniform. Cory calls that his “first introduction to what it’s like to be owned by somebody else” – the manager just found someone he liked better and the bellman was gone.
[34:42] What Cory would want to do for a living other than medicine or real estate
At one point, Cory almost quit medical school. At the end of his second year, he recorded an album of his original music. Both music and medicine required full-time commitment, and he knew he couldn’t do both part-time. He decided to play music for fun, and commit to medicine as a career.
When he was still in college at Stanford, just before the Macintosh computers were introduced, Cory knew the whole thing in Silicon Valley was going to balloon up. He was doing computer programming classes, and his teacher told him he was a natural. He wanted to get Cory lined up to do that for a living, but Cory wanted to be a doctor. A part of him wonders what would have happened if he had gotten into computer programming right as Microsoft and Apple were ramping up.
Now that he is retired, Cory is going back to music. He is learning piano bar sets, and he hopes to play at restaurants and cruise ships.
[36:36] What Cory is reading for news, information, or inspiration
Cory reads between 50-70 books per year. He alternates between self-help books and novels. He loves science fiction, so those are usually the novels he reads. He is currently in the middle of Men are From Mars and Women are From Venus.
[37:49] What Cory does for healthy self-care
He doesn’t use an alarm clock anymore, so he gets to sleep in. He always thought he was a night owl, as he loved playing music late at night. He could play a gig until 2am, but he hated getting up in the morning. Every Saturday during the years he practiced medicine, he would sleep a couple hours later than his wife. Once he retired, however, he was waking up a couple hours before his wife. He realized that he wasn’t actually a night owl, he was just perpetually tired. Since he now gets the sleep he needs, he naturally wakes up earlier. Getting enough sleep is definitely his biggest self-care habit.
[39:11] Whether leaders are born or trained
Cory thinks it’s a bit of both. You are born with an inclination toward liking to lead or liking to follow. One is your preferred mode, but you can train to become a good leader either way.
[39:51] Whether the desire to heal is born or trained
When Cory was a child, his grandfather used to read him a book called Dr. Goat. It was about a goat who went around and healed everybody, and when he got sick all the animals came back to take care of the doctor. When he was 2-3 years old, he had totally memorized that book. His grandfather would tell people that he could read it. He couldn’t read it, but he was inspired to help others just like the goat.
As far back as Cory can remember, he wanted to be in healthcare. Today, an old version of Dr. Goat sits on his mantle. He didn’t have any family members in healthcare, and in fact he was the first in his family to go to college. Cory thinks it was his environment that made him want to be a doctor.
Links to resources:
Cory S. Fawcett, MD
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