Welcome to the big money W2 league. That’s great, but don’t think that just because you bring in a lot of money you will be somehow set for life. That’s an error many physicians make. And it’s not just physicians, it’s lawyers, CEOs, wealthy inheritors, professional athletes, professional musicians, actors, and generally anyone who brings in a lot of money. Your risk is in your dependence on the specialized thing you do. If that goes away you have a huge problem. You must manage your money as anyone else should. The way you should do it is different from others, though. Here’s how to start real estate investing for the high income earner.
If this isn’t the right level for you, here’s the other posts in this series:
- How to Start Real Estate Investing as a Teenager
- How to Start Real Estate Investing as a College Student
- How to Start Real Estate Investing as a Young Professional
- How to Start Real Estate Investing as a High Income Earner (this post)
How to Get Started
I’m going to say this again: Don’t fall into the trap of thinking you are set for life when you graduate from your professional school and get that high-paying job. I’m proud of you, and unlike a lot of real estate gurus out there, I value an education. I think it is reasonable to pay for someone to teach you if they are honest and the value is there. But, the world is littered with former high earners who fell out of the workforce due to burnout or retirement (forced or otherwise) and have very little reserves to continue the lifestyle to which they’ve become accustomed. Avoid this by taking these steps now.
- Avoid the temptation to buy [insert fancy expensive car, house, boat, etc. here]. Don’t do it. Really, who wants to go to a doctor or lawyer who drives a $100,000 car? You know what their priority is. But, you can have all that stuff. Save it to later. I once saw an attorney who wore a clearly expensive looking watch. It was gold and garish and huge. He wanted you to see it. If that guy values watches that much, how much is he valuing his clients? Dumb. But dumber is the fact that his watch set him back at least a year of investment into his future years.
- Minimize Expenses. This goes for anybody. There are so many ways they are bleeding you with monthly subscriptions and eating out and ‘hobbies’ that people do one time and quit. It’s so very easy to fall into the trap of not worrying about spending on that credit card because their income is so high.
- Pay Yourself First. This is also in the Saving category. The first at least 10% of your income should go to an account earmarked ‘investments’. You and your spouse must not touch it for anything but investing. This is the best way to save up for a down payment. You make a lot of money. This will grow quickly. Do more than 10% if you can, but I find it difficult with a family to go higher.
- Avoid using hours as a currency. Oh, this one is insidious. It’s odious. It’s ridiculous. If you don’t know what this is, good for you, but you probably haven’t been making high amounts of money long enough. This is the calculation which goes through the mind of a high earner, which says, “I can buy this, it is only 3 hours of work.” The trap here is that they are binding themselves to their work. It’s a form of a loan which you must pay back in sweat. It encourages ever more work and less time to enjoy that bauble. It’s unique to high-earners – no one working fast food says, “I have to work 107 hours to buy this thing.” – but high-earners do. And it’s stupid.
- Decide on Active vs. Passive. This is going to be a tough one. If you are like me, you like control. But, if you like your career, you should not lose focus on it. If you want to transition out of it sooner rather than later, do the extra work and do active investments. If you want to continue working, then go passive. More on these below.
- Go the Active Route. If you chose Active in #5 then read on. Start educating yourself on all the different types of investments. Do you want single families or multifamilies? Fix and flips or manufactured homes? Land development or commercial property? There are so many options, but you are a high-performer and you can learn about them. Once you do, get a real estate agent and plan that first purchase.
- Go the Passive Route. This takes the money and invests it in real estate without any active intervention from you, leaving you to do your work. It’s the easiest route for high-performers, but by no means the only one. You’ll need to educate yourself on the many options for passive investing, including stocks, funds, and syndications. Number 8, below, will give you much more information on this.
- Take my free Course on Getting Started for High-Performers. It’s much more in depth than this post and will give you everything you need to know to get started.
This is only an overview, but it will help you get started. The important thing is taking that first step of deciding to plan for your future. Good for you.
