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One Year Real Estate Review of Investment Property #5

At the time of writing this post (August 2023), Selenid and I have officially owned our 5th investment property for 1 year! So, we recently sat down and performed a one year investment property review. And we want to share it with you!

I think this is a really great exercise for us obviously. And we’ve done it for all 5 out of 8 properties that have reached the 1 year mark. But hopefully it is also helpful for all of you who are considering becoming real estate investors.

My goal with this one year real estate investment review is to give a completely transparent and open view of the financials. This way you can evaluate what investing in real estate will and more importantly won’t do.

It once again is a great illustration of why investing in real estate is a flywheel, not a rocket ship

Refresher of deal analysis for investment property #5

You can find an in-depth deal analysis for this property from right after we bought it here.

investment property review

And if you’d like to brush up on how to screen and analyze real estate properties, check out this post.

Anyway, as a quick review of this investment property, we estimated at the time that after renting out the 2 units, the cash on cash return would be a 16.8%!

This well surpassed our target CoC return of 10% so we were very excited!

One year real estate review of investment property #4

So let’s see how we did…


After 12 months,

  • Our total cash flow from the property was $13,321
  • Our yearly cash-on-cash return was 16.58%

So, we have performed really close to our expectations! However, as we will talk about next, there is definitely still meat on the bone…

We should actually be cash flowing better

We continue to learn as we invest which just makes us better investors! In this case, this issue was tenant-related.

Dealing with tenant rent payment troubles

About 6 months or so ago, the old tenants in the lower apartment of this property moved out (and into another property of ours with more space). Anyway, we showed the apartment and selected another tenant.

By all accounts, she was a fantastic potential tenant. She had a stable job and great reviews from her employer who we called. We spoke with her past two landlords who had no issues with her and stated she always paid on time. And, most importantly, she just seemed normal. So we offered her the unit and she took it.

And for the first 3 months, we didn’t hear from her at all. She paid rent on time and took great acre of the property. But then she contacted us because she lost her job due to unexpected cuts. She was finding (and eventually found) a new job but, because she didn’t have an emergency fund, got really behind on finances.

We faced a couple choices: we could evict her and we could work with her. We elected to work with her and installed her on a biweekly payment plan. However, she is still two months behind on rent.

So our cash flow suffered. But we feel like we made the right decision that aligns with out purpose and why in real estate investing.

However, once these back rents are caught up, our annual cash flow will rise to >$16,000 annually and our CoC will rise to >20%!


You may be looking at the cash flow number and be thinking, “Wow, is $13K really worth all of this hassle of owning a property and investing in real estate?”

The answer is still a resounding yes! I’ll show you why…

This doesn’t begin to tell the whole story

Remember, there are 5 ways that you make money in real estate:

  1. Cash flow
  2. Appreciation
  3. Tax benefits
  4. Principal pay down
  5. Inflation hedge

So, the cash flow number only tells 1/5 of the story!


Our property actually has not experienced any market appreciation after we bought it. And honestly we really don’t care. Because we didn’t buy it for the short term or for market appreciation. It is a whim and arbitrary. We still take advantage of it when it helps us though. But we don’t rely on it.

But, we also have created a ton of forced appreciation on the property. We do love and use forced appreciation because it is very much in our control. Via forced appreciation, the value of our property has risen by ~$180,000 on top of the new value that the refinance was based on.

Now, banks will not use a rent-based method to calculate 1-4 unit property refinance values. But a seller will pay based on the property’s value as a business i.e. the value after forced appreciation. So this has obviously helped us a ton.

Tax benefits

The tax benefits of real estate investing are tremendous.

Via depreciation, the IRS actually considers real estate properties to be losing money every year. Even when they actually are putting money in your pockets via cash flow.

These passive losses from the property then count against any passive gains. So they won’t offset your W2 or 1099 income, but they will offset things like income from rent collected. This makes real estate very tax efficient.

However, by having you or a spouse obtain Real Estate Professional Status or REPS, these passive losses can count against your active W2 or 1099 income!

It’s not easy to get REPS. You or your spouse have to spend at least 750 hours per year materially participating in your real estate business or spend 1 hour more than your other employment. Whichever is the greater amount.

More about depreciation here and REPS here.

But obtaining REPS is where HUGE tax savings come in. Let me show you…

Selenid again met criteria for REPS for 2022. We also performed a cost segregation analysis of the 4 new investment properties that we purchased in 2022. This will allow us to take advantage of accelerated depreciation from the properties. That way we take more paper losses from the properties this year rather than spreading it out over the usual 29.5 years.

Counting all properties, we cost segregated $290,398. From just this property, we cost segregated ~$72,600. At a marginal tax rate of 39.6%, this results in roughly $29,000 of tax savings!

Principal pay down

The beautiful thing about cash flowing real estate investing is that the tenants’ rent pays for your mortgage.

So, every month, the tenants are increasing your equity in the property and increasing your net worth.

Now, in one year of ownership, most of the mortgage payment goes towards the interest on a 30 year mortgage. So this has maybe increased our net worth by $2000 total.

So, not huge gains yet but still a major advantage and wealth builder long term.

Inflation hedge

The last way to make money via real estate is an an inflation hedge.

How does this work? Let’s go with an example from this property…

On last check, inflation has recently been quoted around 3%. Finally down from it’s highs around 8% a year ago.

Again, this property made $13,321 in cash flow in one year. But this money is inflation indexed. The reason is because as inflation rises, I raise my rents and am paid at the inflated rate. In fact, we were able to raise our rents when we unexpectedly turned over the two units on this property.

In contrast, your W2 income generally stays the same regardless of inflation.

So, my real estate income will cover this 3% current inflation or whatever it becomes in the future. My other income and investments largely will not.

That is a big advantage.

Bottom line of this one year investment property review

So, in all, our first investment property performed very well!

Our net worth increased by:

  • Cash flow: $13,321
  • (Forced) Appreciation: $180,000
  • Tax benefits: $29,000
  • Equity pay down: $2,000
  • Inflation hedge: $400 ($13,321 * 3%)

This all totals a net worth increase of $224,721! Even completely disregarding forced appreciation, this is a big chunk!

Obviously, investing in real estate has been a huge factor in increasing my net worth from -$450K to +$400 in 14 months as detailed here.

This is why investing in real estate is worth it. And I hope that this real estate investment review in particular demonstrates this. There are always bumps in the road. But the path is still worthwhile with patience and perseverance!

Too many potential investors get bogged down in the fact that the cash flow from one property will not make them wealthy. And this is true. $15,000 is and should not be life changing for a high income physician.


That tells only a part of the story. There are 4 other ways to make money in real estate, even from just one property. And this analysis does not even take into consideration that its cash flow and appreciation gains helped pay from another investment property that makes us money and increased our net worth!

If you are interested in learning more about getting started as a real estate investor, I consider these 4 posts to be required reading:

You can also check out my free webinar on the 12 steps to financial freedom for physicians to get jump started!

What do you think? How would you grade our real estate investment after one year? Anything else that you would like to see in our one year investment property review? Let me know in the comments below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

    3 thoughts on “One Year Real Estate Review of Investment Property #5”

    1. It’s good but no details on price, down payment, fiancing term?
      Not sure about the forces appreciation.
      I am sure however about how you benefit from infaltion, and it’s far better than what you state. Basically inflation destroys you debt on a tax free basis.
      You may want to read the work of Dan Amerman on this topic. IMO it’s the secret to real estate wealth: whether consciously or not.
      Good job.


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