Get Started Here!

One Year Real Estate Review of Investment Property #1

At the time of writing this post (November 2021), Selenid and I have officially owned our first investment property for 1 year! So, we recently sat down and performed a one year real estate review of the property. And we want to share it with you!

I think this is a really great exercise for us obviously. But also for all of you who are considering becoming real estate investors.

My goal with this one year real estate 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.

one year real estate review

I think you’ll be surprised.

Refresher of deal analysis for investment property #1

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

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, we estimated at the time that after renting out the two units and a work shed, the cash on cash return would be roughly 17.5%.

Not too bad.

One year real estate review of investment property #1

So let’s see how we did…


After 12 months,

  • Our total cash flow from the property was $13,932.14
  • Our yearly cash-on-cash return was 21.04%

So, we beat our expectations!

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

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

This doesn’t begin to tell the whole story

Remember, there are 4 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 experienced a market appreciation of around $40,000 6 months after we bought it.

We took this chance to do a cash out refinance on the property where we received back about $15,000. We then used this money as part of a down payment for investment property #3.

But, as many of you know, we do not rely on market appreciation. It is a whim and arbitrary. We took advantage of it when it helped us though.

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 ~$136,000 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.

More about depreciation here.

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.

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

Selenid will obtain REPS for 2021. We also performed a cost segregation analysis of our 3 properties. 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 27.5 years.

Counting all properties, we cost segregated $200,000. From just our first property, we cost segregated ~$67,000. At a marginal tax rate of 39.6%, this results in roughly $25,000 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 5.4%. This is obviously much higher than the typical 3% that is aimed for. Honestly, I don’t work too much about this. But a big reason I don’t worry is because of real estate as my inflation hedge.

Again, this property made $13,932.14 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 contract, your W2 income generally stays the same regardless of inflation.

So, my real estate income will cover this 5.4% inflation or whatever it becomes. My other income and investments largely will not.

That is a big advantage.

Bottom line of this one year real estate review

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

Our net worth increased by:

  • Cash flow: $13,932.14
  • Appreciation: $150,000
  • Tax benefits: $25,000
  • Equity pay down: $2,000
  • Inflation hedge: $752 ($13,932.14 * 5.4%)

This all totals a net worth increase of $191,684.48!

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.

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. $13,000 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 real estate review? Let me know in the comments below!

Love the blog? We have a bunch of ways for you to customize how you follow us!

Join the Prudent Plastic Surgeon Network

And accelerate your path to financial freedom with my free FIRE calculator!

    We won't send you spam. Unsubscribe at any time.

    Join The Prudent Plastic Surgeon Facebook group to interact with like-minded professional seeking financial well-being

    The Prudent Plastic Surgeon

    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].

    6 thoughts on “One Year Real Estate Review of Investment Property #1”

    1. It seems like you are double counting the inflation hedge as a way of making money in real estate. Isn’t inflation already reflected in the appreciation and rent you collect from the property? If you raised rents by 10% (an added $1393) that would not be an addition to the $753 you calculate as 5.4% of the current rent. There doesn’t seem to be any reason to mention the $753 as part of the performance of the investment.

    2. My wife is a part time Realtor here in San Antonio. For few years back we looked into buying a house to rent or built one to rent, in different submarkets and all the profits were not significant, less than 5 % (this using a manager taking 10% of gross of rent), so I gave up.
      2 years ago a began investing in Syndications (2) for multifamily. Hassle free, pure passive income. The cash on cash every year is about 5-6% and then at the end of 5 years or less I expect get 2X my initial investment. These are class B and C apartments.
      What do you think about just investing in syndications on a single apartment or a fund of apartments?, specially when you don’t have a spouse willing to become a real estate investor status.


    Leave a Comment