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The Real Estate Flywheel Effect for Successful Physician Investors

Investing in real estate is like a flywheel. This is a perfect metaphor that I really just became aware of. But if the shoe fits…

What is a flywheel?

In technical terms, a flywheel is a mechanical device which uses the conservation of angular momentum to store rotational energy.

Again, in technical terms, this rotational energy is a form of kinetic energy proportional to the product of its moment of inertia and the square of its rotational speed.

I know…whhhattt????

The better way to think about a flywheel

This will be more familiar for readers with kids. But a flywheel is very similar to that playground apparatus that looks like a giant circle. Your kid sits on the circle and you start to turn it and turn it and turn it.

real estate flywheel
You remember these guys from your playground days, right?!

At first, turning that giant playground hunk of metal is pretty tough. You start out slow. Each push takes a good deal of effort.

But then slowly, the flywheel starts to gain momentum. The pushes become easier. And easier.

Suddenly, you barely need to push at all. The flywheel (and your kid) keeps spinning and spinning quickly of their own momentum!

(Hopefully all of this ends without your kid falling off or throwing up.)

But hopefully this illustrates pretty clearly the concept of the fly wheel…lots of consistent, slow effort up front that leads to sustained momentum down the line.

What does the flywheel have to do with real estate?

Real estate investing has become a really popular concept and strategy in the past few years for all comers, but especially with physicians. The reasons make sense. When you combine rampant burnout with desire for alternative streams of leveraged income, real estate is a natural progression.

I know this because I became a real estate investor as a full time physician at the beginning of this period. But I have noticed a big shift from then to now…

Fans of real estate investing have begun to pitch it as almost a type of “get rich quick scheme.” Especially as the popularity of short term rentals grew. Courses routinely advertised physicians who grew their cash flow by 6-7 figures through real estate investing in 1 year!

Even in promotions with less hyperbole, potential investors only saw the end product of a smoothly running real estate portfolio. Without seeing the important and thankless steps that were taken to build it.

Unrealistic expectations and unnecessary risk shortly followed…

But this is not the reality of real estate investing

Like anything, real estate investing is a long term sport. Those who rush in are destined to fail. I’ve shared this quote from Angela Duckworth many times before, “Enthusiasm is common, endurance is rare.” And it holds very true in real estate investing.

Becoming a sustainably successful real estate investor is like pushing your kid on the flywheel.

Lots of small effortful pushes in the beginning leading to less effort as momentum builds and then finally…whoosh…the flywheel takes off!

Too often, we just see the take out without the earlier pushes or we are modeling after others that have not built a sustainable system…

That’s why I really want to emphasize and share those steps of the real estate flywheel in this post!

The real estate flywheel

Selenid and I are not perfect real estate investors. We have made a ton of (well-published) mistakes. Every deal leads us to learn more and make improvement.

More than this, we are still somewhere in the beginning to middle of our journey on the real estate flywheel. We definitely have not hit that “whoosh” breakthrough.

But we have been doing it consistently enough and well enough to start to see the flywheel moving faster with each push (and our kids getting dizzier and dizzier).

And everyone’s real estate journey will be unique and different. And that’s ok. But all successful ones do have one thing in common…and that is the flywheel process.

I want to use our real estate flywheel as an example of how it works and then break down some general concepts for building your own!

Our real estate flywheel journey

I’m going to be succinct here as I’ve shared all the details and specifics of each step in other posts which will all be linked here if you are interested!

July-September 2020

I first learned about real estate investing and began to understand how powerful it could be in achieving financial freedom. I brought the idea to Selenid who, despite being skeptical, agreed to learn more.

We spent the next few months reading everything we could. We also took online courses and spoke with other investors.

It was during this time that we defined our simplifying concept of real estate investing. Basically we defined the criteria that we were going to use to buy properties and how we were going to run them.

This was a slow push on the flywheel for sure but set the foundation for future pushes.

7 Steps to Visualize the Big Picture in Real Estate Investing

October 2020

We had been looking at a ton of properties but had yet to find one that worked for our criteria.

Finally, along with our awesome investor real estate agents, we identified a duplex that fit it very well.

Using my signing bonus, savings, and the remnants of an old 457 account from residency, we bought the duplex for $174,500.

It cash flowed ~$1150 each month.

Not earth-shattering. But another slow methodical push on the real estate flywheel.

One Year Real Estate Review of Investment Property #1

April 2021

Another 6 months go by. During this time, we use our savings rate of 40-50% each month along with the cash flow from our first property to save up enough for another down payment.

We look for properties and eventually find another duplex that fits our criteria.

We buy it for $196,500 and it cash flows for ~$1580 each month.

Nothing crazy but we have now doubled our real estate cash flow and made another important, cohesive push on the flywheel.

One Year Real Estate Deal Analysis of Investment Property #2


Watch Jordan’s Masterclass Webinar on The 12 Steps to Financial Freedom for Physicians here!


June 2021

Sooner than expected, our real estate agents bring us an off market 3 unit property for sale.

It fits our criteria and we decide to buy it for $202,000. We are able to save the down payment from our incomes as well as using a cash-out refinance of our first property.

Unfortunately, we stray from some of our set strategies for this property and make some costly mistakes.

Because we are determined, we are able to overcome these mistakes and the property adds ~$2400 of cash flow every month.

Again, we have doubled our monthly cash flow and made a momentum inducing push on the flywheel.

One Year Real Estate Review of Investment Property #3

March 2022

It has now been nearly a year since the last property. During this time, we saved for another down payment heavily relying on income from our properties. We also optimized our management strategies for the other 3 properties.

They are now largely running on an automated passive system that we have built.

We find another duplex that meets our criteria and buy it for $228,000. It adds ~$1600 per month to our real estate cash flow.

By sticking to our system, we push the flywheel again, keeping its momentum building…

Insider Look: Deal Analysis of Investment Property #4

June 2022

Fast forward to when I am presently writing this post.

We have seen identified two other properties that met our criteria and had offers accepted.

Unfortunately, during closing, one of the properties fails to meet the contingencies that we placed in the contract and we kill it. We get our escrow back but lose $800 for inspection and appraisal fees.

Meanwhile, the other property heads smoothly towards closing.

A summary

Currently, Selenid and I own 4 (going on 5) rental properties which have a net cash on cash return of approximately 25% and a monthly cash flow of >$7,000.

That sounds pretty sexy.

But now go back and read through our timeline again. It’s not sexy. It took work and discipline and dedication. There were annoying things to deal with.

But it was all worth it. It’s just not sexy. The real estate flywheel is not sexy pretty much ever. Any investor I know can give a great one liner. But there are always a million hard pushes of the flywheel behind that one liner.

This is not to discourage you. It is to motivate you!

Slow and steady wins the race. I hear so many investors get frustrated when they realize their first property will only net $1,000 in cash flow. But that’s what it is supposed to do!

Then you build and push. Build and push. Build and push. Until you hit that breakthrough which is guaranteed to come if you use the flywheel that right way!

So, what is the right way to use the real estate flywheel?

I want to now share some general strategies for getting the flywheel to work so you can become a successful real estate investor.

1. Build your foundation first

Crawl. Walk. Run.

That is the order of steps in doing anything successfully.

Take the time to educate yourself and develop your own strategy for real estate investing. This strategy should be simple, reproducible, and meet your unique goals and needs.

Selenid and my strategy is laid out here.

You don’t need the same one. But you do need one.

2. Make the first push knowing it will be hard and only go a little way

Once you embrace the flywheel and set your expectations and strategy, just go for it. You will never be 100% ready. But once you reach the point of being maximally “book ready,” you need real life experience. Just like when you became a resident after maxing out your med student book knowledge.

Patiently wait for the right opportunity based on your criteria and strategy and, when you do, go for it.

And don’t be discouraged when this first push is hard and the flywheel only moves an inch…that’s what it is supposed to do!

3. Keep making consistent and coherent pushes on the real estate flywheel

The key here is that the pushes are consistent and coherent.

First, be consistent. Keep making those small pushes, one after the other. Each one in itself will seem tough at first. But they will keep getting easier as time goes on. Recognize and appreciate each bit of momentum that you build.

Next, be coherent. Too often I see investors changing their strategy on the fly. First, they want to invest in small multifamily long term rentals. Then they are going to be a syndicator. Now they are into short term rentals.

None of these is bad on their own. But the plan needs to stay coherent.

Each non coherent push of the flywheel that does not follow your foundational strategy is going to slow it down and halt your momentum.

Stick with your plan.

What is Best? Short or Long Term Rental Investing

4. Build for sustainability

As you keep going, the momentum will grow and grow. With each push, make sure you are building a system that is sustainable in the long run.

Predict and forecast your growth. And then plan to accommodate it because you know it will come if you keep making the right pushes.

So, don’t become caught off guard when that big “whoosh” breakthrough moment does come. Because it will come…

Embrace the flywheel

Your journey to become a doctor is not sexy. Or easy. It also was a flywheel. MCATs…small push. Step 1…small push. Med student rotation…small push. Overnight shifts as a resident…small push. And on and on…

And once you get to the end and tell someone at a cocktail party that you are a doctor, they just see the marvelous end product. But that is not reality.

Becoming a successful real estate investor as a physician is the same thing. So, don’t be blinded by the marvelous end result of others or discouraged by the difficult, small pushes in the beginning.

Harness the power of the real estate flywheel to your advantage and your breakthrough will be financial freedom! These posts can help:

What do you think? Have you ever thought of the flywheel concept before? Where else can it apply? How have you felt about your real estate journey or lack thereof? 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]

    4 thoughts on “The Real Estate Flywheel Effect for Successful Physician Investors”

    1. This is a great cautious, prudent, encouraging, and well written post. And – the flywheel – is pure genius. We started our journey in nearly the same time frame….more of a mix of syndications, but 2 SFR’s, one STR, and building a vacation home/STR. Not a roaring fire right now – but feel like there is a massive fire/coal base that has been built and in another 12-18 months will be performing beautifully. (Kind of like classic
      West texas stick burner smoker…takes a while to get heated up, but once it does, becomes more efficient. Little wood keeps the temp at 235 degrees)

      Reply
    2. Love to see the steady progress, and the flywheel metaphor is apt, Jordan. I’m still in those early, fear and inertia-filled pushes, but I know staying even keeled and persistent through that is what it takes to create a reliable and relatively low risk source of income that nicely complements (and perhaps eventually replaces) a W2.

      I’m always impressed with your cash flow numbers, so great work there. And I thought it was just the property taxes, but now $800 for inspection and appraisal of a duplex gives me another reason to be impressed by Buffalo!

      Who are these investors who are frustrated with $1K net cash flow on a first property? Assuming you mean monthly, that’s a heck of a number for a single family or small multi. Perhaps that referred to annualized cash flow?

      Anyway, I’m picking nits, but I genuinely enjoy you sharing your journey and always learn a lot from it. And I couldn’t agree more about the importance or just getting in the game once you’ve done a reasonable amount of prep and have a strategy in place. See one, do one, teach one.

      Reply
      • Hey Stephen thanks! And yes those are monthly numbers. My wife and I definitely out a lot of work into getting these properties up and running efficiently to cash flow so well and managing ourselves is a huge advantage. We are able to do this by creating systems that make managing relatively automated and smooth.

        Reply

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