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Okay, several medical office buildings, and a few hospitals. They all have tenants that will pay me rent. I love passive income.
Mrs. Max OOP and I sold our house down south a few years back. It was a great house, and we miss it very much. But, we will now be renters for the foreseeable future.
This took our real estate equity that we can actually “touch and live in” to $0.00. With such a low real estate allocation and the stock market stuck on high, I eventually got interested in looking for a way to buy more real estate without actually having to live in it.
In entered Physicians Realty Trust (DOC) to the party. A REIT that is just what the doctor ordered.
So What Is A REIT?
In short, Real Estate Investment Trusts (REITs) are companies that own and often operate income-producing real estate. Think rental property. They are required to pay a minimum of 90% of their taxable income to shareholders as dividends. Owning one of these bad boys is basically like being a landlord without all the midnight phone calls to fix things. DOC specifically targets/owns medical office buildings that are then rented out to tenants that provide healthcare to patients. DOC owns over 250 properties in 30 different states, and over 90% of its portfolio is medical office buildings.
Hey, this sounds like an investment even Max OOP can understand!
Since a lot of this blog is about healthcare, I figured why not specifically own a healthcare REIT? Nothing wrong with investing in and making a little money off the very system I am determined to fix. After all, I have dedicated my working years to this industry and this still seems like a solid long term investment to consider with the baby boomers aging out. Thanks Dad!
Mr. and Mrs. Max OOP don’t have time to manage traditional rental houses at this point since we are both still working. Since we are quickly approaching financial independence, and our expenses are low, we have access to W2 cash earned from our day jobs. We have been using this cash to build an “empire” in healthcare real estate with minimal effort. Since I already front-loaded my 403(b) for 2019, I am no longer getting $12 paychecks. Now we have EVEN MORE free cash to dedicate to this.
Max OOP Buys A REIT
Last year at this time when I got done front-loading, healthcare REITS looked to be trading at a discount compared to the rest of the market. Much of the beat down in their price was related to current/future rising interest rates and the unknown future of the American healthcare system. These are both still risk factors to consider today along with other risks Max OOP doesn’t even know about yet. This is why we run experiments.
“What?!?!? Is Max OOP really a stock picker now? I thought that was a loser’s game?”
It is. But let me run my experiment. Maybe someone smarter than me is reading this and will convince me otherwise and get me back on track.
Buying large sections of the entire US economy through total stock market index fund investing will always be our core investment strategy. But with the overall market trading at a premium and our physical real-estate equity at $0.00, I thought this would be a fun experiment with a small sliver of our portfolio. By the way – yes I know we technically own a small amount of real estate through my total stock market index.
To kick this experiment off strong, I purchased 300 shares of DOC costing $4,398 back on 2/28/2018. I paid $4.95 in commission to Fidelity. Not bad – my realtor would have probably hit me with a 6% commission charge for about $260.
I added additional smaller positions in March, April, May, and July of 2018. Since I am still planning on holding DOC for several years, I still like DOC at this price. So yesterday, I bought another 65 shares of DOC for $18.62 per share for a cost of $1,215. This takes our total empire to 925 shares valued at about $17,200. Since DOC typically pays about $0.92 in dividends per share every year, we will expect to receive about $920 in cash dividends from this investment over the next 12 months. As I said, I love passive income.
Just a side note. It would be wildly irresponsible for someone to make a similar investment without doing their own research just because some random person on the internet is doing it.
Max Out of Pocket = $4.95 Fidelity commission X 7 Transactions = $34.65
Do you like REITS?