Healthcare to houses: Doctors building wealth. #408

The idea is that you buy enough future days off that eventually you don't have to go back to work , or you can start working part-time at the clinic , or you can start dialing back on your procedure load or whatever it may be , yet to the point where the numbers make the decision for you .

All you have to do is show that your income is increased and you can buy more benefits . At that time , no medical questions asked .

That's a group of investors that have pooled their money together to take on a larger project . And you have general partners that are the ones doing the day-to-day operation . And then you have limited partners , which are people that are contributing their capital to be a part of the project .

So I mean , we all know that to have success in business , or especially in real estate , it takes three things it's time , it's experience and money .

And this is a situation through syndication , where people that may have money , have capital but don't have time or don't have experience can partner money with people that do have time and experience to take on bigger projects . So we're a syndication and we specifically focus on self-storage .

I always assumed that it was just a large company built with a whole bunch of , or being run by , a whole bunch of MBAs or whatever some type of real estate company . But I never quite looked at it like for the most part these may be syndications brought up by different investors and so forth .

It wasn't until , like , I got into , I'd say like four or five years into practicing and I started realizing that doctors were getting into , you know , creating their own like surgical short stay suites and so forth , and they will get multiple investors to , you know , buy into these things .

And then eventually syndication came down the line as we started doing more and more of this podcasting .

So so syndication basically sounds like if you ain't got enough to buy a large property , you get a whole bunch of different investors and then you kind of figure out the rest later on , but you just have multiple people who are purchasing and have multiple likes . What's the best way I can say it .

They have different layers of skin basically involved in owning and you said it the best but basically multiple people taking care of a property .

You can have an individual project like one hotel and we're going to go raise $10 million from a group of investors and some people are putting in 50 and some people are putting in 250 or whatever and we're partnered with someone that takes down that project and manages it the day to day the value add , increasing the value of the property by increasing the net

operating income , and at some point traditionally there's an exit right . You sell the asset for everybody to get a payday . We're a self storage syndication and the way that we do it that's a little bit different without . We don't need to go down the rabbit hole of our strategy too much .

But instead of buying self storage or building self storage , we specifically focus on buying old big box retail buildings like Kmart's grocery stores and warehouses . You know big box retail has basically destroyed that space has gone away because of Amazon and Walmart Like it's basically just been wiped away .

But you know , at one point there was 1200 Kmart's across the country . We've all seen these buildings . It's like dinosaurs now and stuff . Exactly . So we buy those old big box retail buildings that nobody else wants . My partners are the GC .

We do the construction and we convert them from old , nasty buildings that nobody wants to class A climate controlled self storage facility . So we raise money from a groups of investors .

We get the buildings for so cheap that traditionally like if you and I wanted to go build a self storage facility , it's going to cost us about 120 bucks a square foot plus the cost of the land .

With all of our last conversions , with the land , the parking lot , the conversion and once it's turned into a class A climate controlled self storage facility , we're usually sitting around 63 bucks and 50 cents a square .

Which means when we are hitting stabilization and we're usually buying a property for a couple million , we raise a couple million to do the construction and then as a stabilized self-storage facility it's usually worth 13 to 17 million . We're usually sitting around 30 to 35% loan to value , which means we can refinance .

Give everybody a great payday when you get paid out by way of a refinance . That's not a capital gain because you don't sell anything , so there's no taxes and then we can keep the asset and allow it to continue cashflow and moving forward . But it's a scale .

I got the loans to back it up . I spent four years in med school , five years in residency , another year in fellowship and then I work when I take care of people , and I understand that lingo , everything that you just said . For the most part , I understand syndications , but I think the majority of people who hear what you say goes over their heads .

So let's bring it down a little bit . Right back to first grade , second grade levels . Why should people be considering why doctors , specifically , who make more money per hour doing their job right ? They spent so many years like talk to us about why we should consider real estate . Why should we consider syndications ?

Because , I'll be honest with you , there's a lot of noise out there . Right ? People are saying you get into Bitcoin right now . Bitcoin is back , right , I don't know how long it's going to last , but Bitcoin is back . You got regular stocks right . Then you got all these other type of pump and dump things that are going on . Just on another level .

I'm not equating any of that stuff or even syndications to that , but there's a lot of noise . Talk us through how to kind of weigh through all of that to really understand real estate on a level of why doctors should really consider it when they make so much money doing what they do best . Talk us through that .

And the last thing I want to do , especially to the white coat community , is my job is not to sell our deals or what we do to anybody , but what I think is really important for your community and one of the reasons I think what you're doing here is valuable is that these should all be tools that everybody has in their tool belt to figure out what they

want their future to look like . And if you're a white coat physician , you're making a really good income , but at the end of the day , you're still trading time for money . Right , you're exact , you said it best . You're making a really , really high income .

You're a surgeon , or if you're an interventionalist or cardiologist or electrophysiologist or orthopedics or whatever it may be , you're getting paid a really high amount for the time that you put into it . At the end of the day , you're still trading your time for money .

I think that if you ever think there's going to be a point in time with your life or with your goals and what you have coming down the line , there's ever going to be a time when you don't want to start trading time for money , the day that that arrives is not the day that you need to start thinking ahead and planning for that .

So there's a lot of different ways that you can build maybe not an off ramp , but just create some more options for yourself and put yourself in a situation where you have freedom of choice , like we're all looking for . This is something that I think resonates with a lot of people in the White Code community is that everybody's talking about financial freedom .

The reality is , I think that goal by itself is a little bit shallow if it doesn't come along with location and time independence , because what most physicians have is they have at first they have debt right , but eventually they start having money to spend , but a lot of times what they don't have is time and freedom of choice or freedom of location about how

they want to spend that . I think , if the overall goal is not just financial but it's time and location independence , those three things together can create an independence of purpose , which I think is what people are really looking for . Now , the way that you do that if that's something that you want , you have an unbelievable amount of options .

You can do crypto , which is a little bit speculative . You can do real estate . You can do active real estate . I built a portfolio of 14 Airbnb properties at the beach , which eventually replaced my income with what I was doing with medical sales .

So every time you are doing something to manage your property instead of paying somebody that whose time is worth a lot less than yours , kind of leaving some value out there . What the mistake that I made is that I built up 14 properties that did not allow me location independence and I couldn't walk away . They're really busy during the summer .

It's at the beach . It's busy on the weekends .

I got a four year old and almost one year old . If I did everything right , later on in life they may not ever remember that I sold pacemakers , that I worked in the lab or anything like that , because we kind of successfully created an off ramp . What I really did was I built a second job for myself where I was still trading time for money , right ?

And the way that that worked for me was to partner with someone else that had expertise . First of all , I went out and I found the oldest , most successful business and real estate people that I could find and I said what are those guys doing ?

The people that look like they're sitting around not doing anything and they can go travel when they want , fishing when they want , whatever . And inevitably it was three things . It was hard money , lending and note , lending .

I didn't have any money to lend anybody and it was people that owned mobile home parks , which I had no business in , that no interest , or it was cell storage . So that's the direction that I went , but it doesn't really matter . It doesn't matter what you choose .

I think the question is , how much time are you gonna have to dedicate to it and is there an all-for-amper away for you to back out of that future on down the line ?

But it's better off instead of you taking time to go actively do those things . You're gonna have to get really good at it and take a long time to earn enough to replace the income that you currently have .

So I think the better option is to just keep the main thing , the main thing , and Anytime you take money , capital and you invest it into any kind of passive investment strategy and there's a lot of them out there . The way I look at it , every time you invest into a passive investment strategy , you're buying future days off .

The idea is that you buy enough future days off that eventually you don't have to go back to work , or you can start working part-time at the clinic , or you can start doing , you know , dialing back on your , your procedure load or whatever it may be . So get to the point where the numbers make the decision for you no matter where you are in your career .

In episode 176 , jamie Fleissner of Sefa life insurance explains why the best time to buy disability insurance is During your residency most people , most physicians , acquire their disability policies during residency , and there's several reasons .

You're not getting younger or healthier over time , so you're at the ideal time . The earlier you get it and the younger you are , the less expensive it's going to be so , whether you're a resident or you're in attending , it's never too late to protect your income .

Because if I let's say , for example , you know I am a surgeon or I'm a ER doc and I own like Multiple quads and I'm getting monthly , I'm getting monthly checks , right , I understand that . That's in my bank account . I'm getting monthly checks . I use that to pay off the mortgage , whatever is left , and all the catbacks and all that stuff .

I'm taking all that stuff right , that's elementary , I get that

. How does it work with a syndication ? Like , am I getting ? I'm not getting anything on a monthly basis , right ?

You can go invest in apartment complex and you're just gonna get monthly checks and a monthly newsletter and that's it , and some of them may last five years . Some of them may last seven years . Some of them is gonna be an 18% annualized rate of return , some of it's gonna be 22 .

Some of them are gonna be development projects that take longer because you got to build something for the first couple years and then fill it out . But yeah , you can get quarterly distributions . You can get monthly distributions . You're gonna get a K1 . You're gonna get accelerated depreciation .

A lot of physicians like to invest in properties that have larger Depreciation because you're gonna be able to get a K1 and offset some of your other income that you have coming in as well . So a lot of it depends on what your goals are and what you're trying to accomplish , but the way that it looks is .

You're gonna look out across an RV park , a mobile home park , a self-storage facility and an apartment complex . You're gonna find an operator that you like and that you trust . You understand their business model and you look at it and eventually you say , yeah , this looks good .

You sign , you review all the legal documents and operating agreement , subscription booklet , private placement memorandum . You can invest either with cash or you can invest with a retirement account . And then when you say like , yeah , this all looks good , this is all .

It's SEC regulated and then you invest in the project and then from then on , typically you're getting Monthly newsletters . You have an investor portal that you can log in . You can track the progress of the property . You can see what's happening with the development .

You can see where it is and lease up or lease increases if it's an apartment complex or renovation or whatever . You're following along . You can be as involved as you want to and then typically you're gonna get either monthly or quarterly Distributions .

The lifecycle that I see for most people is most people want to do exactly what you said you want to buy a bunch of small quadplexes . You want to get those monthly checks . You're gonna manage it . You're gonna get the taxes , the maintenance bills , all that and you're looking at your return on investment or you're looking at your cash on cash return .

We put this much cash out . How long is it gonna take me back to get that much cash right ?

What typically happens in the lifecycle is , eventually people realize that they still have to manage that or have to manage the manager of that , and a lot of times , instead of having , in terms of scale , to hit the level that it needs to affect your life the ability that you have to spend time with your kids , the amount of time you have to spend with your

spouse , the amount of time that you don't have to spend in clinic or in the OR to Scale to a point that it starts to affect your life in a meaningful way .

You have to grow so big that it makes more sense maybe to just to get into one apartment building , because after you hit about 60 units you can have an onsite manager and the load becomes so much easier than having a bunch of smaller properties .

Eventually , that person that moves into that larger property , that finally gets to a level that it starts affecting their life in a meaningful way In terms of the cash flow , usually gets to the point where they say you know they were looking at the return on investment , then they were looking at the cash on cash return , then they're looking at the return on

equity . That person eventually usually gets to the point says what's my return on time the amount of time that I have to spend thinking about this real estate project and managing it or managing the manager what's the return I can get on time and a lot of times if you go out and you're an active investor , you can probably beat the returns .

You're gonna get through a syndication , you can go out and you can flip houses .

main thing ? Most people , especially in the white coat community , eventually get to the point where they say you know what I would rather make ? Instead of making 30 or 35 percent return on investment per year , I would rather make 20 .

And think about this for one hour every quarter when I get my quarterly distribution check , or one every month when I get the monthly distribution check .

How do you vet them the right way ? How do you know what a good deal is versus what is a bad deal ?

It was a small community that is now I think they're probably up to 2,500 members . They had about 1,200 little over a year ago when I connected with them . It's about 2,500 members .

That are specifically people , mostly highly successful people that are looking for opportunities and different operators to invest with , and so the beauty of that is you have a bunch of operators in there sharing their deals and what they do and what their strategy is , and you have 2,500 people picking it apart and talking about it and having community about that .

They have a website . They also have a social media site , yep , and then they also click on community up there . There's a whole social platform . They have podcasts , which are great for education , and they also walk through different investors . Also , a conference that I think is groundbreaking for me is Joe Fairless has the best ever real estate podcast .

It's the longest running daily real estate podcast ever out there . He's got a community . There's a conference in Salt Lake City this year called the best ever conference . There's a lot of different resources out there .

If you just look at , what you're talking about are alternative investment strategies , and the alternative investment space is where usually something in real estate , but it can be ATMs , rv parks , it could be hotels converted condos .

You're renting someone a box of air but it's very predictable as to what the demand is gonna be . But you figure out what you want .

I'll let you speak , but talk to us about it , because that's really fascinating the mindset , how that works , almost like Freakonomics .

It's like , okay , well , is that population segment dies off ? What's happening to storage ? Is this an asset class that's going away ? And the unfortunate reality is that especially young people in our country can no longer buy houses the way they once did . They're renting .

When you buy a house , you have an attic , you got a basement , you got a garage , but when you rent , you're renting based upon the square footage that you're getting right . And so what ? We're seeing there's a lot of growth and people getting pushed out of these urban markets into these smaller secondary and tertiary markets across , especially the Southeast area .

North Carolina Eastern North Carolina is having explosive growth . A lot of people became location independent because of COVID and people are getting pushed out into these markets that traditionally are underserved for storage , and you're seeing apartment complexes and housing blow up all over the place .

Well , when those people are renting instead of buying , instead of renting a two bedroom condo for , say , 1800 bucks a month . They're gonna rent a one bedroom condo for 1300 bucks a month and then get a storage unit for 150 or $200 a month because they're using it as an extension of the garage and extension of the closet , so they still have

. The way that the younger generation is using storage is wildly different than before Previously . The baby boomers are going in there once or twice a year . Millennials are in the property usually two to three times a month , so what matters to them is , first of all , proximity , high residential density in a one , three , five and seven mile radius .

But it has to be several things it has to be safe , secure , well lit , easy access and it has to be climate controlled , because they're putting clothes in there and mountain bikes and kayaks and they need to be able to get in there at six am on a Saturday morning and grab their snow bibs and their board and get out of town and get to the mountains .

They're in and out of there differently , because they can't afford to own the space that you and I probably grew up in , and so , because of that demographic change , like the , millennials now make up the largest population segment that we have it's 34% of the population , but they use up 38% of the storage .

So I think just keeping your finger on the pulse of what's happening with the country , bad fiscal policy is creating life changes for younger people and because of that , they're living differently . And if you look at storage , that's an extension of the closet of the garage and it's not discretionary spending .

For them , this is a necessary spending pattern that they have .

Is that something that like Nomad Capital that you guys ? Is that like properties that you guys have like within your I don't know what you guys call it ? Can you roll , or something like that ?

Now we started a fund and so this year we have a fund going on where investors , we pull money together in a fund and that fund is buying five self-storage facilities across the Southeast . So we've already closed on two of them and are doing the conversions and we got three more in the pipeline .

So one investment gives someone ownership across five self-storage facilities spread across the Southeast , different operators on a local level , different market drivers . So that's the idea . Syndication offers you to take on projects bigger than you could do on your own and it allows you sometimes , within one investment , to create diversification in your portfolio .

But I would be honest with you if that may not be enough return for people , if it doesn't hit their goals , and you should go , be active If keeping the main thing , the main thing is more important to you and not sacrificing your time , I think that's the place where passive investment strategy can make sense .

They're like listen , doc , I wanna start building that off-ramp , right , Maybe not now , but maybe in 15 , 20 years , right , it sounds like passive investing , like maybe getting into a syndication might be down their alley because they're not quite ready to give up their practice yet .

They're building their nest egg , they're building themselves , naming a community with their clinical practice and then eventually , maybe in 15 years , they buy themselves that off-ramp and they're gone . But for those right now who are thinking about look like I need something right now , I need a higher rate of investment .

You're saying more of a hybrid approach might be , Might be the answer .

I would say , like , talk to your spouse and have some clearly defined goals as to what you're trying to accomplish with your life and and what you want to what you want to do , and don't Sacrifice being happy now and enjoying your family and your traveling your time to put that off . You know , don't sacrifice too much right up front .

But I would say , yeah , you can . You can have a hybrid approach and you can invest basically with the fund model in mind , like , look , first of all , you probably want to pay off your medical school debt first . Right .

I think , for most people my age I'm 41 for most people that's been taken away from us , physicians are one of the people that you still can save your way to retirement . So if you live within your means and you you want to save your way there , you can do that .

If , like , if you have bigger goals for your life than that , you're probably going to need to play offense instead of just defense , and that means investing in some capacity . Number one , invest in yourself and pay off your medical school debt and and specializer , do whatever you want to do .

I would say this if you think a passive investment strategy is part of when you want to end up , in terms of just one of the tools in your tool belt , you can look at all kind of different offerings , all kind of different return Platforms , but also remember most of them don't start paying off in a meaningful way right away .

It's gonna take you three , four , five years before the first one , hopefully . Do the best you can to double your money in five years or less . This is right at this is no as a passive investment strategy Okay .

Is it the month , excuse me , is it the the yearly Distributions , or is it with the thought process of eventually this property is gonna get sold and then there's gonna be a larger payout at the end ? Talk us through that park setting . That . That could be a little bit confusing for people also .

You're gonna increase the rents and the value of the property because the net operating income goes up , basically , just meaning the rent goes up . Right , when the rent goes up , the value of the whole thing is gonna go up by 30 35% . You're gonna hold it for three , four , five years .

Everybody's gonna get a little bit of the monthly rent and then you sell it and when you sell it , everybody gets their money back plus another big chunk on top . My only problem with that is that at the end of the day , you're still trading time for money , like if you really , if you zoom out , you're a glorified house flipper .

Right , you're buying something , you're fixing it up and you're selling it for everybody to get a payday . That's great , but you got to keep working to keep getting paid .

I am interested in investment strategies where it you , it you know , if your house flipping , your wholesaling , anything like that You're a real estate agent , the day you stop working is the day you stop getting paid .

Same thing if you're a physician , the day you stop working is the day you stop getting paid , because one way or another You're trading time for money . The reason I like our strategy but there's a lot of other strategies like it and I'm not saying ours is that unique Because we're building these properties out for so cheap .

What we typically do is that four or five years in around the five-year mark there's going to be a refinance . You get all of your original cash back , plus another chunk on top . Plus , you've been making quarterly cash from the cash flow coming out of the property . So do the best we can to double our investors money in five years or less .

But after that you move on to something else , go find another project , but you still own your same percentage of equity in that project and it we're gonna hold it in the long term . We're sitting around 160 million and assets under management . Right now .

So hopefully , between all those things , you double your money in five years or less . But then you still own 5% of that project . You're exactly right . We reset the debt bases because we refinance but say we're gonna own it for another 20 years . You're continuing to get paid out with every cash distribution on that .

And let's say you take that money , you go , move on to another one and then another one . That's the idea is that you're basically you can build up your own pension by buying ownership and projects that we continue to hold long term . To me that's the benefit over .

If we're buying something , we're fixing it up and in selling it , that's great , but you're gonna get paid once , and so are the operators right . The idea is , the reason we're called nomad capital is because a nomad is somebody that goes where they want , when they want and does what they want .

You can't do that by trading time for money and getting paid once .

You have to own a portfolio of properties that continues to cash flow moving forward , and so for us , we want everybody to get those good short-term returns , but the important thing is that we want that long-term cash flow and we're building a tribe of real estate nomads and everybody can stay in .

And again , I don't think there's anything like what we're doing is special in the self-storage space , but we're not the only ones doing it . I think the important thing is this is an example of what I mean of like deciding what's important to you . You know , do you ? Do you have a long-term vision or a mid-term vision , or a five-year vision ?

Let that determine who's the best operator for you , what the best strategy is , but the best thing is figure out what those goals are for you .

Are you trying to replace your income because you don't like clinic and you don't like going into the lab or surgery or whatever you're doing Like you can clearly define that and Hopefully work backwards to something where you have a little bit more independence of purpose about what you want the rest of your life to look like .

It's the first one , the traditional sense , where we've put in a certain amount of money and then , after a certain amount of years of them Improving the property , they'll sell it and they will kind of get our large distribution from that . But this is something that I didn't know was out there , so something to consider .

So make sure you guys contact Clint , as well as a team at nomad capital if you guys want to learn more about this . Once again , clint , thank you very much for your time , man , I appreciate it .