WCI #200: Vetting Private Real Estate Deals

This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011.

Here's your host, Dr. Jim Dali. This is White Coat Investor podcast 200 vetting private real estate deals. Still not sure what to do with your student loans or overwhelmed with how to tackle that giant debt? In an ever changing political climate, the experts@studentloanadvice.com are here to help guide you through the best options to manage your loans. Our experienced staff have consulted on over $250 million in student loan debt and the average student loan advice.com client has saved over $190,000. You will receive a customized student loan plan using the principles of the White Coat Investor. Get answers to all of your student loan questions. Get gain clarity about your financial future and start down the right path toward financial freedom. Book a consult today@studentloanadvice.com you can do this and the White Coat Investor can help. All right. I hope you're enjoying our new Milestones to Millionaire podcast. Those are dropping on Mondays. They're short podcasts featuring you and your accomplishments and we're using those to inspire your fellow White Coat investors to do the same. Whether it's paying off debt, acquiring wealth, or whatever other financial milestone that you've hit, be sure to tune into those and share your experiences as you go through your financial and investing career. We got a nice review from somebody on it. They said they love the new MTM segment. Love the inspiration that keeps my wife and I going as we work to pay off our loans in less than two years out of residency. Awesome. Appreciate that. Five star review. Okay, I got a couple of emails within 48 hours, three emails. I think people pointing out something that might be a problem with with public service loan forgiveness and the low percentages of people getting it. They basically think there's a systematic error because they are getting emails saying you do not qualify for public service loan forgiveness. This is people who don't expect to qualify for it. They're just sending in their annual certification form to the Department of Education and they're getting this email back saying you don't qualify for public service loan forgiveness. So they think maybe the reason why the percentages of applicants that are actually getting public service loan forgiveness only being 2 or 3 or 4% is because they're using the wrong denominator. They're using all the people that are doing their annual Certification forms as people who are actually applying for Public Service Loan forgiveness. I don't know if that's true or not, but these White Coat investors have been told that on the phone that that's how they're counting them. So that ought to give those of you going for Public Service Loan forgiveness maybe a little less panic when you see those numbers that only a very low percentage of people are achieving it. Obviously, if you haven't made your 120 monthly payments, you're not going to get Public Service loan forgiveness. So keep that in mind. I'll monitor that situation as it goes. But it seems that might be an issue with the Department of Education. No surprise for those of us who have been dealing with them and the student loan servicing companies. We have a really great podcast today. We have Peter Kim, one of the members of the White Coat Investor Network, on today. We're gonna be talking about all kinds of stuff about passive income, mostly real estate, and answering a lot of your questions about it. So let's get him on the line. All right. I'm excited to have Peter Kim, M.D. back on the White Coat Investor podcast. Peter is the founder of Passive Income md. I hope this is not the first time you've heard of him. If it is, I have completely failed in my role to promote, but he does some awesome work there. Passive Income MD is one of our partner blogs here at the White Coat Investor, but it is just one of many pursuits that he does. Peter, welcome back to the podcast.

Hey, thanks for having me, Jim. I'm excited to see that you've got this really fancy studio behind you. If you guys aren't watching this on video, you need to check out Jim's studio. He's upgraded. This is amazing.

Yeah, I've got my White Coat Investor T shirt on here, too. Those of you who are coming to the conference this week, you've got one of these lifetime member White Coat investor T shirts as well. So lots of. Lots of fun and exciting stuff going on right now. We're recording this the week before the conference, of course, but as this drops, we're actually in the middle of the White Coat Investor conference. So tune into that, obviously, if you're in the conference. But, Peter, you've had a lot of interesting stuff going on in your life since we had you on the podcast last. You moved recently. Tell us about your move and what motivated it.

Well, we haven't moved quite yet. I'm actually in the process of a move. I mean, it's not even moving that far. We're moving probably about 50 miles from where we're at right now. But typically I live in west la, but we're moving down to Orange county and that's probably news to a lot of people. I haven't even told a lot of people and now I'm telling you. How big is your audience now?

Oh, it's not that big. It's only about 35,000.

Okay. Nobody's listening to this. Yeah, no, we're making the move. It's not happening for a couple months, but it's for family. I think that we're doing our own mini version of Geo Arbitrage. You've talked about it. Leif, the physician on fire talks about it all the time. This is the best I can do right now without leaving my entire family behind. So we're moving to an area where the housing costs a little bit cheaper. And for the school system, for our kids, it's got an amazing public school system. So we can go through that and not have to worry about the private school system up here. So that's what we're doing.

Awesome. And you've had some changes in your clinical work as well. Can you talk about those?

Yeah, I went from full time to part time, where I was giving up a ton of shifts, nights and weekends, to actually officially going per diem again. I love clinical medicine. I love what I do. I'm an OB anesthesiologist. It's fun and I enjoy it. But I think after doing this for 10, 11 years, the nights and weekends and the time away from the family, especially with what's going on now and how important I feel it is to be around family, not having flexibility over my schedule was a huge thing. And so luckily, and fortunately I have these other projects that I have going on, which gives me that flexibility. And so I decided to go per diem. Yeah, I mean, I work one or two days a week. That's about it.

Yeah. So the Passive Income MD has become incredibly successful over the last year. What are some of the highlights that you can tell us about?

Well, Jim, that's really thanks to you, to Leif, to my other partners. Thanks for all the other people who have really given us so much support and the readers out there who really resonated with what we're talking about. It's grown. I mean, it's not. It's so funny because none of this was really intentional. When I first started the blog, if you remember, I was totally anonymous and I didn't even want my name out there. And it was More just to share my journey and my story and how things were going. And eventually people just kept asking for different things. And I have a hard time saying no to people. Just a people pleaser, I guess. Some people said, well, I need a Facebook group to talk about this. Sure. We launched a Facebook group. Then people said, oh, I want to take a course on learning, or can you teach us more about due diligence on real estate investments? I said, sure. So we started passing Real Estate Academy. And then this past year, especially when Covid hit and everything was kind of going crazy, there was a lot of unrest in the group and people were talking about what to do. And so I simply asked our group, what can we do? What can I do? I guess to serve you and what do you need right now? And people said they needed stories of physicians who were doing some really cool things outside of clinical medicine, other ways to create income. And so that's what we did. We created the Leveraging Growth Summit. Last year it was again, exceeded my expectations, was over 10,000 people that were part of that. And then we did a virtual summit for real estate as well. Financial freedom through real estate. And so last year was the year of virtual summits and conferences. And again, it was attended by over 20,000 people in total. And it was so fun. And so there's a lot of things that are happening. We're about to launch another summit coming up in the next couple of weeks.

Let's hear about that summit. What days does it take place? At least the live version?

Yeah, the live version. So by the time people listen to this, we're actually launching an opening Registration for Leverage and growth summit on the 8th of March. So that's probably short. After people listen to this, it's going to be going on from the 22nd through 28th. In total, it's seven days, over 35 physician speakers. It's going to be all interview format. You're going to be one of the featured speakers. And what we're going to be doing is really talking to people about their journey of being a physician, being a physician, entrepreneur, all those things, how they're able to balance their whole life to pursue these other things, create income outside of clinical medicine, how it affects their views of being a physician and how they're balancing all that and they're just sharing all those origin stories. And I think people get a lot out of it.

Awesome. So they can sign up between now and when it starts. It's actually free, right. For 48 hours after every interview drops. So it's totally free if you watch it quickly, but if you want access to it afterward and indefinitely, you can get that as cheap as 97 bucks. Right? You can get that for $97 if you buy it before the conference, 147 during the conference, and 247 if you buy it after the conference. So clearly you are incentivized to buy it before the conference even starts. But it should be a great summit, so you can learn all about that@ passiveincomemd.com and I'm sure the links will be quite prominent to the summit both before and during the summit. So congratulations on putting all that together.

Yeah, it'll be fun. The goal is to get to as many people as possible, so that's why it is a free on the surface.

So.

So you can come in, enjoy as many videos as you want. For the people that want to take it at their own pace, they want to take advantage of some of the other upgrades with the VIP where they get access to some exclusive Q and A sessions and things like that. That option is there for them as well if they want. But either way, we just hope that you get a lot out of it and really just enjoy it.

Cool. Sounds like it's going to be a great event. All right, so Cindy has gone to our Facebook groups and solicited questions for us to answer on this podcast, and you guys did not disappoint. We have got a ton of complex questions to go over today, and we're really going to dive into the weeds, I think, on a lot of passive income kind of stuff, a lot of real estate kind of stuff, and I hope you find it enjoyable out there in listener land if this all goes way over your head. We have lots of resources available not only on our respective podcasts, but our respective blogs that will dumb it down for you and give you the basics of real estate estate and other passive investments. But today we're going to get into some weeds, there's no doubt about it. So are you ready for this, Peter?

Yeah, I mean, you might have to help me out. Some of this stuff is way over my head, so.

All right, well, let's start with one that I know is not over your head. This one comes from Nathan Wilds, who asked, how would you recommend a young physician dial up his real estate portfolio over time, starting from scratch?

Yeah, that's a good question. I mean, I think that as a young physician, honestly, I think your focus should be on creating as much income from your doctor job as possible. That's what I think initially, because that is your greatest source of income, your capital, the wealth creation initially is through your doctor income. So I recommend that people really focus on that initially, find good sources of that, and then as quickly as possible, funnel that into other sources of income, like real estate, that sort of thing. And so if somebody were going to start, I'd actually recommend that they start kind of like I did. I started by dipping my toes in just because, again, in the beginning, I didn't know too much. I didn't know too much. I felt like I don't know the risk. I guess that $5,000 or $10,000 as a young attending meant a lot more to me then than it does now. But so I dipped my feet in just to see if this is something that I would enjoy. That seemed to kind of jive with my, like, my mindset and kind of how it works. So I just. I started by doing a small crowdfunding deal, and I did it, putting 5,000 at risk. And that was enough, where I felt like, okay, this is an opportunity for me to kind of have some skin in the game, to actually learn to take action. But at the same time, if things don't go perfectly, I'm not worried about my family being able to eat and that sort of thing. And so I started with a small crowdfunding deal. It was a debt deal where we lent out money. And then, I mean, Jim, you have some of those opportunities on your website, but you lend out money, they just pay you back with interest, and you're able to see kind of how the real estate world works in terms of debt lending, and you really educate yourself. So I invested passively in a couple deals. There's something called syndications, which you've talked about. We've talked about it quite a bit, where essentially people pull their money together to purchase larger properties. So you don't have to bring in the whole thing yourself, buy a whole apartment building yourself. You can just jump on with somebody else who's operating that deal. I invested first in a first deal for $25,000 for one of those. And again, I got to watch how these things work, how the numbers work, how they operate things, and how real estate can actually create cash flow, can create wealth. All these things I learned by investing passively first. And then I got comfortable enough to ultimately own my own rental properties. Now, I'm not saying that everybody has to go that path, but that worked for me because I was working really hard. I was working a lot of hours, nights, weekends, but it allowed me to put my capital in a way to work passively. First, learn until the point where I felt really comfortable buying my own properties.

Yeah, I love three things you say about that. The first one is that your clinical income drives it, right? No matter what you invest in, whether it's real estate, whether it's stocks, bonds, whatever, you gotta carve it out of your income. You gotta come up with some capital. And the way you do that is by not spending everything you earn. So that's the first point. I really like that you said. The second one is that you started slowly and dipped your toe in and learned as you went. And I did the same thing, right? $2,000 investments, $5,000 investments, $10,000 investments. You can do that. Now, a lot of them do require you to be an accredited investor, but most docs already qualify for that by virtue of their physician income. And so that typically is not an issue. So I really like those points that you mentioned there. And then the third point, I think is figure out where you want to be with your investments. For example, you learned that, hey, I love this stuff. This is really interesting to me. I want to buy my directly and be in control of them, get all the tax benefits out of that that I can, and really get into the real estate world. Whereas I didn't necessarily end up in the same place. I might have started in the same place you did, but I kind of ended up in a different place. And where I ended up after going through these individual syndications, through crowdfunding platforms for two or five or ten thousand or twenty thousand dollars, is I kind of ended up with real estate funds, private real estate funds, because I just didn't want to go out and buy my own rental properties. You know, we've had a rental property in the past. Frankly, I didn't enjoy it. I wasn't that good at it, you know, and I much prefer a passive investment. But I see the big real estate funds as being better investments, more easy to diversify, better management than you get from, you know, what you can get on a crowdfunded real estate platform. So start at the same place. I think I ended up in a different place than you did. But really, you've seen that slide. I have. I think you've used it, in fact, in some of your presentations. Yeah, that's the spectrum of real estate investing. And you've got directly owning the, managing the property down the street on one side, and you've got the Vanguard REIT index fund on the other side, and you've got to figure out where your place is on that spectrum, how involved you want to be and on the side where you're owning the properties directly, that's where you got to have the most expertise and you put in the most time. But it's also where you get the most tax benefits and you have the most control. On the other side you get benefits of liquidity and diversification, but the tax benefits and the control are not nearly as good. So I think as part of your process, part of your journey as a real estate investor is figuring out where you're going to show up on that spectrum. Do you agree with that?

Oh no, these are all great points. Yeah, I reference that slide all the time. I do put wci fire your financial advisor just so you know, so I don't act and pass that off as my own. But that's a great slide because again, it is a spectrum and I'm constantly changing over time. I mean even the last year my perspective on this has all changed. But really I take a hybrid model. I mean I think that there are benefits, like you said, to direct ownership, the tax benefits, but up to a certain point, because after a certain point it takes up so much of your time and your bandwidth and that sort of thing. So there is like an optimal point for me that I found that hey, I want to own this many properties because it is running your own business. At the end of the day, owning your own properties is like running your own business owners maximum benefit there. But of course takes the most amount of time, energy, hassle, knowledge factor, that sort of thing. So I do it enough for me to capture some of those really amazing tax benefits like real estate professional status and then everything after that in terms of my capital, my time, my energy when it comes to real estate is just really focused and devoted on more of these passive investments like you mentioned, like funds and syndications.

And are you now qualifying for real estate professional status?

Yeah, my clinical income has cut down quite a bit. Enough that I definitely qualify for those who may have heard of it before, I mean there are some qualifications that allow you to designate with the really again, qualify with the IRS as a real estate professional. And really you have to demonstrate that you work more in real estate than you do in any other day job. That's one of the main qualifications. And so having gone per diem allowed me to do that. And when I did some of the calculations, taking into account some of the tax benefits and all that, actually by working less clinically at the end of the day, I was finding more money in my pocket. And so for me it's a calculation.

One of those terrible incentives we built into the tax code, unfortunately.

I know it is crazy. And so it just was so obvious for me what to do. And so that's something that definitely you need to consult with your CPA about to figure all these things out and do it right. And you want to do it the right way because apparently that portion of the tax code is highly audited. You just have to make sure you are doing it correctly legitimately. There are a lot of great resources out there for that. But just definitely find a great CPA if that's where you want to be.

Yeah, the basics it are 750 plus hours in real estate and not more than that in anything else. That works out to be 15 or 16 hours a week or so. So it's not something you do once a month. It has to be an ongoing thing you're doing. And you basically can't be practicing full time medicine at the same time. Although a lot of docs find a workaround where their spouse becomes the real estate professional. Speaking of that, let's talk a little bit about a question. This one comes from the physician on fire who's asking what forms of passive income can be offset with depreciation from real estate investments if one has a high income and no real estate professional status? Well, obviously real estate, yeah, real estate.

Well, that's a good question because again, the bonus benefits of real estate professional status, I think to really go a little bit further on that, is that the depreciation or the losses on paper from that real estate allows you to offset your clinical income. And that's like super powerful. What he's saying is that what if you're not a real estate professional? What if you're not going through all that? What can it actually offset? A lot of times those losses just tend to just kind of pile up over time and you just kind of continue to carry them forward.

Yeah, that's what mine are doing for sure.

And so some people don't have the ability to unlock those. So really it's got to be any sort of passive gains that you're getting. So either from real estate, the income that you get from rentals, or whether you sell that property is another way to unlock a lot of those things. Or passive income is also from. The IRS considers any income from any business that you are invested in but you don't materially participate in. Like for example, if you own a business but you're not actually. You're an investor in it and you're not involved in the daily operations. That's also considered passive income. So that stuff can be offset as well with some of those losses. But again, ultimately, if you want to unlock those things, oftentimes you have to dispose of that asset and sell it. If you're not real estate professional.

Yeah, Oil and gas partnerships, small businesses, those sorts of things, it's not your capital gains on your stock or mutual fund portfolio that can't be offset by these real estate losses. And it can't be earned income unless you qualify for real estate professional status. So it's not going to be your clinical income. Sorry, Leif. It's not going to be your blog income. You can't use it for that. That's active. So it has to be unearned income. Basically that comes off schedule E. As.

Long as you're not actively involved in it, then that counts.

As long as you're not actively involved in it. Yeah, because there are tax benefits to claiming active involvement. Right. Because that gets you 199A deductions. So you want to be, you want to be careful exactly how you claim your involvement in those other small businesses that you own. All right, let's go on another question. This one is. Shoot. This is a common question and I don't have an answer and I know Peter doesn't have an answer either, but let's talk about it anyway.

Oh, why, why are you asking?

It's because it's so common, right? We get asked this all the time. Is this a good time to invest in real estate? And if so, which kind? Residential, commercial, single family rentals, multifamily, etc. How do you address that question when you get it, Peter?

I mean, I tell people people are making money at all times, all parts of the cycle. I mean, you hear stories whether it's in real estate or whether it's in the stock. You probably. Again, you get the same question. Is this a good time to invest in stocks? Like trying to time the market when it comes to real estate or index funds or these kinds of things, it's kind of futile. Either way, you're not going to be able to time things properly. So the key is to be in and invested and invest for the long term, for the most part. And same thing I say with real estate, I think there are opportunities at all points in the cycle in real estate as well. Just like anything else, when things are going poorly in terms of the market, that's when the most opportunities are available to you. And that's when actually the true, like they say, transfer of wealth happens in real estate, especially during those tough times. I think what he's referring to right now is that this seems to be a really almost like bubble territory is what people are talking about, or a.

High point, at least with the cost of housing, when people are looking at buying houses.

Yeah, with the cost of housing when you're out there especially the market is crazy right now. Again, people didn't expect this at all. But they're looking for investment properties. They're looking at all that. It seems like the price according to rent. It's hard to cash flow. These things called cap rates are super compressed. And so people are like, man, it's really hard to make income right now. The thing is, there are opportunities out there. There are people still doing quite well. I mean, I'm looking at. I'm still invested with a good amount of people. I've invested actually in the past year. I mean, I've invested probably more than I have in the past two years combined. I mean, this is in this whole bubble territory because I think there are tons of opportunities still out there, especially the people that know what they're doing. I'd say. I think that deals are hard to come by, but the people that are finding deals and who know how to operate these things are like a lot of these real estate funds that you're invested in. I'm invested in. I still think for the long term, the opportunities are there, Although my expectations are a little tempered. I'm not going to expect the same type of returns maybe that I got in 2000, 2014, 2015, but my money's still going to work. It's still doing well. It's still doing better than sitting there in cash. It's still growing my wealth, especially right.

Now, since cash pays nothing.

That's the other alternative. What is the other alternative exactly? Sitting in a savings account right now, that's not where you want to be. With all the we talked about stimulus and all this stuff, all this cash flowing out there. I don't know where inflation's going to go, but I have to think that having your money in assets that are growing is the smartest place to be right now, in my opinion. And for me still, when it comes to real estate, again, you can find those deals. I invest mostly for cash flow, so I still see those deals. So I'm still investing right now. I just have to be smarter, I'd say with who I'm investing In back in 2014, 15, 16, didn't matter who you're investing with, I'd say as much. The market was just screaming and doing well. So people are doing quite well. I think right now you have to do a little bit more due diligence, make sure, make sure you're educated, make sure you're going with people that have established track records. And again, I think I'll talk about this at the conference and I hope people who are listening to this listen to my talk at the conference. I'm going to be talking about the three biggest mistakes I made in real estate investing. And I think a lot of those things apply to times. I mean, really the things I've learned from them really apply to how I'm investing today. One of the biggest things, without spoiling too much, but one of the biggest things is I've learned you gotta know who you're investing with. That's matters more than what the deal you're investing in. So you gotta really learn how to do that. And I think especially in this time, it's more important than ever.

Yeah. You know, the best time to invest is 10 years ago. The second best time's today. Everyone always worries that I'm gonna put money in and then the market's gonna go down. Well, if you put money in every month for the rest of your life, about a third of the time that's gonna happen to you and two thirds of the time it isn't. And so play the odds. Just invest when you have the money and over the long run that's going to work out very well for you. Otherwise, the only way to answer your question, if now is a good time to invest, is to have a functioning crystal ball and nobody has it. And that applies whether you're investing in stocks, bonds, real estate, cryptocurrency, whatever. Without a functioning crystal ball, you need a long term systematic investing plan. That's really the only way that you can really decide when a good time is.

Yeah. To give you a little perspective, I have friends that have been sitting out of the real estate investing market for the last five years. They got tips from their friends back in 2015, 2016, that that was the height of the bubble. Right. I mean, I don't remember that. People thought, this is crazy, this is unbelievable. This run, same, same thing with stocks, I'm sure 2015, 2016, this is it, it's going down. So people are just holding outside the market. And so in the last five years, I have friends who are still waiting on the sidelines and now, you know, they can't sleep at night because they. They can't figure out when to get in. Now at this point.

Yeah. Turns out market timing's hard. You got to write twice. You got to know when to get out and when to get in.

Yeah. So I'm still investing, and I invest in. When it comes to real estate, I think I forgot a part of the question was like, what exactly in real estate am I investing in? I'm. I still am preferential to multifamily apartments. I mean, something I understand. Well, it's something I've spent time learning how to properly, you know, do the due diligence for. Due diligence for, and how to vet those things. Just because I feel like that is a sector that's not going away anytime soon. Yeah.

People are going to need a place to live for sure. Even if they lose their job, they still need a place to live.

Exactly. And office and resident. You know, office and retail. Like, I feel like there's just so much shift going on there, and I think you have to be a little bit more sophisticated, understanding where the winds of change are going and how that works for me. I understand apartment buildings. I've lived in one. You've probably lived in one. You understand the mechanics and numbers. And I don't think that's going anywhere. So I feel comfortable in that realm.

All right, so let's talk a little bit. This is kind of a side question about that one, about starting from scratch. And it really, I think, speaks to a lot of docs, particularly docs maybe in the lower half of physician incomes that are like, yeah, well, of course I'd like to get into that fund you're in, Dr. Dolly, with $100,000 minimum, but I don't have that kind of cash sitting around. I can't swing that. What should a doc that doesn't have $50,000 or $100,000 to put into a real estate deal do? Are they better off sticking with a Vanguard real estate investment trust index fund until such a time that they can afford those sorts of investments? Or is it worthwhile dipping a toe into some of these crowdfunded investments that have 5 or 10 or $20,000 minimums? What do you say to the doc in that situation, Peter? Should they be patient and wait, or should they go with these investments that maybe aren't as good but have much lower minimums?

That's a tough question to answer. I feel like either way, I'm going to get some angry emails again. The way I happen to do it was I dipped my toe in with some of these smaller investments through crowdfunded platforms. I understand like now having gotten to know some of those crowdfunding platforms, I think you can be lulled into a false sense of security with some of those where you're like, okay, somebody must have seen this, somebody must have taken a look at this. It's on the platform. It looks fancy picture. There's some fancy pictures there and some numbers and it kind of gets you in there. I think you still have to learn absolutely how to do your own proper due diligence. But in my opinion, you don't learn to do that well until you have a little bit of skin in the game. And so I would rather learn, you know, personally with a smaller amount at play than putting my first, a hundred thousand dollars, you know, investment in my first investment. So I feel comfortable like recommending when people are like, hey, I'm going to go into a crowdfunded real estate investment. I'm going to do. I found this on the website. I'm allowed to go into a syndication for $10,000 because it's all I right now at this point can afford. But it gets me in the game for real estate. And if they say they've done their due diligence, they've learned how to do that, I don't think it's necessarily a bad thing. I mean again, it's an education. They're somewhat kind of investing in their own education. Obviously there's potential to do well financially, but again, the risk on the other side is not huge and severe. So I have no problems with people going into a smaller investment for that amount. There are some great platforms out there that do allow for these type of investments. But again, you got to do your own due diligence when it comes to the REITs. I'm sure that can be fine too. I just personally never, I don't know why I just never got into the REITs. I like the private stuff with the single operator and those type of investments. But I mean, there's nothing wrong with the ones that you're talking about. I think again, the numbers have shown that you can, correct me if I'm wrong, that it correlates a lot more with the stock market.

Yeah, certainly the publicly traded ones do.

Yeah, the publicly traded ones. So when I invest in these private investments, the goal of it for me is to get that diversification, the non correlated asset. I'm trying to collect as many of those as possible. And so real estate and real estate Private syndications tend to fit into that category. And so personally, I think your first investment should be on the smaller amount to kind of learn, dip your feet in. And so I'm okay with that personally versus waiting.

It's interesting because you're weighing two things, right? You're trying to get non correlation with the rest of your portfolio, but you're also trying to get diversification. And by definition, when you're putting all of your real estate allocation into one or two or three actual individual deals, individual properties, in a lot of ways you're not diversified that way. So it's a lot of balancing act. And I agree that it's pretty tricky. And I don't envy those who are faced with this decision of how to get started, how to ramp it up and go from there because it's not easy. And I think as we've seen with these real estate platforms, you know, at one point there were over 100 of them and they're not all going to make it long term. They're not all equal and some are better than others. And sometimes it takes years to determine which ones are better than others. You know, they all claim to do at least a little bit of due diligence themselves, but I think over time you've seen that some do a better job of that than others. And so it gets a little bit tricky. I think choosing between those investments, the nice thing when you're only putting in a few thousand dollars is at least you're not putting much at risk as you sort this field out. All right, our next question actually comes from the physician philosopher who says, I want your thoughts on taking money out of traditional retirement vehicles to fund real estate investments. It seems to be recommended more and more in the real estate space. What are your thoughts on that?

I mean, I'm more interested in hearing your opinion on this.

I've got a strong opinion on this. I don't think anybody's going to be surprised by it.

I bet you you do. I, you know what, I have some friends who've done this and I've watched them do it and I've seen them do quite well. Again, that's only one two people story, but I think it all depends on where you're at and your goals and that sort of thing. I mean, again, it's, you know, I'm all for diversification and I think, you know, somebody kind of lent me a word that I use now quite a bit like having intellectual humility. And so I realized that I don't know everything and I can't control everything. And I think with real estate, sometimes I have a tendency to just dive in and know that I know exactly the outcome that will happen with it. I know it's not going to necessarily be the case. So I've learned, and maybe got a little bit more conservative with time, is that I like to have as many hedges as possible. And so for me, I don't invest a lot in the stock markets, publicly traded markets, but what I do is I do it with my retirement accounts and I pretty much leave it there and I don't touch it. And that's kind of like my hedge against things kind of going poorly on the real estate side. For whatever reason, it's not a huge portion of my portfolio. I'm probably flipped in terms of the percentages versus, like, most people in terms of the way they invest in real estate versus stocks. Again, it's a very, very small percentage for me, but I just leave them in there personally. Now, if someone's at the place where they can actually make a really clear calculation and determine that, hey, if I pulled this money out of my retirement accounts, it creates enough cash flow for me, net of fees, this kind of thing, and it totally changes their life from day one. I can understand why somebody would do that. I mean, it makes sense for me. I had a friend who did that. He's 50 years old, and he had been working for quite a while, had built up quite a nice retirement account, been working for one of these large institutional health companies, health corporations, and he was sitting there grinding ways like, okay, I have another five, 10 years before I hit my pension and before I can retire. And then he looked at his numbers and he's like, wait a minute. If I pull this money out of my retirement account now, and I bought these apartment buildings that provide this cash flow, I can actually pretty much quit today and live the life I want to live. And it was crazy that I saw him do it, and he did it and he moved, and he now travels the world with his wife and his kids and lives the life that he wants. And that has that whole ideal life that he actually wanted to go for. I mean, I'm not saying that happened with everybody, but he actually made a very smart, calculated decision in doing so, and he had a plan for it. And I think that was huge. Not just the idea that, hey, I'm just going to pull all this out and maybe someday do this kind of thing. And so I could see it going both ways. I haven't done it personally myself. But I tell people to caution people that if you're going to do this, make sure you have a good plan for where that goes. But again, I'm not going to tell people not to do it because I think there is potential for great gain on the other side. But I know you probably think differently.

I don't necessarily think differently. I actually think the way you're doing it is how most people do it. Most people who are really into real estate, they do it like you're doing. They use their taxable account to invest in real estate. They don't liquidate all the retirement accounts. They just save above and beyond what fits in the retirement accounts and use that for their real estate investing. I've got a neighbor, he's a very successful real estate investor, very successful small businessman, well paid surgeon. And that's what he does. You know, his retirement accounts are all full of stock and bond mutual funds and all his real estate investments are outside retirement accounts. I think that's a very common way to do it, and I think that's the ideal way to do it, is that you are saving enough, earning enough and saving enough that you can both max out your retirement accounts. However, you invest that money and have something above and beyond it to invest again in whatever you want. And then you can decide when you have that situation where the best place to put the investments is tax wise. Because the answer to that most of the time is that equity real estate investments ought to be in a taxable account and debt real estate investments ought to be in a tax protected account. They're terribly tax efficient or inefficient. When you're talking about a fund like a DLP lending fund, you know, we mentioned that on the blog and the podcast recently. This is a fund that's traditionally had returns in the 10, 11, 12% range. Great returns, right? High returns. And they're paid out to you every year as ordinary income. It's terribly tax inefficient. That is the worst possible situation for tax efficiency. The entire return comes to you every year as ordinary income tax. And it's a high return that is the ideal asset to have inside a retirement account. So if you pull money out of your retirement accounts to invest it in real estate, you can no longer have that retirement account space to put an investment like that into. And so I think that's a real mistake to lose that opportunity that you may want down the road. Whether you invest in real estate or whether you invest in stocks, whatever you invest in, you have now permanently decreased the size of, of that tax protected account. Because there are all these awesome benefits of a tax protected account. You know, you don't have the tax drag as it grows. You know, you can just name beneficiaries. So it makes estate planning easier and it can be stretched for 10 years after it's inherited in every state. You get massive asset protection for it if it's inside a retirement account, you know, so retirement accounts are good and there are lots of ways you can use it to invest in real estate. Sometimes if you want to invest in private real estate, it has to be a self directed account, whether that's a self directed individual 401k or self directed IRA or whatever. And so you may have to roll over your 401 into an IRA in order to do that sort of a thing, but it's not necessarily a reason to pay all those taxes during your peak earnings years plus a 10% penalty. You know, you're all of a sudden now you're starting with 50% of the money you had before, whereas if you would have just invested it inside the retirement account, you wouldn't have lost that and you would have an opportunity down the road to get that money out at a much lower marginal rate. So I just worry when I see people saying liquidate your retirement accounts and buy index universal life insurance with it or buy real estate with it. I just worry a lot of times these people are selling you something and they just know that this is where your money is. Your money's in your home equity, your money's in your retirement accounts. And of course that's where they want you to go to it so you can buy whatever they're selling. So I think you need to be really cautious with it. Is it possible to come out ahead, pay all those taxes and penalties and have the investment be so good that you still come out ahead? Yeah, it's possible. But I think you better run those numbers and you better be real sure that it's going to work out right for you in that perspective. I own lots of real estate. It's almost all in a taxable account. You know, I'm not anti real estate, but I also max out my retirement accounts and, and try to grow as much as I can to keep that tax protected to taxable ratio as high as I possibly can make it. Because these days, like you Peter, my ratio is going the wrong direction all the time. You know, my taxable account is becoming larger and larger every year because I'm putting more money into it than I am into My tax protected accounts.

I mean, I will tell you that I had recently a conversation with my cpa. We talked about bonus depreciation for those who don't know. That is something that's like in place right now. That is something that is decreasing over time and that really allows you to front load a lot of your deductions. And that's like a special benefit for those people, especially that real estate professional that can take advantage of that. He did tell me that during this period right now, while you have all this massive depreciation that you can front load into your investments, that it may be smarter for you to actually take that money instead of putting in a tax deferred account. He did tell me it might be better to put it into real estate, capture all those tax benefits, especially with the real estate professional status, and that you have a short window to do this and it might make a lot of sense. So I think that as long as you have a plan for it, I'm not against it at all. And I think that it makes sense for some people. You just have to really run the numbers with your cpa, with yourself, be intentional. I've seen people borrow from their retirement account, so you don't necessarily pull it out altogether, but borrow from their retirement accounts, put it towards some real estate, put that money back because they have the capital and that sort of thing. So again, I've seen people do this smartly. So I'm not totally against it. I just want people to know. And like you mentioned, as long as you have a plan for it, I think people can be successful doing it either way.

Yeah, I mean, it's like when you got real estate professional status, you got bonus depreciation. Like one of the funds I bought a year ago, I put $100,000 into the fund. My depreciation the first year was $35,000. Right. I think I got $2,000 in income from it and I got $35,000 in depreciation. Right. That if you can use that to offset other income or offset the cost of pulling a bunch of stuff out of your retirement account, you know, maybe that works out. But that's not the average doc investing in real estate. You know, they're not going to have those benefits. So you got to really understand how it works when you start doing something that most of the time is not a good idea, which is paying a 10% penalty on retirement account withdrawals. So got to have a plan. I agree with that. All right, let's move on to something else. People Want us to talk about vetting, vetting these deals. How do you vet syndication deals? How do you do good due diligence without signing up for another course? How do you see through the conflicts of interest to some financial bloggers like you and I who are pumping not so nice deals from real deals? Let's talk about all that. Let's talk about vetting, let's talk about conflicts of interest, let's talk about due diligence. You got some thoughts in that category?

How long is this podcast, Jim?

I know, exactly, exactly. It's just a huge topic, right? I mean you've got a course that is basically set up to teach people how to do due diligence, how to vet syndication deals. So I'm not sure we can distill your hours long course into three minutes on a podcast, but why don't you throw them a pearl or two?

Yeah, I mean I think that just to give you the basic outline of the course, just so that I can help people with the vetting, it's like you have to vet, just remember, you got to vet the sponsor, you got to vet the deal and then you've got to vet of course the market around it as well. And those are the three major things you have to understand before you jump into any particular deal. But I said it in pretty specific order because I think it's the sponsor. If there's anything I can't get stress enough to people, the sponsor or the operator, whoever's running that deal is the most important aspect of this whole opportunity. Because anybody can put out nice numbers. A lot of times people just get, honestly, they get fixated on that internal rate of return irr. They see that number, they see the cash on cash they think they're going to get and they just get fixated on that. And sometimes people choose the deal based on that number. And I think that is probably the one big fallacy, the one big issue that I've had to learn over time to get over. Because you start spending that money in your head already when you see that number, right, you see that 20% per year IRR. And you're like, okay, that's the one I'm going for. I'm going to get this much cash flow.

It must be better than the one that's promising 16%, right?

Exactly. So that's how you choose. I'd rather take 20 than 16%. But what I've learned over time is especially when the market does, it's in a period like it is now where there's Some rough patches through, we've seen it through Covid and all the different operators. And who's been able to handle these situations well with these vacancies, with all these rent eviction moratoriums, and who's been able to deal with all this very well? The more experienced operators and sponsors are the ones that are actually flying through this and doing quite well. So when I look for those people to invest in, I'm really looking for the people, if I can, who have been through multiple cycles, they've been through the ups and downs because this is not the first time people have had high markets, low markets, this kind of thing. It happens every 7, 10, 12 years or whatever it is. And so there are operators, sponsors who have been through three of these cycles and you've seen them change their philosophy in terms of investment or whatever their business plans to adapt to these type of things so they're prepared for it. Like one of the things that if people who are there during 2007, 2008, one of the biggest lessons that people learned is that you're financing and everyone knows this, your financing can come back to bite you. And so a lot of the operators now and sponsors, if you look at their deals, they're putting on longer term financing so that they can ride through a lot of these ups and downs and they're not expecting necessarily to get in and out in two, three years, depending on how the market goes. So I would say look at your sponsor, get that track record and that is the first thing to look for. And if you cannot, if they're not being transparent with it, they're not being willing to give and talk about it, talk about some of their mistakes and failures. I'm okay if there's some blemishes on there. Like if I see a few mistakes in there, like I actually asked them, I say, look, what did you learn from that? And how are you going to make sure that that doesn't happen again in the future? And that's something that really I put a lot of weight on. If somebody says, okay, this is what we learned and this is what we're doing better now. But that is the number one thing I can stress to people. And that alone, I think could save you from making some pretty mistakes in real estate.

Yeah, I think that is the very best advice you can get, particularly for private real estate is it's you're investing in the person, right? That is the biggest risk is that that person dies. I mean, that's the biggest risk. Or they leave the Business or whatever, you know, in a lot of ways, that's what you do is evaluate the person. And even if this, you know, a good person can save a bad deal, but a bad person is, can screw up a good deal. And so you really want to get the right person in there. The difficulty comes in, in that people with a lot of experience that have done this through multiple market cycles, they don't have any trouble raising money. And so they often put minimum investments on their funds or on their syndications of 100,000, 250,000, a million dollars more. And it gets out of what you can actually afford to invest with them. And so you're left weighing having a less diversified portfolio and putting a bunch of money with somebody experienced against having a more diversified portfolio and spreading that money around people with less experience. And I think that's, that's a real dilemma and something that a lot of us struggle with in this space.

Can I tell you about my strategy, though, with all that? I think is.

Yeah, go ahead.

I think ultimately my goal, and I kind of borrowed this from some other people that I've watched who have done this for quite a while, is that there's a limited number of sponsors out there. There's new ones being formed all the time. But I think my ultimate goal is to find my 10. These are my 10 sponsors or operators that I'm going to basically ride live or die with and the people that I trust and that I've done deals with them that I can continue to double down with them and find that 10. I figured 10 sponsors or operators will give me enough opportunities in terms of the number of deals they do, enough diversification in terms of across sponsor geographic, all that type of thing. But if I can find those top 10, that's exactly where I'll be investing most of my money in the future. The problem, it takes you time and money to figure out who those top 10 are. So that's why I do spread it across different operators. Right now, as I'm learning, I'm watching how they, you know, obviously manage and operate, how they report, what kind of relationship we have and whoever get comfortable with. But that's really what I'm trying to get it down to. And I think that's going to be a personal decision for everybody.

Yeah, let's talk a little bit about conflicts of interest, because you and I both have conflicts of interest when it comes to operators. And what I've discovered over the years is that people sometimes have unrealistic expectations of advertisers Right. You don't go after the New York Times because they advertised a knife and when the knife was sent to you, it was dull. Right. You don't go after the New York Times. And so advertisers are advertisers. They're people willing to give us money to put ads up on our website. So your expectations maybe shouldn't be that high that there's been some serious vetting going on of everybody who buys an ad on a given website. For example, I had a pharmaceutical company come to me the other day or come to us the other day. I shouldn't say me, because I'm really not handling this. Cindy does a lot of this, but they come to me and they wanted to advertise their new migraine drug. And I look at it and I'm like, you know, when people come in to me with migraines, I give them Benadryl and some Compazine and some Toradol. You know, that's probably what I give 90% of the migraineurs I see in the ER. Chances are I'm never going to prescribe this fancy new migraine drug, but it's FDA approved. And I said, you know what, we can sell them an ad if they want to buy an ad. Is that the cheapest migraine drug out there? Almost surely it isn't. Is it the best migraine drug out there? Almost surely it isn't. But is it right for somebody? Probably. And are we going to take their ad money? We probably are. But you shouldn't assume that. That is white coat investors saying this is the best migraine drug on the planet and the first one you should reach for and the only one you should ever use. So I think we need to lower people's expectations in some ways. Now, I do have recommended things on my site, things like financial advisors, people that we vetted. They have to fill out an application and I give you the application that they filled out to look at. So you can look at the vetting that we did, our insurance agents. Right? These are people that hundreds of people, hundreds of white coat investors have gone through and gotten their insurance needs taken care of. And if I got a bunch of complaints about them, I made them either fix them or took them off the list. And so some of those things we can really vet well and there really are recommendations for us. But I put a big notice at the top of my real estate page that I have not vetted every one of these deals that you should consider them introductions, not recommendations, and that the due diligence is on you. I tell them the first step in your due diligence should be learning about it here. Because I literally cannot go out and walk all these properties. I literally cannot do background checks on every principal at every one of these companies. That's got to be on you. And so I'm very straightforward. When I invest in a deal, I tell my readers, particularly those on the real estate newsletter list, that I'm investing in this. Or, you know, if I'm not telling you I am, you can assume I'm not. That doesn't necessarily mean I think it's a bad deal. It's just that I don't need to put more money in real estate right now or I don't have the money most of the time. That's what it is. But you shouldn't assume that every deal you see on the white coat investor is going to be exactly as it was advertised. You know, some of that is going to fall on your shoulders. If you're interested in being an accredited investor, then be an accredited investor. That means you have the ability to evaluate and vet these deals on your own. And if you don't have that ability, aside from the ability the government requires, which is the ability to lose your entire investment without it affecting your financial life, if you don't have that ability to vet these deals, stay out of them, you don't have to invest in this stuff. There's no called strikes in investing. You can go invest in the Vanguard REIT index fund, right. And have a broadly diversified, very liquid, very low cost investment. You don't have to invest in this stuff. But if you're going to be an accredited investor, what are your thoughts on how much expectation our readers and listeners should have as far as, you know, us vetting the deals that are advertised on our podcast or on our blog?

You know, I do my best to vet the sponsors. Absolutely. I mean, it's like, yeah, I mean there is some level of responsibility and I do understand that there's definitely value or weight that is put on these type of investments when it's put on the site. I think you've done a great job of trying to vet every single person that comes your way. And I'm sure you've turned way more people away than you have actually let onto your site. That's the same way with us as well. We understand this is a small community and I think that, you know, this being a doctor to doctor, you know, this type of blog and that sort of thing, we talk to doctors and so I think there is some level of responsibility that I think all of us do take when we make sure we put something on our blogs and sites. And we want to make sure that obviously it is something that we can stand behind. I've narrowed down my list of people that I even allow to be honest with you on the site. And it is because I do want to feel good, at least that I've done my due diligence and that I feel comfortable promoting these people because I know in some ways that if things do don't go perfectly well, there will be some emails coming my way. So I want to let people know that I do spend a lot of time doing the due diligence. And so that's why you don't see much on my site, to be honest with you. At the same time, I do make sure. And that's why we do have courses. That's why we do spend the time putting all that content out there is to say, yes, please don't blindly follow anything that ends up on the site or any site that you see. Any blogger. I think that makes me most nervous from all these things. I remember one time I had somebody write me, and this is when I was anonymous and somebody write me and basically said, I mean, this was the email I got. I'm about to invest $50,000 in this fund that you mentioned you were investing in, and I'm about to hit submit. Are you sure this is a good investment? And I was shocked. And I was like, oh, my gosh. I mean, it obviously made me feel and understand how important it is to make sure, you know, to put good investments and put good, you know, good content on the site. At the same time, I was like, wow, this is. This can be, you know, this can be very scary. And so people. That's why it made me even more diligent about letting people know you've got to understand what you're doing, what you're investing in. This is, I mean, serious investments make a big impact on your future. But at the same time, like I said, I try not to put anything on there that necessarily I wouldn't invest in myself.

Okay, all right, so let's talk about investments gone bad. What are some of the worst case scenarios with these deals? So let me tell you about one of my investments. So one of my investments I bought through a crowdfunded platform. It was a $20,000 investment in a syndication. It's an apartment complex. And it turns out that the sponsor, the operator, this person running the syndication is fraudulent. He basically ran a fraud. It sounds to me, I don't know that he intended to do this, but he got in a hurry and he had built this real estate empire and built it with too much leverage. And he got in trouble. The leverage caught up to him. And the bottom line is this particular syndication was part of this empire of his. And at the end of the day, he didn't have the money to complete the project. It was a value add project and so it stalled. And of course we got a bunch of empty apartments now that are supposed to be getting renovated and it sits around for a year. This was a preferred equity investment. It was supposed to pay 14% a year and it paid for about a year and then it stopped paying. And it's been dragging on now for years. What am I going to get out of it? I might have a total loss. I'm not going to lose more than my initial $20,000, but I might have a total loss of that $20,000. I think a more likely outcome, and part of this is due to the platform doing a good job of putting together another deal and using that deal to actually acquire this investment back from the bank that had foreclosed on this operator back from the bank in order to kind of save the deal. I think as a result of that, I'm probably still going to have a loss on the investment, but I don't think it's going to be a total loss. I'll be thrilled if I get all my principal back and there's no way I'm getting all the interest that's due to me back. So that's how investments can go bad. You can have essentially a fraudulent operator. And it goes to your point that the most important thing is the operator. And a lot of times that's hard to assess when you're going through a platform that puts you one step back from the operator. So other deals I've had go bad. I've had another deal that was supposed to be a one year debt deal. It was a syndication. We loaned money to this person to flip a home basically over the course of a year. And it took him longer than he thought. It took more money than he thought. He had a hard time selling it. At the end of the day, he made the payments all the way through and he kept paying us the interest due. But I think it was three years before I got the principal back on a one year deal. And so that sort of scenario is not uncommon at all in this space. That happens all the time. You got all Your principal, you got all your interest, but it turned out not to be nearly as liquid as you thought it was going to be. So what are some of your worst outcomes that you've had so far in your real estate investing career?

Yeah, I mean, that last one sounds really familiar. I have one just like that. Again, if people are watching, if they're going to be part of your conference, and I hope they're watching it, I just lay out my three biggest mistakes. But I go into way more detail in terms of numbers and all that stuff on that lecture. But I think that if I want to talk about some of them just like that. I mean, I had one deal where these developers got way in over their head and they thought they could do. They put these fancy pictures of what this home that they're going to buy and flip and turn into this amazing architectural dream in the hills of LA with this hillside. Turns out they didn't know how to account for this hill and grading issue with permitting and all that stuff. A project that was supposed to take 16 to 18 months, again took over three years where they actually never even got the property built. They essentially just ended up selling it off because they couldn't get the permits for it. Luckily the market allowed it to. You know, the market was fine in the last, whatever it was over that three to four years. So they were able to sell and they were able to give most, you know, everybody back their principal plus about 100 bucks. I think that was like three or four years. I think I had. There's obviously, you know, I was glad I didn't lose my money, but that money was locked up for a while. Also there's opportunity cost. I mean, I could have just literally just left it in a savings account and done better. And so there's an opportunity cost there as well. That was one of the mistakes. But again, it was a learning lesson. Another one was where I invested in an office, kind of complex area. And it was a lot of health complex type stuff. And it was really dependent on one anchor tenant which they thought that was definitely going to renew. The tenant didn't end up renewing, just tanked the whole investment there. The bank ended up taking the property back, I think over five years. I think what ended up happening, I lost about. I think it was a $10,000 deal. I lost about 4,800 bucks on it. So it was like a 48% loss over that period of time. So didn't go great. But at the same time, it was one of the very first deals that I actually invested in. I didn't know what I was doing. And again, one of the mistakes I've learned, I went into it just because it was there and I wanted to learn. I'll be honest with you, that deal led me, gave me the confidence, even investing in that one, to learn more about it, invest in others. And so if you look at it from an isolated thing, yeah, I lost money on that deal, but it helped propel me to do many other deals that were much better. I've learned so much from it. And to be honest with you, I think ultimately that deal, when I look at it in the scope of everything honestly, allows me to be a smarter, better investor.

One of the things I learned from deals going bad, both on the debt and the equity side, is just how important diversification still is in this space. Just like it is when you invest in stocks or bonds. Diversification matters. And so that's why I like being in a debt real estate fund where I've got 70 or 80 different loans in the fund rather than two or three that I picked out myself, because if one of those goes bad, I might lose a third of the money in that fund, for lack of a better word. Whereas if one or two debts go bad inside a private real estate lending fund, that's hardly going to affect my return at all. So diversification still matters, even though you're investing in real estate. All right. So some people view, for rightly or wrongly, maybe mostly rightly, they view me as being a much bigger paper assets guy, a much bigger stock investor, and you being a much bigger real estate investor. And they want to know in what ways has our partnership changed how we view the investment space, if at all? You want to take a shot at that?

Yeah, I mean, I'll be honest with you. When I first started this whole real estate journey and everything that I was learning, I was going to pour into basically 100%. That whole idea of pulling money out from my retirement accounts, doing all that stuff, that was going to be me. I was just going to go 100% in real estate. I think that watching and reading your content leaves content talking about different opportunities and index funds and seeing performance and this kind of thing. And the importance of diversification has just been hit, just kind of get pounded into me over time. And so I found myself again. I've kept those investments. Again, it's a smaller portion of my portfolio, but it's a hedge there. It's something that maybe if I wasn't in this partnership, I wasn't around this content all the time. Maybe that wouldn't be there today. Who knows? Would I be better off? Would I be worse off? It doesn't matter. But either way, I think the importance of diversification is something that I've learned. And so I'm a bigger real estate person, But I'm not 100% against paper assets like some other my friends in real estate are. So I think that definitely it has given me a lot more balance kind of being partners and being around this world with you guys.

Yeah, you know, it's interesting. I definitely came to investing from the mutual fund side, without a doubt. Right. A boglehead through and through as far as that goes. The problem came in that I kept running into doctors and others who are like, you know, I've done really well in real estate, and they show me the numbers and they show me how they did, and I'm like, yeah, okay, well, that works, right? That certainly is a legitimate pathway to wealth that many people have followed. And there's all kinds of advantages. You know, we've talked a lot about depreciation today, but another advantage is the fact that it's way easier to use leverage in a safe way in real estate than it is margin investing on, you know, on stocks, on gamestonk. You know, it's just not a safe way to invest to leverage up your game stonk and hope it turns out well. Whereas applying, you know, serious amounts of leverage to a real estate investment can be just fine. And so I think I slowly and gradually came around to saying, you know, I want maybe more of my portfolio in this than I have. So at some point, I don't know, seven or eight years ago, I went from having 7.5% of my portfolio, which was entirely in the real estate investment trust index fund, to 20% of my portfolio in real estate. And I divide it. 5% still in those publicly traded REITs, 5% in private debt real estate, and 10% in private equity real estate. And I think that all occurred before we actually joined up in the WCI network.

I want to take credit for it, though, Jim.

I'm not sure I can give you credit. Certainly I can give you credit for a lot of the relationships that I have made since, which, as you know, and as we've talked about on this podcast, the relationships and the sponsors, the operators themselves matter a great deal in this space. And so, you know, I don't know, I look at it sometimes and I go, maybe I should increase the percentage of my portfolio in real estate. Maybe I should go 30% or 40%. And other times I go, maybe I should dial it back. Maybe I should only be 15 or 10. So it's like everything in life. You're trying to balance your fear of missing out with your fear of loss. It's the same way you set your stock to bond ratio. And I think that's how you need to set your real estate to stock ratio. Some people are going to be very comfortable being 80% real estate and 20% stocks. And then there's people on the other end of the spectrum that are 80% stocks and 20% real estate. And I think you just got to figure out what you like and what you're comfortable with, because that entire range is reasonable. I would, however, caution you to avoid extremes when you're saying you can't make money in paper assets, the stock market is a casino, that's just not true. And to say that all real estate investing is a second job, that you're going to get cleaned out and all real estate investors go bankrupt, well, that's not true either. The truth's in the middle. And so you got to figure out where in the middle you're going to fall, you know, and find your own pathway. There are many roads to Dublin, Taylor Larimore likes to say, and all you gotta do is pick a reasonable one and fund it adequately and you're gonna reach your financial goals. All right, I think we are. How long are we pushing here, Cindy? We gotta cut this off, right? Yeah, we're at an hour already, so let's quit talking. Peter, let's make them come to the conference which is going on as this podcast drops. Let's make them come to your summit if they want to hear more from us. And we'll be back on the podcast at some time in the future, I'm sure. Any parting words for the 30 or 40,000 people who are going to listen to this podcast?

Yeah, I mean, I think the biggest thing for me is when I talk to so many people about this is there is no right or wrong when it comes to all this stuff. I think the more important thing is that you take action of some sort. So if somebody said, hey, I want to dip my feet in, great. If there's somebody who said, I want to start real estate by buying a, you know, a 45 unit apartment building, go for it. I mean, I'm not against it. I mean, I just want to say, like, when people ask me that stuff, I say go for whatever you're comfortable with as long as you're doing it smartly with some proper due diligence and some guidance. The most important thing that I say is get started, make an investment, start learning, get some skin in the game and I think that will really help propel you to get where you want to be with your portfolio and all that stuff. So again, I'm all for it. Like I said, all of this stuff has been fun to talk about at the same time. Everyone has their own path. However, I can support anyone in terms of providing content resources. I'm there for you and thanks for this opportunity to be on this. Jim.

Awesome. So if you want to learn more about Peter, passiveincomemd.com is the hub of everything and he's also got a great podcast out, the Passive Income MD Podcast, so be sure to check that out as well and we'll get them on in the future. Thanks for your time, Peter.

All right, thank you.

I hope you enjoyed that podcast with Peter. If you are interested in his summit later this month, you can sign up for that whitecoatinvestor.com summit. Should be a lot of fun. I'm going to be doing my interview with him live, so hopefully I don't say anything too stupid, but most of it I think is pre recorded. I think five or six of us are going to do it live during that summit, but check that out as well. Still not sure what to do with your student loans? Overwhelmed with how to tackle that giant debt in an ever changing political climate, the experts@studentloanadvice.com are here to help guide you through the best options to manage your loans. Our experienced staff have consulted on over $250 million in student loan debt and the average studentloanadvice.com client has saved over $190,000. You will receive a customized student loan plan using the principles of the White Coat Investor. Get answers to all of your student loan questions, gain clarity about your financial future, and start down the right path toward financial freedom. Book a consult today@studentloanadvice.com you can do this and the White Coat Investor can help. Okay, thanks. For those of you who are leaving us a five star review and telling your friends about the podcast, the most recent one comes in from Jesus who says amazing even for college students. I absolutely love the pod, although I will start medical school in the next year and I'm years away from making any real money. Is so inspiring and so helpful to listen to all the incredible interviews and so much reasonable and practical fiscal advice. Always great to get a head start on thinking about finances, and I opened a Roth IRA to put a little every month because of the podcast. So thankful for such an incredible resource and the WCI community as a whole. So he's thanking me and he's thanking you. Thanks for being part of our community. Keep your head up, your shoulders back. You've got this and we can help. We'll see you next time on the White Coat Investor Podcast.

My dad, your host, Dr. Daly, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney or financial advisor. So this podcast is for your entertainment and information only and should not be considered official personalized financial advice.