WCI #31: Alternative Investments with Dr. Meadows

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 Dahli. Welcome to White Coat Investor podcast 31 Alternative Investing with Dr. Meadows.

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A reminder to be sure to visit my other partners in the White Coat Investor Network Physician on Fire, which can be found@physicianonfire.com and Passive Income MD, which can be found obviously at passiveincomemd.com and next week, in fact, we're going to have Passive Income MD on the podcast here. I hope you're also following us on Twitter. It turns out that's actually the most up to speed way to keep up with me. I post interesting stuff that I find on the Internet there in just a few minutes, whereas you might be waiting weeks for the newsletter or this podcast and months for blog posts that I'm writing now. The snow is falling here in Utah and the conference is coming March 1st through 3rd is the first white coat investor Con. We call it the Physician Wellness and Financial Literacy Conference and we hope you're getting information about it if you're signed up by email. If you're not getting emails about the conference, please contact us so we can make sure you're getting them. Of course that conference is full, so if you're not on the wait list, you're probably not coming this time, but hopefully it goes well and we end up being able to do it again. I'm also working right now on an online course. By the time you hear this, it'll probably be almost complete, but I don't expect to launch it until January. It's going to be awesome though. It's not going to be cheap though, because I've literally spent every spare moment I had in the last two months making it and the information in it is super valuable. But for someone who wants to become financially literate and have a written financial plan with as little pain and time spent as possible. It's going to be perfect and a steal at the going price. There will be a special promotional period early on where you can get a hundred bucks off, so watch for that in January. Today's quote of the day comes from Henry David Thoreau, who said, wealth is the ability to fully experience life. In today's podcast, we're going to be talking a little bit about alternative investments. And we've got a special guest here today, Dr. Kenyon Meadows. He's a radiation oncologist who practices in Georgia. He recently wrote a book I reviewed on the blog called Alternative Financial Medicine. It's subtitled High Yield Investments in a Low Yield World. In the book, he discusses his ongoing experiences investing in stuff that isn't stock and bond index funds. Now, regular readers know that I also invest in alternatives, although only about 15% of my portfolio is invested in something besides index funds. So far, it's been a pretty good experience. We'll be getting into both Dr. Meadows alternative investments and my own today, and hopefully we'll all come away a little bit smarter. But first, let's get to know Dr. Meadows a little better. Welcome to the show.

Thanks for having me, Joan. Appreciate it.

It's, it's great to have you on. And my readers or listeners, I should say, prefer having something besides my voice on these podcasts. So I try to indulge them. And I think going forward we're going to be doing a couple of interviews a month and so it should be great. But first, let's start with you telling us a little bit about yourself, both your clinical practice and how you ended up getting involved in teaching about investing.

So, yeah, as you mentioned, I'm a practicing radiation oncologist here in Southeast Georgia, practice full time and been out since 2006. And this journey into alternative investments, well, quite honestly, it came out of dissatisfaction, as you will, with the returns and my experiences with investing in traditional stocks and bonds. I think everyone can remember the 2008 crash and for those who have been out a little longer, back in 2001. And so I recognize that the public markets, they certainly deserve to be a big chunk of your investing portfolio. But I did begin to be interested in something else that wouldn't be correlated with the market, wasn't necessarily going to go down and lock stock when the market took a crash, you know, something not correlated, basically. So that got me interested initially.

Great. Now you're how long have you how far are you out of Training I finished in 2000, 2006, so actually the same year I got out of residency and.

Okay, yeah.

And you're married, children?

Yeah, married and two. Two girls, 10 and nine.

Cool, very cool. And so I mean, obviously at this point in your career, you're kind of approaching mid career like I am and you've got your investments on the side and now you've got, you know, your website and your book and also you have your clinical practice still. So that's, that's pretty great to have all those sources of income. Tell us a little bit about the book, why you wrote it and who should read it.

Well, so I got into alternatives in a real meaningful way about in 2012 and basically I started doing, we call private mortgage lending, which was lending money to real estate professionals to flip houses. And that dovetailed into buying rental property. And then also about that time, the online lending really started to jump off in a meaningful way with things like peer to peer lending and the real estate crowdfunding and things of that nature. And so I happened to delve into that and after a while it became obvious I was having a good experience with it. I was enjoying learning about it and then talking with my colleagues. And I know we've all had the doctor's lounge chatter. When I would bring up what I was doing, it just seemed to be so foreign and different than from what most people were doing. And many people would ask me to talk at more length about it. And that got me thinking, well, you know, why don't I write a book and write it from the perspective of to be sort of a primer, as it will for a busy professional who is looking to learn about some alternative assets. And from the perspective of somebody that was not biased, meaning I didn't have a financial product to sell them, which, which of course most of your listeners, when they get financial advice, it is coming from somebody who ultimately has something to sell them. So I thought it'd be a different and unique perspective.

Very cool. Yeah, I've read the book. It's a quick read, I think. I think it's 96 pages is what Amazon's telling me it is. And I got through it pretty quickly. The thing I liked about was very personal. It was, here's where I'm at, here's what I'm doing. You know, I did this, I did this. And it's really personable. It feels like talking to somebody in the doctor's lounge.

Well, that's where it was born out of a lot of conversations in the lounge for sure.

Now tell us about your asset allocation. What are you actually invested in?

So all the different categories in the book are represent things that I have invested in. And if I had to put it in two general buckets, there's some form of real estate and the other bucket would be some form of alternative lending. And so at the cornerstone of everything, honestly is owning cash flow, rental property, single family homes. That's the thing that's going to be. That's the main thing that I'm allocated in. And then number two would be the private mortgage lending offline, as it were, because we got the online crowdfunding nowadays. But those are the two biggies. And the other things, I would say they're meaningful, but they're smaller allocations. And then you want to know about my overall allocation and particularly, well, how much do you invest in the traditional stock market? Well, that's still a big chunk of what I have because as you recall, up until 2012, that's pretty much all I did. So any discretionary money that I had after I funded my retirement account and took care of all my other obligations, I had a taxable account at Merrill lynch and was very aggressive with that. It's just that it's tailed off considerably since I've started doing the alternatives the last four years.

So do you have a written percentage that you try to keep a certain percentage in stocks of your portfolio and a certain percentage in real estate and a certain percentage in hard money loans, or.

Actually not a firm percentage. I did look over my overall allocation and preparation for this podcast because I knew that was something that you wanted. And as it turns out, it's about 60% alternatives and 40% stocks. But again, that's a big sea change for me the last few years where I've done pretty much just through my work, 401k in terms of the stocks and everything else has been a lot of alternatives.

Do you expect that ratio to continue to grow, the alternatives to, you know, stocks and bonds to grow?

Yeah, I think that. I think that ratio will continue to tilt more toward the alternatives. I mean, I think that again, I'm very, very comfortable with the, with the ownership of the rental property. I'm very comfortable with the private lending partners that I'm with. And so, yeah, I think that definitely deserves to keep growing when it comes to the other things, the online lending, because ultimately you have a lot less control over that. Those percentages will be kind of kept where they're at or there always be a more modest percentage of the portfolio. So I think that's how it's going to be going forward.

Very cool. So you're still maxing out your retirement accounts then, that are available to you?

That are available to me, yeah. Yeah. So, you know, have the, it's. I'm an employed physician, so, you know, I have the, the, the account there. And then from a pre, from a prior job, I did have a small IRA that I rolled over as a Roth actually. And it's actually the self directed thing. And so I actually do some of my alternatives with a small self directed account too.

That's good to hear. You know, I'm surprised how many people I run into that are interested in real estate or alternative kind of stuff and then I find out they're not even using, you know, a Roth IRA that's available to them and meanwhile they're investing in very tax inefficient stuff just in a taxable account when they haven't even maxed out their retirement accounts.

Right. From what I read, I think only about 3% of people have a, have a self directed account. And so, yeah, it's not that common.

Yeah, for sure. There's definitely an extra step of complexity in order to get a self directed ira. But I, I'm just surprised that, you know, even people. I think I was listening to a podcast on Bigger Pockets, which is a huge advocate for, you know, real estate investing, and the person doing the podcast hadn't even heard of a Roth ira, basically. And I was just really surprised because there's so many ways that you can combine the benefits there. A retirement account with still being able to invest in what are not necessarily traditional investments. Absolutely. Now what would you say to a Doc that can't max out his retirement accounts and invest in alternatives? He's got to choose between the two. What would you say to that doc?

Boy, I hadn't thought about that one. I would say that it would depend on what alternative he was going to get into if he was just going to do something relatively passive, such as like a real estate note or something along those lines. I think you could kind of go either way. Now if you're going to get something like say, like, say like a rental property. Right. I really think that between the cash flow, tax advantages, leverage, all that when it comes to rental property. I think I actually would lean more towards that route. Assuming you could get comfortable with ownership and just learning about, you know, what it means to be a landlord and owning the property and all that comes with it. And there's, you Know, there's definitely, it's not totally passive. So if I had to choose between those two, I would say to go with the rental property, to be honest with you.

Now what would you say to critics? Let's take a hypothetical critic off the Bogleheads forum, for instance.

Sure.

I mean someone brings up real estate investing there and the first thing that happens is people scream, that's a second job. You don't want a second job, do you? And what are you going to do when the toilet overflows? You know what, what's your response to those kinds of criticisms of investing in real estate?

Well, that, that's very much, that very much could be a possibility and I certainly wouldn't advocate for, for any doc practicing full time to try to be the first line manager or the person taking the calls when you get the, the toilet overflowing at 2 in the morning. So you know, having a good property manager in place, having either a newer property or a newer renovated property such that a lot of the capital expenditures and repairs and all that kind of stuff are kept at a minimum. So those are the kind of things that I would say to make sure you have in place before you go doing it. But if you do that, I can honestly say that owning well managed rental property that's in good shape can be relatively emphasized, relatively passive, meaning you'll have to manage the manager. You know, there'll be issues that come up, tenants unexpectedly move out, you know, an eviction, that kind of thing. But you're really making more executive type decisions in terms of telling them okay, yes, do this, no do that. And, and having somebody really, really managing the day to day mechanics of it. So it's not that bad.

It really isn't now, I mean nobody ever has all home runs when they step up to the plate. What have been some of your worst alternative investments? Some of the experiences that maybe weren't so good?

Yeah, honestly, loaning money to some local entrepreneurs, that's been not great in terms of things that were covered in the book. I've done a lot of real estate crowdfunding projects, first position debt on them. So loaning money on projects. And there have been a couple that have not worked out and the properties are in various stages of foreclosure and ultimately will be liquidated. And the platforms are cautiously optimistic that we'll ultimately get our money back. But, but it's, you know, it takes several months to go through that process. So that's definitely been something that's not worked out.

Yeah. And what Percentage of the online crowdfunded hard money lending that you've done, do you think has ended up in default?

Yeah, I've done like 42 projects and I currently have three that are in some level of default and about 25, 26 of them or so have actually completed and capital's come back and the others are performing as expected.

You know, it's interesting, those percentages actually seem pretty high when I look at their data, what they cite. I mean, a lot of them are citing, you know, default rates of 1, 2%, whereas yours is closer to 6, 7. It sounds like has been your experience.

Been my experience, Yeah. I have three. Three out of about 40. So again, you know, when it ultimately comes down to it that the three that are in default, they had been paying all the way up until the time it was time to exit and everything. So I've been collecting interest and I. And at least two of them, you know, I feel pretty confident that they are going to be able to get us our money back. So when you say an ultimate default, I may, I think maybe one will ultimately do that.

Maybe that's the discrepancy between the percentages, right?

Exactly. I think they're counting ones that they've gone through the foreclosure process and even still they weren't able to salvage money. So I think that's where it comes in.

Now tell us about your home runs. Tell us about your best experiences investing in alternatives. The stuff that's really got you jazzed about this and has you moving into, you know, doing more of it with your portfolio.

Well, yeah, in terms of, in terms of just raw returns, not, not talking about tax advantages or anything like that, partnering with a rehabber or house flipper and participating in some of the upside on the profits with a nice profit split, that for sure, from a pure return standpoint has been the best thing where you can, you know, these guys, they rehab dozens of houses a year. They have multiple projects going at once and you can participate with like the same money like twice a year. Say for instance, like two separate house flips. And if you participate in the upside on the sale and everything, you can definitely get returns north of 30%. I've been able to achieve sometimes. So that's pretty nice.

That's pretty exciting. Now those are people you know locally or that's a group you met online or who is this?

Yeah, you know, in a couple of instances online, but then ultimately getting, getting together in person and they turned out to be regional. Even though my initial contact with Them was somebody online. So yeah, these are, these are folks kind of in the, in the local regional circle, as it were, that I know. Yeah.

Any other particularly great experiences you could share?

Any other particular great. Well, I mean, I guess I would again to come back to the rental property. Right. I, I was a little timid in terms of delving into that, being a landlord and everything. But again, I met up with, I did a lot of due diligence, learned a lot about the space, and found a great partner in that arena they call turnkey rental investing. And that has been basically a revelation for me in that you can own a portfolio and grow it and it not be this thing that is a constant headache at all. And so that has been very, very, very, very good and something I would definitely champion.

Now, when you talk about a turnkey property, you're talking about a rental property in another city, right? Not something you can drive by on your way home from the hospital.

It certainly can be that way and that, you know, for the returns to work out well and everything. There's a lot of areas in the country where it's very difficult to, to own a rental property and have it cash flow properly. So yes, you got to get comfortable with potentially owning property well outside of your geographic metro, particularly if you live in a very expensive area. Now as it is, it winds up turning out my properties, they're about an hour and a half away in Jacksonville, Florida, so they're not down the block. I can't just walk to them, but they're not so, so far away that I can't go by and check on them every, every once in a while. But, but I, but the point is I, I've gotten comfortable enough that what a good provider and everything. I would have no problem owning a property in another, you know, clear across the country. I wouldn't. But you, but you got to do your homework on that.

Yeah, I certainly had a rotten experience with across the country rental property, but the main problem I had was I could not find a decent property manager at any price.

Well, here's the thing with the whole turnkey model. The best situations are when the turnkey provider, that is the person sourcing the property and rehabbing it and everything and getting it tenant ready. If they stay on as the manager, a lot of people feel that that's the best way to go because ultimately they're more connected with you having a good experience because they ultimately want you to buy more turnkey properties off of them, which is really where they make their most money. And the property management is just sort of a thing that they do. But when you turn things over to a third party property manager, property management is such a low margin business. It's tough and it really requires people to. It can be kind of time intense and management intense and it's very hard to find good ones. And I've talked to a lot of real estate pros, have big, big portfolios and, and they complain about it too. So yeah, property management is difficult.

Yeah, I think that was exactly the problem we had. You know, I mean, they just weren't making that much off of us. I think our place rented for eleven hundred dollars or something like that. I can't remember exactly what it was. So they were only getting 10% of that. So for 110 bucks a month, I just couldn't expect them to spend much attention on my property. You know, they had 200 others they were trying to manage and that ended up given us enough problems that we literally started managing it from all the way across the country. You know, the property was in Virginia and we were in Utah at the time and you know, I decided when the tenant was gone, that was it, we were selling. There was no way I was going to try to put a new tenant in there from Utah. It just didn't make any sense.

Well, yeah, I don't know how much, how much time you spent maybe talking with a lot of the management companies, current clients, but that's a big thing there because they certainly will tell you the truth. So that's something I always do.

Yeah, we, we, we, I think we found every property manager in the, in the, in the city there, in the county that could have done it. I mean, we really did beat the bushes looking for a good property manager. So I agree that maybe even before buying the property, the key is to have the property manager in place because that is certainly a big piece of your success.

They can make or break it when.

You'Re out of state. All right, well, let's talk about some of the issues I've had with some alternative investments and see what you think and get your opinion and just have a conversation about it for the rest of the podcast. So in 2012, about the time you were getting into this stuff, I got into Lending Club as well and you know, read everything there was online about it and the returns looked promising and I invested and my returns were promising. You know, I was getting 13%, 12%, that sort of thing, being fairly aggressive, but, you know, picking loans that showed promise, at least in the retrospective data. To do well going forward. And I continued to have double digit returns up until about mid 2016 when all this revelation started coming out about Lending Club, some of the screwy things their CEO was doing and he got canned and so on and so forth.

Right.

And since then I decided, you know, I had one night where I laid awake thinking about that investment. It was hard for me to add to it. You know, I dedicated 5% of my portfolio at that point to peer to peer loans. And I decided that night that I wasn't comfortable with it. And the next day I started liquidating and I'm still liquidating, you know, because as you know, some of those notes are three year, five year notes. And if you can't sell them on the secondary market, which seems to be becoming harder and harder these days, you're really stuck with them for the long haul. And so while I've, you know, I've cashed out 90% of my investment, I think, you know, I've still got a little bit going forward there. And my returns since mid-2015 haven't been terrible by any means, but not what I was seeing before. What are your thoughts on these, you know, peer to peer lending, the lending clubs, the prospers, some of the smaller ones and where you think they're going, whether you think they're still worth investing in?

Well, you know, we have a lot of parallels with our experience there. I actually was able to meet the CEO Laplanche at a conference I went to. I was, there's a big online lending conference that happened to be out in San Francisco a couple of years ago. And I happened to be out there. So I went and had a chance to meet a lot of the heads of a lot of these online platforms, crowdfunding, peer to peer and everything. And you're right, you know, I got into the peer to peer lending about that same time, about the same asset allocation in terms of the portfolio and everything. I was less aggressive than you were. I was aiming more towards 7, 8% type returns and investing a lot of A and B type loans. And when all that stuff came down last year with the CEO and everything, my returns didn't slip very much. You know, a mild spike in some of the defaults and everything. But ultimately what was expected and what I actually got, you know, they vary by like a half a percent or so. So now I did stop adding to my positions about a year ago and I'm slowly letting things cycle on out. And so I do think that the peer to peer, you know, conceptually and as an asset class, I think it, it does have long term legs. I just don't know if Lending Club ultimately is going to be the company that's going to, I mean, they can right the ship, but I'm down on them and I haven't really transitioned into like Prosper, which I think would be the other really big one in that space and haven't paid much attention to some of the smaller players. So yeah, my enthusiasm for peer to peer, you know, it has gone down. Even though my personal experience for the loan and credit quality I invested in, the returns have been about what was promised. Mm.

You know, it's interesting. Part of the issue I had with that was I looked at it and I said, you know what, I can make 8 or 9% and loan to people that are putting no collateral up what whatsoever. You know, they're, they're, their interest rate might be 20, but you know, I'm going to get 8 or 9% maybe and, or I can lend to somebody and get 8 or 9% and, and have it backed up by a real property.

Yeah.

And that was one of the things that I just said, you know what, I'm going to start lending on hard money loans where there's a property that I can foreclose on, at least have a pretty good chance of getting most of my money back by liquidating the property. And that was kind of what pushed me out of the peer to peer lending in the end. I didn't like the irregularities going on, I didn't like the platform risk. But mostly I just said, why am I doing this if this is all I'm getting? You know, if I'm getting 13, maybe it's worth doing, but if I'm getting 8, it just didn't seem to be worth, you know, basically giving people signature loans.

I see. Yeah. And when you look at it in that perspective, you're absolutely right. Because, you know, when a loan goes bad on there, you know, you pretty much, you know, the platform even tells you, you know, don't count on us collecting on it. Whereas on the real estate side of things, you know, I've got a few, a couple of loans that have gone bad. I feel pretty good actually about getting my money back. So I totally get it. I think that was, peer to peer was one of the very first things I got into. And peer to peer predated the real estate crowdfunding. They've been around since about 2007, whereas the real estate crowdfunding's only been around since the Very first platforms were in 2012, tail end. So for a while, you didn't really have a choice, really. But now that the real estate crowdfunding's emerged, I think because it's secured, that's a much, much more enticing proposition. Although I can tell you from having been on the crowdfunding platforms in the very beginning, you know, the interest rates offered on them, they've come down considerably as I think more and more people are getting into that asset class and they don't have to offer quite as attractive rates. I've been on there long enough where I've gotten, you know, 14, 13% debt, first position debt, loans, and now pretty much everything's maybe like 9% or so.

Yeah.

But I had a. Had a couple of years there where I was getting in the teens all the time.

Well, you know, it's even worse than that. I've been watching Pierce street this last month, and they send me an email most days about noon that they got a new, you know, property available for you to loan on. And literally it fills at 9% in an hour. You know, if you want to invest in it, you got to basically be sitting on your email when it comes in. And so I think there is. The demand's really gone up for these investments, and I suspect that will push rates down.

Yes, absolutely. As people have gotten comfortable with it.

Yeah, yeah. Speaking of that, you know, this crowdfunding real estate stuff, now, there's probably 120 companies online doing this now. How does somebody go about picking the good platforms out of that? What. I mean, what do you recommend when someone wants to do this?

Well, you know, my perspective, being an early adapter, and I was on the platforms where, I mean, literally, like, you'd invest in a property and you'd get an email or a call or whatever from one of the principals on the platform, you know, to talk with you and all that kind of stuff. And so I had a chance to learn a little bit about the industry from some of the insiders and everything. And as it turns out, I happen to be on a lot of the platforms that from pure size, from a pure size standpoint, which I think does matter, I would view them as safer because they've had several properties cycle through. They've gotten to work with several sponsors that they call them, the people who. The actual real estate entrepreneurs during the work, and there's a track record there. And so I would certainly stick with some of the bigger, more established platforms that have been around since 2012. I think you you from an operation standpoint and, and from the quality of sponsors they work with that have a track record, I think you'll do better than some of the newer ones as a very general guide.

Now, now, let's name a few names here. When you say the big guys, who are you talking about? I mean assume someone listen to this podcast has never even, you know, googled crowdfunded lenders before.

Yeah, well, I would say Realty Shares is certainly one of the biggest. Realty Mogul and Patch of land, those are three platforms that I know have been around since 2012, I think the first year and have been in the game, you know, pretty much from the beginning. And I think I pretty much made mention of those in my post on the site on you guys site about my experience in crowdfunding. So I would start there. Not to say that some of the newer guys can't be good as well, but I do think there is some value in going with some, some of the established and bigger players. I think they have less, they have less incentive to list more questionable deals just to have enough volume on their platform, you know, which, which is a real issue I think with some of the newer players out there.

So yeah, for sure the volume is an issue. It's, it's interesting how difficult it is to find a deal. Do you, do you keep cash sitting around to wait for a deal? I mean, it hasn't been my habit investing over the years to keep a bunch of cash sitting around. I basically invested when I got paid. But with these deals I found that sometimes you have to wait a few weeks or you know, for a syndicator in particular, maybe a few months. Do you find yourself carrying a lot of cash waiting for an attractive deal?

I do. So there is a component of cash drag, as they say on the portfolio, but I think in terms of its ability allow me to sort of cherry pick or get a deal that I think from the terms on it, if it's a repeat sponsor, something pretty attractive about it. I think it's worth it for me and not just feeling pressure to just sort of invest as soon as they have, you know, any particular deal up there. So yeah, I do keep a little bit. But fortunately, as you know, the amount to invest can be pretty modest per deal. Right. So at least it's not a ton.

Exactly. So let me tell you about another experience I've had in alternative investing and get your thoughts on that. So I'm in a partnership now. I think there's 150 docs in it or so. And we have a practice building, you know, where our administrators work out of. And there's a separate company that, you know, the docs in the partnership are allowed to buy into that owns the practice building, which is basically leased to the partnership. And, you know, and it's. Some years it's had a really good return and some years it hasn't. This year the return was surprisingly low when real estate in Salt Lake had been doing very well. And so I kind of balked a little bit at it. And I said, what in the world? Why did we have no return this year? As I dove into it, I realized, you know, there's nobody really managing the store all that well on this investment. You know, we've got our practice administrators and we've got the docs that are busy practicing medicine. But, you know, it turns out that there's maybe a few things that we probably ought to look a little more carefully at and how we operate and actually go a little bit more by the book with that. But what are your thoughts on owning the building you practice in and those sorts of investments?

Well, you know, I can't really comment in depth on that. I'm part of that breed of docs of this younger generation where I've been employed the whole time. I've had some ownership and some equipment associated with our practice. But in terms of the building itself, I haven't personally. Generally speaking, it seems like that's a good thing to be involved in, but I can't really comment too much in depth on that.

Yeah, for sure. Every deal is different. I had another interesting experience in Salt Lake actually this year with our sponsor of this episode, Fundrise. I got involved in a. It was kind of a preferred equity deal with a property they were developing here in Salt Lake. And I think it basically promised us a 14% a year return as the investor. And after about two and a half years of getting these checks like clockwork, once a quarter, 14%, they decided they were going to move the property into their E reit, which I've got a post coming up on the blog. But basically, you know, I no longer got. I got my capital back, but I no Longer had this 14% investment because they'd moved it into this model they're moving to now. What do you. What are your thoughts on these new kind of ereits that both fundrise and, you know, a related product that realty mogul is putting out, their mogul REITs?

Yeah, you know, I. It's interesting. I've heard some of the heads of the platform say that they've gotten feedback that a lot of the people on the platform, you know, they don't. Number one, you mentioned sometimes an availability issue where it's tough to get in on a particular deal because it fills so quickly. And, and then number two, they have gotten feedback that some people, you know, they don't like the relatively small amount of work it takes to click through an individual deal, look over the memorandum, look at the deal terms and sign up on an individual deal basis. Whereas I don't mind doing that. And so I think these ereits are a response to those two measures. And so I definitely think that for some investors out there, it's going to work out pretty well. Personally, I haven't done it. I still have stuck to the per deal, individual thing, looking it over. So it's not necessarily for me because I figure if you're going to do that, you're only like a half step removed from just, you know, getting a publicly traded reit. You know, so what's the, what's the big difference on the crowdfunding platform? That's my view at least.

You know, as I've looked at it more carefully, I think there is a little bit of a difference there. And I think the main difference is what they put in the reit, for example, you know, I mean, like a fundrise one. This is basically the deals being brought to them, which a lot of times are a little small apartment building or a single family home, that sort of a thing, and they put a dozen of them in there or whatever. That seems like a far cry from, you know, a Simon REIT that owns 350 shopping centers across the U.S. you know, it just seems like they're investing maybe different types of properties.

Yeah, well, I certainly, from a scale standpoint, yeah, but I'm saying like sort of fundamentally like the whole genesis of the crowdfunding thing or what was supposed to be the appeal of it was you could get the experience, as it were, of investing in a particular project in a particular geography and you know, and you be, you know, you be on that one particular deal if you wanted it, you know, so to do the reap thing in any, in any, to any degree, it just seems a little antithetical to what was supposed to be the appeal of it. But, but obviously some people want that.

Yeah, for sure. You know, it's, it's interesting though. I think at the end of the day there's a large percentage of people that want the returns with the least Amount of hassle possible. Right. And you know, and that's a beautiful thing about, you know, a broadly diversified mix of stock and bond index funds. You know, it's very automatic. I mean, I manage my parents portfolio of stock and bond index funds, including a REIT index fund in literally an hour a year. That's all it takes to manage it. You know, we rebalance it once a year we take out their rmd. That's it. And so I think there's a lot of appeal to that sort of thing. I mean, some people are hobbyists like you and I are interested in looking at the individual deals, but I'd say the vast majority of investors are, are all for making it as painless as possible as long as the investment still turns out good. And, and maybe that's what they're trying to appeal to with those, you know, ereit type structures. I've had a couple other interesting deals that neither one of which has actually worked out well for me. My hospital at the partnership that I joined here in Salt Lake is actually syndicated. The docs can actually buy a piece of the hospital. Unfortunately, just the way it's worked out. I've never actually been able to buy a share in seven years that I've been there. And it's now, you know, we've changed management. There's different group owning the hospital now and they're not nearly as keen on this idea. And it turns out that if I want to buy shares, I have to buy them at twice the price of what they can be sold back to the hospital for. And so, you know, I mean, everybody looks at that and nobody's really buying them. But certainly there's lots of interesting deals that get offered to doctors out there.

Absolutely.

Sometimes the returns are great and sometimes they aren't. Like in the first few years of this syndication deal, people were making 25%. It was great. But those returns haven't been there the last few years, although they're still positive. And the problem for me has been I've never been able to buy them.

Okay.

When we built another hospital recently and they made an offer that we could by the real estate that essentially the hospital corporation would be renting from us if we wanted to, you know, basically do a syndicated deal on the real estate and it was interesting with a lot of the other docs, you know, I put a little bit of money into that and after their lawyers got done looking at it, in the end they decided it wasn't such a great deal and they just paid our money back. A couple weeks later with interest, and closed the deal. So it's, it's interesting. There's lots of options out there that'll be brought to you as a doc. And sometimes they work out well and sometimes they don't. One question I frequently get is about surgery centers. Most surgeons at some point or another seem to be offered the opportunity to buy into a surgery center. And they always ask me, how do I evaluate this deal? How do I know if this is a good deal or not? What do you say to that surgeon that's interested in buying?

In another thing that I can only speak in very general terms to know our hospital system here, they had a, you know, a very keen eye on buying the surgery centers in town. And so I knew that they were, you know, they were pretty profitable. And so in general, from, from talking with people, it's been a very good investment for surgeons. So. But in terms of any specifics, yeah, can't. Can't offer you much more than that, to be honest.

Yeah, I've always cautioned be really careful about their due diligence. Have their. Get an attorney and have them look it over. Have your accountant look it over. You know, if you're using a financial advisor, have them look it over. But then realize that I think those kinds of risks are good risks to take in your career and in your investments, because they do pay off a lot of times, especially when you can have an effect on the investment. In a lot of ways, it's like what Warren Buffet does, where he comes in, buys a big chunk of a company, puts himself on the board, uses his expertise to make it better. You know, in a lot of ways, that's kind of what I'm doing with this white coat investor network or where I buy a piece of these other blogs. And I'm able to use the trust I have with readers and the contacts with advertisers and with other people in this space and be able to help them cut two years off their learning curve and help them be successful. And then I get to own a piece of it. And so I think when you're looking at a surgery center, a lot of times that's your opportunity. Not only may it be a good investment, but there are things you can actively do to make it a better investment.

Quick question for you, Jim. You mentioned how you've done the peer to peer lending and you've done the real estate crowdfunding. Have you done the other sort of main category of online lending that I've come across, which would be the Business lending, like business debt lending. Have you done that?

I haven't done much of that and I think the thing that scared me off on it is it just reminded me too much of the peer to peer lending. You know, it just seemed like there wasn't a real asset behind it. And as you know, a lot of ways it was a signature loan. And so that scared me off a little bit. When I was on the peer to peer lending platforms. I remember when I looked at the data and it's been several years since I did this, but those were not the notes that performed well and so I avoided those when I was doing, you know, even the lending club prosper kind of stuff. Almost all the loans I did were people trying to get consolidate their credit card debt.

Yeah, well, you know, I have had a pretty, a pretty good experience on a peer to business lending site in terms of its layout and everything. It's very similar to lending club called Funding Circle and you know, been on it going on close to three years. So some of these loans are starting to come due and everything. And that's actually worked out pretty well with returns in the teens to businesses. Now the thing about them versus I think a lending club platform, I mean these guys are at least from an underwriting standpoint they're very focused on just business debt and usually service based businesses. So I think there's definitely some more expertise there as opposed to like on a lending club. So that's been something that's worked out pretty well. But like you said, you get these personal guarantees from the business owners and they make sure the person has some assets and in some cases there can be some collateral put up too. So I think it's a little bit better than a lending club type situation. But again a fairly small allocation. But that's worked out pretty well.

Yeah, I guess the other concern I'd have with that is, you know, when I look at a single family home, the economics of it, the business I understand, I can look at it and say, well this is the expenses they're going to have, this is the source of income they're going to have. And I feel like I can look at that and kind of evaluate it. When I'm looking at somebody's business, it's not a business that's in a field I'm involved with in any way. I feel like I maybe don't have the expertise to do the due diligence and so I think that's kept me back from that sort of an investment in the past as well.

Mm. Understand.

Yeah. What other, what other words of wisdom do you have for our readers? They consider maybe adding some of these alternatives to their portfolio. Would you, you give them guidelines on what percentage of a portfolio they ought to consider adding or how to start with it?

Well, to be a shameless plug. But you know, I do think my book is a decent starting point in terms of just getting some of the language down, what the categories are that I had experiences, what the risks are and what types of returns you can expect. And there are some due diligence points. But the main thing you've got to learn, I mean, you know, anything you get, you invest in. You've got to try to understand the asset class to a decent degree before you go putting any money into it. So I certainly spent a lot of time learning about this before I committed $1 to it. So that's my main thing is learn, make sure you understand for sure.

For sure. So for those who aren't aware, his book is Alternative Financial High Yield Investing in a Low Yield World. That's by Kenyon Meadows, MD. You can buy it on Amazon. It's easy to find, it's not expensive. You can even download a free sample chapter on his website, which is alternativefinancialmedicine.com I really thank Dr. Meadows for being on the podcast today.

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