#124 6 Simple Rules For Successful Real Estate Investing

Foreign welcome to the Passive Income MD Podcast where we talk about creating your ideal life through multiple streams of income. I'm your host, Peter Kim. If you enjoy hearing about this stuff, make sure to hit subscribe so I can bring it to you every week. Now let's get on with the show. Hey everyone. Hope you're having another great week. We've talked about sharing this podcast with some of your friends and people have also rated and reviewed us. I really appreciate that. I want to let you know that we actually take a look at this and I care about all the feedback that we get, both good and bad. And so I wanted to read this comment from Lizzie Ag. She said so many golden nuggets. Literally every episode is packed with golden nuggets of wisdom. I love hearing about opportunities that I didn't even know existed. And she talks a little bit about the mindset and how this podcast has helped her. And again, this is not to toot her own horn, but I want to just say thank you for saying that it really means a lot to us. Sometimes it feels like, you know, you're like speaking out into the void and you don't know what's happening out there. So to get that kind of feedback, whether it's even in the form of hitting some stars or whether it's writing something back to us through our email or on our Facebook group or, you know, leaving a comment or review, I really, really appreciate it and I want to let you know it means a lot to me. So thank you. Thank you so much for those people who have taken the time to do that. I really want to honor you for those listening also as well. I mean, again, you're taking time out of your valuable day to try to learn and listen. And so I'm definitely here for you and I'm here to support you. So now all of us listening to this, we want to be successful at anything we take on. Likely. If you're listening to this, you are a physician, a high net worth individual, someone who's been ambitious and gotten pretty much everything you've wanted. I'm guessing you worked hard and you've achieved so much. And when it comes to real estate investing, I know that many of us are hoping to achieve that kind of success. So you probably read a ton of books, you've been talking to a lot of people, and there's so many rules out there that people might talk about for you to be successful at real estate investing. And someone challenged me one time and asked me if you had to boil it Down. What are your ten commandments? Ten seemed like a lot for anybody to remember, so I've actually boiled it down to six simple rules for successful real estate investing. You know, there's obviously a lot to know about this whole subject. It's huge. It's like telling somebody you're in medicine. Again, that's not enough. There's so many different fields, different different facets, different specialties, and it always seems like there's more to dive into. And it seems like the information seems to be this big abyss that there's just. It's just an endless pit of information. So whether you're brand new to real estate or you've been in this whole game for years, there are times for everyone, including me, where it can feel a little overwhelming. And I bet most of you are still working clinically. For those of you especially that are working full time, I'm sure it can feel like you don't have enough bandwidth to learn it all, or you're giving up sleep to do that. It might also feel like there are a ton of obstacles to face when we try to learn how to invest and invest well. However, I found that these obstacles, I think they're often larger in our minds than reality. And again, we are good at jumping to the worst case scenario. And having spent a ton of time in the real estate investing community, I've gotten to know so many different busy physicians that have taken action and become quite successful at it. Even people that came to our first conference in 2019, just in the last couple years. It's amazing to see what they've done once they put the wheels in motion. Now, the ones that I find have the most difficult time of actually getting started, they're the ones that tend to get caught up in all the little details and the minutiae of investing. For those people, I believe it can actually be helpful to step back a little bit and focus on just the simple things. Again, I talk to so many people in this space, and I will tell you that success leaves clues, meaning that you talk to enough people, you're gonna start to notice a pattern of things that these successful people are doing and thinking. And if you can just really distill some of that down into basic principles or rules, I found that successful real estate investing is definitely possible. So, number one, perform thorough due diligence. Obviously, doing the proper due diligence, it's the most important part of the investing process because nobody wants to get stuck with a bad, bad investment. And if you've invested in enough investments Especially early on, you're going to be stuck with a bad investment. The key is to avoid as many of those as possible. I know I use the words passive income and real estate in the same sentence all the time or quite often, but I don't want people to get the wrong idea. It doesn't take zero work, and I don't think I've ever said that. It takes some work up front and then you can continue to reap ongoing rewards. The benefits come later. So when thinking about this first rule for success, this is where you have to roll up your sleeves. You got to get to work. If you find a certain deal, whether it's a buying a single family home for yourself or an apartment complex, or you're investing in in someone else's deal like a syndication, you're going to need to research the person running the deal that might be yourself, the market, and understand the key metrics that are part of the deal and the numbers that will help you decide whether this deal is going to work for you or not. You might have heard the phrase that people often use in real estate, you make money when you buy. I think it's mostly true. Sure, if you buy at a good price, you can make a lot more mistakes later on and do well. But obviously strategy while you hold the property is important. And making sure you implement those strategies, but making sure you absolutely make a smart decision before you make an investment that's truly going to set you up for success. Now, how do you do that? We've talked about in different podcasts, different blogs. You can look into some of those to get a little bit more detail, but it ultimately comes down to figuring out and understanding the business plan of the real estate investment, meaning you understand the numbers, how it works, who's actually running the deal, making sure that at the end of the day, it fits your goals. If it's cash flow, which is probably is for most people, is it going to produce that cash flow for you and how's it going to do that? And if this deal is presented to you, do you actually believe that the people running this deal can actually follow through and do what they say they're going to do? What is their experience? Have they done it before? Have they made mistakes? These are all things that should be part of your due diligence process. They now I'm going to spend more time on this rule than any other rule. It's because I've made this mistake so many times, especially early on in my investing career. I invested in deals not only where I bought properties myself, but I invested in other people's deals. Well, I'll tell you honestly that I did not know how I was going to make money. I saw a bottom line profit and it looked good. And it's. Somebody else created the numbers for me and I wasn't even able to verify it, but it looked good. And I was so busy working that I felt like I didn't have the time to do the proper due diligence. Now I've learned to educate myself. I found a community of people to look at deals with. And my hope for you is that you're able to do the same. Okay, rule number two, diversify into different markets. Now, when it comes to stocks, we've probably all heard how important it is to diversify. Just like anything else in life, whatever you want to do, it's never good to put all your eggs in one basket, and that includes medicine. The same is true of real estate investing. When you're purchasing a rental property or two and you're in one market, it's not a bad idea. But it's also good to look at other markets where things can change. I mean, real estate investing is considered local, meaning that in my area, like around Los Angeles, it's going to act differently in different markets than Dallas, Atlanta. Whether there's a recession, whether the economy does some different things, certain markets and even certain neighborhoods will react differently. And so what do you do? You diversify into different states, into different markets. That way one area takes a hit, the others can pick up the slack. Maybe the other areas don't do well. This is the best way to mitigate risk across the board. I've talked about the holy grail of investing. Ray Dalio talks about it all the time. And he talks about diversification is the key to creating consistent returns. Cause I don't know about you, but I care about consistent returns because my goal has always been to live off the income that comes from my investments. And I can't live off that income. If one year it is great, the second year it's horrible, it's just not a great way to live. I want that steady, growing cash flow that comes with having a diversified portfolio of investments, primarily through real estate that provide that cash flow for me so I can live life how I want. So how do you diversify if you're investing in passive real estate investments? Well, you can do it by diversifying into different sponsors, the people who are running the deals, into different types of properties, multifamily apartments, industrial, which are warehouses Self storage, whatever it might be. There are ways to diversify into different asset classes. Then you can also diversify into different areas. Like I mentioned, you can choose all these things, which, when you see these deals, it's good for you to understand where the rest of your portfolio is. Maybe you're highly concentrated in Phoenix or Dallas and you're, you're thinking, I, I should diversify into the east, into Atlanta, Florida, whatever it might be. All right, let's move on to point three. Leverage your time. All the best investors that I know when it comes to real estate investing have learned that their time is extremely valuable. Not only that, there are other people that you can pay who will probably do a better job than you will at whatever that task might be. For example, if you own your own properties, I find it very, very interesting when people decide to be their own property managers. And I don't quite get that. You've invested in real estate so you could free up your time. You didn't want a second job. But if you're running the property, especially if you are the property manager, you are fielding the calls, you have to figure out things, you have to figure out how to run that business. You, you may be getting calls, the late night maintenance, plumbing calls, whatever. Your time is worth way more than that. And I understand you're going to give up a percentage of your revenue for that property management. But if that property cannot produce profit with a property manager in place, then that's not the right property for you. It's like for those of you who have their own office, it's saying that you would make a lot more money if you could handle the phones, do the charting, take temperature doing all this. Of course, you can make a lot more money if you do everything yourself. But what kind of business would you be able to run at the end of the day? And what kind of life would you have? The other way you can leverage your own time is to invest in other people's deals. Meaning that you're leveraging their experience, knowledge, resources, time and effort so that you can create returns for yourself. Yes, you can probably make more if you didn't have to pay someone else to do it. But your time is worth way more than that. And how you value your time will determine how you spend your time. Number four, think long term now. Somewhere in between starting your journey to financial freedom and reaching the end, whatever that might be. If there's truly an end, there's probably a stretch of time or maybe a couple times in between where you're like hustling to make things happen. In the middle of that, where you're like looking at different opportunities you're hustling, it might be easy to lose sight of your ultimate goal. The need to get there so quickly might override anything else, especially some good judgment. I never said that investing in real estate is a get rich quick type thing. It is a get rich for long term and for future generations type thing, in my opinion. And what is being rich is ultimately having control of your time. So when you create goals, create that one year goal and three year goals, but the 5, the 10, the 15, make sure you understand where the end point is and how to reverse engineer your whole journey to get where you want to be. Meaning that break it down into digestible chunks that you can actually accomplish that first year you want to do this much. Year three by year five. I find that having those milestones along the way actually helps me achieve my ultimate goals, whatever that might be. And here's the truth, your goals will probably move over time. I don't know about you, but I, I always thought that becoming an attending was my end goal. But it's funny how the goal line moves. Well now I don't want just become an attending. I want to live well, I want to enjoy my life. I want to have a good family. So you'll find that goal posts or goal line, whatever you call it, will continue to move. So think of this long term and in everything you do. When it comes to this whole journey, ask how will this help me reach my goals? There's a balance here, but I think ultimately the, the best way to be successful in the short term even is to think about this as a journey and think about this in the long term. Okay, Number five, embrace lifelong learning. And I've said this many times before, but I can't stress enough how important it is to continually learn when it comes to real estate investing, to seek knowledge, to dive into different books, podcasts, courses, conferences, whatever it might be. Gaining more knowledge will always help you in the long run. That finding a community of people, that also helps as well. Maybe somebody has been there before. I always like to learn from other people and I find that oftentimes that truly helps accelerate my journey. Not everything is in books, but that's why you'll still see me go to conferences. That's why I even share a lot of the stuff I'm learning, because it reinforces a lot of the stuff in my mind. I mean, I've been asked before, like, why do you even Spend the time to talk on podcast, like do this. If you've done well yourself, why not just be happy with that and not waste your time? I will tell you that even sharing what I've learned with people helps to reinforce the things that I've learned, helps question the things that I've tried and done and really challenges me to learn a lot more and get out there and try new things. So if you're on this real estate investing journey, realize that there's lifelong learning, but I think that's probably part of who we are as people. You wouldn't be in this position if you didn't appreciate lifelong or at least higher level learning. And number six, accept that you can't control everything. I know for us as high achieving physicians, high income professionals, we're so used to having everything as controlled as possible. We took the certain courses, we did well, we put in the time. If we studied hard enough, we know that we would achieve something, whatever it is, a good grade or get where we wanted to be. The truth is, when it comes to real estate investing, between all your research, your learning, hiring, due diligence, whatever it might be, there you can only do so much. At a certain point, what will happen, will happen. So I tell people, take the stress off of yourself to be perfect. Realize that there are always going to be things out of your control. And that's okay, I know, easier said than done. But protect your peace of mind by focusing on things you, you can control. You can't control the economy, you can't control what all your tenants might do. Not every investment will be a home run. And that's okay. If you've diversified your portfolio, you've taken enough action, you invested with enough people, you've done your proper due diligence, you're going to win way more than you lose. And that is what is going to help you get where you want to be. And when things go wrong, you course correct, you figure things out. And, and I know that if you're listening to this, we're resourceful people. We're resourceful enough to not only get back on track, but probably make up for all the things we've lost. So the journey to financial freedom for all of us, it's gonna have its ups and downs. There'll be some setbacks, but there'll be some really nice gains that we didn't expect. There are gonna be some things we can't account for. So accept it, learn from it and move on. And I can't tell you how much easier that is on my mind and my brain. When I learn to accept that I've learned that things will happen. But I quickly go to what can I do to fix this? What can I do to learn from this? So there you have it. The six Rules I know that real estate investing, it's not always the easiest thing. I don't pretend that it's the easiest thing. It takes that upfront work. It takes studying, learning, making mistakes, but getting up and ultimately achieving way more than you expected. It is possible to be successful, especially if you follow these six rules. If you haven't started investing, I will encourage you. You've got everything you need to get started in terms of the knowledge, the experience, the resources. More than you think you do. Especially if you're listening to this podcast. If you're already investing, congrats. Keep going. Keep up the amazing work. Let us know how we can continue to support you. Let us know on our Facebook group Passive Income Docs or just reply to any of our newsletters that we send out. Thanks everyone. Hope you had a great week and let's talk again soon. Enjoy the show. Let me know by dropping a review in the podcast app you're listening to us in. And if you haven't already, make sure to hit subscribe. Are you part of our community yet? Join thousands of physicians who are also on this journey to creating their ideal lives through multiple streams of income. You can join us on our Facebook group PassiveIncome Docs and you can always learn more at our website, passiveincomemd.com thanks again for allowing me to be a part of your journey. See you next time.