#15 Making Your Money Work For You ft. Dr. Victor Mangona

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 staying safe and healthy out there. I know that it's still a crazy world, but hopefully you are focusing on things that you can control. I'm trying to do the same, trying to make the most of this opportunity, spend time with my family, have that quality time, but also try some new things. And one of the coolest things that I think we're doing here at Passive Income MD is that we're about to launch our very first virtual summit. You might hear about it in a week or two, depending on when you listen to this. Hopefully it's before the summit. It's going to be called the Leverage and Growth Virtual Summit for Physicians. And why we chose that name is that we have Talked to over 50 physicians who have figured out how to leverage their medical degrees and their training to ultimately grow and develop multiple streams of income. So the Leverage and Growth Virtual Summit, and it's going to be a completely free resource and look out for it and sign up for it, tell your friends about it. It's just one way that we can really serve this community. And you're going to be hearing from all these physicians. And today I wanted to bring you a preview of one of those physicians who is just happening to do that, create and grow these multiple streams of income through real estate. All the lectures will not be on real estate. Real estate is one portion of it. Entrepreneurship, different business ideas, media, online. It's just going to be a total cool group of physicians that you're going to hear from. In this particular case, Dr. Victor Mangona has been able to create a significant amount of net worth as well as cash flow using passive real estate investments like syndications. As you know, that's one of my favorite ways to create cash flow. And he's going to talk a little bit about why he got into it, how he got into it were some of the resources he used and ultimately where he's going with it. So enjoy the show. Thanks, everyone. Hey, everyone. We're going to HEAR now from Dr. Victor Mangona. He's a radiation oncologist, but he does so many other different things. He dabbles in real estate, entrepreneurship and everything. And so we're going to kind of get to the bottom of his story and I'm so excited he's here with us. Thanks for being here.

Victor. Peter, greetings. Thanks for having me. It's a pleasure to be here.

Yeah, I'm so excited because we've talked in the past, but I haven't always asked you about kind of how you got started on some of these things. Let's kind of go back a little bit in your origin story, and let's talk about you as a radiation oncologist. I'm sure you. It was very difficult to get there. Obviously you worked hard at it, you committed to it. And let's talk about how you started venturing and kind of veering off into this other stuff.

All right. So it's kind of done in parallel. My parents had a couple rental properties, so I've always been exposed to that area of investment. I've helped manage them since I was a young kid. And I remember going there on the weekends and doing housework at our rental properties. So that was always normal to me. I went to med school, did residency. My first property, I bought back in 2006. I had bought it in med school, planning for that to be my first rental property in the future, and I still own it to this day. And then as I got through training as a radiation oncologist, I got my first job in Private Practice, 2015. And then I started having money and had to figure out how to put it to its best use. So we started going to real estate investment meetings. As I know you have. You've done a lot of different things, meeting different kinds of people, and kind of got to where we are now.

Yeah, I mean, what was your goal with all that stuff? Sorry, just kind of.

So primarily it was to make our money work for us. Right. We worked so hard to make money, and I wanted my money to work for me. I wanted to develop multiple income streams, develop passive income so I could become financially independent as fast as possible, so that I wouldn't be reliant on my income from working in order to be able to support my lifestyle.

And you saw that primarily happening through real estate. And what kind of real estate? I mean, own your own rental properties, but I'm sure there was other options for you.

Yeah, we first thought about just owning single family properties. And I was going through the. I'm going to do one house a year for 10 years, and after 10 years we'll have 10 properties. And that worked. We started house hacking at the beginning. Our first house out of training, we bought specifically as a rental. We. We ran the numbers as A rental, and we were able to get it with a physician mortgage so we could get in. One year later, we bought another property. So we did this for a couple years, and now we have two properties here in Dallas. But we realized that this is not necessarily the fast track, because as my income grew in private practice and my time shrunk, I realized the value of my time a lot more. So then we moved away from single family. But in parallel to this, we are trying to find ways to make money. Each year between buying each house, we networked with people who do active flipping. And so we've actually partnered on different flip projects, which I don't do actively, but we now just partner and lend. But the education was very valuable because now I understand how to underwrite those deals, which translates to really all of investing. It's not just real estate. The principles have been very valuable. So nowadays my time is just so valuable. We can't spend time finding and acquiring assets. We just work with other people who specialize and do that just professionally as their job, so that my time is used to make as much money as possible that I can then invest and spend the least amount of time possible on that side.

Where did you learn all this stuff? I mean, you said you went to real estate investor meetings. I know that you kind of grew up in a household that was owning rental properties and you were helping to manage that. Where did a lot of this knowledge come from? And maybe what books, resources, things like that online?

So I don't read much. Most of it has really just come from networking through Facebook groups. Some of them were formal education. When I joined, one of the programs I did had a lot of online modules, so I watched those, and I go to conferences. Most of it has been through just talking and working with other people. The formal part has been very helpful for a lot of the fundamentals. But in practice, working with other people who do what you want to achieve professionally and working with those successful people has been the most valuable. And so it's really just been talking to people, Facebook groups. I'm very good at being able to engage in. And for me, that's the kind of reading that I. I'm more able to absorb sitting and reading a book unless I really want to read it. It doesn't usually get completed.

Well, how difficult is. Do you think that is for physicians who want to get into this? Because I think people, when I talk to people, they're a good subset of people that say, hey, I don't know if I could learn that or it seems difficult, it seems out there, but having gone through it, you've done it not really by reading books, but talking to other people. I mean, how challenging do you think that is for the typical physician?

So physicians are very smart people. So there's nothing academically challenging about it. It's about choosing to allocate your resources that you have available to you. So besides things online, I listen to a ton of podcasts for a long time and I have like a 40 minute commute on average each way. And just listening to podcasts, that's a great way to get passive education. You get some value out of your commute. And actually you don't worry about traffic as much anymore because then you're like, oh, I want to finish this episode. Right. So it's not hard. You find the right people who are doing what you want to do and you ride on coattails of others. And educationally, academically speaking, this is so easy. But you have to be accepting that you don't have the knowledge set, because as doctors, we often think that we know a lot of things already. But you learn from other people who've already done it. Learn from other people's mistakes is actually the most valuable thing you could ever do in this space because there's a lot of mistakes to be made. So you learn from other people's mistakes and it can help you succeed faster, sooner.

So you said you turned your attention, you were doing some fix and flips, and you said you were lending, and that means probably you were using your capital, they were using it and paying you back with interest, right?

Yes.

Yeah. And then you moved into other things and you said you obviously own your rental properties and you said that you started investing with other people who were doing this. Can you explain a little bit about what that looks like and what that means?

Yeah. So as our capital was coming faster than I could spend my time finding deals, I had gone to another real estate meeting of people who were doing syndicated real estate in multifamily. So now instead of buying individual properties, we buy very large apartment complexes. Typical property is in the eight figure range, 10, upwards of $50 million per property. So this is 100 plus units. And when you're at that scale, you can have a couple people be in charge of managing the operation and you have the rest of the people simply investing capital. And so that's what we do now. And I work with people, I invest with people whom I know personally. And now we've been able to just invest, invest, invest, invest. We've Invested in, I think, 11 multifamily properties now over the past two years. So we would never have been able to get there just buying individual properties on our own. Because to do private individual real estate well, you have to spend time in getting the right assets, underwriting them, managing the managers, and all of that time is very valuable. And so I wouldn't have been able to acquire this much in the way of assets or cash flow. So this has worked out best for us. And I don't get any phone calls about the properties. My wife loves it because she doesn't have to deal with any of the stress. We have to deal with some of the K1 statements, making sure that our bank accounts are attached properly so that we get paid. But really it's very, very, very little effort on an ongoing basis. Cool.

I want to talk a little bit about what that exactly means, because I think there are some people that are probably new to this and they don't understand what it means to invest with somebody. You mentioned the word syndication and things like that, and that might be above people's heads, but how do you find these investments? And then what does it look like to invest in it? What kind of numbers are we talking about? What kind of terms? And then what are ultimately some of the benefits, I guess, in terms of returns? This is a loaded question, but basic.

Understanding when you're operating at this scale, okay, so let's pretend you're buying a $10 million property. That's like owning 100 $100,000 properties, right? So instead of accumulating each of those one at a time, you and a group of people own all hundred of them. And so you just invest your capital. And then we have what are called the general partners or the sponsors of the deal. These are the people who are, who find the asset and help make sure the asset performs okay. And so they're taking on all the headaches, and you just get to enjoy the privileges and the benefits of owning the asset. That's why we invest in real estate in the first place. Nobody buys a rental property, but because they want a headache, nobody wants to deal with another liability. That's not why people get into real estate. They want it because of the financial benefits. Right. So this allows you to get financial benefits without putting in all that other sweat equity. So there's a trade off in general? Yeah. If you do everything yourself on a percentage basis, you're likely, if you do it well, to get better numbers, if you do it well and get the right properties, the right prices, which buying single family is very hard when those are primarily priced at the market value of what somebody would buy to live in. Not as a business. But I found out about these by going to real estate investment meetings. I met a guy who runs a program, and he has an educational program that my wife and I joined a couple years ago. It included a bunch of online lectures, but also included bus tours where hundreds of us would go there. Every few months, we load up a bunch of buses. We'd go to different properties, and they'd run the numbers. Okay, so speaking of the numbers, a typical deal, because you can only have so many investors in most of these projects, you have to put up a good amount of capital. So usually we're putting up at least $50,000, and we've put up to $200,000 into a single deal. But typical investment minimum is 50,000. Let's say they're trying to raise $4 million to buy a. Let's say a $10 million property. So 50,000 goes into 4 million 80 times. So you would need 80 investors at $50,000. So they would put all up their money. Okay, and then after you own the asset, then every month or every quarter, depending how the project is run, the cash flow gets distributed between the people who are the general partners, the sponsors, those who are the limited partners, the investors. So on a typical deal these days, cash flow will be in the range of, let's say, 7%. Okay, that's kind of a typical deal. Sometimes a little north of that, sometimes a little south of that. And that's just kind of on average, so you put in $50,000. Let's pretend that 7%. You'll get $3,500 that first year. Okay, so like, 300amonth. But as you own the asset, usually that cash flow grows because the rents grow. Now, sometimes the mortgages are interest only for a few years, so it might grow for, like, three years, and then it might be principal and interest. So then there might be less cash flow. So then you might go down again a little bit in subsequent years. In the process, usually the value of the asset is also growing because rental properties at that scale are valued as businesses. They're valued by how much income they have, how much profit they have. So over a course of five years, you've gained cash flow, but you also have had an appreciating asset, if done properly. And so then if you exit, they sell the property, then those capital gains get redistributed out to the limited partners and the general partners. Often the appreciation is about the same amount as the cash flow. So let's pretend you're getting 7% on the cash flow side. There's also 7% appreciation along the way. So in the end you might get around, let's say 14% on an average annualized basis.

So let's say you have a busy physician, they're in a decent to high paying specialty. How many deals or how long will it take do you think, if their goal is to replace their physician income, like, how feasible is it that they could do that using these investments? And then what kind of expectation do you give people who are doing this? Like how long that process might take?

Okay, that's a great question. So replacing physician income can be a big challenge. It's actually one of the, it's paradoxical. But earning a very high income can actually be one of the biggest problems for a physician because there's very little that a physician can do outside of medicine to actually replace that level of income. So it takes a lot of assets or a bunch of other jobs or a very successful business. So having that high income can get in the way, especially if you learn to spend it all on the front end. The best thing to do is to learn to separate yourself, your spending from how much you earn. They should have nothing to do with each other. So as your income goes up, your spending doesn't change. My paycheck does not go into our checking account. That's almost the equivalent of putting cash into your wallet. That money is gone. Right? So I only put money into my brokerage. And then every quarter or so, whenever our checking account is low enough, we just do a bolus transfer. That way I don't correlate my income with my spending. Now let's pretend you're very well compensated and you have a very temperance standard or cost of living. Okay? If you could save, let's say 80% of your money, this is a very high percentage, okay? Very high. In a matter of a handful of years, your investments should be able to replace your spending. So our goal starting off in this was I wanted to get to a number where our passive income supports our expenses within five years. Okay? And we're four and a half years into this and we're ahead of schedule. So we are very happy with where we are. That was to get to a sustenance level. If we just took our cash flow right now, we probably couldn't have all of the expenses we have right now. But a lot of our expenses are directly correlated with the fact that we work. Right. Like, if we weren't working, we could cut a lot of our expenses down. I call that, like, working tax. That's outside of the income tax. But we could certainly get by on our cash flow right now if we needed to. But within one to two years, we will be very comfortable and have a lifestyle that would basically replace, like, my wife's income right now, and she's a radiologist working 70%.

So what do you think are some of the biggest difficulties for physicians that are thinking of doing this? I mean, I mean, you're working full time still, right? Yeah. You work a lot.

You wanted to do this meeting a long time ago. Today is the first day.

And then how you're able to really balance all that with being a physician, being a father, doing all these things? Like, I guess people are wondering how to balance all these things to ultimately get the goals they want.

Yeah, it's a challenge because as physicians, a lot of us are type. A lot of us have perfectionistic, controlling mentalities. We want to be in charge of everything. And to get to that level in real estate, that requires a lot of time, energy, education, experience. The same way that you invest in, like, the stock market in your other investment accounts, that money you invest without any plan of actually controlling what's going on in those companies. If you look at real estate the exact same way and say, hey, this is what I'm going to do passively, and limit the amount of time intentionally so that it's not costing you other things. So you could get all your education just driving to work and home. If you spent every day of your commute for six months just listening to different real estate podcasts, you would have an unbelievable wealth of education. Okay. Understanding you could do it for one month and get yourself so much farther from where you started. So the first principle is just to let go. Think of it as a passive investment. And you just want to educate yourself enough and network enough that you get yourself in with the right people. I mean, people like you. You bring resources directly to other physicians and make it so much easier doing a lot of legwork on the front end. And for me, when it comes down to it, I ultimately always want to invest in a place where I know I'm investing with. In parallel with X and X and X person. These are the people in charge. And at the end of the day, these are private equities. Right. They're not publicly traded securities. They're private. So I like to know the people who are running the deals. I put my Money alongside their money. And so I'm okay with that. I have enough other responsibilities that I don't want more responsibility. I don't want to take the phone calls and make decisions about different things. I want to be able to limit that because that's what causes a lot of stress. We have as physicians is having all those things to deal with. So you let go get some education, work with the right people, meet people, and then start. The best way to get from point A to B is take one step.

Well, what do you think? The just to leave people some practical advice. Like when you actually meet these companies or these people that are running these things, what's like the first question or two that you ask them to help you do the due diligence on them or to make you feel more comfortable about investing with them?

Yeah, so there are a number of things that I look at. One is first, are they putting in capital into the deal? How much of their own capital are they investing? Deals can look great, but when they don't have skin in the game, if there are other deals where they have skin in the game, their attention might not be focused on the one that you are investing in. So. So that's a number one. I don't invest in anything unless somebody else has skin. And I want to know how much it is, because as an investor, I don't want to put in more money than the people who are in charge. That's kind of one of the things. Second is track record. Although this is an interesting thing because when you're underwriting track record, a lot of this can just be based on market. So I look at things like what challenges you had and how have you been able to. To get past those challenges in different situations. I want to look at how have your investors been taken care of when things haven't gone as expected? Because things aren't always going to go as expected. I want to know how they value their investors. So when people say, my investors have met pro forma and every single deal that we've been running and we have 20 deals, that means a lot to me. It doesn't necessarily mean so much to me when somebody says, oh, I have a portfolio of a billion dollars and, and we own 100 assets, because you know what, if they own 100 assets, how much time is that individual actually possibly pouring into the one that you're investing in? So I actually don't necessarily dislike investing with newer people, people who are still a little green, because the people who are a little more green are the ones who have to work really hard to establish themselves. When somebody asks their baby, they don't want to go bad because that might ruin their entire career. Right. So I don't look at experience necessarily just in that realm, but I want people to have a little bit under their shoes. But I also want to know that this property, how are they going to make sure it's taken care of and what are their goals? So in the deals that I usually invest with the investors, the limited partners, we have a preferred equity position. So preferred equity is paid before the general partners profits ever get distributed. So, for example, if a deal has a 7% preferred rate of return, you need to receive your 7% of your capital back to you on a cash flow basis before the general partners receive a dollar of any profit distributions. And that aligns our goals. They want to make sure that they are meeting their goals, otherwise they don't get paid. Some deals structure it where it's just a straight percentage where the general partners might get 30% and the investors may get 70% of every dollar of profit. Well, the property could be performing poorly, but that general partner is still taking 30%. They may have to work very hard to get that property to perform a little bit better. And it might not have much difference on their bottom line. They may be more motivated to just get the next deal and get 30% of the next acquisition. So I like our goals to be aligned because that's what's going to carry you to the end the most successfully. Remember I said you have to be willing to relinquish your control, but if you know that they're going to make the decisions that are in your best interest or the kind of decisions that you would want to make, those are the decisions that are made when goals are well aligned. And to me, that is of primary importance.

Yeah, I'm with you on that. I remember, I would hear from, I'm trying to remember who said this. I think it was Tony Robbins, but it was like, how do you know you can trust somebody? And really what it comes down to is that your interests are aligned. That's how you can ultimately trust somebody. And so I think, especially in this realm, it's really, really important to figure out, figure that out. And I know it comes with a little bit of a trial and error trying to figure that out, because no two deals are the same, but I think you hit the nail on the head there. You mentioned some podcasts and I think for people you mentioned a couple times, and I was like, I know I was thinking what podcasts are the. Do you have any of those off the top of your head that you can remember that maybe some people can kind of.

So the first one that actually I got hooked on was the Afford Anything podcast with Paula Pant. She's got a very calming voice. It's a nice way to get into work in the morning. And she owns a number of single family rentals and she kind of caters to that audience. Regular America, Regular Income America about getting rental properties, managing them, but also just about financial independence. But she's the one I got hooked on initially and I binged on hers and she's fabulous. I like other financial podcasts. I also got really hooked on the Stacking Benjamin's podcast, which Joe Salsihai. He's wonderful. His has very little to do with real estate, but it's about finance in general. But it's kind of like a variety show. It's entertaining. He also has a spin off show and he was gracious enough to have me as one of his guests a while back when he was getting it started. But those were the two that I got hooked on initially and got me started. Biggerpockets has just an unbelievable wealth for real estate. Got yours. I'm happy to hear that. Semi retired MDs, they got theirs launched or a soft launch. That's very exciting. I'm excited to hear about that one. But there are so many out there. So just start listening because that time, if you're driving, that time's gonna be spent anyway. You might as well make something out of it.

Absolutely. So what do you think that if there's something that you wish you knew at the beginning of this, it hasn't been that long for you. But if there's something that you wish you knew at the beginning, which would have probably saved you a lot of headache and maybe even shortcutted things for you to kind of accelerate you on this path.

Yeah, I would have gone into multifamily investing sooner. I wanted to wait a little bit longer when I kind of might have had more money. I didn't start it until I think two years after we finished training. I wish I had done that more on the front end because then one market timing wise, it would have been amazing because that was right as values in multifamily had been soaring. But I have more assets now, I have more cash flow now. I'd be farther along in the journey, but that's what I would have done. I used to want to do everything myself and I know that A lot of us have that tendency. We all went through training, through residency, where you do everything like it is you. That is your job is to just get everything done. And we're. That's kind of ingrained into our head. We're not trained to believe that we actually have any value in our time. Right. And so you just want to do everything. And I should have learned earlier just to let go, not try to do all these things. Even though the numbers look good, I did not value the time I put in. And if I did, I valued it at the time, at the money that I might have been making at that time. And back then, I didn't have kids yet, and I was like, oh, I have more time. But I didn't see where. I didn't look forward as to what I was going to be able to generate as a physician three years down the road. And so if you think with the end in mind and think, okay, five years from now, this is where I want to be, then you think, what's the direct path to get there as opposed to doing that transition? Now, having a single family property is a very educational experience for anybody. You learn a lot doing it. But owning one rental property is not necessarily going to make any difference in a physician's cash flow. Back when I was a resident, I turned my first property into a rental right out of training. And, okay, it was cash flowing like 300amonth, which was awesome. At that time, when you're making like, $3,000 a month, that sounds great. But now when $300 is like an hour or less, if that property causes you one hour of headache, even with a property manager, you only traded that time for that money. So there has to be a scalable value there. And had I looked farther down the road and seen that earlier, I would be in a different position now. But I'm very happy where we are. We've learned a lot. We've made a lot of headway. We also ran an Airbnb for a few years, and that generated an incredible amount of cash flow for us, especially this past year. But that hasn't. That's not necessarily as scalable for us. That was something we did, and it made a lot of money for us. But I don't envision having 20 Airbnbs, but I do envision owning 20 apartment complexes even within the next two more years.

I mean, do you think the opportunities are still out there for people right now? I think that people are looking at the time that we're in right now, and they're wondering where the market is and without going to all of it. Let's just give us your 1 minute take on where you think the opportunities are in this time that we're going through right now, especially with COVID there.

Are going to be an unbelievable amount of opportunities. I mean timing wise, I wish that I had finished training in 2007 because you know, condo that I lived in had 40 units. I could have bought all of those units. The following year it sold for $600,000. It's unbelievable. There will be a lot of opportunities and people are going to be able to buy properties that have incredible cash flow and appreciation. You have to underwrite them well and don't get over leveraged. That's where people get in trouble. I look for safe deals. I don't look for the 10%, 12% cash on cash return on an annualized basis. That to me is just very, very, very risky. I want a deal with at least a seven year mortgage, if not 10 to 12 year mortgage that will ride out an entire market cycle or multiple cycles. And I'll take less cash flow to be under leveraged with very, very safe lending terms because this is where people, times like these people are getting ruined because they over leverage themselves and they got bad mortgages that they cannot refinance.

Yeah, those are some great tips and I think for anybody listening to this, they should definitely consider those criteria, especially when they're considering investing as well. I think a lot of physicians have the. They make the mistake of just chasing the high returns and chasing the glossy numbers. But ultimately I think that also protecting the downside is just as important, if not more important, especially for us as physicians. Now where can people. You know, before we get to our number one tip for people who are interested in diving into real estate and kind of following your same path, where can people find out more about you? Where can they reach out to you perhaps as a resource and yeah, learn more about it.

So if they're in your Facebook group, I'm often there. I'm happy to touch base. People can find me there directly in Facebook. I do have my web page which is a little bit dormant, but it's 39.6392 numbers and then point p oint number6.com I have a number of educational videos there that have been stored there as a repository. They're also on YouTube but people can reach out to me directly. Find me on Facebook is honestly the easiest way to get ahold of me. Emails are just that I can never catch up with emails. I've given up on that.

All right, thanks. Let's give me your number one tip before we leave here. For people who are interested in really creating financial freedom through private passive real.

Estate, most important thing is to live as low a proportion of your income as you can. So you can invest as big a proportion of your income as you can. If you do that, if you save just half of it, you can easily get there in under a decade.

So that's powerful. I think that's the goal for everyone, you know, then they ultimately get the choice to live how they want, especially in and out, you know, outside and inside of medicine. So, anyways, I want to thank you for your time, Victor. Been super helpful.

Peter. Thank you for your time.

Yeah, you've done amazing things, man, and keep it going and yeah, thanks for your time.

Absolutely. Whenever you do another TikTok, we'll do a duet.

Yeah, talk to my wife about that. Okay. All right. Take care, my friend. See ya.

Peace.

Bye. 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 a 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, Passive Income 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.