#71: Is the Time Spent Investing in Real Estate Worth It?

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've had an awesome week. I think you're gonna enjoy this week's podcast episode because we're gonna be talking about a topic that so many people talk about when they think about investing in real estate. In fact, it's one of the most common objections to actually investing in real estate. And that's about the time involved in getting into these type of investments. Now, before we get to that, I just wanna remind people, by the time you're listening to this registration is now open for our Financial Freedom Through Real Estate Conference 2021. It is our signature conference. It's one of my favorite conferences of the year. And what we do is we get about 25 experts in the field of real estate there to provide information, education, resources to all those who are thinking about getting started in investing real estate or really improving in their portfolio and maybe even branching off as different things. So here's your opportunity to get all of that information. High Yield packed in one place in one weekend, September 10th through 12th. And guess what? It's absolutely free. Now there are VIP options for people who want a little bit more access and want the recordings type thing for life. But otherwise, if you just want to get in, get the education and hear from these amazing speakers for absolutely free, check out PIMDCON 2021. So PIMDCON conference pmdcon2021.com and you can register for free right there. The other thing is that our real estate course for those who want to learn how to confidently invest in passive real estate in four weeks, the waitlist is now open. If you are on the wait list, you are going to have access to some additional discounts and that is launching pretty soon. The waitlist sale is coming up in a few weeks, so make sure to check that out. It's at www. Passiverealestateacademy.com. you know, if you ever spend any decent amount of time with me, whether it's over at dinner, whether it's at even a sports event, or just, just, you know, just coming over to the house and hanging out, you know that I can't stop talking about passive income investments, right? I mean, I talk about it, it's a passion of mine and somehow inevitably comes up and we all these conversations with friends, we talk about real estate investing. Now I've heard obviously countless stories of how real estate investing has helped people achieve their goals. But from those who haven't started investing, right. I tend to hear a lot of objections. Now. One of the major objections I hear is that, you know, they say this, I don't want to be called in the middle of the night to unclog a toilet. I don't want to deal with plumbing issues and that sort of thing. I mean, what they're ultimately saying is that they really value their time, right? They don't want to deal with the hassle factor and the effort involved. You know, possibly investing in real estate. Probably they've heard stories, you know, there might be a myth that's perpetuated and that sort of thing. I mean, I totally get it. And we're all busy professionals, professionals, you know, we might make decent incomes, but our time is extremely limited. I mean, it's our most precious resource. So it makes sense then that we want to make the most of what little free time we have, right? We have families, we have other interests. Right. That we want to pursue. So really we want to make the most of it. So I totally get that and I'm in line with that type of thinking. So if time is absolutely so valuable, and we know that real estate investing, you know, often takes time, why in the world would anybody want to invest in it? I mean, isn't it one of the most time intensive investment strategies? And that's what people tend to say, right, versus investing in the stock market or that sort of thing, and just letting it ride, right? Totally passively. Well, we're going to talk about that today and I want to share my experiences at least, you know, what I have. Investing real estate when it comes to time involvement. Now, when it comes to getting started, investing in real estate, like everyone should always mention that it is extremely important to gain the proper knowledge to make a smart investment. Right. I mean, this is actually the most time consuming aspect of real estate investing, in my opinion. Really accumulating the knowledge and the experience to do this. Well, I mean, honestly, it's not extremely difficult, I say, compared to all of the academic, you know, things that we've gone through to get where we're at. But it still takes time and education. I mean, I spent a lot of time reading books, blogs, listening to podcasts, taking courses, you know, participating in forums and conferences and summits and our Facebook groups. So I've really made the effort to go to, you know, all these type of things to learn from people and the experience of others. Now I've realized that all this time, the way I think about it, it's not a cost, but it's more of an investment. Now, after high school, I'd say that for most people listening to this, you spent probably five to eight to 10 years minimum. You know, you've dedicated it to learn how to be a competent physician. Now, as we continue to learn, we still continue to practice and learn, and that learning never ends. Now, when it comes to real estate investing, people often expect to be able to gain all the knowledge that they need in like one or two books. So they ask, like, what is the one book? But we know that's definitely not the case. It takes like layers and layers of just learning and foundational learning and experience by actually investing to actually get competent and feel comfortable in doing it well. So, yes, this takes some time. Then once you actually decide to invest. Now, depending on the type of investment, it may alter or kind of adjust the amount of time that you have to spend on it. Now the toilet comment that I talked about before, the plumbing issue that refers to time spent owning your own properties, I like to call that active investing. I'm sure we've all been tenants at some point. I mean, I'm sure everyone's like rented an apartment at some point, right, during college or at the dorm or whatever it might be, and we can remember how things break and just things go wrong. You can't predict that. So managing your own property can, yes, be extremely time consuming, especially if you built up a nice portfolio, right, of units. When you start hitting, you know, more than 1, 2, 5, 8, something go wrong right? Now when I hear people spending a crazy amount of effort with their own rental properties, it's usually because they've chosen to self manage. Why are they self managing? Well, because they want to save on management fees and they feel like they don't want to give up those returns. Now personally, I think it's absolutely better to spend your efforts on finding good property management. Your time is worth way more than, than whatever you pay them. Now, a good company like that will do a much better job at handling tenant issues, screening tenants, and making sure everything is in compliance with local rules. Plus, it frees up time so you can enjoy doing, you know, what you love. I mean, that's like the point of passive income, right? So people ask me all the time, how much do I spend on my rental properties with good management in place? Well, I'm always honest with People. In the beginning, when you first purchase a property, whether you're management or not, there is a positioning of the property where you have to do some rental renovations, you get to know the property, figure out how it works, ultimately think about the business plan and that sort of thing. That first six months to a year of owning a property, you know, it can be a little bit more intensive. But after that period, once that property is, what they call, you know, stabilized, then your management can handle most of the major issues. Then what you're doing as an owner is really reviewing property management statements. You're looking at, you know, what repairs were done, and honestly, they usually list what services were done, plumber calls and that sort of thing. And then you realize, man, I was not called for all those things. I mean, I was blissfully unaware, hopefully doing something that I enjoyed, like hanging out with my family. And the only way I found out about, you know, these things was by reviewing monthly statements. Otherwise, I might get an email about a tenant moving out and a plan for, you know, turning over that unit, refreshing it, renovating and that sort of thing. And then my role is to, you know, basically approve it or not. Now, there isn't to say there can't be major issues. Like, I like to be totally honest about it. I've had roofs that leaked. I've had a fire in apartment building. I've had a lot of leaks. And so these are unforeseen, like, I'd say disasters that you probably have to spend a little bit more extra time on, you know, but if you're fortunate, they don't happen that often. Sometimes they come in ways, unfortunately, and you have to deal with it. However, again, if you have great property management who can handle these type of things, it really minimizes the time that you have to spend on it. I leave all the day to day as much as I can to the professionals. So again, I can spend my limited time on things I'd rather be doing or thinking about ways to improve my life. Now, another way that you can invest is more of the passive stuff, right? The crowdfunding, the syndications and funds that we talked all about. That's when you're investing in a really passive manner with real estate professionals. Now, they've laid out an opportunity for you to invest in. You see that what they call the deck or the offering memorandum, and it offers you the opportunity to be a limited partner in their deal and tells you about all the returns and the timeline and that sort of thing and how they'll really turn this Property and this deal into something good, right? And make money for everyone. The time spent in these type of investments is all on the front side. It's about doing the due diligence and figuring out whether this is a good investment for you to make. And as I was talking to somebody about even just last night, I say you got to spend 80 to 90% of your time on these type of deals, vetting the sponsor, research their experience and the track record, get to know the leadership who's part of that deal. Because it's a human game. The people that know how to do this well can execute well, have a good structure. They'll take a deal and basically follow it, right? Their business plan. They'll actually meet or exceed their business plan, or if the market kind of goes down, they'll be able to manage their way out of it. It's the sponsors that don't know what they're doing, that haven't been battle tested, who don't have the experience. Maybe I just were lucky recipients of a great market. When things go poorly, they're not gonna be able to manage their way out of it. So it's important for you to understand that sponsor's track record, what they've done, and how they plan to mitigate risk. So that's the majority of time you spent. The rest of it, you need to vet the deal. Like, what kind of opportunity is it? Is it debt, equity? What kind of asset class, meaning that is apartment building, industrial, warehouse, retail, strip mall, that kind of thing. Like, what are your expected returns and what kind of risks are they taking to meet those returns? And how long is your, you know, how long is your investment likely to be held up for? And ultimately, what's the minimum to invest? Now, once you have a firm grasp of all of that and then you decide to invest, then the rest should be completely passive. And that's why, honestly, we tell people, learning how to confidently invest in these type of investments is everything. Because after that, you get to sit back and wait for these distributions to roll in. They call it mailbox money. And to me, it's like the definition of passive income. Most of the work is done up front, and then the returns continue on afterwards. Like someday that property's gonna sell and you'll receive your return and capital and you'll be ready to move on to another investment. I mean, I think people ask me, like, how long does it take to vet an opportunity like this? And, I mean, some can take just a few hours, some could take a couple more hours, three to five hours, you know, while I gather data and that sort of thing. It really helps also if you have a community of people investing, you know, together, because it really cuts down on that research time. And if you already know the sponsor very well from before and they just offer you another deal, obviously that cuts down on the vetting period quite a bit. So now, as of the time of this podcast, I have to look at the exact numbers, but I've invested in more than 30 to 35 of these type of investments. And every time you look at them, you get a little bit better and faster at doing the due diligence. So having to put all this time in and this effort, like at the end of the day, you know, is it worth it, right? That's what people ask. I think it kind of depends on your goals. Like my goal, it's always been to have multiple sources of passive income, which truly allows me to spend my time how I want. I wanted that control for me, I wouldn't even invest in real estate if it didn't allow me to buy my time back. So because of that, I mean, I put systems in place to make it at least time consuming as possible. Like, so when I own my own properties, I use property manager. There's no doubt, there's no question about that. When I invest in passive opportunities, I do the vetting up front. I stick to some trusted sponsors, maybe I've done the vetting already and then I sit back and wait for that income to come my way. You know, ultimately it's true, yes, real estate investing can be time intensive, right? A little bit more, more than stocks, depending on what you're doing. But you can really structure it to really give you that additional passive income, those streams which ultimately build and build and that cash flow allows you to spend your time how you want. I mean, I tell people having, you know, making smart decisions and investments and you know, if you can do it now, right, in real estate, the earlier on, that can really change the trajectory of your life, right? And your career and the time you spend. Especially if you consider now as being one of the best times of your life, right? Well, you have a family, you have health and these kind of things. Isn't it worth it, right? Isn't it worth it to create passive income now so you can start enjoying your life now? And so I think it's worth the extra time. So I'd love to hear what you think. Let me know, let me know. On the blog or in our Facebook groups, passive income docs, we'd love to hear from you. Okay, see you all again next week. 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 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.