#73: The Roadmap to Success in Passive Real Estate Investing

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 had an awesome weekend. I don't know about you, but this last previous weekend we had Financial Freedom Through Real Estate Conference 2021, otherwise known as PIMDCON. That was amazing. We had over 8,000 physicians and other high net worth individuals sign up to just find out more about real estate. We had over 20 speakers, we had so many amazing sessions, plus Q&A sessions, mixers, and it was just so fun to talk about all aspects of real estate and how to use that to create your ideal lives. We talked about active investing, massive investing, investing short term rentals. You talked about taxes and asset protection. It was amazing time. Hopefully if you were there, you got some value out of it. We're going to do it again next year. Hopefully it will be live in person. We might do a hybrid portion too as well, so look forward to that. Thank you for being a part of this year's conference. Your feedback was amazing and we look forward to doing it again. For those who want to continue the journey, want to let you know, depending on when you're listening to this, that our next class of Passive Real Estate Academy is happening soon. In fact, enrollment is open right now and only till the 26th. So if you want to get in with our next class, you want to learn how to confidently invest in passive real estate investments like syndications and funds in just about four weeks and join a community to vet deals together, share opportunities for a lifetime. You get lifetime access to that. Make sure to join us, okay? And we want to make sure you love this thing. We, we will let you take the entire course and if you don't love it, let us know. We'll give you your money back. So that's our guarantee. Hope you're able to join us. Find out more@ passiverealestateacademy.com now this week we're going to be talking about the Passive Real Estate Investing roadmap. I know that when people think about getting into real estate investing, they often have a little bit of fear or trepidation getting into it because they don't understand actually how to get started and what the next steps are. When we all got into medical school or into our specialties, we kind of knew what the roadmap was, right? Get into med school, get into a good residency, do a fellowship, find a job. And it seemed pretty clear which way to go next. But when it comes to passive real estate investing, or just investing in general, sometimes it feels like the wild, wild west. Like you're not sure exactly what the first step is. You don't know what the second step is. Sometimes it's hard to visualize what path you should take to be successful. And so that actually keeps a lot of people from investing. And so I've actually thought about this quite a bit, and I've kind of come up with a roadmap to help people figure out what it looks like to become successful in passive real estate investing. And I decided to share that with you. Right now. We're gonna go through each step. There are actually six steps, and let's go over them right now. Step number one, Just like with any map, you have to know where you're starting and then where you wanna end up being, right? Those are the two points that you need to find out how to get from where you are to where you wanna be. So the first step is to figure out your goals. You need to actually make it as concrete as possible and be as specific as possible. This is what I tell people. Figure out, how much cash flow do you want a month? How much cash flow do you want a year? Because putting a number on it, an exact number, gives you exact target to hit, right? And then when do you want it? Because it matters. Do you want it now? In the next five years? How quickly do you have to do so you want it in 10 years, 15, 20? So come up with a number that seems to make sense for you, actually gives you a little bit of excitement. And figure out how quickly you want it. And I'll give you example of other ones that I've heard before from people in our course, in our community. Some people said, I want $10,000 a month in extra cash flow from my investments in 10 years. Then there are others who have said, I want $20,000 a month in 10 years. You know, all these things are doable now. You just kind of start with those goals so you can start breaking down or reverse engineering your plan to figure out how to ultimately get there. Another question I always ask is, like, how important are the tax advantages for you? Like, are you trying to really, really, really trying to minimize your taxes? And how important is that? And that'll also help you decide what investments to get into. Number three, like, how important is diversification? Meaning that how concentrated do you want to Be in your investments. Do you want to have multiple different types of investments all over different states, all different types? Like how important is that diversification? And I think all these things are super important for you to figure out and actually put down on paper. So I'll usually give people time to think about it and then not just think about it, actually write it down somewhere. Because I don't know about you, but I have spent some time writing out goals and I've done that last. Over the last couple of years, I've spent some time doing some more self development. And when I go back to those notebooks and those things and I look at those goals, it's amazing to see how many of them I've actually accomplished. Even at the time when they seem kind of outlandish, they seem crazy. There's something powerful about setting your intention and then somehow you tend to make things happen, right? Same thing with when you decided, I'm going to be a doctor, I'm going to be this type of doctor, right? You didn't have to think about it too much. You had that as a goal and that all your actions and the way, you know, your mindset and all the thing was geared and focused on doing that and you were able to accomplish that. So write them down and I promise there's a greater chance that you're going to hit them. Okay? Step number two, you got to find opportunities. So step number one was find your goals, Figure out your goals. Number two is find opportunities. So where do you find opportunities? Especially in passive real estate investing? Now we're talking about syndications and funds. We talked about it on previous podcast episodes. You know, that's where you invest with other people and invest in their deals and leverage everything they have to have your money working for you to create more income opportunities. Where do you find these type of deals? You might find them at local real estate investor meetups. I know I did. I go to conferences, you know, whether virtual or live to find out these things. You might go to blogs, books, podcasts, different Facebook groups, and you might hear about different opportunities that people are investing in. All these things are about networking, right? Meeting other people, talking to them about their experiences, and getting introduced to some of the same opportunities they've had success with. The other thing is, maybe there's crowdfunding sites out there for you, right? And we have a good list of them on our blog. My favorite crowdfunding sites. You can just look it up in Passive Income md maybe you hear about it from some of your friends. They might pass you some opportunities or maybe one of your colleagues at the hospital might be talking about it and that might be as well. Now, I don't know if you notice on Facebook, if you ever, you know how Facebook tends to know what you're looking at or interested in. Sometimes you'll see ads there. You'll also look at Google and Reddit. But personally I don't recommend necessarily that you just take these cold opportunities and seek them out. Usually it helps to have somebody that actually knows a sponsor, knows these deals, has had success with them, and that's going to really increase your chance of finding a good deal as well. Then the next step, step three, you actually have to vet the opportunities and do the proper due diligence. Now this is a step, surprisingly, that so many people gloss over. They just cross their fingers, they just hear about it from a friend, they look at it, they say, I don't really understand it, but you know what, I'm going to put down 25,000, 50,000, a hundred thousand dollars based on crossing their fingers. Now personally, I think that's a lot of money to put at risk for something that you know very little about, right? Or have spent little time learning out, you know, learning how to do the due diligence for. I mean, how much time in terms of working did it take you to create that income? This is supposed to be post tax income. So if you're putting in $50,000, you probably had to do 80 to $100,000 of work for physicians. That's not a short period of time. That's time that you traded away from your families, away from doing things. So it is your hard earned money. So make sure you know where you're putting it and why you're making that decision. You don't want to do a whole lot of trial and error in this situation to learn if you can. Now, I know some people just follow their friends who've been successful and colleagues, that's better than nothing. I mean, there are probably your friend, hopefully if they know and you trust that they know what they're doing, they that would be a great thing. Now the thing that I've noticed though is people have different goals, they have different objectives. For some, they might have different risk tolerance. So I wouldn't base all your decisions based on what your successful friend is doing. The other thing is some people just choose opportunities because the professionals tell them, you know what, this is a great deal. One thing you'll look at, when you look at these opportunities, you'll see all this time, you know, because of our conservative underwriting, mean that we're being very conservative. Conservative. Whenever you see that word conservative come up like five or six times on one page, that should make you think, who's telling you it's conservative? Is they're telling you that or is it based on your due diligence? Are you realizing that they're being conservative? So I will tell you that this is probably the most important part of this process. I mean, obviously, you have to find out your goals. You got to find the opportunities, but you got to spend the time knowing why you're investing with that certain group and where the risks are and how to mitigate that. Because at the end of the day, you don't want to lose money. That's your time that you cannot get back. You know, step number one, according to Warren Buffett, rule one, don't lose money. So make sure you mitigate the risk on that side by knowing who you're investing with and knowing how to do the proper due diligence. Now, where can you find out how to do that? There are plenty of books on the subject. There are Facebook groups. There are obviously some great courses out there and some communities that you can be a part of to learn how to do this well. And I will tell you, it is an investment to focus on that and spend your time on learning how to do that. Because there are three things that you need to learn how to vet. Number one, who's running the deal? Because let me tell you, it matters who is holding the knife. Like, when it comes to a surgeon, like, just because they're at a certain institution or this or that. Yeah. Their track record matters. Their experience matters. Right. Who's holding the knife? And, you know, you wouldn't put your, you know, trust in somebody who really doesn't know what they're doing. And you probably spend a good amount of time. If your family member were getting operated on by somebody, spend that time with the sponsor as well. Figure out who's running the deal, what's their track record, what have they done in the past, what makes them successful now, and what's going to make them successful. Maybe when things don't go as well, maybe the market doesn't, you know, sags a little bit. How are they going to be able to get through that? How have they got through it in the past, and what are they going to do in the future? So that's where you spend most of your time. Then you look at the property itself. Does the deal make sense? Is it In a good area. Do those assumptions make sense in terms of how they're going to increase rents, drop expenses, you know, these kinds of things? Is it a story that you start to believe in terms of what they're going to be able to do with it? Third, you want to look at the market. You want to know where the property is located and the demographics of that area. Is it in an area that is increasing in population? Right. That that means more renters, that you know, demand and supply. Right. Or is it an area that has like concentrated, like job market that you know is going away in the future? For example, I remember Detroit went through a huge issue with their automotive market. You know, the jobs were all kind of very hyper focused on the automotive industry. And unfortunately that went down. And so, you know, it really damaged that whole city and that whole area as a market when it came to real estate. And even within each market, as probably you all know, there are certain areas where you would rather live. Sometimes a street or two makes a difference. So there are sub markets that you have to know how to vet. I know this may sound intimidating to learn how to do these things, but it's just repetition. There are plenty of people who do this well. There are community members go from again, knowing very little to nothing to about four weeks knowing how to do this really on a great, on a very high level. So I know it can be done if people just put the effort in just to learn how to do this and spend a little bit of time honing their skills in this step four on the roadmap. You know, we've all talked about already setting your goals. We talked about finding opportunities, we talked about vetting opportunities. Then after you do that, to actually have success, you gotta invest, you gotta take that step. And so many people also get stuck here. Like they're worried about making the perfect opportunity and making the perfect investment. They want that home run right off the bat. Well, let me tell you, in the beginning you're gonna have to learn a little bit, right? You're gonna learn how to vet. But when you invest, you learn so much more about different opportunities, what to look at. And so I wanna kind of release you of a little bit of that expectation that your first deal is gonna be perfect. It may be, and I hope it is. But to be honest with you, most people's first deals is a learning experience. So that's why a lot of people go with a little less that they feel like, okay, at the very least I'm gonna learn with this amount. Then they start learning, then they're comfortable putting in bigger and bigger amounts. But none of it happens without you investing. Just so, you know, just like investing in stocks, I guess, for the long run, you don't get rich overnight. It takes time for these deals to happen and to turn around for it to sell. And your wealth does grow, and it grows in an exponential manner. But as we know, when you look in an exponential curve, right, it doesn't happen right away. It takes time for that thing to build a little bit, and then it starts growing at a rapid rate. So you have to get to that point. And the only way to do that is to actually invest and get started. The cool thing about these passive investments is that when you. And once you invest, really, there's not much more to do. You just wait, you hear, you know, wait for the updates, and you just wait for distributions. And those things should accumulate over time and eventually these properties will sell and, you know, hopefully from that you'll get a nice return and then you can roll that into the next deal, really compounding those returns over time. The beauty of these passive investments is that again, all the work is done up front where you've done the due diligence and you learned how to do that well. Then once you invest honestly, it's completely hands off except for looking at updates. And you get a tax return every once in a while and you. And every year and you hand it off to your cp and that's about it. All right, step five, then what's next? Right? You've already gotten your money, you got all this. To really get success, I think you really need to make sure step five and six happens. You got to measure and course correct. Now what does that mean, measuring course correct? So it's just like the analogy of like a plane flying from Los Angeles to Hawaii. Like if you look at it from on those little cool maps on the airplane, it looks like it's just like this really smooth straight line. When in reality there are different wind conditions. Things are happening. They have to change flight paths. If you look at it on a micro level, if you ever look at these, this course, the path of the flight, it's actually quite jagged. Things are moving and that sort of thing, it's smoothed out over time when you look at it on a macro level. But on a micro level, you're constantly course correcting, right? And so the same thing should be, is the same thing you should be doing with your own investments. Like you make an investment and then see how they do. But figure out whether it makes sense for you, whether you made a good decision or not. Like, figure out whether, you know, you need to make some adjustments as you go based on the cash flow that you're getting upon the, you know, the deal and. And the updates that you're getting. Is this a group that you want to stick with? Are you. Do you need to look for other groups to invest with that? Constant measuring and course correcting is ultimately what helps hone and get your investments in a really great place to provide the cash flow that you want and that you need. All right, and lastly, step six. I call this the acceleration phase. So, you know, you start. Usually it takes a while for people to get their first investment under the belt. And then once that happens and they're measuring and they're course correcting, I find that things can accelerate really, really quickly. Things don't necessarily work in this, this whole space on a linear fashion. It tends to be exponential only because you tend to compound your returns over time. I'm not saying it all happens super quick, but at some point it starts to accelerate. Mean that again, the velocity of your money, the velocity of these investments tends to increase over time. Now, how do you do that? How do you make sure that you accelerate toward your goals? There are two ways that I think that you do that, especially when it comes to investing, like this. Number one, model other people. You got to figure out what other people are doing well and then just follow them, right? Figure it out. You've done that in your career, you've done that in your training. You found people do it well and you start to do things like them, right? I mean, you might. You might change things up a little bit, but you find those mentors, right? You find people that are successful, you know, they're successful for a reason. They figured out something, whether it's through trial and error, and you get to jump all that. You know, that hopefully that painful stage. Learn from their mistakes by modeling other successful people, right? And how do you do that in reality when it comes to passive real estate investing? Find a friend who's extremely successful. Find somebody who's in this space, who's teaching about it, who knows it well, has had experience with this, and can really kind of be a model for you in terms of figuring out how to make those investments and avoid mistakes, right? Learn from their trial and error. Learn from all those mistakes that they made to really leapfrog that, right? And start this journey out on, like, ahead of the game a little bit. And number two, to really accelerate Things I say find a community, right? Find a community of like minded investors. For those who are part of our conference recently, you saw the power of being in a community of like minded people. In that community of thousands on that Facebook group, the energy was amazing. People were pushing each other, supporting each other, helping each other look at deals. When I think about passive real estate investing, I feel like it's a team sport, meaning that we're all looking at these deals together and it's not really like my deal is better than your. It's not like that. Like there aren't really winners and losers in this. Like, especially when we're all trying to get the same goals, we can all invest together and do well. Meaning that. So get a community together who knows how to do these things, can talk about it, can vet deals together, share information, share resources. Because I mean, honestly, 10 people looking at a deal, you're going to find things that maybe you yourself wouldn't have seen. Now maybe it adds some color, maybe it doesn't add your change your decision at all, but now you have a better perspective on it and you have even more reason, you know, in terms of information to say yes or no to an opportunity. You know, we've been really fortunate to create a community of over a thousand of us that come and look at deals together. And that's been so powerful because I'm learning too. There's somebody who's in a different market and they're able to say, you know what, that, you know what they're saying on that pro forma, what they're saying on that deal actually doesn't make a lot of sense. I live close to there, so I know. Or that sort of thing, right? Just stuff like maybe me being on the west coast, like I may not ever know that, right? Or there are people in the community who will find opportunities just because everyone has their own networks. And so you find different things. So maybe people can share that and you can find opportunities that you wouldn't have found. So, so that community aspect I find is extremely important. In fact, rarely do people talk about it in the investing world as much. They kind of talk about like, you've just got to do your plan, you got to do what's best for you. And that's absolutely true. You're going to have your goals and your objectives and all that stuff, but having a community to bounce ideas off, share opportunities and these kinds of things are extremely important. And you're going to learn at so much of a more rapid pace. And ultimately I think that will help you accelerate towards your goals. So let's, let's do a quick recap again of the passive real estate investing roadmap to success. Number one, figure out your goals. Number two, you find opportunities. Number three, you vet opportunities. Number four, you invest. Number five, you measure and course correct. And lastly six, you accelerate. You accelerate towards your goals. So I find that if you can follow those six things and stay on that road, you're going to find success in this. You know, we're all extremely intelligent. We've all really worked hard to get where we're at. If we put our focus on something right, especially as physicians, in my opinion, there's no reason we can't be successful in it. I hope that's helpful. If we can support you in any way, please feel free to reach out. In any case, have an amazing 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 at. 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 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.