Hassle-free real estate investing for busy doctors [PODCAST]

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“Why real estate?

By having a ‘why’ you want something, it’ll help keep you motivated to pursue your goals when setbacks and mistakes occur.

For our family, we wanted passive income streams.

Passive income gives you options. I love options.

It doesn’t matter if you want to work forever, retire early, or change careers, multiple income sources can make it happen.

Our passive income is not only tax-free, but we’re also able to access it if needed, unlike traditional retirement accounts.”

Jeff Anzalone is a periodontist who blogs at Debt Free Dr.

He shares his story and discusses his KevinMD article, “Hassle-free real estate investing for busy doctors.”

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Hosted by Kevin Pho, MD, The Podcast by KevinMD shares the stories of the many who intersect with our health care system but are rarely heard from.

Transcript

Kevin Pho: Hi, and welcome to the show, where we share the stories of the many who intersect with our health care system but are rarely heard from. My name is Kevin Pho, founder and editor of KevinMD. Today on the show we have Jeff Anzalone. He’s a periodontist, and he wrote the KevinMD article “Hassle-free real estate investing for busy doctors.” Jeff, welcome to the show.

Jeff Anzalone: Thank you, Kevin. A pleasure to be on here. Avid listener; thanks for all that you do for the doctor community. I appreciate it.

Kevin Pho: I don’t have very many periodontists on the show, so if you could just share your story and your journey to where you are today, that’d be a great start.

Jeff Anzalone: Yeah, absolutely. I’ll try to make this as quick as possible. About two weeks before I finished my residency at LSU, I was supposed to come back to my hometown to practice and join a group. Unfortunately, that fell through right before I completed training, so it left me with a two-month-old and 300,000 in student loan debt. And unfortunately, we had already purchased a home and got an interest-only loan, so we were in the hole big time. But the worst part about it was, as you know, they don’t teach us anything about running a business, so I really didn’t know what to do.

So I just started networking with other dentists and dental specialists in the area. I started working out of some of their offices as I built my practice, and I actually went back to doing what I used to do in high school and college, and that’s mowing yards. So you can probably imagine, looking at the people’s faces. I used to mow their yards, and they’re like, “Well, aren’t you supposed to be a doctor yet?” I said, “I am, but I’m broke.”

So anyway, at that time, I was a big Dave Ramsey follower. We set up a program, and we were able to clean up all of our debt within about seven years, including the house, so we were excited about that. But about five years ago, we were snow skiing, and I sort of swerved out of the way to avoid running into a kid, and I fell. When I fell, I landed on my wrist. As kids, and as teenagers growing up, you never think about getting injured, right? I’ve got teenagers, and they’re pretty much like that too. But that was the first time I started to question: What would happen if I couldn’t work? How would I provide for my family? Because I was only focused on the income coming in from my practice. That’s it. My wife works a little bit part time, but it’s pretty much on me. So that sort of started the process of me searching out other streams of income, which has actually led to where I am today.

Kevin Pho: Fantastic. So let’s transition into that article, where we talk about some of those other streams of income, “Hassle-free real estate investing for busy doctors.” Now, for those who haven’t read your article, can you just walk my audience through it and maybe share the story of why you decided to write it?

Jeff Anzalone: Yeah, absolutely. It was actually what I had just mentioned regarding the ski trip, the ski accident, which led me to find real estate. But when I started looking at real estate, I thought the only way that you could invest was actually owning the property outright and being a landlord. One of my favorite books that I’ve read, and I’m sure you’ve read: “Start with Why,” Simon Sinek. One of the reasons that I wanted to do something extra, or my wife and I wanted to do something, was we wanted to spend more time with our kids while they’re still under our roof. If we owned real estate outright, we’d have to be a landlord, and that would take up more time, so we knew that that was out.

Luckily, I started learning about other options, such as passive real estate options, where you could continue treating patients, whether full time or part time, but invest your money in things outside of the stock market that start to pay you. What happens is you basically focus on getting these assets to cover your expenses, your monthly expenses and your personal expenses. Let’s say you have 10,000 a month you’re spending on personal expenses: your home, private tuition, that sort of thing. Well, if you work and get enough passive income coming in to replace that, then you’re financially independent. If you want to work, great; if you want to work full time, part time; if you want to do something else.

So the great thing about it is it really started providing us options that we never had before, because everyone’s focused on the traditional way to save for retirement: work 30, 40 years, put your money in a 401(k), and hope that you have enough and you don’t run out. But doing it this way, it’s a completely different way to look at it, and really, it inspired me to start my blog and then write the article that I submitted to you.

Kevin Pho: So tell me a little bit more about the passive real estate investments that you’re involved in. Is it a syndication? Are you investing in debt? Is it crowdfunding? Are you banding along with a group of other doctors and dentists? So tell me a little bit more about the passive real estate investment that you’re talking about.

Jeff Anzalone: Sure. Actually, I started with crowdfunding online a few years ago. It worked out OK, but I ran into a deal where I put a good amount of money in it, $50,000, and unfortunately, every investor in that deal lost their money. That was with RealtyShares, which is no longer; it was basically taken over, it went out of business. The problem with that is you’re relying on a website to show you all these deals, and you don’t know who you’re dealing with, Kevin. And at that time, I didn’t have a clue what I was doing, so it’s totally my fault. I take the total blame for that loss.

But if you know who you’re dealing with, that’s how we invest now, mainly with syndications, because if I’m investing 50 to 100,000 or more, I want to know these people personally. I want to know their standards, their ethics, are they moral people, other people that have invested with them, their business plan. And then I like to walk the properties with them. Once I started getting more involved and really learning about it, I really love investing in something that I can look at and touch and feel, instead of a piece of paper in the stock market, a share in Amazon or whatever. Not that that can’t make you money, but to me, providing for my family and wanting passive income, that’s what’s worked best for me.

Kevin Pho: Now, for those of my audience who aren’t familiar with what a real estate syndication is, can you just briefly explain what that is?

Jeff Anzalone: Yeah, absolutely. All it is, simply, is you pool your money in with other investors, and together you invest in something that you otherwise couldn’t invest in on your own. So let’s say you invest in a 40 million apartment complex. Well, most of us can’t do that by ourselves, so we pool our money together and invest in that. Typically a sponsor, an operator, is the one that finds the deals. They manage the deals, they market them, so they’re the ones that take care of everything, and then they send you your checks every quarter too, which is really nice. So they’re the ones that basically take care of everything for you, and you just collect your check.

Kevin Pho: Now, in comparison to the stock market, what kind of annual returns are we talking about with a typical real estate syndication?

Jeff Anzalone: I still invest in the stock market with our office 401(k), and I provide a match for my employees, and I typically have anywhere from 7 to 8 percent, index funds with Vanguard. So not bad; that’s average, I think. For the most part, with these syndications, we’re basically doubling our money about every five to six years. A lot of that is tax-free, so the returns are much higher. The tax benefits are fantastic, which, you know, for the majority of your listeners, that’s our highest expense. You know, 40 to 50 a year we’re paying in taxes. So this really helps. If you do it correctly, it could really help lower your tax burden.

Kevin Pho: And typically, how much is the minimum investment for a syndication?

Jeff Anzalone: The ones that I’ve personally been in are $50,000. There are some out there that are a little bit lower, and some are a little higher, but that tends to be the average.

Kevin Pho: And I know syndications invest in a variety of buildings. It could be residential, it could be office, it could be storage units, it could be car washes. So in general, the syndications that you’re talking about, what exactly are they investing in?

Jeff Anzalone: The ones I’ve personally been in are multifamily or apartment complexes in high-growth areas that are stable. They’ve been cash flowing for 20, 30-plus years. A lot of people right now are questioning, “Should we get into real estate, with the way that the climate is right now and how things are changing?” And they’re always asking me, “Jeff, how do you find the best deal?” That’s the wrong question to ask. The correct question to ask is, “How do you find the right sponsor?” If you find the right sponsor, they know what they’re doing, they know where to invest, they know how to invest, and they’re going to find the deal. And typically, whatever returns they’re projecting is typically going to turn out better, because they’re such good operators, and they’re able to do things in order to get the investors the best return. So like I said, the key is finding the sponsor that you can trust, that knows what they’re doing.

Kevin Pho: So let’s ask that question: How do you go about finding the right sponsor? Because I know that there are a lot of syndications out there, and they advertise avidly to the health care profession. So what’s your due diligence when it comes to finding a sponsor, and how can clinicians go online, and what are the questions they should ask?

Jeff Anzalone: Yeah, that’s a great question. Unfortunately, I had to do it by trial and error, losing a good amount of money, which really caused me to take a step back and focus on learning it myself. Then I started the blog, debtfreedr.com, where I share my personal experience of what I had learned along the way. As I started that blog, I started having sponsors reach out to me: “Hey, Jeff, can we work with you?” This and that. I really started learning the differences between who the shady characters were and who were really the ethical people.

So you definitely want to look at their track record. Don’t just take their word for it. Talk to other investors. Be very diligent about it. Talk to several investors, not just one. I mean, the more that you can do, the better. And don’t just look at their website, because anybody can put anything that they want on a website. So probably the track record, but you need to look at what your goals are, Kevin, your personal goals. Our personal goals are we want tax benefits, we’re pretty risk-averse. I don’t want to put my money in something and lose it again. I’ve got kids, and I’ve got college to pay for.

So you want to make sure that these people are investing in stable areas that aren’t class D apartments, or sometimes class C-plus apartments, where those are in kind of a rough neighborhood that could have the potential for really high gains and high returns, but could also have the potential to, like I had, lose it all. Kind of like in the stock market, you can invest in Walmart, McDonald’s, Amazon, Apple, pretty stable companies that aren’t really high and aren’t really low, or you can invest in penny stocks, where you could hit it big, but more than likely, you’re probably going to lose your money. So you want to see what types of things they’re investing in and what areas they’re investing in. So those are some of the things that you can ask.

Kevin Pho: Are real estate syndications the only type of real estate investments that you’re currently involved in?

Jeff Anzalone: It is. I did look at single-family homes when I first started, but again, that didn’t mesh with our plans, because we didn’t want to be landlords, and it’s very hard to scale. I’ve got an occupational therapist neighbor who has eight single-family homes, and he’s like, “Well.” I said, “Well, you’re going to want 20 or 30.” And he said, “I can’t handle that myself.” So he’s kind of hit the limit, whereas with these, you could do whatever you want.

One other area that we’re looking at now is self-storage, because, as you know, people just buy more crap, and they have to have a place to put it. So those have been doing very well for a lot of our investors. Plus, the majority of, not only self-storage, but the mobile home parks in the United States, over 80 percent, are owned by mom-and-pop owners, so not these big corporations. A lot of them are wanting to sell out, and a lot of them haven’t really managed it as well as they could, so you have a lot of potential to purchase these and really increase the value on them. So we’re really looking at those two areas for next year.

Kevin Pho: We’re talking to Jeff Anzalone. He’s a periodontist, and he wrote the KevinMD article “Hassle-free real estate investing for busy doctors.” Now, how do you see the pandemic affecting real estate investments in general going forward in the next one to two years?

Jeff Anzalone: Actually, I had a doctor email me that exact question this morning. All of the investments that we’re currently in right now, none of them have quit paying. And I know a lot of people that have invested in different areas of real estate; some of them have taken a hit this year. So again, if you can find the correct sponsor and operator that knows where to invest, you shouldn’t have a lot of ups and downs, because everybody has to have a place to live. You look at the basics; you got to meet your basics first. Even people that got the unemployment or stimulus money, what do they do first? Well, hopefully they pay for their mortgage first, food, shelter, clothing. So you take care of those needs first. And I think it’s very, very stable, as long as you are in the correct area and you’re working with the right people.

Kevin Pho: Can you share some resources for clinicians who are interested in learning more about syndications and other real estate investment options?

Jeff Anzalone: Yeah, absolutely. I’ve got a whole area on my website, debtfreedr.com. There’s a real estate tab, and I have resources on there: tax resources, people that I work with personally, that I invest with, and a couple of other trusted advisors that I deal with as well. So I think they could check that out. Also, if somebody’s interested in learning more about passive income, they could go to debtfreedr.com, free guide, and it’s just the basics of what passive income is and how to get started and learning about it.

Kevin Pho: And my final question, Jeff: What is your take-home message you want to leave with the KevinMD audience?

Jeff Anzalone: The take-home message would be: Start with your why. If you’re married, sit down and make goals together. And every time you come to a point in your life, or you’re wanting to invest in something, always resort back to your goals, and that will point you in the direction that you should go.

Kevin Pho: Jeff, thank you so much for sharing your insight and time, and thanks again for being on the show.

Jeff Anzalone: Absolutely. Thank you for everything that you do for us too, Kevin.

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