Browsing Category:Passive Income

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As you know, I believe that investing in real estate is one of the best ways for doctors to create financial freedom. There are two main differences to consider when investing in real estate:active against passive. It is absolutely important that you understand everyone.

In the beginning you have to invest the work related to due diligence and welding equality. You will be glad that you have made the investment, because the benefits remain after you have invested time and energy. One of the biggest advantages of real estate investments is that you can take advantage of this initial investment.

The reason I'm investing in real estate isn't because I'm looking for another job. I enjoy my career as an anesthetist. However, I don't want my life to depend entirely on the earnings from my medical career.

The direction of medicine seems to be changing. If you've been in medicine for a while, you can probably see that. I firmly believe that if you do not make any changes now, you will regret it in your future!

Now let's take a look at five things you will learn about active and passive real estate investments!

  • What is crowdfunding?
  • The importance of due diligence.
  • Which is better: invest actively against passive?
  • A look at the advantages and disadvantages of active and passive real estate investments.
  • How can I best operate an investment property to optimize my return?

Here's a breakdown of how this episode develops …

The main difference is that as an active investor, you are a landlord. This means that you actually own the property. This does not mean that you manage the property in this way. This is another important distinction, but that you actually own it, which means that you make all calls for it. Your name is on the rental agreement and you are ultimately responsible for what happens to this property. You can make this process more active or passive, depending on whether you want to manage the property yourself. What I mean by management is daily operations. Do the tenants need something repaired? Do you need to collect rent?

You should think about what other investments you need to make to achieve your goals, and not worry about tenant calls for plumbing or noise. If anything, the reason you bought these properties is that you have more time to do the things you love with loved ones. Instead of taking these calls, I would much rather spend time with my family going to the park or the beach

A real estate fund usually consists of a basket of syndications. That means you go out and invest in a fund manager or operator. With this capital they buy a few of these houses and put them together. You can invest in multiple properties with one investment.

Now let's talk about the advantages and disadvantages of active and passive real estate investments. Let's talk about active investing. One of the advantages and benefits of active investing is the control you have. You actually own the property so you can make all the important decisions. Do you want to do rehab? Do you want to fix the problem? Do you want to color a certain color? Do you want to change the name? Do you want to hold onto the property? Do you want to sell it? These are all your decisions that you have to make if you actually own the property yourself.

Now let's talk about passive real estate investments. One of the biggest advantages is the time spent. If you are an active investor, you are there every day, especially at the beginning. Once you hand it over to property management and the property performs well, you are likely to invest a lot less time in property management. However, it takes some time to position the property and get to this place.

And if you haven't done so yet, let me know what you think about this episode in one of our Facebook groups: Passive Income Docs or Passive income professionals

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The doctor philosopher discusses how one day we'll all suffer from a syndrome. It is something that has plagued human happiness from the beginning. Would you like to know the solution? Read the post.

Today's classic is published by new Doctor philosopher. You can see the original Here.

Enjoy!

"Someday syndrome" is widespread in many areas of life, but particularly bad in medicine. You know what I'm talking about. "One day when I have finished my medical studies …" or maybe the more common phrase is "One day when I am present …" Sentences that begin with this type of expression imply that today is not a good day is enough. And I'm here to tell you that if you don't find satisfaction today, you will never do it.

One day I'll make enough money

One day the syndrome affects how much money we have to make to be happy. "One day" we will earn "enough", which raises the question, what is enough?

Studies have shown that people feel happier if they earn 20% more than their current income. This was true regardless of whether the person earned $ 30,000 a year or $ 300,000. It is difficult for people to be satisfied with what they have, even if satisfaction is the real secret of financial success.

Ironically, the high point for long-term satisfaction is somewhere between $ 75,000 and $ 105,000 a year. In areas with low cost of living, such as North Carolina, the number is at the lower end of this spectrum. In countries with high cost of living (e.g. California or New York) long-term satisfaction with an increase is just above the six-digit range.

The point is that this number is drastically lower than the income of most treating doctors. So if you find yourself in a situation where you really believe that "a little more" income would solve your current problems, I encourage you to think about it. Go through the children's questions and reduce your life to the essentials and stop spending money on the rest.

One day the work will be done

One day, the syndrome also affects our work.

If you feel the burnout that is so widespread in medicine, you will find out why. Sometimes we just have to say no, which is easily possible after a Hell Yes policy has been introduced.

Personally, I've found that this is a major area of ​​my slow transition towards burnout. After my wife started her full-time job, commitments that seemed reasonable earlier were suddenly more than I could handle.

Suddenly I found myself in a world where my "to do" list was growing. This created constant stress in my life until I finally realized that it was okay to say no to some things.

In the end, it became clear to me that there was always more to do, no matter how much work I did. The internal (and external) checklists that I create never end. Posts have to be published, work has to be done and blog posts have to be written.

In a way, this can become a work treadmill (similar to the idea of ​​hedonic treadmills) where, no matter how hard we run, we're always stuck in place. We never make progress towards our goal of finding satisfaction.

One day I will be happy when I buy …

This form of Someday syndrome takes many forms. Sometimes it comes in the form of buying the house present. Maybe it's the new car that you think makes you happy. Or maybe it's Country Club membership.

Regardless of which status symbol you feel most attracted to buying, the result is the same. These things are unlikely to lead to happiness in the long run. As Jonathan Clements teaches us in How to Think About Money (arguably my favorite book on personal finance), our money is spent much better on experience than on things.

Nevertheless, we feel compelled to live the lives of doctors. Although we're fighting, it's much easier to Dr. To become Jones when Dr. To become EFI.

This is something that we all fall victim to sometimes. Captured me. However, the truth remains. If we cannot find satisfaction today and in the things we currently own, we are unlikely to find them in new possessions.

Satisfaction is the key to success

To fight Someday syndrome, we have to find satisfaction today. We have to settle for our station in life, the possessions we have (so they don't own us) and realize that more money is not the answer.

The reason for this is that excessive spending and habits go in two directions. I mean, the more money you spend, the more expensive your lifestyle becomes. And the more expensive your lifestyle becomes, the more money you have to save to become financially independent.

In other words, a more expensive lifestyle requires a higher savings rate and a longer time to get there. In the end, we will find that even this last hurdle (almighty financial independence) will not make us happy.

Life is about travel. Not the goal.

So if you find satisfaction today, not only will you need to save less and achieve your financial goals earlier, you will also find that what you were looking for in terms of financial independence was there all the time.

As Robert Jastrow said

“For the scientist who lived from his belief in the power of reason, the story ends like a bad dream. He has climbed the mountains of ignorance, he is about to conquer the highest peak; As he pulls himself over the last rock, he is greeted by a group of theologians who have been sitting there for centuries. "

Don't be the scientist chasing their dreams so that they don't stop figuring out the philosophy of life. Find out what is important to you, dare to live this life now and find satisfaction today.

Take home

Taking it with you in today's post is easy. Learn the art of gratitude and contentment. Realize that Someday syndrome is very real.

This next professional hurdle, bonus or status symbol will not make you happy. More money doesn't make you happier either.

Finding satisfaction today is the real recipe for financial success. Shape the life you are supposed to live and then chase it with ruthless devotion.

If you do that, you may find that "one day" is today. You were there all the time!

Have you ever suffered from Someday syndrome? What were you most looking forward to and disappointed in the end? How do you find satisfaction today? Leave a comment below.

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Here is Journal Club 7-3-20! I hold one every week JOURNAL CLUB. After filtering the articles on the web, I present some that have influenced my life this week. Be safe and stay healthy!

  • Finances are not always as easy as making money, spending and saving. Financial psychology is a real thing. Indeed, our spending behavior can either make or break the bank! Financial Residency provides a comprehensive and definitive guide to influencing behavior and finance. So give it a try!
  • Of course, you all know that I am concerned with the concept of passive income. Especially in times when many doctors can no longer rely solely on their doctor's income to make a living, it is important to consider how you can create multiple income streams. Millennial Money Man has made a list of 62 passive income ideas for 2020. Guess what's at the top of the list? Crowdfunding, of course!

In the end, I hope that Journal Club 7-3-20 was helpful to you.

Finally a little motivation. Have fun and a nice weekend!

Journal Club 06/26/20 Investor Club

Journal Club 7-03-20

Previous articleThe key to successful investment? Your mindset

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Hundreds of athletes gather every few years to demonstrate the world's greatest human skills: the Olympic Games.

And every time athletes set new world records. It seems impossible that people would still be setting records after all these years. One might think that the human body would eventually get the most out of it. In 2016, 27 new world records (and 91 Olympic records) were set, from pole vaulting to sprinting and shot put.

How does this happen? How can the athletes not only muster the determination to reach the Olympic Games, but also set a world record of all time?

Yes, it comes from advanced training methods, but mostly from a change in mindset.

New goals are set and the possible expanded.

The world of real estate investment is no different. We may not be active in sports, but if you want to achieve your financial goals, your mindset is no less important.

Investing can be difficult to navigate, but with the right attitude, you can achieve your goals and shape the life you've always wanted – both for yourself and for the people you love.

Overcome the fear of failure

There is a general saying that you have probably heard many times:

A mistake is not an option.

It's an admirable idea, but when it comes to personal growth, we know how important “failure” is. After all, we learn most from our mistakes (I know I did my part).

For many of us, the idea of ​​making a mistake – failing – and losing money is enough to hold us down.

I definitely understand this fear. It took me a while to overcome this fear and make my first investment. But even now, I consider the time I spent waiting to plan any eventuality, essentially paralysis through analysis, as a waste of time. I made mistakes that cost a bit of money, but I still think my biggest mistake was waiting so long to start.

It is important to know that even if you take a step into the unknown and make a mistake, it is still a step forward. It is far better to get closer to your goals than to stick with me.

Although failure may not be an option, errors will occur. That's okay. Don't let the fear of failure stop you from achieving your goals – and achieve your ideal life.

Be precise about your desired result

What is your ideal life Take a moment to imagine. Are you retired and sitting on a beach in a tropical paradise? Are you free with your family to travel when and where you want without worrying about money?

You may still be working, but on your terms, and not relying on your job income for a living.

Whatever your ideal life is, it is crucial to have a concrete picture of it in mind. Write it down if you can.

This is the life you can have, and it can come sooner than you think.

If you've read this far, you've probably realized how effective real estate investment can be to gain financial freedom. We'll talk more about it, but for now it's important to know why you want financial freedom.

set goals

I have already spoken about it, but it is worth repeating.

It's easy to think, "Well, I just start and see where it takes me." Even if getting started is a great achievement, this approach will either take a very, very long time, or worse, expire.

If you take some time to set concrete, actionable goals, you will find that not only will you achieve these goals faster, but you will also have a developed roadmap to guide you on your way.

How do you set actionable goals? Make sure that it is S.M.A.R.T. While I go into more detail here, the idea can easily be summarized with this acronym:

S – specific
M – measurable
A – Accessible
R – Realistic
T – Time-bound

I actually had my own shift when it came to teaching the SMART method of achieving goals. I now ask people to pursue “REALISTIC” goals and to improve them dramatically. I'll talk about what that looks like in a future post, but don't limit yourself to selling small targets.

Not only is it important that the goal is clear, you also need to know when you have achieved it, that you can actually achieve it, and it must have a deadline.

If you set your goals in this format, you have everything you need to achieve them. This leads directly to my next step.

Take action

It may seem obvious, but in reality many potential investors never get past this step. All of setting and learning goals in the world is of no use to you if you never take action.

On the one hand, I fully understand how intimidating it can be to make this first investment; There is always some risk.

But while no one wants to lose money, failure to follow this first step leads to much higher costs.

The cost of inactivity

One of the biggest motivators for me is just thinking about where my life will be if I don't do anything. For example, if I had never invested the first $ 5,000, I often think about where my life would be now.

Would I ever have financial freedom? It is more likely that I am still in the valley of indecision, swapping time for money and hoping for a different result.

The truth is that every decision you make is a step forward or a step back. When it comes to achieving your ideal life, there is no middle ground. If you don't achieve your goals, don't stand still. You step back.

Think about some of the choices you've made that have drastically changed your life for the better. You may have decided to apply for a particular school, place of residence, or job that you didn't think you could get involved with.

Perhaps you have decided to make an investment or learn something that was normally uncomfortable for you, but that has taken you on a different path.

Now think about what your life would be like if you didn't do anything instead.

This is the real cost of doing nothing.

The good news is that you can now choose to continue. It doesn't have to be a big step. Even reading a book on investment is progress. The key is that you always take action when you get to the next step.

How do you want to get there?

Hopefully you have taken some time to set and visualize your goals and you are ready to go. The question is . . . what now?

The next steps you take are important as they determine the path for the next few years.

I wrote an article on the subject, but in summary, continuing education is critical. Find out what options you have and what interests you. When you find a deal or platform, do the due diligence. Then all you have to do is make the investment.

The key is that you need to adjust your mindset correctly to go through all of these steps with less stress and ultimately achieve your goals earlier.

If you want to share your trip with like-minded people and get step-by-step actionable learning, be sure to read our next course: Passive Real Estate Academy. We will cover the next steps in detail and you will get all the tools you need to invest safely.

Registration will open again next month. So don't wait! Join the waiting list here.

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Consumer smoothing uses debts and savings to ensure a constant level of spending throughout your life. The White Coat Investor says it's a bad idea. Do not do it.

Today's classic is published by new White Coat Investor. You can see the original Here.

Enjoy!

Consumption smoothing is the idea that your spending or consumption should be relatively similar throughout your life. That is, if you make a lot of money, you only spend a small portion of it, and if you don't make a lot of money, you borrow or use your savings to fund consumption.

At first glance, it seems wise – you can always spend the same amount of money, but in practice it's a really bad idea. I'm not the only one who believes that, and my review (which was actually written months after this post) from Jonathan Clement's book How to Think About Money (with a foreword by Bill Bernstein) showed me that at least two other bright minds agree with me. Dr. Amber said the following:

Academics praise the flood of so-called consumer smoothing: when you are young, you borrow a lot of money and then pay off this debt when you are old, in order to maintain your standard of living throughout your life. This is a really, really stupid idea as it ignores the habit: get used to the Beemer and Business class when you are young and if you are middle-aged you will need a Bentley and a private jet. My medical colleague and finance author Jim Dahle advises newly founded doctors to live like a resident for a few more years after starting their practice. That's good advice for almost everyone: get used to Motel 6 when you're young, and when you're older and richer, pinch yourself every time you check in at the Radisson.

Later in this book, Clements says the following on the subject:

This is about the so-called hedonic treadmill or the hedonic adjustment. The thought: We are aiming for the next promotion and are initially enthusiastic when the promotion is complete. But all too quickly we adapt to our improved circumstances, take the new job for granted and soon long for something else … The process of striving for material improvements and quickly adapting to these improvements makes it difficult to achieve a permanent increase of our happiness level.

If you look around, you will see examples of consumption smoothing everywhere. It manifests itself in medical students on vacation, paid for by student loans, residents driving cars that they can only afford after ten years, and new visitors who buy a house with zero down despite a net worth of -. $ 400,000.

There are obviously some valid uses of debt (consider how student loans can increase your career income five times if you had never attended medical school). In addition, savings in times of job loss, financial strain and certainly retirement are extremely useful. Despite these facts, smoothing consumption is a terrible idea for three reasons.

# 1 Consumer smoothing upset your mindset

A certain mindset is required to get rich / wealthy / comfortable, etc. Almost every self-made millionaire shares the same characteristics and mindsets. They work hard, save money and practice frugality, especially at a young age.

Consumer smoothing encourages you to never really develop this mindset. Like the little red devil on your left shoulder, he tells you: "Buy this Mercedes, you are a doctor and you will make a lot of money at some point." You deserve it."

It is unlikely that someone with a smoothed-out mindset instead of a wealth-building mindset will ever build the wealth that would actually enable consumer smoothing.

# 2 Expenses are like narcotics

More importantly, as mentioned by Bernstein and Clements above, the main problem in smoothing consumption is hedonic adjustment. If you live like a resident (you know to stay at the Radisson) there will be no reward for all your hard work later.

Spending and consumption are like narcotics. Not only can you become addicted to them, but you will gradually become tolerant so that the same amount of expenses no longer brings the same level of happiness. So if you spend the same amount all your life, your happiness, at least as far as it can be bought with money, will actually decrease due to this increasing tolerance.

Do you want to “smooth happiness” all your life? Then set up your finances so that you can spend a little more each year. That said, you should start spending very little early, which is exactly the opposite of consumer smoothing.

# 3 Consumer smoothing encourages you to borrow too much

Another big problem with smoothing out consumption is that a lot of credit is needed at least in the beginning and you then spend the rest of your life repaying those debts from your youth. Some people are big fans of debt and hardly distinguish between good and bad debt. Others are rabid against debt because "the borrower is the lender's slave."

I am more of a "debt is a necessary evil" that I can justify some debts, but they should be rare and far apart on the best possible terms and pay off relatively quickly, unless there is an obviously better use for the money (like getting the match in a 401 (k) or maybe maximizing the retirement account.)

The problem with debt is that it traps you in a path. If you borrow $ 450,000 to go to the medical school, guess what you will be doing over the next 20 years, whether you like it or not. That's fine if that's what you want, but too often it's not.

In reality, you don't borrow from the bank or the federal government. You borrow "Future You". And the future You may not estimate the amount borrowed or the terms that you have agreed to. You should assume that Future You wants to have a better vacation than you want, drive an even nicer car than you drive and have less financial worries than you.

Life also changes. You may want to change your career. You may be disabled, divorced, or widowed. Maybe you have a child with special needs. Perhaps your expected income will be halved. In all of these situations, the target level of expenditure for which you are “consumer smoothing” is too high. What now? You're hosed, that's something.

Thanks to the adjustment, we can easily adjust our lifestyle to a lower level and are still happy in the event of an economic downturn. However, if you have high debts and high fixed costs, this adjustment is difficult, if not impossible.

Smoothing consumption is a bad idea. People are not machines and life changes. Start your adult life with very economical habits and you will always feel rich.

What do you think? Do you believe in consumer smoothing? Why or why not? Why are doctors and other high-income professionals involved in this? Comment below!


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Here is Journal Club 06/26/20! I hold one every week JOURNAL CLUB. After filtering the articles on the web, I present some that have influenced my life this week. Be safe and stay healthy!

  • It is always a good thing to find additional ways to make money on the side, and it can even be a source of fun. Many doctors earn several hundred dollars – some even thousands – and fill out medical surveys online. The doctor at FIRE shares a list of medical survey companies that pay in cash and allow you to earn an income of 1099. Listen!
  • The pandemic has raised many money-related questions. One thing you may have wondered is how much to tip, especially in the service industry. Well, Anjali Jariwala of FIT Advisors answers all your questions about money etiquette, including tips during the pandemic, in one of her recent blogs. Look here!
  • There is a big difference between earning income and owning income streams that work for you. Four Pillar Freedom shares his experience of learning this lesson and how he has increased his income streams to make income, even if he does not invest a lot of time and attention in these streams. He even shares his current income stack.
  • As doctors, we have a responsibility to support our communities not only within the hospital, but also outside of the hospital. Dr. Doctors Unbound Podcast's Dave Draghinas recently received Dr. Goines and Dr. Gibson interviews to discuss how they will positively impact the next generation of STEM leaders – many of whom may become the next generation of doctors! You can listen to the episode here.

In the end, I hope Journal Club 6-26-20 was helpful to you.

Finally a little motivation. Have fun and a nice weekend!

Journal Club 6-19-20 financial offer

Previous articleHow to start investing in private real estate deals

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The investment process can be intimidating. There is a lot to learn and there are so many options – even narrowing down to just a few investments can be difficult.

However, if you've been reading this blog for a long time, you know that property investment (in my opinion) is the quickest way to build passive income streams and ultimately gain financial freedom.

Where do you start Well, this article gives you a good idea of ​​how to get your first real estate contract. Let's jump right in.

Educate yourself

The first step with any new company is to learn about as much process as possible. While learning is great over time, the better you are ahead of time the better.

First of all, it is important to determine your investment style. Some people prefer a more active approach, while others prefer their real estate investments to be as passive as possible.

I will explain the investment strategy “active versus passive” in more detail. In summary, it can be said that real estate investments largely fit into this spectrum:

private real estate investmentsAdapted from the FYFA course – White Coat Investor

On the left side you have active investments. The main lesson from this category is that you are the landlord and the investments are more practical. In general, the more work you do monthly, weekly, or even daily, the more active the investment.

At the other end of the spectrum are funds and REITs that offer a much more passive approach.

This training is not about choosing exactly which investment option is suitable for you (that will come later), but simply determining how active your investments should be. Do you prefer the liquidity of more active investments? Or do you agree to tie up some funds in the long term for a more passive approach?

It's really up to you and your personal goals.

As you may have guessed, we will focus more on the passive side of the spectrum as we continue our discussion. However, most of the steps listed apply to almost every real estate business.

Once you have determined which end of the continuum you feel most comfortable with (and which one suits your goals), you can narrow down which investment options are best for you.

Limit your investment options

As you may have noticed, there are several ways to generate residual income from property investments. In a way, this is a continuation of the step "educate yourself", but with more specific goals. Here are some ways you can invest, as well as some things to consider when looking at them.

Syndications

In short, syndication occurs when multiple investors contribute to a large pool of capital that is then used to invest in a single property opportunity. This strategy enables any investor to make a deal that would otherwise have been unaffordable.

Typically, these syndications are formed by a "syndicator" for the purchase of a particular property. This is great for the investor as you know exactly what you are getting into before you invest.

Real estate funds

Funds work a little differently, of course. Real estate funds usually don't focus on specific properties. Rather, the capital is pooled and then used to either buy multiple properties for later sale (equity funds) or to lend money for short-term returns, such as fix-and-flippers (debt securities).

There are actually many types of funds that fit many different goals. While they are a great way to invest in real estate, performing your due diligence is critical to your success (more on that later). You can find more information in this article.

REITs

Real Estate Investment Trusts (REITs) are companies that own or operate real estate investments. As an investor, you do not invest in the property as an owner, but are essentially a shareholder in the company. These shares are usually traded on the public stock exchange and are therefore easy to buy and sell.

However, as an investor, you tend not to take advantage of all the major tax benefits of a property investment because you are not considered to be the owner of property, and ultimately your upside potential is also limited.

There is also much debate about whether it actually offers real diversification, as values ​​tend to correlate much more closely with the stock market than other passive real estate options such as syndications and funds. In this post I will focus more on the latter.

Crowdfunding

Crowdfunding is a good place to start in real estate investments. As with syndication, you can contribute to a larger pool of capital that is then used to buy one or more properties. After the investment, sit back and wait for the dividend checks to arrive every month.

However, what makes crowdfunding great for beginners is that investments are made through an online platform that makes it very easy to find deals. You don't have to contribute much either – I started crowdfunding at just $ 5,000. And although due diligence is still important, most platforms take on the guesswork.

Indeed, performing your due diligence is important no matter which option you choose. We'll talk more about that in a moment, but it's worth repeating. Researching a good deal is a long way, and to get it going again you can find those deals much more effectively if you take the time to educate yourself.

And although it's not particularly exciting, take the time to learn the numbers before making decisions. At the very least, you should understand what numbers are related to the business and how this affects your goals. You don't have to be a number guru or anything, but a basic understanding will go a long way.

find offers

Now that you've understood the categories and general investment options (and hopefully decided on a method that fits your goals), it's time to find some actual offers to invest in.

But where do you find them?

In the past, your only option was to be well connected. You basically had to know the right people who knew the right people.

But with the JOBS law, many deals were legally published online so that everyone could see them. These deals became the crowdfunding platforms I mentioned earlier. This is also a great way to get started, and I've even put together a list of the sites I recommend.

However, many people say that the best opportunities are still the ones you will never see publicly advertised.

To find such offers, it is helpful to hold real estate conferences on a regular basis and to network with experienced syndicators in the room. Conferences like this often take place locally or even nationally. This is a fantastic place to learn, meet people, and even find opportunities. You can read about our conference last year here.

In addition to such conferences, it also helps to network with other experienced investors. You can find like-minded investors simply by asking. You will be surprised how many of your employees invest – or at least are interested in discussing their own goals.

Finally, join an investor club. There are many, many options for this, each taking into account different criteria for joining and goals. If you are interested in this idea, we would be happy if you join ours! We often offer opportunities that you won't find easily elsewhere. Find out more here. Note: You must be an accredited investor to become a member.

Perform due diligence

I've already mentioned this briefly, but it's such a crucial step that I think he deserves a section of his own.

Once you've narrowed down the types of deals that work for you and actually found one, it's time to take advantage of this training. The next step is to review the business and make sure it is an investment that you want to make.

The most important parts of the due diligence can be divided into three categories: who conducts the business, the property itself and the market on which the property is located.

Who makes the deal

The group, often referred to as a sponsor, syndicator (in the event of syndication), operator or manager, can make or cancel the investment.

Before making an investment, it is important to review the track record. How successful have you been in the past? How long have you been doing this? How does the group deal with risks?

A large part of the selection of a sponsor is based solely on trust. Make sure that they present information clearly and are fully transparent about their previous business relationships.

For more information on checking the sponsor, see this case study.

The property

In the case of syndications and crowdfunding, where you know which property will be involved in the business, you should carefully consider the history of the property and plans for the future.

Make sure you understand the condition of the property. It probably won't be in terrible shape, but will it need a new roof? Will the floor need to be replaced soon? Find out about upcoming costs related to maintenance.

You also want to examine closely how the property behaves now and how it behaves in the past. You can also look at other properties in the area to get an even better idea. You also want to keep an eye out for expected renovations or conversions that could improve operations.

The market

Finally, you want to take a look at the market where the investments are made. Important questions are: Is the environment emerging? Are companies opening up in the region or are people moving away? What is the general purpose of the environment, i.e. housing, industry, etc., and is this likely to change soon?

Ultimately, you want to get a full feel for as much of the investment as possible – not just the investment conditions.

Invest

Finally the time has come. You narrowed down a type of investment, selected a deal, and performed your due diligence. It's time to make your investment.

Although you probably found this in the research phase, it is important to make sure that you are qualified for the business you have chosen. Being qualified usually means being an accredited investor.

While accreditation is not required for many businesses, many do. Such deals typically have minimum investment thresholds of $ 25,000 – some even $ 250,000.

Whether or not you are an accredited investor shouldn't stop you from investing, but it could shut you out of certain trades. Find out more about what it means to be accredited here.

Okay, with the last hurdle out of the way, there's only one question left. How do you actually make the investment?

Well, usually you have to transfer the funds, just like with any real estate transaction. The operator or platform that hosts the store has an account and you must transfer the money to that account.

The key here is to make sure that this is done safely and in the safest way. After all, it is likely that you are dealing with a lot of money. It is vital that it arrives at the right place and is protected on the way.

Waiting

The last step is sometimes the most difficult. Up to this point, everything was up to you – from training to research to investment. Now all you have to do is sit back and wait and trust the sponsors to carry out their business plan. This can be the hard part.

The large part, however, is simply waiting for the distributions. At some point they will return capital and one day the building will likely be sold. After all the first work, all you have to do is make sure that these checks go to your bank account.

At this point, I hope that you can use this information and narrow down a procedure that is suitable for you. Education is the key, and although it is best to be as well prepared as possible beforehand, there are always some lessons to be learned in this way. The key is to get started.

If you want each of these steps to be broken down in detail and have a resource that will help you safely invest in passive real estate deals, I would definitely recommend you take our Passive Real Estate course Academy.

Not only will you learn thoroughly, it's also a great opportunity to meet like-minded people along the way. The registration opens. If you're interested, you can re-join the waiting list next month for exclusive discounts! >>Join the waiting list here. <<

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Doctor on FIRE interviewed CEO Charles Clinton of EquityMultiple, a leading platform for crowdfunded commercial property investments.

Today's classic is published by new Doctor on FIRE. You can see the original Here.

I have personally invested in a handful Crowdfunded real estate Deals. I don't want to recommend investments to my readers that I don't want to invest in myself.

One of those investments that happened to be my first was with EquityMultiple.

I think it's good that they offer a variety of types of investments (equity, debt, mezzanine debt) and, as you'll learn, do a full due diligence and pass 90% of the investments on their way. I am also a fan of the comprehensive introduction to investing in commercial real estate and other items on the Resources tab.

CEO Charles Clinton was kind enough to answer a number of questions I had as an investor who doesn't know real estate inside out. Last year, I was a guest in an interview with Soren Godbersen at EquityMultipleand I'm happy that they could return the favor.

EquityMultiple is one of several crowdfunding real estate platforms. What distinguishes EquityMultiple from the others?

Right – we saw that the number of crowdfunding platforms for real estate operating in the US balloon rose to over 100 in the years following the JOBS Act. The herd has been consolidated and discarded and we have found that the remaining platforms are consolidating around some models, as far as this is intended for the investor:

  • Syndication marketplaces where the sponsor (the company from which the investment originates) is connected to a network of investors via software, but the platform does not offer much intermediate care or asset management
  • Single family loans, with the platform providing debt financing for fix and flips of single family homes
  • EREITs, an income-generating property fund that is opaque or semi-opaque to investors, similar to the private REITs that have been around for decades
  • Discrete real estate, internal care that allows individual accredited investors to access certain commercial real estate, and a degree of underwriting and curation for the deals presented.

We are closest to the last model, with a platform that allows individual investors to access institutional quality commercial real estate investments starting at just $ 5,000. However, we like to think that our platform and focus have some other unique features:

  • Full-cycle asset management: We report on the performance of closed investments frequently and transparently over the entire term of each investment.
  • Customer service: We see ourselves first as a real estate investment company, then as a technology company. We are not trying to "automate" the human aspects of investing, and we recognize that investing is about trust, even when it is done online. We therefore strive to be available to all investors and potential investors as best we can.
  • A range of risk / reward profiles: While some platforms focus only on debt or just common stocks, we present a curated range of senior debt, preferred stocks and equity investments with a range of target return ranges and holding periods.
  • Institutional CRE focus: We focus on institutional commercial real estate projects: Partnership with experienced real estate companies in multi-tenant real estate and across different types of real estate. We believe that this offers our investors better diversification options and protection against downward movements.

I understand that EquityMultiple is supported by Mission Capital, a real estate company with more than 15 years of experience. Can you tell us a bit more about Mission Capital and your relationship with them?

Absolutely, and that has to do with the institutional focus I was talking about. You can think of our partnership with Mission as another differentiator in relation to other real estate investment platforms.

Mission Capital – which has provided our seed capital funding and with which we share an office – has provided institutional real estate companies with CRE finance and other capital market solutions since the beginning of the last major economic downturn. Not only does this offer our Investment Committee excellent prospects when it comes to review business, but Mission's nationwide network of sponsors and lenders also strengthens our pipeline of potential investments.

How many EquityMultiple investments have roughly gone through the entire cycle, with investors being repaid? What returns have investors seen on completed deals?

By June 2020, we had completed 96 investments nationwide. So far 22 investments have been fully completed and most have met expectations. We have created a track record utility that shows the overall performance of the portfolio that anyone can access when creating an account (which is free).

Most of these 22 investments realized are debt securities or preferred stock transactions. This means that our investors were entitled to a contractually fixed flat rate return (and a target portion of the uptrend in preferred equity investments). As a result, our total returns at this point reflect the annualized range of returns from low to medium teens that we offer through this type of investment.

We are still at the beginning of many of our investments. The range of possible returns for equity participation is generally much larger. I would really encourage anyone who is curious to check out the Track Record tool. As our business volume has increased in recent years, we expect an increased number of exits to be included in this reporting in the coming quarters.

With crowdfunded real estate, accredited investors can invest more passively in syndicated offers. How much due diligence does EquityMultiple perform? What level of care do you expect from individual investors?

Good question. EquityMultiple has an in-house team that carefully reviews all potential investments – the company from which the business originates, the market, the details of the investment thesis and the underlying pro forma assumptions. This means that we spend weeks, if not months, evaluating and negotiating every potential investment and ultimately choose less than 10% of the deals we see.

Hopefully this gives some comfort to investors, but we believe it is important that investors understand that all investments, including ours, involve risks. Similarly, we recommend that investors carefully review the planned distribution plans and risk factors for each investment and whether they fit well with their portfolio.

For this purpose, we endeavor to structure the information on each transaction so that investors understand the investment thesis at a high level and can understand it in detail in order to feel comfortable.

We also encourage investors to ask questions freely. While we strive to present the investment details clearly and concisely, we recognize that clarifications may be necessary here and there, especially for people who are new to commercial real estate investments.

How would you compare and contrast investments in crowdfunded real estate with other passive real estate investments such as REITs or REIT index funds?

REITs are similar to real estate crowdfunding in that both vehicles give individual investors access to commercial real estate at relatively low minimum amounts. There are, however, some significant differences:

  • REITs are generally opaque – management decisions and even individual properties within the fund are usually hidden by the investor. On the other hand, with a platform like EquityMultiple, investors can understand exactly what they are investing in at asset level, have a better sense of where the money is going, and align their real estate portfolio more closely with risk tolerance and risk tolerance.
  • As public REITs are traded, they tend to correlate strongly with the stock market. This means that there is inherently less downside protection than with private real estate (the types of assets that are now available for real estate through crowdfunding platforms). Similarly, public REITs have been more volatile in the past than private real estate.
  • Private REITs did not have this problem, but in the past they were characterized by extremely high management fees (often high single digits or even over 10% compared to the annual fees of 0.5% to 1.5% for EquityMultiple investments).
  • The downside: REITs are liquid, while investments made through EquityMultiple and other platforms are generally illiquid

For many investors, it can make sense to have both REITs and private commercial real estate in their portfolio. As a Blackstone study found a few years ago, portfolios that provide 20% or more for alternative assets in the private market – like real estate crowdfunding – tend to outperform those who don't.

Real estate has generally performed well since we emerged from the great recession. How would you expect crowdfunded real estate investments to develop in a cooling real estate market or in the next recession?

The short answer is: Nobody knows exactly and you shouldn't trust anyone who claims to have a crystal ball.

It would be foolish to assume that the current bull market will last forever without a major correction. It would also be too pessimistic to assume that the next downturn will destroy real estate markets as much as during the last recession and that the opportunities for returns will dry up completely.

Real estate markets do not have the same level of extreme leverage and overbuilding as they did before the Great Recession, and we continue to see returns in alternative CRE asset classes (such as data centers or self-storage) and emerging secondary and tertiary markets, in which the underlying demographic trends remain strong.

As always, diversification is key – some markets, property types and crowdfunding investments in real estate will be adversely affected in the next downturn. Others less or not at all.

Certain alternative real estate asset classes – such as self-storage, prefabricated housing communities, and student apartments – can prove to be countercyclical and generate strong returns in the next downturn. Likewise, some markets will outperform others due to specific local demand drivers and net migration factors.

Again, no one can 100% predict the specific contours of the next downturn and the impact on certain local property markets. However, investors who diversify across markets, property types and holding periods are better able to weather the storm when and how it occurs.

Platforms can be done right by investors by offering a variety and breadth of commercial real estate investments across the country. At EquityMultiple, we also try to negotiate built-in investor protection such as payment priority and interest reserves for the payment of cash distributions.

What was your background before EquityMultiple and what inspired you to found this company?

We founded the company with the shared vision of making commercial real estate investments more accessible and transparent for individual investors. In addition to stocks and bonds, private real estate transactions have generally achieved high returns and high downward protection in the past, but until recently were largely inaccessible to individual investors.

Our goal when founding the company was to use the technology and give individuals across the country the opportunity to make passive investments with experienced real estate companies, provide a level for underwriting investments, and provide single investors with a single point of contact for a diversified commercial To create real estate portfolio.

Incidentally, we have found that the product is a natural fit for many doctors – intelligent, detail-oriented, very busy professionals who do not have the time to acquire and manage commercial properties themselves and really benefit from optimized access to private CRE investments .

My background is in real estate law. Before founding EquityMultiple in 2015, I worked for Simpson Thacher, a large law firm here in New York, on some very large, complex CRE transactions – including Blackstone's $ 1.9 billion and $ 6 Motel 6 purchase Restructuring and refinancing of property in the lead up to its $ 2.5 billion IPO. My legal background definitely helps me to find my way around in the small print of real estate transactions, structure business and spy on risks.

I've always wanted to do something more entrepreneurial, but the light bulb really lit up when I got a Christmas bonus, and even though I was immersed in lucrative commercial real estate in my daily job, I really didn't have access to it as a single investor.

Start the reception paid survey opportunities in your area of ​​expertise to your email inbox by joining the Curizon community of Doctors and health professionals.

Use our link to join and you will also be entered into a drawing for additional $ 250 will be given to a new registrant who will be referred to FIRE by a doctor this month.

Where can potential investors see current offers?

Due to SEC and FINRA regulations, all investors must answer a few initial suitability questions before entering our platform and reviewing current and previous offers – including self-certification as an accredited investor.

We welcome everyone who is interested create an accountTake a look at a short suitability questionnaire and take a look at our current and previous offers as well as the track record page mentioned above. Creating an account does not require you to take any further action.

Is there anything else you would like to tell my readers?

I would also like to mention that we plan to offer opportunity funds. – New tax-privileged real estate investments under the Investing in Opportunity Act, an under-the-radar component of the tax reform at the end of 2017. I will not go into the program in detail here (possibly the subject of a future interview!), but interested investors can visit our resources page about Opportunity Funds.

(PoF: Thank you, Charles, for taking the time to answer my questions in detail. I appreciate your openness to describing both the potential risks and the benefits of these (for us, not you) commercial real estate investment opportunities.

I also appreciate the offer from a 1% increase in earnings for my readers about their first debts or preferred investments with EquityMultiple. The readers also thank you.)


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Here is Journal Club 6-19-20! I hold one every week JOURNAL CLUB. After filtering the articles on the web, I present some that have influenced my life this week. Be safe and stay healthy!

  • In today's economy, especially with the rise of COVID-19, many doctors are beginning to think of creating a second stream of income. However, some doctors believe that this excitement about "part-time jobs" that comes from the declining economy can also create fear of being afraid of missing out on a part-time job as a doctor. Are side gigs mandatory for doctors? White Coat Investor shares his opinion. Listen.
  • Unfortunately, many lost their jobs during this global pandemic. This is not ideal, but Think Save Retire encourages people in this position to see this as an opportunity to regain control of their life and time. They made a list of the best companies to start with. Look here.
  • Let's be honest. Insurance can be a pain to think about. In addition, as a doctor, it is more than necessary to make and make informed decisions. Researching all of this is probably the most stressful part. Well, Financial Residency has created a checklist for each insurance category that is of interest to doctors. They contain specific details about each type, as well as resources to ensure proper reporting in a blog post.

In the end, I hope Journal Club 6-19-20 was helpful to you.

Finally a little motivation. Have fun and a nice weekend!

Journal Club 6-19-20 financial quote

Previous articleNot all earnings are the same

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not-all-income-is-created-equal

One of the most common financial pitfalls people make is thinking that all income is created equal. It’s an easy mistake to make; after all, a dollar is a dollar . . . right?

Well, that’s what I thought. What completely re-shaped how I spend my time and energy, though, is learning that one dollar can actually be worth less than another, simply based on how it’s produced.

It’s a tricky concept to explain, so let’s jump right into some examples.

Is Your Income Being Devalued?

One of the best ways to illustrate this is to look at the 2020 tax bracket.

Credit: Nerdwallet

At its most basic level, this graphic shows that every dollar earned above $518,401 (when single) is taxed 2% higher than the prior bracket.

In other words, if you earn more than $518,401 per year, every additional dollar is worth 2% less than in the lower bracket.

Make sense?

This not only devalues your money, it devalues your time. After all, if you’re getting paid a certain wage per hour, your time is now worth 2% less at the highest bracket.

The point of all of this is to say that you need to figure out where the dollars are worth the most, and how to use the minimum amount of time and effort to create those dollars. That’s how you leverage your time for maximal benefit.

To put it another way, would you rather spend an hour to earn $250, taxed at 35%, or spend that same hour earning the same $250, but taxed at 10%?

The tax amount makes a huge difference–especially when we’re talking about numbers much greater than $250 (as we all know, it’s not what you earn that matters. It’s what you keep).

Income and the Cash Flow Quadrants

In order to put this all into perspective, let’s take a moment to revisit the CashFlow Quadrant, concept presented by Robert Kiyosaki in his book of the same name.

The table is made up of four quadrants:

  • Employed
  • Self-Employed
  • Business Owner
  • Investor

The highest taxes occur on the left side of the quadrant. This is, in essence, where the dollars are worth the least.

The dollars on the right side, on the other hand, are generally worth far more.

Physicians and other high income professionals are usually stacked on the left side of the quadrant. Either we’re highly paid hourly employees or we’re running our own practices, but working like crazy to produce results & income.

Where we all need to be if we want to create financial freedom is on the right side of the quadrant where we own (not operate) the business or invest and create income passively.

I think this is a key concept that doctors need to understand.

Still another way to think about this is to categorize income in three ways: ordinary/wage, portfolio, and passive.

Ordinary / Wage Income

This is the money you make from your job. It’s where you put in time and in return, you get a set amount of money.

Physician income is ordinary income. It’s taxed at ordinary income rates which is in essence the highest rates.

Oftentimes, when people say to “tax the rich,” this is the group that gets disproportionately affected. These are the doctors, CEOs, lawyers, and dentists; High-income earners that work really hard for their money. Unfortunately, they just don’t have a lot of tax benefits available to them.

As a side note, your 401k will also be taxed as ordinary income.

Portfolio Income

This is also known as “capital gains,” which are the profits you receive from the sale of a property. As with any income, this is subject to taxes.

It’s taxed differently than normal income, though, and so working strategically, these taxes can be worked in your favor (for more information on this, be sure to read this post).

In short, money that you create from your investments, whether it’s the stock market or through real estate, can be taxed as capital gains.

Capital gains are currently taxed at 15-20% for this population. That’s a far difference from 30-37%.

Passive Income

As you know the is my favorite type of income. For our purposes, this is money created primarily through real estate or distributions. It’s a result of being on the right side of that CashFlow Quadrant.

It’s taxed completely differently.

In fact, through the use of depreciation and bundling that with Real Estate Professional Status, it’s possible for the real estate income to be taxed at 0%. 

0% vs 35%… think about it, then think about it again. 

Time: Your #1 Asset

When you make your living exclusively through ordinary income, you’re essentially a slave to time. Time and money are completely linked. The only way to make more money is to put in more time – or figure out a way to increase the value of your time.

But no matter what you do, this income is capped based on the number of hours you can put in.

However, with portfolio and passive income, your money is not necessarily linked to your time. This is what allows for true financial freedom.

It is crucial, then, to figure out a way to convert ordinary income to passive income, or to convert a low-yield dollar into a high-yield dollar.

Convert Physician Income To Passive Income

As physicians, we may get taxed more, but our higher income is an advantage (at least, initially). We just have to be aggressive about moving that income from the left side to right side of the cashflow quadrant – as much as possible and as early as we can.

Sure, we’ll take some early tax hits, but using advantages, like the Real Estate Professional status, can quickly move you to the right side of that quadrant.

The old saying summarizes it perfectly: you can’t earn your way to financial freedom.

The reality is that unless you break the connection between your time from your income, you’ll be working until you die.

Fortunately, it doesn’t have to be like that at all.

Take my friend, Dr. VM. He’s a very highly paid radiologist. He believes that early in his career, there’s no more efficient way to make a good income than to work hard at being a doctor.

He’s doing that diligently. But he’s also funneling a significant amount of those funds into passive real estate investments like funds and syndications. He has a couple of large investments and owns shares of hundreds of apartment buildings.

These investments are starting to create a significant amount of cash flow. In fact, within a few short years, he anticipates that his passive income will overtake his active income and he’ll be in a position where he’s completely financially free.

Really. It’s possible.

Once you see your money as a tool, it only makes sense to make as much of it work as hard for you as possible. And the best way to do that is to move it from the left side of the quadrant to the right; from ordinary to passive.

In fact, as this concept starts to make sense, you’ll see not just money, but income and time completely differently. It is not all equal. Understanding this is the key that will accelerate you on the path to your ideal life.

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