Category: Real Estate

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Section 8 Multifamily Ownership To Build Wealth

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The Section 8 Housing Program offers financial assistance to access low-cost housing, sometimes referred to as the housing choice voucher program. And is one of the most reliable real estate investment opportunities known so far.

Since the government takes care of a large chunk of rent payment, the section 8 multifamily subsidized housing program has a massive advantage over traditional rental contracts. We examine how a shrewd property owner can tap into the program and build wealth.

According to the latest figures, about 2.2 million households by low-income earners receive subsidized rent through the section 8 housing choice voucher program.

What Is The Section 8 Program?

Under the program, the government pays a percentage of the tenant’s rent directly to section 8 landlords whose property is in the listing. The U.S. Department of Housing and Urban Development Management (HUD) funds the program by paying, on average, 70% of a section 8 tenant’s rent and utility bills. A family must typically earn under 50% of the median income in a given area to qualify for HUD Section 8 relief.

Section 8 Multifamily Home Ownership

Homeownership and maintenance under the program can involve financial support from the HUD. The owners can also access conditional government subsidies when renovating, building new homes, or putting up properties for a mortgage.

The homeowner must set aside units to house the low-income American population under the section 8 housing list.

Section 8 landlord application can be lengthy and costly, involving a lot of paperwork, a waiting period, and property inspection. It can take up to 5 months to get approval.

Multifamily homes are properties with up top units and still qualify as a single residence from lending standards. These can be townhouses, duplexes, triplexes, or apartments with up to four units. Five units and above are multifamily but usually require a commercial mortgage.

Most multifamily dwelling property owners rent them out to residents. They are great for generating a higher monthly rental income with lower maintenance costs, so you can rely on commercial property investment to build wealth over time.

Vouchers Under The Section 8 Housing Program

Section 8 includes two types of vouchers for the tenants– The Housing Choice Voucher Program and the Project-Based Voucher. The Housing Choice Voucher program allows tenants to choose any unit within the section 8 program. The Project-Based Voucher ensures that the federal rental assistance stays within the selected housing unit and is often more profitable for the owner.

Advantages Of Section 8 Multifamily Home Ownership

1. Easy Bank Financing

For real estate investors with a record of handling rental assets, the bank can use the projected rental income from the units to finance down payment programs for multifamily homeownership.

2. Certainty Of Rental Income

Upon qualifying for the Section 8 program, the HUD agrees with the property owner on the expected rental income, per the Fair Market Rate. The landlord will receive monthly payments from the government, even when there’s a recession.

3. Occasionally Higher Rental Rates

As an incentive, the government often includes an annual 5 to 8% incremental increase on rent payments. The rate could translate to a better deal than what they would get from the open market.

4. Increased Occupancy Rate

Qualified and listed property multifamily homeowners get access to a vast pool of would-be tenants on the waiting list. The list can have 2 million or more Americans at any given time. That means minimal vacancy issues, reducing your marketing budget significantly.

5. Stability Of Rental Income

The federal subsidies make multifamily homes in the Section 8 program suitable for long-term tenancy, as the tenants are likely to stay longer in the units.

Source: Morning Invest(Youtube Channel)

Building Wealth Through Section 8 Multifamily Home Ownership

Among several real estate investment opportunities one can look for investing in several multifamily homes as a remarkable way to achieve long-term cumulative wealth. Here are some tips to consider when investing in section 8 multifamily homeownership:

A) Choose And Manage Tenants Wisely

While renting out the multifamily units under Section 8, you pay off your mortgage from the tenants’ rent. Hence, liabilities go down, while in almost every instance, the property’s value goes up.

In this case, there comes a time when the mortgage is zero, and the income is primarily profit. Therefore, you can obtain more multifamily property, which you can scale to millions of dollars in wealth.

B) Ready Investors

The multifamily concept is more investor-friendly as compared to single-family units. In this case, when you need financing, you bring the deal to the table while investors bring the money on board. Later, the profits get split as agreed.

C) House ‘Hacking’

When you own a multifamily home, you can live in one of the units while renting out the rest. The tenants’ rent caters to your housing expenses, and you can save up over time.

D) Add More Rooms

A sure-fire way to increase your rental income is to follow the BRRRR (buy, renovate, rent, refinance, repeat) strategy. Additionally, it would be best if you thought about increasing the number of rooms.

There’s a healthy market for multifamily homes with more than four bedrooms, but a chronic shortage for them:

For example, a single home will make you $150 in profit per month, but a duplex will rake in $300, while four-unit multifamily will fetch $600 within the same timeframe.

Bottom Line

Scaling up wealth from multifamily units has a longer time horizon, is not entirely problem-free but is assured, especially when listed in the Section 8 program, whereby there is the assurance of monthly government payments. It gets better over time as you can hire property managers from top commercial real estate investment companies that also offer a few tax benefits like 1031 exchange process to run it on your behalf, and you can adjust rental prices upwards after periodic renovations.

www.redpillkapital.com

If you simply need more information. have questions, or want to discuss a specific deal, I’m always excited to help. Reach out to me at info@redpillkapital.com

If you are ready to start your journey to financial freedom but want specific additional educational materials, we have a course designed for physicians.

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Real Estate

Tokenization of Real estate in 2022

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As a technology enthusiast, I have always been into innovation that could change the world. That’s when I heard about the fund-raising campaign from the group called UGro that has recently been into real estate tokenization with the motive to bring this technology into our day to day lives. The interview by Mr. Neal Bawa from UGRO started with a brief introduction that eventually was directed towards how the real estate market and financial management would collaborate in coming times.

To begin with, I am Dr. Gurpreet Padda, born in Punjab, India. While I was in my early childhood, I relocated to the US with my family. Being the only brown kid with a turban in an all-Black school, I have known the word discrimination. However, this allowed me to think out of the box, be curious about things happening around and learn the process. This curiosity to know everything took me into science and computers.

As a teenager, I was generally active in doing repair work at home. When things started happening on a larger scale, I took help and ultimately started hiring people for doing some construction work; that’s when I fell in love with real estate. I wanted to earn freedom and co-invest with people, for I had found out.

“A Lone-Wolf isn’t an alpha without its pack!

How Did I Become Interested In Blockchain, Real Estate, Crypto, And Tokenization?

Well, my academic background is pretty self-explanatory. Being a computer geek and having an MBA degree majoring in International Finance justifies my passion for technology and finances at a global level. I have always wanted to know how transactions occur, and this has a rather serious story behind it.

I have known that about 5.5% of international transactions, which is for the general public, are secured into middle mens’ pockets. I wanted to find out how these transactions happen, why they happen, and what can be done to stop this wastage of capital? Why can’t families live across nations transfer money without involving any mediator?

My findings gave me hints about cryptocurrency, which indeed is fascinating. So I learned about fiat currency which can be used for tokenization to bring liquidity into the entire real estate market. In my opinion, we’re at the beginning of a new revolution where complete computer systems are upgrading the ability to make transactions where the transferring value to one another is tokenized.

How To Avail Tokenized Contracts For Cost-Effective Transactions?

With these questions in mind, I tried to figure out contract languages to make them cost-effective, and quicker to share the assets with others. Not to forget the low-risk profiling that is to be maintained. Hence, I invested in this fund-raising contract with UGRO for the sole purpose of getting into tokenization.

For people newly introduced to the term, Neal explains that tokenization is the conversion of real estate into stocks or stock-like qualities.

In the case of the general share market, if someone talks about a particular stock with the potential to go bullish shortly, we tend to take positions real quick in the matter of a few clicks, affecting the financial market. However, that’s not the case with Real Estate Investment. It’s more complex than it looks.

Real estate is three times larger than the share market. Moreover, the market is highly illiquid, and now the solutions have been revealed. People in the field say that blockchain can be used to find a much faster and more secure way to demonstrate real estate so that anyone around the globe can take a position in the US Real Estate Market. The best part is that US real estate is the topmost blue-chip real estate in the world.

The fact that tokenization is already being done by many makes it all the way more special. But this needs to be done with the right process as follows:

The first component is to take ownership of something and put that ownership into a token that can be described precisely.

The tokenized property will represent a fragmental possession of real estate that can be demonstrated in your social groups and families concerning returns. “Token Represents A Real Thing”, is where it all starts.

The next step is to liquify these tokens. Since commercial real estate investing is an illiquid capital diversification, turning this into a liquid asset and putting it on 24*7 markets require real work.

However, there are problems associated with being a limited partner in real estate. First, one needs to keep the investment the entire time, which would dramatically change as soon as tokenization enroots in the scenario.

Finally, assigning value to these tokens.

A commercial real estate investment company’s management team is an independent figure regulating and managing these real estate tokens. With this, one would be able to stake the token and get a loan or even sell some part of it, which will lead to a decentralized and tech-savvy Financing System or as said Defi, which would further be utilized to generate revenue streams out of it. Therefore, the leverage position improves gradually. This is because an asset will hold its value; people would be willing to lend you even on the underlying asset value.

As Neal mentioned, tokenization is the opportunity to open the gates of a new era worth $10-100 trillion. However, here comes the pain point- not everybody will believe in this initiative. Yet one needs to pick the right team in the argument.

But, how do we pick the right team and the right management? After all, it’s the management that will manage and develop the property we want in terms of valuation!

Your ideal team would be the one with an excessive understanding and experience of both the financial and Real Estate world. They would first need to answer the question- Why would people want to go for tokenization?

Once you know how to access a token, how to keep it safe? how to transfer these tokens safely and cost-effectively? Then, you automatically cut out the middlemen and will be able to make any real estate NFT transactions in a few clicks.

And that is the reason UGRO’s fund-raising campaign for tokenization caught my eye. The management understands technology and its integration with the real estate market, making them the right team to pick for a complete Proptech System. I have experience working in several domains, and as per my observation, a team needs to have three things to be able to create a decentralized financial system for investors;

  • Financial background.
  • Technical background.
  • Property management background.

Neal says that UGRO is planning on tokenizing individual luxury fourplexes with small shares of the company. However, the plan doesn’t just end here. The thing that surprised me was that these people were much ahead of what they could imagine as the future of the real estate market. With a $70 million fund, they envision creating a metaverse; creating digitally twin buildings to put them on metaverse would open up the data to any buyer in the world who would wish to invest in US real estate. Hence, the sale that is supposed to take place in around 6-7 months would eventually happen in 10-15 days.

That’s quite interesting, for it serves the vision: Entire Real Estate Tokenized. Yet the process needs to be followed accurately, and it’s the management that will demonstrate the beginning of this revolution. Not just us; in reality, many monopolies are already headed in this direction.

Hence, all in all, to be a successful investor in the field, always choose the right group to invest with- and that’s what UGRO believes in.

www.redpillkapital.com

If you simply need more information. have questions, or want to discuss a specific deal, I’m always excited to help. Reach out to me at info@redpillkapital.com

If you are ready to start your journey to financial freedom but want specific additional educational materials, we have a course designed for physicians.

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Real Estate

Commercial Real Estate Investments: Understand The Risk And Reward

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Every seasoned commercial real estate investor knows that all investments are prone to risks. While real estate investing is not as risky as penny stocks, options, and futures, the sheer amounts involved mean that if things go belly up, you stand to lose a lot.

That’s why it pays to identify the kind of risks attached to each real estate investment vehicle before you ink a deal. Industry leaders created categorization labels to help investors identify the amount of risk each investment poses.

According to Tal Peri, head of U.S. East Coast and Latin America for Germany’s largest open-ended fund, Union Investment Real Estate, these labels help him focus on the losses spectrum that matches parameters for the fund he is deploying capital.

If you’re a new investor to the game, you might want to pay attention to the labels—they indicate under what category an investment falls. That might be the difference between scoring a great deal and losing money.

As usual, the higher the risk, the higher the investors’ returns. This article helps you understand the risk and returns involved in Commercial Real Estate Investments (CREIs).

Risk Vs. Return

Before discussing the different categories of CREI’s, it’s first necessary to define what risk and return are and their relationship to each other in building an investment portfolio.
Risk refers to the possibility of financial loss or some other adverse outcome. It’s wise as an investor to put strategies in place to help you recognize and manage risk better.
Return is the amount of income or profit made on an investment. In real estate, returns usually come in rental income, property appreciation, beneficial tax treatment, or some combination of all three.

As mentioned above, the relationship between risk and return is the higher the risk an investment poses, the higher the potential profits. The reverse is also true.

Risk-Reward Categories For Commercial Real Estate Investments

There are four categories for real estate investment strategies as highlighted in the diagram. These contain the factors to consider when investing in real estate:

Strategy 1: Investing In Core Real Estate Assets

Many consider this a low risk real estate investment, and it rightfully takes its place near the low risk-low return spectrum.
Core real estate assets investment often consists of established high-rise office towers and apartment buildings. You will find them downtown in major cities like New York City, Chicago, and San Francisco.

Tenants in this category have excellent credits and commit to long-term leases. As a result, investors are guaranteed reliable cash flow, making it a risk-free investment.
The characteristics of core investments are:

● The buildings are relatively new, efficient, and well-maintained.
● Bears attractive and functional design.
● Has top-quality building finishes.
● The property is in an accessible and highly desirable location.
● Relatively low degree of leverage since they might range from 0-50% of the asset’s value, but rarely higher.
● Properties are fully or mostly leased (close to 90% occupation).

Suppose your primary investment objective is to protect your assets from a decrease in purchasing power while at the same time securing long-term wealth for your family. In that case, this is the investment strategy for your needs.

Core investments have a low risk of principal loss and generally provide returns in the 4% to 8% range. However, that also means they have a low chance for significant price appreciation.
In addition, the major reward to such investments is that a slowdown in economic activities won’t affect them since their tenants are financially stable and unlikely to face unemployment.

Strategy 2: Investing In Core-Plus Real Estate Assets

Think of core-plus as those in the second place, a step higher than core assets, in the risk ladder. That means it’s slightly riskier but offers better returns.
There’s increased opportunity since investors can renovate the properties and, in turn, hike the rent. However, there may be a risk and opportunity since the property may be in the suburbs and not fully leased.
The characteristics of such projects are:

● Historic building rather than new construction.
● Building in relatively poor condition.
● It faces a dip in tenant credit.
● The property is in a not-so-great location.
● There’s a slender opportunity for price growth.

Annualized leveraged returns on these assets generally range from 10% – 14%.

Strategy 3: Investing In Value-Add Real Estate Assets

Value investments pose a mid-level risk since they generally have a problem that needs fixing.

Value-add real estate projects incur a higher level of risk alongside the greater potential for driving operating revenue growth and capital value appreciation.

The potential for rental growth in such assets could be discovered by:

● doing moderate renovations to attract higher-paying tenants
● higher rental rates in the immediate neighborhood
● brilliant business plan to reposition the anchor space/tenant
● adding additional square footage
● upgrading building systems
● improved finishes and installing new amenities
● changing of property managers

Remember, the goal is to give the property a refreshed look and, in turn, attract quality tenants who would afford higher rent rates.

Since you put in more effort to execute this business plan successfully, these investments typically provide leveraged returns between 15–19%.

Leverage with value-add: 65% – 85% of asset value/cost. Unleveraged returns on value-add assets are high enough to entice further use of leverage to enhance leveraged returns further.

Strategy 4: Investing In Opportunistic Real Estate Assets

It’s the riskiest investment strategy. Most of the projects in this category are new developments that you have to build from the ground up. In other instances, it necessitates a total turnaround.

These projects can include significant design, engineering, construction costs, legal fees to navigate repositioning and obtain entitlements, and brokerage fees to market and lease space or sell units.

In addition, the major downside to opportunistic real estate assets is that investors could go months or years before receiving any income.

However, opportunistic investments offer more than 20% in returns due to the value-addition renovations or new constructions to a vacant lot.

Conclusion

Investors need to understand the risk and return relationship when scrutinizing a potential real estate purchase. The level of the return should be proportional to the amount of risk taken.

If you’re a risk-taker, and investing in commercial real estate makes you tick, it’s advisable to implement these investment strategies labels.

According to real estate gurus like Tal Peri, you should actively mark all potential investments using the labels to alleviate risk. Thankfully, the label strategies real estate investment risk analysis doesn’t require experience, expertise, and full-time focus to accomplish.

www.redpillkapital.com

If you simply need more information. have questions, or want to discuss a specific deal, I’m always excited to help. Reach out to me at info@redpillkapital.com

If you are ready to start your journey to financial freedom but want specific additional educational materials, we have a course designed for physicians.

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Property Investors Real Estate

6 Challenges Multifamily Property Investors Face

6 Challenges Multifamily Property Investors Face

A multifamily property is any residential property with more than one housing unit. Duplexes, townhouses, condominiums, and apartment complexes are all multifamily properties.

Investing in a multifamily property is one of the best ways to dip your toes in real estate and property management. That’s because multifamily properties offer many benefits, such as steady cash flow, lowered risk, passive income, tax benefits, and valuation potential.

That said, like any other investment channel, it has its pitfalls. These are some of the challenges facing the real estate industry in 2021:

1. Management Intensity

You do have the option of outsourcing management for a multifamily property. However, looking after such property is so intensive that it occasionally requires your personal intervention.

For instance, you will deal with multiple tenants, leases, maintenance jobs, tax issues, and even different payment options. Each tenant has a unique way of handling their lease and communicates differently.

Some tenants will treat the property with respect, while others will tear up the place, leaving you with hefty repair bills. You can avoid this by screening potential clients to ensure you lease the property to a responsible tenant.

Also, if one thing goes wrong in one unit, it will likely go wrong for other units as well. Such a situation translates to higher maintenance and repair bills.

Compare this to if you were dealing with a single-tenant leasing a 15,000 sq. ft. office space. Despite the size, it’s still just one tenant. Unlike residential properties, maintenance costs and obligations fall to the tenant and not the owner, making management less intensive.

On the flip side, dealing with a multifamily unit has its perks compared to managing separate single-family units. It is easy to hire one on- or off-site manager to oversee the complex with a multifamily property. Whereas with multiple rentals, you’d need several managers to do the same job.

2. Cost

It is an understatement to say the price for a multifamily property is hefty. In fact, this is one of the main challenges of property development. This causes many real estate investors to shy away from investing in this property type.

Investing in a multifamily property is also challenging for first-time investors who may not have the required amounts to make the down payment.

For example, a two-unit apartment in New York or San Francisco costs more than one million dollars. As an investor, banks will require you to raise at least 20% for a down payment. This amount translates to $200,000, which is an amount a new investor may not have.

The scenario is more challenging in a bull market because new investors compete against seasoned investors for the same property.

An advantage to this is that you are more likely to get approval for a multifamily unit loan rather than a single-family home. That’s because banks view multifamily properties as low risk.

If you are a first-time investor, you can qualify for an FHA loan if you opt to live in one unit within the multifamily property, as you rent out the rest. FHA loans require a small down payment compared to other loans.

If the rental income from the multifamily loan is enough to pay for the mortgage that means you will live rent-free. However, you might need to live at the property for at least one year for this to apply.

3. Competition

As mentioned, multifamily properties attract seasoned investors. The result is serious market competition, which shuts out budding investors.

Experienced investors have an advantage over the others as they can pay for these properties in cash. Moreover, they have the industry connections to effortlessly secure funding.

These investors are also more than willing to waive purchase contingencies like financing contingencies or paying for inspections. Combined, these factors make seasoned investors more appealing to sellers than new and inexperienced ones.

New investors should partner with experienced investors when they start investing in multifamily homes to stand a greater chance. The partnership offers an opportunity for a new investor to learn the ropes.

4. Regulations

Landlords for single-family units already deal with strict regulations, but they are worse for multifamily properties. Breaking any codes results in hefty fines and penalties.

Because of real estate issues during COVID, the federal government made some rules and regulations you must enforce, including social distancing rules to stop the pandemic.

Further, there are mandatory design standards, utility cost computation rules, and the federal government has regulations governing multifamily communities.

To avoid falling foul of these rules and regulations, ensure you research the federal and state laws and abide by them religiously.

5. Vacancies

It is not uncommon for multifamily properties to have vacancies for weeks or months at a time. If you are still paying a mortgage on the property, you will have to cover that cost on your own.

Renting out both sides of the complex ensures that you still have a rent collection of about 90%. With a single-family unit, months-long vacancies are costly and offer a collection rate of about 80%. If this continues for a couple of months, it will affect your overall profits.

6. Frequent Turnover

Generally, tenants in such properties are more temporary than other real estate types. Multifamily property tenants are typically first-time renters, and with time, they’ll want to move onto more family-friendly properties.

With an enlarged family, they’ll need a bigger space, a yard for their kids and dogs to play in, and a garage for their multiple cars.

Because of that, the average length for tenancy in a multifamily home is one-third of what you’d expect at a single-family property. So, if you’re looking for tenants to stay a little longer, a multifamily property is not the right fit for you.

You can also avoid having too many vacancies by offering a generally pleasant living experience.

Final Word

You may be wondering if multifamily properties are the right real estate investment to try out. Like any other real estate investment, this type of property investment is lucrative. That said, it comes with its own set of cons, like any other type of real estate.

The most prevalent real estate challenges of 2021 you will face include hefty initial investment, high maintenance requirements, and frequent tenant turnover, forcing you to search for new tenants frequently.

That said, it’s up to you to decide whether to invest in them. When you address most of the challenges listed above, the multifamily property is one of the best investments.

www.redpillkapital.com

If you simply need more information. have questions, or want to discuss a specific deal, I’m always excited to help. Reach out to me at info@redpillkapital.com

If you are ready to start your journey to financial freedom but want specific additional educational materials, we have a course designed for physicians.

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Real Estate

Questions For The Syndicator

I Thought I Would Share The Exact Questions I Get Asked As A General Partner, Which Are The Same Questions I Ask Of People That I Invest With Who Are General Partners. I Invest In Other People’s Deals, And I Have My Own Deals, And I Want To Share The Commonality Of Questions That Are Super Important To Ask. I’m On Both Sides, And I Want To Share This Information.

Real estate is the most powerful way to accumulate wealth. More people have become millionaires through real estate than any other means. We know how to find the property, create a plan for improving the cash flow, negotiate the deal, and manage the asset. Your passive investment provides you with the opportunity to earn an income without the nine to five. We create a unique business strategy that fits your financial and investment goals. Get the financial freedom you need to do more of what you love. We are Red Pill Kapital, with a K.

How Long Have They Been Actively Engaged In Real Estate Investing?
I want to vet the general partner. I want to figure out how long they’ve been engaged in real estate investing.

• Did they just start a year or two years ago, or have they been in this for 20 years?

• What’s their track record?

• What’s their experience?

I want to look at their comparative analysis of this offering versus other offerings, look at an analysis of the things that they’ve actually completed, and look at their actual results delivered.

I want to know what they offered before and what the result was from that offering. In other words, what was their pre-offering package, and what was their final result? I want to get a copy of their previous deal. I want to get a copy of their investor communication that they’ve provided, because more than likely, how they communicated with other investors is how they’re going to communicate with me.

I want to know how long they’ve been doing syndication. I want to know what their investment strategy is. Is their strategy to just kind of shoot everywhere, or are they a highly refined sniper? Both things are good. You could have a wholesaler that was buying houses, and that might be one way to approach it – not the way that I would approach it. You could have a targeted sniper that looks at hundreds and hundreds of potential real estate deals or targets, but then picks the one out that’s super important and super necessary.

I Want To Know About Their Strategy.

• Does it correlate with the current and future market conditions?

• Can they describe their strategy?

• Can they describe how the macro trends affect their hyperlocal neighborhood, where this specific piece of real estate is?

• Do they understand what’s going on with this local neighborhood and how the job trends are going to make a difference?

I Want To Ask Them Before I Do Their Background Check:

Is there anything negative that they want to discuss with me? Is there anything negative they want to disclose? I pay very close attention to the vocabulary that people use and their style of communication. That vocabulary is going
to determine how clear and standardized they are and how their verbiage is going to come out, because if they’re not clear with me, and they’re not using standard vocabulary in the real estate vernacular, then there’s going to be a problem, because they’re not going to be able to deal with the banks. This might be their way to learn, and I don’t want to pay for people’s education.

That doesn’t mean that people don’t make mistakes. It doesn’t mean that things won’t happen.

What It Means Is I Don’t Want To Pay For Somebody Else’s Education.

I want to know if what they’re telling me is a fact or it’s an opinion, or if they’re mixing opinion as if it’s fact. Everything has a rational basis underneath it, but do they understand what that rational basis is, or are they just opening? I want to make sure that they’re using industry-standard metrics, not something that they made up, not something that they think they can derive.

I Need To Know What Locations Do They Invest In?

• Do they invest in the location that this project is in, and why are they investing there?

• Are they investing there because there’s a demographic reason?

• Are they investing there because they heard this was a good place from their buddy Joe, and they’ve listened to some real estate shows and everybody says, «Austin is hot, so I’m going to Austin»?

I want to know how well they know this hyperlocal environment that they’re currently investing in. Do they have a team that’s ready to undertake the investment? That doesn’t mean that
they have to have a team that has a general partner with an attorney, an inspector, a loan broker, insurance broker, and property management. All of those things can be hired out, but is it assembled? Is it ready to go? Do they have an attorney? Have they specified out who the inspector’s going to be?

• Have they picked out the loan broker?

• Do they have a relationship?

• Have they talked to an insurance broker?

• Have they even talked to somebody who’s going to help on the taxes? Because who knows?

In certain areas like Arizona, once you buy a property, your tax rate may go up a few percentage points, whereas if you buy a property in Texas, it may go up a few hundred percentage points.

Really, the functionality is to make sure that they’re prepared for this, and that they’ve anticipated this. Not all the team members are part of the general partnership. Some are just simply independent contractors.

• If there’s going to be major construction, have they identified the team that’s going to do the construction?

• Have they identified the rehab budget?

• Who’s going to manage that construction?

• Has that construction management cost been built into this?

• Has a pro forma that matches the construction, that’s specifically going to determine the cash flow, been done on a monthly basis, rather than some sort of nebulous percentage basis of the whole year?

Because the reality is you can’t take a percentage basis to the bank. What you can do is take the monthly income to the bank, so you need to know exactly what your pro forma is going to be per month – not as a global number, like an IRR, you need to know what the cash flow’s going to be. Cash flow you can deposit. IRR you can only look at.

I want to know what asset classes do they regularly invest in and what grade of asset. If they invest in multifamily, which makes sense, but they only invest in grade A, and this is a grade C, I don’t think they’re going to do as well, because what they’re going to try to do is take a grade C and upgrade it to a grade A, and that’s never going to happen. You might be able to get to a
grade B-minus, but you’re never going to get to a grade A, and you’re just going to spend a ton of money for nothing.

If they’re used to grade C, and they’re buying a grade A, they probably may not have the skillset to deal with the grade A tenants, because grade A tenants have a much higher need basis, and you’re basically creating an experience
for them in which you take care of things. Grade C, not so much. You want to know how many years of experience do they have with a particular asset class and how many years of experience in this grade of asset.

I Want To Look At Their Credibility

Are they going to put their own money in the deal beyond the acquisition fee? A lot of times all they’re putting in is the acquisition fee, which is the money that you’re putting in, and the acquisition fee might be 3 to 5 percent of the deal. It might be 7 percent of the deal. Just depends on the deal. But if that’s all of the money that they’re putting in, they’re not putting in anything. They don’t really have anything to lose.

Yeah, they spent a lot of time. They may have looked at a lot of projects, but I want them to feel the pain of failure if there is failure. I want to know: have
they ever had a deal gone bad? I don’t invest with people that have never had a deal gone bad, because a deal gone bad creates a whole different feeling and creates a whole different set of skills for the syndicator.

I want to know if they’re sponsoring other investments. How many other investments? Where are they at? Because I don’t want their attention overly diverted. That doesn’t mean that they can’t do other investments, but I need to know how much of their bandwidth of time is going to be spent on this investment, because this is the one that’s important to me. Can they give me names and contact information of past or current clients? Can they provide contact information for other investors so I can talk to them for a reference?

Credibility Questions

• Do they put their own money into the deal, beyond the acquisition fees?

• Did they ever have a deal go bad? If so, how did they handle it?

• Are they sponsoring any other investments? If so, how many?

• Can they give you the name and contact information of their past/ current clients?

• Can they provide contact information for other investors, that you can speak to them from a reference?

Deal Structure

I need to know what the deal structure is.

• Is there a preferred rate of return?

• Is there a waterfall?

• What’s the split?

• How do we structure this deal?

• Do they change the split between the general limited partner after a certain threshold?

It might be 70/30 going in, but then it might become 50/50, and you need to understand that.

• Are they only allowing accredited investors in, or is it also sophisticated?

• How are they making that decision that they allowed certain sophisticated investors in? Because that could impact the entire investment.

• How many key principles do they have?

• If there are no other partners, what’s going to happen if the investment goes south? Because if there’s only one general partner, and something happens to that one key person, everything is going to go south.

• What are their sponsor fees?

• How long are they usually holding an asset for?

• What’s their investment strategy?

• Is this a value-add?

• Is this a buy and hold?

• Is this a value-add with an intended refinance?

• What are we doing here?

• Where are we going to?

I want a map that tells me exactly what they’re actually thinking. If they can’t describe this to me in probably two or three sentences, they haven’t thought hard enough about this. This investment strategy is an elevator pitch – it should be that refined.

Reputation Search
I Will Always Do A Reputation Search

That might include just a simple online search looking for complaints. I want to look for positive comments. I want to look for negative comments. I want to do a UCC background check. I want to do a criminal background check. I want to check if they’re a prohibited party from the Securities and Exchange Commission.

I want to look for references on social media about this specific syndicator.

• Are they on a podcast?

• Do they have other websites?

• Do they have YouTube channels?

The more web presence they have, the less likely that they are going to be anonymous, and more collateral information is available that keeps them from behaving poorly later. I want to know if I can discuss this offering with one of my trusted advisors. More likely than not, I’m going to have to sign an NDA to make sure that everything is okay.

I want to contact the syndicators’ past or present colleagues or employees, and I want to know what their opinion is. I want to ask details about the past deal that the syndicators handled.

Legal Documents
When I look at the documents, I want to make sure that they’re professional – that they’re legal, they’re accurate, they’re complete. For me, they have to come over by DocuSign or one of the other electronic means. If they’re sending me paper, I kind of wonder about that, because in this day and age, that’s highly unusual. I want to make sure that all the documents are there, and that they look professionally prepared – that there’s not any typos in there.

I want to make sure that it’s an actual syndication attorney that signed off on this and not just some online tool that they’ve used to create a private
placement memorandum. I want to analyze the property, the market, the major employers in the area, the location, and the proximity to shopping centers and employment hubs. That should be described all in the offering memorandum.
I want to cross-validate it later, but I want to make sure that’s in there.

I want to review their pro forma and their underwriting and their hold period, and I want to determine for myself if this is conservatively written. Has this been stress tested? If need be, I’ll use a third-party underwriter to validate. Using a third-party underwriter to validate a plan, to validate somebody’s pro forma, is a very cheap insurance policy and can save me a ton of heartache later. Typically, this runs about $2,000 by the time that I’m done.

When I’m getting my offering memorandum, I want to make sure it was professionally prepared, that it’s not full of typos and mistakes. I want to make sure that it’s concordant with the property. I want to make sure it hasn’t been copied.

When I Deal With People, I Want To Know:

Is this a pressure situation? Because if this is a pressure situation, it is possible that they’re making a mistake. I want to make sure that there’s been plenty of time for me to analyze it and that I’m getting the appropriate amount of attention that I need in this deal. Are they answering my questions, or are they brushing me off?

I Want To Make Sure That They Understand My Particular Situation, My Goals, And My Needs. What Does That Mean?

Well, if I’m investing with an IRA, it means something totally different than if I’m investing with my own cash. If I’m investing for a five-year horizon, and this is a ten-year opportunity zone project, I’m not in the right deal. You can’t manipulate an opportunity zone project for ten years and expect to make a five-year return.

I Want To Know:

is this a pressured sale, or was this a pressured piece of information that they’re putting out? How many other deals did they look at before they selected this one to present? Did they look at three deals and this is the one? Because usually I find that, at minimum, I’m looking at 20 to 40 deals, and sometimes
a lot more, to find one that is worth analyzing. I want to make sure that they’ve verified, that they’ve evaluated, other similar assets of similar grade in a similar demographic. I want to know why they rejected those deals.

Pressured Sales?
• Is the deal sponsor giving you enough time and attention?

• Are they answering all your questions?

• Do they understand your situation, goals, needs?

• How many deals did they look at before they selected this one to present?

The Actual Deal
When you actually get to the deal, and you look at the market comps that are provided by the syndicator, you want to make sure that it’s in the right neighborhood. If you look at the market comp, and it’s plotted out, and it’s from two miles away, it’s probably not the same neighborhood. So, that’s not reliable. There are all kinds of online tools that you can use to validate a particular neighborhood.

You Want To Look At Their Projections Of Those Market Comps, and are they in line with neighborhood comps, not from something two miles away? I
guarantee you that if you invest in St. Louis, and you’re investing in University City, which I’ve invested in, if you go two blocks, you’re in a hellhole. If you go two blocks in the other direction, you’re in the business district, and the cost differential in housing is that one side sells for 40,000 and the other side sells for 400,000. One side rents for $350 a month, and the other side rents for
$1,800 a month – and they’re within blocks of each other.

You want to make sure that the overall offering makes sense in terms of the returns and the duration of the syndication. You want to make sure it makes sense for this particular syndicator and their background and the proposed plans. You certainly wouldn’t put up a high rise in the middle of farmland, so you want to make sure that this specific plan makes sense.

• Have they stress-tested this deal?

• Have they looked at what would happen on this deal if you went to historic vacancy rates – 30 percent vacant?

• Would they still be able to pay debt service?

• What would happen if taxes jumped 150 percent?

You want to look at the reversion cap rates. That’s what would happen to the value at a particular net operating income if the cap rate goes up.

Let’s say that you’re buying at a cap rate of six and you’re going to sell in five years. I usually increase the cap rate by 0.2 percent per year. So I’m looking at a reversion cap rate of seven, and then I want to know what it is for value. You also want to know if and who the lender is that’s underwriting. If it’s Freddie Mac and Fannie Mae, then it’s probable that you have additional eyes on this loan, because Freddie Mac and Fannie Mae have amazing underwriters. Those are the people that I use to underwrite my deals, and I think it’s very important to have that level of underwriting because it means the deal will stand on its own. Freddie Mac and Fannie Mae do not lend you money unless this deal is going to stand on its own.

You want to look at your cash-on-cash return. You want to look at your equity multiple. You want to look at your average annualized return, and the bank wants to look at your debt service coverage ratio. If your debt service coverage ratio is below 1.2, this is a no-go deal. If my average annualized return is below 7 percent, for me, that’s a no-go deal. If my equity multiple is not at least 1.9, this is a no-go deal.

I want a cash-on-cash return that’s significant. I don’t want to do deals that I’m not going to make a decent return on because I know what I can get in the market, and so I want to be very careful. When I look at the actual deal, I also want to impute what the depreciation value is to me, specifically.

The Actual Deal
• Evaluate the market comps that the syndicator has provided. Are the target rents competitive for this neighborhood in this grade property?

• Are the projections in line with the comps?

• Does the overall offering make sense in terms of returns, duration, syndicator integrity and background, and proposed plans?

• Have they stress-tested this deal? Vacancy rates? Taxes?

• What are the reversion cap rates?

• Is this a loan being underwritten by Freddie or Fannie?

• What’s the COC, Equity Multiple, Average Annualized Return, DSCR?

Thoroughly Understand The Capital Stack And Distributions

Equity Distribution

• Equity split at refinance or sale
• Asset management fees before or after pref
• Catch-up clause
• Refinance contingency
• Waterfalls

You have to understand what the capital stack is, so I’m going to just go over what a full capital stack is because I think it’s relevant. When you buy a piece of property, a portion of it is going to be equity and a portion of it is going to be debt. The debt is what you’re going to get from the bank. There are two levels of debt: senior debt and mezzanine debt.

Senior debt is the debt on the property if you’re not doing a rehab, so let’s just take an example. Let’s say that you’re going to buy a property.

Of that 70 percent debt, if there’s a rehab in it, it’s likely that about 50 percent of that is senior debt, and the other 20 percent is mezzanine debt. It’s a lender that is not going to give the full amount of money. It’s going to be at a slightly higher interest rate, and they’re second in line should anything bad happen. But if there’s no significant construction, then the whole thing is going to be senior debt.

So you’ve got 30 percent left that you have to raise equity for. The preferred equity gets the preferred return. The common equity gets the non-preferred return. The preferred equity is you; you’re the limited partner. So you’re going to get a split, and it could be a 70/30 split, or it could be a 50/50 split, or some combination thereof.

Inside that preferred equity, there’s usually a percentage. The first 6 percent goes to the preferred equity, and then it’s equally split, so you want to take a look at those numbers very closely. I usually map out my full capital stack. I usually just take this diagram and I put it down on paper so I can visually interpret this.

• What’s the mezzanine debt?

• What’s the senior debt?

• What’s preferred equity?

• What’s the common equity?

This is the easiest way for me to figure out exactly who’s going to get what, and what my expectations are going into this.

Then, when you look at the equity distribution – and you need to look at the equity split – what’s going to happen if it refinances versus sells? A lot of places, a lot of folks, will do an equity split at refinance or sale of 70/30, but if they’ve refinanced it, and you’re still in the deal, then the subsequent part is usually 50/50. It’s difficult to tell, but you’ve got all your money back, so for you it’s an infinite return anyway. Really, the ongoing risk is to the syndicator.

So, you want to take a look at that equity split at refinance or sale. You want to look at those asset management fees. Do they come out before or after pref? I’ve seen it done both ways. I think it’s very reasonable to do it before, and I’ve seen it very reasonable to do after. Most of them are done before the preferential payment.

There’s also something called a catch-up clause. The catch-up clause is we had enough money to pay the asset management fee. We had enough money to pay the 8 percent pref or the 7 percent pref, but we didn’t have enough money to do an equity split at all. So next year we do the same thing, and the next year we do the same thing. Eventually, the general partner catches up at the time of sale.

It’s very important to know whether there’s a catch-up clause or not. You want to know about any refinance contingencies. You want to know about waterfalls. Waterfalls are shifts in percentage based upon particular targets. There might be waterfalls because of construction. There might be waterfalls because you hit certain numbers. These are additional kickers. It’s very important to understand them.

So What’s My Process?
My average time to preliminarily analyze a deal is about four to six hours. I have people, though, that help me. I’ve got two full-time paralegals. We’ve got a full-time attorney. We have an in-house financial analyst, and we outsource our Freddie Mac underwriting for an extra look at deals that have gone forward.

I look at the people first. I look at the syndicator first. Then I look at the general demographics of the area, specifically looking for jobs. Then I look at the hyperlocal environment of the particular deal, and then I look at the deal. I don’t get to the deal until I’ve vetted the people and I’ve vetted the demographics. I’ve looked at the hyperlocal environment, then I look at the deal, and the least important thing that I look at is the entry cap rate.

People always talk about, “Oh, so-and-so has this cap rate. So-and-so has that cap rate.” Almost all of my deals are value-add. So what I’m looking for is not the entry cap rate. I’m looking for the exit cap rate, and I’m looking at the net operating income. Based upon the net operating income, that’s going to drive my value. I look at that delta between current net operating income and anticipated net operating income. That’s my value-add because that’s going to drive that value up.

I rebuilt the entire pro forma. I don’t want to use unintended math errors that might be hidden in a formula in their pro forma. So I basically copy the rent roll. I look at the T12, which is the last trailing 12 months, and I also look at the T3. I copy out all of the data, and I apply the rule of thumbs to costs. I want to make sure that I’ve done my own independent pro forma.

If my preliminary analysis is good, then I usually go visit the site. If I have to visit the site, that’s me adding about another 24 to 36 hours into my analysis. I don’t need to visit every single unit in the site, but I need to get a feel of it. I don’t invest remotely.

Last 6 Months Of 2019

Passive Investment

per 17 Offers (total received 51 offers, 43 different syndication groups)
6 Preliminary analysis
2 Site visits
1 Investment
did 3 passive investments last 6 months
added 17 syndication groups to my no-fly list
Active Direct Investment

>150 properties analyzed (actual site visits on 19)
4 offers made (full due diligence)
1 purchased and closed
In the last six months of 2019, in my passive investments, per 17 offers, I received basically 51 offers in 43 different syndication groups. From these 17 offers, I had six preliminary analysis, I had two site visits, and I had one investment. So it went from 17 to 1. I’ve basically done three passive investments for the last six months, and I added 17 syndication groups to my no-fly list.

These are 17 syndication groups that sent me offers, and I did the preliminary analysis on the people in the syndication group, and they had significant red flags. I know that I don’t have to reanalyze their deals. I might wait a year or two and let them back into my group to fly, but for the next year or so they’re locked out. I’m not even going to bother looking at their offers, because there’s something in there that I’ve identified in that particular group or those particular people that’s super dangerous.

It could be an SEC violation. It could be a pending bankruptcy. It could be a bunch of UCC liens. It could be some other criminal behavior. So, they go on my no-fly list so I don’t have to analyze them again. When I look at my
active direct investments, I looked at over 150 projects. I did actual site visits on 19 of them. I made four offers, and then did full due diligence with those four offers. I purchased and closed one. Greater than 150 down to 1, versus passive investment 17 down to 1.

Final Thoughts
Syndications are long-term prospects. You really need to understand the people that are in the syndication, because most syndications are going to outlast the average marriage in the U.S., which is about 8.2 years. The average syndication deal is between five and nine years right now. If you’re investing in an opportunity zone, that’s a minimum 10-year hold, which definitely outlasts the average marriage in the United States.

You’re creating a contract and offering memorandum. You’re looking at disclosures. You’re looking at PPM. These are all just the prenup to the marriage. The longer the syndication, the higher the risk, the greater the mischief that can go wrong, and the less likely that that prenup will even apply.

You want to make sure that there’s always a contingency plan to remove a bad actor. You don’t want to be stuck with a bad syndicator, and you don’t want to get bamboozled by beautiful graphics and beautiful pictures that somebody’s put together. I want the data. I want the math. The pictures are nice, but they don’t mean much. I can’t eat a picture. I can’t put a picture in the bank. I want to know what the cash flow is that’s associated with these beautiful graphics and pictures and how I’m going to get that into my bank.

Again, it’s a combination of the syndication team, the demographics, the hyperlocal environment, the actual deal, making sure it’s stress tested, looking at the exit, and how does it interact with my specific situation?

If You Need Help Underwriting A Deal, Let Me Know. Just Send Me An Email: Info@Redpillkapital. Com. If You Need Us To Help You Underwrite A Deal, It’s Pretty Cheap. It’s About $1,900, But That’s Not Specific, Because Some Deals Are Very, Very Complicated. But $1,900 Is Really Cheap Compared To Getting Into A Really, Really Bad Marriage.
Now this doesn’t mean that we’re going to go do a site visit for you, because that takes a lot more time, but at least we can help you with your underwriting and the reputation analysis research.
That’s one way to do it. But if you just have a couple of questions, that’s always free. Just email me info@redpillkapital, and just put in the subject line, call me. Give me your number, and we’ll chat, because we want to help other investors. We don’t want people to go into bad deals.

So What’s Red Pill Kapital?
Red Pill Kapital is a physician-owned commercial real estate investment and education company. It allows you to invest passively alongside us. We find the property or we find the investment group. We create and validate their plan. We look at how to improve the cash flow. We negotiate the deal. We manage and oversee the asset. Your passive investment provides you with an opportunity to earn an income without the nine to five because physicians don’t work nine to five; we probably work six to nine. We create a unique business strategy that fits your financial investment goals because we understand the specific needs of physician professionals.

Is Red Pill Kapital Right For You?
Your passive investment provides you with an opportunity to earn an income without the nine to nine, because physicians don’t work nine to five. We probably work six to nine. We create a unique business strategy that fits your financial investment goals, because we understand the specific needs of physician professionals.

Are you looking to enhance your financial wealth and truly live the life that you deserve? Are you an accredited investor who’s interested in learning more about passively investing and cash flowing
commercial real estate? Are you interested in investing alongside us? Because we don’t need your money. What we’re trying to do is do bigger projects with more leverage, and the bigger the project, the less the risk because the leverage improves. We only make money if you make money. If you have any questions, please email me at info@redpillkapital.com and that’s Kapital with a K.

We search for value-added real estate for our passive commercial real estate partners, and we actively manage that investment long-term for a successful exit. We are Red Pill Kapital.

Find us at Redpillkapital.Com

www.redpillkapital.com

If you simply need more information. have questions, or want to discuss a specific deal, I’m always excited to help. Reach out to me at info@redpillkapital.com

If you are ready to start your journey to financial freedom but want specific additional educational materials, we have a course designed for physicians.

Categories
Real Estate

Dr. Gurpreet Padda: Creating Wealth With Real Estate For Healthcare Professionals

OVERVIEW:

Jason A. Duprat, Entrepreneur, Healthcare Practitioner, and Host of the Healthcare Entrepreneur Academy podcast speaks with Dr. Gurpreet Padda, MD, MBA and entrepreneur. Dr. Padda is an avid real estate investor. He shares the lessons he has learned as an early entrepreneur and also provides tips for healthcare professionals interested in creating wealth through real estate investment.

EPISODE HIGHLIGHTS:

Dr. Padda grew up in India during war and uncertainty. He moved to the US when he was 8 and started his first business at the age of 10 selling cards door-to-door. At 16, he had a team of 30-year-old men working for him. He states – I was an entrepreneur before I went into medicine. Dr. Padda made it through medical school by hustling, which he did through real estate auctions. During his first year of residency, Dr. Padda rehabbed an eight-unit building in Chicago. After his residency, he went into pediatric anesthesiology for heart, liver and lung transplants. His medical path also included addiction and interventional pain management.

Dr. Padda’s practice has 7 locations and he provides $1.5 million in free care. “Option” is when you purchase a sale contract with an option to buy. You have three months to decide if you want to buy and the price is held at the same level. If you decide not to buy, you’re usually only out $100. Dr. Padda uses option contracts, where he’s looking at zoning and municipal plans. He researches what’s being planned for development in the area. Option contracts are low risk and offer a high reward.

There are two types of wholesaling. “Ugly” includes houses below $80k requiring a lot of work. “Pretty” is when someone wants to sell and is having a hard time finding a buyer. This option provides great margins and it’s the one Dr. Padda recommends physicians to use. Dr. Padda also recommends going big with real estate vs buying single units. Cap rate is the net operating income divided by the price. Become a passive investor with somebody first, watch and learn from their mistakes, and then become an active investor. To get started in real estate investing, talk with people you know. Work referrals through friends and contacts. Don’t blindly trust people on the internet.

3 KEY POINTS:

The most valuable resource on earth is not money but time. You have to look at both active and passive methods of gaining wealth. Passive income is what people pay you while you’re sleeping. The biggest impediments to becoming wealthy are ourselves and our taxes. The number one impediment is our personal wealth operating system and how we think about money.

TWEETABLE QUOTES:

“Time is like a water hose and you’re watering a particular concept or project. The more water and fertilizer you apply to it, the better it grows.” – Dr. Gurpreet Padda

“I think entrepreneurship is the ability to ask questions of yourself, realizing you don’t know, and then trying to figure out the answer.” – Dr. Gurpreet Padda

“Leverage what you know.” – Dr. Gurpreet Padda

RESOURCES:

Red Pill Kapital: https://redpillkapital.com/

Dr. Gurpreet Padda’s LinkedIn: https://www.linkedin.com/in/gurpreet-padda

Michael Blank podcast: https://themichaelblank.com/podcasts/

Adam Adams podcast: https://podcasts.apple.com/us/podcast/creative-real-estate-podcast/id1285094279

www.redpillkapital.com

If you simply need more information. have questions, or want to discuss a specific deal, I’m always excited to help. Reach out to me at info@redpillkapital.com

If you are ready to start your journey to financial freedom but want specific additional educational materials, we have a course designed for physicians.

Categories
Real Estate

What Is A Cap Rate?

Today, I’m Going To Talk A Little Bit About Cap Rates. I Think That Cap Rates Are Very Important For Professionals To Understand And Frequently They’re Misinterpreted. I Want To Spend A Few Minutes Going Over What Cap Rates Are, What They Actually Mean, And How Do You Best Utilize Them.

Real estate is the most powerful way to accumulate wealth. More people have become millionaires through real estate than any other means. We know how to find the property, create a plan for improving the cash flow, negotiate the deal, and manage the asset. Your passive investment provides you with the opportunity to earn an income without the nine to five. We create a unique business strategy that fits your financial and investment goals. Get the financial freedom you need to do more of what you love. We Are Red Pill Kapital, With A K.

Risk And Reward: The Greater The Risk, The Greater The Opportunity For Reward.
In real estate, one of the most important things that you can figure out is how do you define what something is worth. I think that this is one of the most important formulas in real estate, so I’m going to spend a few minutes on it. It is essentially net operating income divided by the value equals the cap rate. The cap rate is inherent and specific to different asset types, different locations, different quality of asset, whether it’s an A, B or C type location, whether it’s a major metropolitan area, or whether it’s rural.

What Is The Asset?

Is it an industrial building? Is it a farmhouse? Is it farm rental land? Is it a multi-family apartment unit? There’s an inherent cap rate that we measure one asset against another and this is a different way to look at risk than just reward and having a generalized principle, and we do that through cap rate. If something has a 10 cap or a 10 percent cap rate, that’s going to have a different value than something that has a five cap. Let’s go over that net.

Net operating income is equal to income minus expenses. You take all of the income, you take all the expenses away, and that’s what you’re left with. For example, if an investment property has $50,000 of net income before you look at any debt service, you have $50,000 of net income and its value in the market is a million dollars. That means that its inherent cap rate is 5 percent.

Now let’s take a look at it a different way; let’s play with the formula. Let’s say that I want to figure out what the value would be if I changed my net operating income. What would the value be? What would be the value in a different market if my net operating income was higher, but I was able to buy it for the same amount of money? Let’s take that example. Let’s say that I went to a different market and the thing was generating $80,000 as opposed to $50,000, but I was only having to pay a million dollars. In both situations, the value’s the same.

One cap rate, the first one where I was generating $50,000, is a cap rate of 5 percent. Where I’m generating $80,000 in net operating income, my cap rate is now 8 percent. That’s a 3 percent difference in cap rate and that can be very substantial. It can tell you a lot about the demographics. The higher the cap rate, the higher the perceived risk for that asset group by people that are far smarter than you and I.

It’s a summary total. It’s people that have already invested in this kind of asset class, in this kind of city, and they’ve kind of sat down and said, «Hey, this is what I am willing to pay.» “Well, this is what I’m willing to pay.” You and I have probably done a few real estate transactions, but this is the summarization of 10,000, 20,000, or 50,000 real estate transactions of that asset group, of that asset type in that community with that demographic.

The Cap Rate Is An Easy Way To Compare Different Rates Of Return. It Also Can Have The Formula Manipulated So That If You Know The Cap Rate, You Change The Net Operating Income. You Haven’t Changed The Property—It’s The Same Property—So The Cap Rate Stays The Same, But You Change Your Net Operating Income. What Happens To The Value?

Cap Rate: Comparison Of Net Income For The Same Dollar Investment Between Different Investments
Cap rates allow you to compare what you do with net income for the same dollar investment between two different investments, whether they’re the same class of investment like, for example, multi-family compared to another multi-family or the same class of investment such as a retail shopping center compared to another retail shopping center or comparing between classes of investment, comparing a multi-family to a commercial office building.

Cap rate says this is my net operating income for this dollar invested. Cap rate is a comparison of net income for the same dollar invested between two different investments. An example is, if I have $1,000 invested and I get $100 of net operating income per year, that gives me a cap rate of 10 percent.
Another example would be that I get an $80,000 return for an $800,000 investment, and that’s a cap rate of 10 percent. Let’s say that I get a $90,000 return for an investment of $800,000; that’s an 11.25 percent cap. If you go further and you get a $60,000 return, which is less, for the same $800,000 investment, your cap rate is 7.5 percent.

Or, A Comparison Of Value-Driven By NOI

If you look at it a different way, if you take the cap rate formula and you take the net operating income and divide it by the cap rate, you end up with a presumed value, and this is very relevant because this is how frequently brokers discuss what a particular value is. They’ll say, «Oh, this is an eight cap and its net operating income is X, Y, Z, and therefore its value must be Y.» This is a value derivative and this becomes very, very important when you’re starting to talk to people and ask them, «What’s your cap rate? What’s your net operating income?» That’ll give you what the presumed value is but this can also be very, very confusing and we’ll go through that in a few minutes.

Given A Cap Rate Of 5%
Let’s give you an example. Let’s say that you know what the cap rate is for the area, for this kind of property. It’s about 5 percent and you know what the net operating income is, it’s $100,000, so what’s the value of that property? Well, if you’re paying more than two million dollars, you’re an idiot because based upon cap rate it should be two million dollars. Now, that’s what it should be and there’s some manipulations that you can do to that but that’s, in essence, assuming all things equal, a five cap with
$100,000 of net operating income should give you a translated value of $2 million.


∆ NOI And ∆ Value
Let’s say that you change your net operating income slightly — $10 per unit per month for 100 units. You go up 10 bucks, which doesn’t seem like a lot, but you do it for 100 units and there are 12 months in a year, so you get a $12,000 increase in your net operating income. On that five cap, you changed your value by $240,000, which is a very significant portion of your purchase price, so a small subtle change creates a huge leverage effect on value.

Changes In Cap Rate, With The Same NOI

A change in cap rate with the same net operating income dramatically changes the value. The higher the cap rate, the lower the value; the lower the cap rate, the higher the perceived value.

∆ NOI And ∆ Value

You can also use the cap rate formula to decide if you make a change in the operations of a particular facility or particular commercial office building or particular multi-family. If you change the net operating income, given that the cap rate stays the same, what’s going to happen to that value? Let’s take an example.

Let’s say you have a 100-unit apartment building and you change the rent just merely $10 per unit per month. That works out to about $12,000 per year. Let’s say that the going cap rate for that kind of
building is 5 percent. That changed the value for a $10 rent change for 100 units by $240,000. That’s a very significant leverage effect that occurs because of this division by cap rate.

Slight Change In NOI Can Have A Disproportionate Effect

Any slight change in net operating income has a disproportionate effect and it’s in the same direction as the value. In a low cap rate environment – i.e., if the cap rate’s about 2 percent – a $1,000 change results in a $50,000 value change. In a high cap rate environment, so let’s say 10 percent, a $1,000 change in net operating income only results in a $10,000 value change. Why is this relevant? This
is relevant because there’s certain markets, such as in California and other places that are relatively mature, like New York, that are very low cap rate environments for the same asset class as would be compared in the Midwest.

You would think because the cap rate is higher, you’re getting better bang for your buck, but that’s not necessarily true. In a low cap rate environment, a smaller change in net operating income drives a
greater value change. This is very important because you can make money whether the cap rate is high or low. It’s really a derivative of net operating income. Keep in mind that cap rates are an explanation of risk, so if the cap rate is super high for a particular asset group and in a particular city, that just might be because that’s a very high-risk area or a very high-risk asset.

Is It Really That Simple?

No. Cap rates are an artifice. They’re a calculation; they’re a derivative; they’re not real. Cap rates are looking at your back or rearview mirror trying to figure out where you’re going to get to. Cap rates are a translation of existing market behavior into a number that allows a comparison between asset groups or between demographics. Cap rate is an explanation of market sentiment, and it doesn’t mean much more than that. It’s like a numerical pain scale. One person’s pain might be an eight, another person’s pain might be a two, another person’s pain might be a three. It’s a scale and it’s highly subjective.

We objectify it by putting the formula in of essentially net operating income divided by value equals cap rate, but it doesn’t mean much – it’s looking at it backwards. Cap rate is a measure of forward-looking financial safety and
wealth preservation. It’s really a marker for potential market risk in a particular environment. You should never be lulled into a sense of safety by looking at a cap rate.

The cap rate is often used by brokers to obscure the real facts, and it confuses the individual investor. You have to remember that real estate is a hyper-local environment and cap rates are typically regional. They’re usually citywide.
Nobody really defines a cap rate for a neighborhood or a three-block area. I know that in the city that I live in, if I literally drive 250 feet from one residence to another residence or one street to another street, I can go from a war zone into some of the most expensive areas in the city, so the hyper-locality of real estate is not explained by cap rates and it’s very easy to confuse.

You can make money whether your cap rate is highor low.

It’s really the property that matters. It’s the management and what the management does with the net operating income. The hyper-local environment determines the value of that particular property, and the time horizon in which you’re going to hold property. The cap rate is really a look at supply and demand and risk. If the demographics are declining for that area—i.e. people are leaving the city – you can expect that the cap rates would go up because the risk goes up. It’s proportional to the risk. Keep in mind the cap rates do reflect the net operating income, so if you have a low cap rate and a high-interest rate, you’re going to find a very tough time financing a particular property because your net operating income may not be sufficient to pay for the debt service.

We search for value-added real estate for our passive commercial real estate partners and we actively manage that investment long term for a successful exit. We are Red Pill Kapital.
Find us at Redpillkapital.com

www.redpillkapital.com

If you simply need more information. have questions, or want to discuss a specific deal, I’m always excited to help. Reach out to me at info@redpillkapital.com

If you are ready to start your journey to financial freedom but want specific additional educational materials, we have a course designed for physicians.

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Real Estate

Medical Professional Investing: Real Estate Strategies

Medical professional investing is a crucial aspect for physicians and other health care providers to secure their financial future. With the uncertainty in public health, it’s important for medical professionals to explore alternative investment options that can provide stability and growth throughout their working years. One such option is real estate investment.

By understanding the financial and market factors associated with real estate investing, medical professionals can make sound decisions that promote both stability and growth of their wealth during uncertain times.

Gaining insight into investing in real estate as a medical professional can assist with making informed decisions, safeguarding assets during economic turbulence, and creating passive revenue sources.

Table Of Contents:

1. Assessing Your Financial Situation For Real Estate Investment

Before entering the realm of real estate investment, it is essential to have a thorough understanding of your current financial state in order to devise an effective plan and set achievable goals. Crafting a plan and establishing attainable objectives for your investments is essential before venturing into the realm of real estate investing. To begin assessing your finances, consider the following steps:

  • Analyze Your Income And Expenses: Start by calculating your monthly income from all sources, including salary, bonuses, and any other streams of revenue. Next, list down all recurring expenses such as mortgage payments or rent, utilities bills, groceries costs etc., to determine how much disposable income is available for investing in real estate.
  • Determine Your Net Worth: Calculate the total value of all assets (real estate properties owned if any), savings accounts balances (net worth) minus outstanding debts like student loans or credit card balances.
  • Create An Emergency Fund: Before committing funds towards real estate investments ensure that you have at least three to six months’ worth living expenses saved up in case unexpected events occur which may impact cash flow negatively.
  • Evaluate Potential Tax Implications: Consult with a professional accountant or financial advisor who can provide guidance on possible tax benefits associated with owning rental property as well as potential liabilities that might arise during ownership period.

Taking these steps will give you an accurate picture of where you stand financially and help identify areas where adjustments need be made before embarking upon this new venture into real estate investing. Remember that having a strong foundation in place ensures better chances success when navigating through unpredictable market conditions faced by medical professionals today due economic uncertainty caused by factors such as the ongoing COVID-19 pandemic.

Examining your fiscal status for property investing is a fundamental initial move to guarantee that you are taking the most advantageous choices for yourself and your future. Examining the available real estate investment prospects is the next step after gauging your financial status for investing.

Key Takeaway: It is imperative for an experienced practitioner to comprehend their monetary standing prior to investing in property. To do this, analyze income and expenses; determine net worth; set up an emergency fund and evaluate potential tax implications. Having a strong foundation ensures better chances of success when navigating through today’s unpredictable market conditions.

2. Exploring Real Estate Investment Opportunities

As a medical professional, you have various real estate investment opportunities available to help grow your wealth and secure your financial future. Before making a decision on the best real estate investment opportunity to pursue, it is important to evaluate your goals, risk tolerance and time commitment in order to ensure you make an informed choice. Here are some popular options for physicians looking to invest in real estate:

Rental Properties

Rental properties can be an excellent source of passive income for medical professionals who want long-term returns on their investments. You can choose between residential rental properties (single-family homes or multi-unit buildings) or commercial rental properties (office spaces or retail stores). Owning rental property requires managing tenants and maintaining the property; however, hiring a property management company can alleviate these responsibilities.

Real Estate Investment Trusts (REITs)

A Real Estate Investment Trust (REIT) is a company that owns and manages income-producing real estate assets such as apartment complexes, office buildings, shopping centers, hotels, etc. Investing in REITs allows you to earn dividends from the trust’s profits without having direct ownership over any physical property. This option is ideal for those who prefer not to deal with day-to-day management tasks associated with owning rental properties.

Crowdfunding Platforms

Real estate crowdfunding provides a chance for financiers to join their funds and put resources into various sorts of land ventures, from single-family homes to commercial structures and new developments. These platforms provide a variety of investment opportunities, such as individual dwellings, business properties and newly constructed projects. Crowdfunding can be an excellent option for those looking to diversify their portfolio with smaller investments across multiple properties.

Fix-And-Flip Properties

If you have experience or interest in property renovation, investing in fix-and-flip properties might be the right choice for you. This strategy involves purchasing undervalued or distressed properties, renovating them, and selling them at a profit within a short timeframe. While this type of investment can yield high returns quickly, it also comes with higher risks due to potential unforeseen expenses during renovations.

To make an informed decision about which real estate investment opportunity is best suited for your needs as a medical professional, consider factors such as your financial goals, risk tolerance level, time commitment required for managing the property (if applicable), and overall market conditions.

Real estate can be a lucrative way for medical practitioners to diversify their investments and generate lasting prosperity. It is essential to grasp your risk appetite before investing in order to optimize gains and reduce losses.

Key Takeaway: As a knowledgeable health practitioner with an inclination for success, investing in real estate can be a great way to expand your finances. From rental properties and REITs to crowdfunding platforms and fix-and-flip opportunities, there are many options available; it’s important to research each one carefully before diving in headfirst.

3. Determining Your Risk Tolerance

Assessing your risk tolerance is a crucial step in making informed decisions when investing in real estate as a medical professional. Determining the amount of risk you’re ready to accept can help direct you towards investments that are compatible with your objectives and level of comfort.

A. Understanding Risk Tolerance

Risk tolerance refers to an individual’s willingness to accept potential losses or fluctuations in their investments’ value for the possibility of higher returns. It can be influenced by factors such as age, income, financial goals, and personal experiences with past investments. To better understand your own risk tolerance, consider taking an online assessment quiz, consulting with a financial advisor, or reflecting on previous investment experiences.

B. Types Of Real Estate Investments Based On Risk Levels

  • Low-Risk: These investments typically involve well-established properties located in stable markets with consistent demand from tenants (e.g., single-family homes).
  • Moderate-Risk: Properties that require some degree of improvement or have moderate market fluctuations but still offer reasonable returns (e.g., multi-family units).
  • High-Risk: Investments involving significant property improvements, new construction projects, or volatile markets where there may be more substantial potential gains but also increased risks (e.g., commercial properties).

C. Balancing Risks And Rewards

To maximize success in real estate investing, it is essential to carefully consider the rewards and risks associated with each opportunity. As a medical practitioner considering investing in real estate, it is critical to evaluate the potential benefits versus the associated risks. For example, investing in a high-risk property may offer more significant potential gains but could also result in substantial losses if market conditions change or unforeseen issues arise.

One strategy for managing risk is diversification – spreading your investments across various types of properties and geographic locations can help reduce overall risk exposure. By engaging the expertise of industry professionals, investors can leverage their knowledge to better identify and manage risks associated with potential investments.

Once you’ve established your risk appetite, start constructing an investment portfolio that caters to your requirements and ensures monetary stability. Constructing a varied collection of real estate assets is an important component in formulating a successful retirement plan for medical practitioners.

Key Takeaway: As a savvy medical professional, it’s essential to understand your risk tolerance when investing in real estate. Finding the right balance between risks and rewards is key; diversifying investments across different types of properties and locations can help minimize potential losses while still achieving attractive returns.

4. Building A Portfolio Of Real Estate Investments

As a medical professional, creating a diversified portfolio of real estate investments is crucial for long-term returns and stability. This article will provide you with steps to construct a real estate investment portfolio that is tailored to your fiscal objectives and risk-tolerance.

A. Diversify Your Investments

Diversification is essential in reducing risk and increasing potential returns on your investments. By investing in various types of properties across different locations, you can mitigate risks associated with market fluctuations or local economic downturns. Consider incorporating the following types of properties into your portfolio:

  • Commercial properties, such as office buildings, retail spaces, or industrial warehouses.
    Residential properties, including single-family homes, multi-family units (duplexes or apartment complexes), and vacation rentals.
  • Real Estate Investment Trusts (REITs), which are companies that own income-producing real estate assets like shopping centers or hotels.
  • Mixed-Use Developments, combining residential units with commercial spaces to create diverse revenue streams.

B. Analyze Potential Properties Carefully

Prioritize thorough research when selecting individual property investments to ensure they meet your criteria for return on investment (ROI) and overall fit within your portfolio’s diversification strategy. Some factors to consider when analyzing potential properties include:

  • Location and neighborhood demographics
  • Local economic growth prospects
  • Rental income potential and vacancy rates
  • Property appreciation trends in the area
  • Maintenance costs, property taxes, and insurance expenses.

C. Leverage Professional Expertise

To make informed decisions about your real estate investments, consider working with professionals who can provide valuable insights into market trends and property management best practices. Some experts you may want to consult include:

  • Realtors, who can help identify suitable investment properties based on your criteria. Mortgage Brokers, to assist in securing financing for your investments at competitive interest rates. Financial planners, who can advise on optimizing tax strategies related to real estate investing or incorporating these assets into a comprehensive retirement plan.

By building a portfolio of real estate investments, medical professionals can take control of their financial future and secure a more stable retirement. Having a basic grasp of portfolio building, let us now explore the means to effectively manage such investments.

Key Takeaway: As a savvy investor, it’s important to diversify your real estate portfolio and thoroughly analyze potential properties. Utilize the knowledge of experts like real estate agents, loan officers, and fiscal advisors to make smart investments that will bring in substantial profits. Put simply: do your homework before investing in order to hit a home run.

5. Managing Your Real Estate Investments

However, it is crucial to develop strategies that will help you oversee your properties effectively and ensure their long-term success. In this section, we will explore the best strategies for monitoring market trends, managing tenants and handling repairs/maintenance to ensure successful long-term investments in real estate.

Monitoring Market Trends

To make informed decisions about your investment properties, it’s essential to stay updated on the latest real estate market trends. This includes keeping an eye on interest rates, property values in the areas where you invest and economic factors that could impact demand for rental properties. By staying informed about these factors, you can identify potential opportunities or risks early on and adjust your strategy accordingly.

Tenant Management

Finding dependable renters who remit their rent promptly and keep the property in good condition is a fundamental element of successful real estate investing. To achieve this:

  • Create a thorough tenant screening process: This should include background checks (credit history), employment verification and references from previous landlords.
  • Maintain open communication with tenants: Address any concerns promptly while also setting clear expectations regarding lease terms or house rules.
  • Consider hiring a property management company: If you lack the time or expertise needed for effective tenant management as a busy medical professional,, consider outsourcing this task to professionals who specialize in overseeing rental properties.

Repairs & Maintenance

In order to maintain the value of your investment properties over time:

  • Schedule regular inspections: This will help you identify any necessary repairs or maintenance issues before they become more significant problems.
  • Establish a budget for ongoing maintenance and repairs: Set aside funds to cover routine upkeep, such as landscaping, painting, and appliance replacements. This can help prevent costly surprises down the road.
  • Hire reliable contractors: Develop relationships with trustworthy professionals who can handle various repair tasks efficiently and cost-effectively. You may want to ask fellow investors or property managers for recommendations.

By effectively managing your real estate investments through monitoring market trends, tenant management, and regular property maintenance, you can ensure that your portfolio remains strong in the face of economic uncertainty. As a medical professional investing in real estate,, taking these steps will provide financial stability while allowing you to focus on your primary career responsibilities without sacrificing potential returns from your investment properties.

Key Takeaway: Keeping abreast of market trends and devising an effective tenant-handling plan are critical for any successful real estate professional. Additionally, having a budget for repairs and maintenance is essential to maintain the value of your investments over time – all while keeping one eye on potential opportunities or risks.

FAQs In Relation To Medical Professional Investing

Is Healthcare A Good Industry To Invest In?

Investing in healthcare can be a great opportunity for physicians and other medical professionals. Healthcare is an industry that has displayed robustness during economic crises, since people will still need medical care regardless of the financial situation. Furthermore, healthcare stocks tend to have higher dividend yields than many other sectors, providing investors with steady income streams. Additionally, investing in companies related to the healthcare sector such as pharmaceutical manufacturers or biotechnology firms can offer greater potential returns if these companies are successful in developing new treatments or cures for diseases. Ultimately, whether or not you choose to invest in healthcare should depend on your individual financial goals and risk tolerance levels.

Are Doctors Good At Investing?

Yes, doctors can be good at investing. With the right knowledge and experience, they can make sound decisions that will help them achieve their financial goals. For optimal success, doctors should solicit expert counsel to ensure that their investments are in sync with their long-term plans. Doctors have a golden chance to capitalize on the prevailing market conditions by studying various investment approaches and discerning how each one is best suited for them. With careful planning and dedication, doctors can become successful investors in real estate or other types of investments for retirement security.

How Should Doctors Invest?

Doctors should invest in real estate for retirement planning. Real estate can be a secure, long-term investment that may generate consistent returns and value appreciation over time. Real estate can be a relatively low-risk option compared to stocks or bonds, making it suitable for doctors who are seeking long-term wealth creation. Additionally, investing in real estate allows doctors to diversify their portfolio and spread out their risk while still enjoying potential returns from rental income or capital gains as property values rise.

What Investments Do Doctors Make?

Docs may put funds into a selection of opportunities, for instance stocks and bonds, shared reserves, land resources, assets like gold or oil futures deals, annuities and other insurance policies. They may also invest in business ventures such as start-ups or existing businesses. Depending on their risk tolerance level they can choose from low to high-risk investments that offer different levels of returns over time. Medical professionals may explore putting money into retirement accounts, like IRAs or 401(k)s, to get potential for long-term development and the advantage of postponed taxation in subsequent years.

Conclusion

For medical professionals, diversifying their investments with real estate can be a wise choice for securing retirement. With careful research, understanding of risk tolerance, and ongoing management of your portfolio you can create a secure financial future while taking advantage of the many benefits that come with owning real estate as part of your medical professional investing strategy. Educating oneself on this type of investing can be paramount to reaching both short-term objectives and long-term financial stability.

By Gurpreet Singh Padda, MD, MBA

www.redpillkapital.com

If you simply need more information. have questions, or want to discuss a specific deal, I’m always excited to help. Reach out to me at info@redpillkapital.com

If you are ready to start your journey to financial freedom but want specific additional educational materials, we have a course designed for physicians.

Categories
paindoctor podcast Real Estate

Business Secrets About Money That Most Physicians Were Never Taught

As Doctors, We Were Never Taught Anything About Money In Medical School. We Have Been Purposely Kept In The Dark, While All Of The People Around Us Are Working Less And Becoming More Wealthy.

Most doctors make a decent living, but that doesn’t mean they are wealthy. Physician salaries and income may be high, but their expenses are also high. If you stopped working today, how many months would you have, before you ran out of money?

Just because we are doctors, doesn’t mean we can’t get seriously injured or sick.

If You Suddenly Couldn’t Work Due To An Accident:
How many months would you have, before you had to move to a cheaper house?
How many months would you have, before you started to deplete your savings?
Did you know that disability insurance doesn’t cover your full income, and unreimbursed medical expenses bankrupt the families of most physicians?
Have you anticipated an additional $285, 000 in medical expenses?
Have you anticipated spending $128, 000 a year for the next 10 to 20 years if you have to go into a nursing home facility?
If Any Of Those Questions Scare You…
Consider this your wake-up call, your chance to take control of your own future.

Physicians today face huge challenges in a rapidly changing healthcare environment:

Declining
Regulation and compliance
Evermore patient demands and never enough time to help
It’s no wonder the burnout rate is so high.

How Are We Supposed To Help Our Patients When We Are Struggling With Our Own Financial Well-Being?
Do something about it!

As A Physician, The Last Thing I Thought I Would Have To Worry About Was Money.
I don’t know why, but I really thought having a 401K and investing in the stock market would let me retire wealthy. I was seriously mistaken. Blindly trusting my money to stockbrokers, promising an 8-10% return, does not actually lead to financial freedom.

As physicians, we assumed that if we simply took care of our patients, we would make more than enough money and that we would never have to worry about money. That eventually when we retired, we would retire with freedom and the resources to enjoy it.

We assumed that by doing good for others, we ourselves would be rewarded.
We assumed that because we have a high salary, we would never run out of money.
Most of us grew up thinking that even talking about money was a bad thing.
Most of us grew up thinking that even talking about money was a bad thing.
Unfortunately, we have ignored our financial education, to our peril.
We trusted in our financial advisers, to guide us in saving for our eventual retirement goals, but in reality, we are putting money into their pockets and they really have nothing to lose. They charge us a fee, whether they make money or not, and if we lose everything, they lose nothing.

Our hospital administrators, our governmental officials, our financial advisers, even our gas station and dry cleaner owners have more wealth and time freedom than we do.

The system is rigged against us. We get taxed at the highest levels and have nothing left to show for it.

At the end of the day, most physicians end up dying broke and broken.

Did You Know About 10,000 People Retire Each Day In The U.S.?
That’s about 300,000 people per month.

Almost 40 million households have no retirement savings at all, according to the National Institute on Retirement Security.

Close to two-thirds of seniors cite finances as the primary reason why they remain at work, according to a recent poll by Provision Living, a provider of senior living communities.

The Problem Is That:
One year of nursing home care, in a semiprivate room is projected to be $128,100 in
A 65-year-old couple retiring in 2019 can expect to spend $285,000 on healthcare costs in retirement
But working seniors only had an average of $133,108 saved for
But What Does This Really Have To Do With Physicians???
I just happened to be making post-anesthesia rounds in the psych ward of an urban university hospital, on a trauma patient that one of my residents had managed to break a tooth on… Not the usual place I would want to find myself at 9 pm after a busy day, but the show must go on.

A patient in a wheelchair motioned me over. He seemed to know who I was, but I had no idea why this disheveled “patient” wanted to talk to me.

It turns out, he had been the head of General Surgery at that very hospital, three years previously, about a year before I had started.

In the OR’s the nurses had regaled me with battle stories about him, stories about life-saving heroics, but I hadn’t met him until that day.

For that day and the next few days when I could steal away a little time, we talked. He needed to pass on what he had learned, what had happened. What had gone right, what had gone wrong, what he wished he had done differently.

He had worked nearly a hundred hours a week for his entire adult life. He was a doctor’s doctor.

He was extremely skilled. He had sacrificed his personal goals to help his patients.

He had made all kinds of money, but he wasn’t in it for the money.

He let his stockbroker manage it. The market would have its ups and downs, but he knew that it would always recover. Because of the stock market crash of 2008, the broker had lost nearly everything. His broker had been actively trading the account as the physician was getting closer to retirement and the overall return wasn’t going to be quite high enough to retire.

Unfortunately, the stock market crash came unexpectedly about 3 months before he got diagnosed with metastatic prostate cancer.

By the time he got through treatment and got his head above water, the market was decimated.

He ran out of disability money, he ran out of savings, and eventually, he ran out of hope.

He didn’t die from cancer, he died from desperation and fatigue.

I had met him in the last few days of his life. I had met him too late.

Nearly Every Week, I Hear Of Yet Another Physician Who’s Burned Out.
A physician who has to close their practice or sell to the hospital and then gets pushed out of their
A physician who seemingly is on top of the world, but in reality is cutting corners to make ends
A physician who can’t get off the treadmill of work, or he will lose


The vast majority of physicians realized they were running out of money… but after they had retired.

If You Want To Live Off Even Half Of Your Final Salary In Retirement, You Need To Save At Least 40% Of Your Income Over The Next 30 Years.

This assumes a historical return of 8-10%. Unfortunately, the projected stock market return is 6% and the Fed inflation target is 2.5%, so the real rate of return is closer to 3%.

Olivia S. Mitchell, professor of insurance/risk management and business economics & public policy, and executive director of Wharton’s Pension Research Council at the University of Pennsylvania.

The reality is that although physicians make a lot of money, they also have huge bills. At the end of the day, they will run out of money just like everybody else, but faster…

Let Me Share A Few Business Secrets About Money, That Most Physicians Were Never Taught.
Are you looking to enhance your financial well-being, and truly live the life that you deserve?

Are you looking for a way to pay less in taxes and keep more of your money?

If You’d Like To Find Out More, Join Our Physician Investors Club,
where you can schedule a phone call with me, and I will send you a free book “Financial Freedom for Physicians.”

What Breaks My Heart.
A fifty-three-year-old female physician colleague reached out to me because she needed a loan.

She had been getting bank loans because she couldn’t make ends meet, despite the fact she made a good living. She had some taxes she had to catch up on, she had college

for her kids she was paying on, she had car payments, and she had gotten behind on a mortgage.

She hadn’t been able to save anything, let alone save enough to retire. As soon as she wasn’t feeding her financial advisers with investment cash, they had stopped returning her calls.

When the bank stopped lending to her, she went to private money loans through loan brokers, who charged her a hefty fee, that she thought she could just pay off with her next few paychecks.

She had been struggling financially, and only turned to me because she had heard that I had helped another physician avoid financial catastrophe when he became disabled from a bad car accident, and I had helped him.

She assumed that I had given that physician a loan until he got back on his feet. I hadn’t given him a loan; I had given him something far more valuable.

I had given him the information and guidance to get off the paycheck treadmill, to no longer be a wage slave.

I had given him the tools to invest money passively, so whether he worked or not, he would still make money.

I gave him the tools to reduce how much tax he was paying, over 40% of his paycheck.

I had shared with him why the stock market was a veneer of truth, covering all manner of unspeakable financial rot.

I had shared with him what true wealth was, the freedom of being a physician, helping patients, and not worrying about if there was going to be enough money to pay for his daughter’s wedding.

Physicians need true financial education and specific tools to understand these complexities, so we stop getting taken advantage of.

So What Are We Supposed To Do?
So my fifty-three-year-old physician colleague got her financial house in order. She changed her relationship with money and managed it like you would manage a ventilator in the ICU. She had been on life support, but now that she knew how to make a change, she could wean herself off of life support.

She paid off her highest interest loans, she stopped spending as a distraction, she set up a reserve bank account for investment, and eventually rolled over her non-performing

retirement accounts into performing assets that not only generated monthly cash flow but also gained in value. Assets that didn’t fluctuate minute to minute, hour to hour, day to day. Tangible assets that would help her retire, and that her kids could eventually inherit.

Financial education is not something physicians are taught in medical school.

We sacrifice the majority of our adult lives to help patients, to help save their lives. We’ve spent so much of our brainpower caring for our patients, we ignore our own financial future.

The financial information we get is filtered through the lens of our financial advisers who tell us to invest for the long-term, in a diversified portfolio of stocks, bonds, and mutual funds.

This couldn’t be farther from the real truth. We are being bamboozled by paper asset managers; we have been blinded to the truth.

At Red Pill Kapital, we are physicians just like you. We recognize your time is valuable, and are here to help simplify and streamline the process for you.

Our Mission Is To Empower You, As A Physician Investor, By Providing You With A Clear And Concise Map To Navigate Real Investments:
That help you reduce your taxes
That keep pace with inflation
Those are passive so you can focus on your true passion to help patients
Red Pill Kapital is a physician-owned commercial real estate investment and education company. We specialize in tax-advantaged commercial real estate assets that produce real results.

How To Learn More.
I look for opportunities where I can generate an asymmetric return, a return where the benefit is far greater than the risk. When you invest in the stock market and you have special knowledge that no one else does, you are breaking the law. But when I invest in real estate assets and I have special knowledge, it’s just considered being smart.

I was once working on an interesting spinal cord implant technology that I knew would make a fortune, but because I had special secret knowledge, I couldn’t tell anybody else and I couldn’t invest in it.

In my real estate investing world, I found out about a pending zoning change that would create a huge windfall for a specific area. Before the newspapers made it public knowledge, I tied up the properties with purchase options. That special knowledge still gives me an extra $5,000 of cash flow every month.

As physicians, we never learned much about money in medical school.

It’s no wonder that physicians are considered such easy prey for financial
It’s no wonder that physicians have such a high burnout
It’s no wonder that a lot of them die
Don’t let this be you. Make a decision to take your financial future in a new direction, where you can achieve true wealth, a future where you can make money even while you aren’t working.

True wealth is not having to work.

Are you looking to enhance your financial well-being, and truly live the life that you deserve?

If you’d like to find out more, join our physician investors club, where you can schedule a phone call with me, and I will send you a free book “Financial Freedom for Physicians.”

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What Is Financial Freedom For Physicians?

So, What Is Financial Freedom For Physicians? It Never Occurred To Me, Until One Day An Extremely Wealthy Businesswoman Asked Me, «So, What’s Your Number?» I Thought, «What Does She Mean?» I’ll Explain.
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Making Money As A Physician?
So, when you make money as a physician, it’s an active endeavor. It’s a personal service business. What you’re doing is you’re trading your time for somebody else’s money. It’s a skill. It’s not something that’s fungible. You can’t go on Amazon and say, «Give me two units of a physician.» You can’t say, «Oh, I need a toaster, and I need it in black,» and they make 3,000 of these things a minute, and you need two of them. You’re not a widget. It’s a highly compensated, highly trained field, but unfortunately, because it’s such a specialized skill, because it’s so highly training, and it’s so lucrative, you have something called Golden Handcuffs.
• What happens if, for example, there’s a disruption?
• What happens if there’s death?
• What happens if there’s a disability?
• What happens if there’s a divorce? What happens even if you have to take a long vacation and you make your money actively?
• What happens to your income?
• How long do you have?
• How long does your family have before it runs out of money, if you have no active income?
How Long Can You Survive On Your Savings Alone, If You Lose All Of Your Active Income?
Take your total savings divided by your average monthly expenses, and you’ll get a number, and it’s the numbers of months of survival.
Now, you might be able to prolong your months of survival, if you have a death insurance plan, a life insurance plan, or if you have a disability insurance plan. You might have an improvement in the number of months of survival, but you know what? This comes at the expense of the person who’s disabled. This comes at the expense or the life of the person who’s the insured. If you’re that person, it’s not a good thing, because the only way that your family members are going to get that value is if you expire. Even if you become disabled, it’s highly likely that your average monthly expenses will dramatically increase, not decrease, and they’ll never increase to the level that you made when you were an active participant in the labor force.
This might explain why there’s a very high suicide rate in professionals, such as medical professionals. There’s financial duress that occurs, and sometimes people face these horrendous potential disabilities and a future reduction in income, and they don’t really see a way out. This might partially explain why suicide rates are correlated closely with financial instability.

What’s Your Number?
It’s your average monthly expenses times 1.30. That’s your number. That’s how much money you need to survive. Based upon your personal number, how many months can you survive? So, take your total savings, divide it by this number, and that gives you months of integrity.

Disability Is Not A Black Swan Event
I mentioned disability, and I want to graphically represent this. In the red line is your expenses. In the green line is your income, if you’re an active income worker. If you become disabled, which is the purple arrow, all of a sudden your expenses start to go up, and your income starts to go down, and what little you had left in savings disappears, and instead you start to accrue
debt. You’re far more likely to become disabled than die. On average, a 32-year-old male is six and a half times more likely to become disabled than die. Deaths due to cancer, heart disease, and stroke have gone down 32 percent, but the disability rate has increased 55 percent.
The things that used to kill people instead now disable them, and the problem is the disability costs way more than the death does.
Income Vs Expense With Disability

But I Have Disability Insurance
You might tell me, «But I have disability insurance. I’ll be okay.» You know, the reality is even if you have insurance, it’s not going to recover your income to the level it was before, and it’s not going to cover the income to the same level as your expenses are going to go up. So, no matter what, you’re not going to be able to maintain the delta between your active income, your expenses, and you’re going to end up negative. You’re probably going to end up in debt.
Disability is more likely to occur long before retirement, but that’s only because the mortality statistics suggest that death is more likely as we age, and that disability is far more expensive to you individually than death. It’s really a catastrophic number that most people don’t plan on; they don’t anticipate. Some people have disability insurance, but they don’t realize how many loopholes are in there, how many hidden limitations, what the time limitations are, or what the occupancy specific limitations are.
Being a physician, and having a disability, and having it occupation-specific to a physician doesn’t mean much. It has to be occupation-specific to what you do specifically at this time. It’s interesting to me. People change what they do, even as physicians, three to four times in their career, and rarely does their disability insurance keep track of that. The other thing is people set and forget their disability insurance. They get it at one time, and 15 or 20 years later, it has no bearing on what they’re currently doing, and it’s usually not indexed
to inflation, and it’s usually not indexed to income changes. You’ve worked actively, and suddenly your entire future gets destroyed, and all of your years of sacrifice are evaporated, because you didn’t anticipate disability.
Population Is Living Longer, But Sicker, With Greater Financial Needs
So, one year of nursing home care in a semi-private room in 2011 was estimated to cost about
$78,000. In 2021, the estimated cost is going to be $128,000. That’s a 64 percent projected growth rate. Did you earn a 64 percent projected return rate on your stock market investment from 2011 to 2021, 10 years? I don’t think so.

Most Americans Live Paycheck To Paycheck
Most Americans live paycheck to paycheck, and the reality is that the median American household currently holds about $11,700 in bank accounts and retirement savings accounts. That includes all their money. Now, median balances are different than average balances. So, the average balance is $34,730. This is the difference between mean, median, and mode. But the reality is 29 percent of households have less than $1,000 in savings. Millennials obviously have the least amount. Baby boomers and older have about $24,280, but they’re getting close to retirement.
The Northwestern Mutual 2018 Planning and Progress Report found that Americans average about
$38,000 in personal debt, excluding their home mortgage. So, even though they might have $34,730 in savings account median, their average debt is $38,000, so they’re actually net negative. About 30 percent of Americans use up about $14,000 of savings a year, so they go negative $14,000 every single year.
The 2018 Federal Reserve Report indicates that about 40 percent of Americans struggle with just paying a $400 emergency bill. 27 percent of those surveyed would need to borrow money to cover a
$400 bill. 12 percent wouldn’t be able to cover it at all. About one in five adults had a major unexpected medical bill last year, and one in four adults skipped necessary medical care because they couldn’t afford it. So, people are living on the brittle edge of insolvency.
At any given time, about 17 to 20 percent of adults are unable to pay their current month’s bills. They’re going in debt every single month. The real median household income in 2018-2019 was about $61,372, which in real dollars is almost exactly the same as it was in 1999. So, the household income average is
$61,372. The average expenditure per consumer unit was $61,224, again indicating that really there’s no difference between people’s income and their expenses. They’re spending everything that they have.
So, what does that have to do with physicians? Physicians make more money, don’t they?

In other words, two thirds of physicians are net negative. After they get their income and they pay off all of their expenses, there’s nothing left over, and there are a lot of reasons for this.
I mean, obviously it’s the concept of “I finally made some money, and I’m going to do what I need to do,” or it’s the concept of keeping up with the Joneses, or it’s the concept of, “You know what, I’ve got hundreds of thousands of dollars of
medical school debt.” There’s an interesting study on neurosurgeons that the vast majority of neurosurgeons continue to pay off student debt well into their 50s. What’s happening is just like regular people, physicians’ expenses match their income, so they have nothing left in savings – just the numbers are a lot bigger.

Being An Active Wage Employee Leaves You Exposed
If You’re An Active-Wage Employee, You’re Exposed.
The reason why is active-wage employment is taxed at the highest possible level. Active employment requires constant activity to maintain your financial integrity. It’s like bucketing out water from a lifeboat that’s sinking. The problem is all you can do is bucket faster, and once you start to get behind, it’s hard to get above water again. But the other problem is you don’t realize, as a physician, your lifeboat is only standing in about three feet of water, and you’re drowning in these three feet of water. If you get out of the lifeboat, you can stand up, and look at the horizon, and walk out of this mess.
These Are The Things That I Want You To Think About, Immediately.
You need to set up some bank accounts and set up some hierarchical accounts. You want to set up an integrity account, which is essentially the number. You figured out what your number was, so multiply that by six, and set up an integrity account. This is where your emergency cash reserve is going to go. It doesn’t mean that you have to set it all up at once, but that’s your intention. Your first goal is to set up enough money being put aside that you have an integrity account, so that should you have an acute expense – should you have something horrendous happen – you’ve got six months of cash.

Your next account, the next flow over, should go into an investment account. You want to have a set dollar amount per pay period going into investment. Now, you notice that your living expenses don’t come until third. What you want to do then is identify what your actual dollars per pay period are that you’re going to use for living expenses, and put it into that living expenses account, and live from that living expenses account. Then you want to pay down
debt, and it’s a strategic pay down. I’m going to go through that in a few seconds. Only after you’ve done your debt pay down can you put some money aside for a splurge account – the dopamine account, the thing that makes you feel good. You have to have something that you’re looking forward to, and so that’s your splurge account. Then whatever you have left, it goes into your final bucket, which is your residual investment account. Sweep everything that you have left into a residual investment account.
Upgrade Wealth Operating System
What I’m really talking about is upgrading your wealth operating system. Your wealth operating system is how you perceive your relationship with money. Most people have an extremely defective wealth operating system. People think that if they spend money, it’s a bad thing. Some people think that money itself is a bad thing. Some people think that rich people are bad people. Ask herself a question, and just close your eyes and ask. If you’re asking, «Rich people are … Rich people do …» ask yourself if you’re getting any negative connotations. Are rich people greedy? Do rich people take advantage of other people? If these things resonate in your head, your wealth operating system is defective.
If you asked yourself, «Money is …» and you let yourself just write it down on a piece of paper, what is money? If money is dirty, if money is something that’s scary, if money is something that you lack, then your wealth operating system is defective. If you asked yourself, «Money makes people …» and if you end up with words greedy, if money makes people jealous, if money makes people behave badly, your wealth operating system is defective. Because money and wealth are merely tools as a process of success. Innately there’s nothing good and there’s nothing bad about money. Money is just simply something that you can use to accomplish a particular task. So, you need to upgrade your wealth
operating system. You need to definitely calculate your number. You need to accumulate your cash for six months of integrity.

Debt Rules: Arbitrage Interest Rates
As you upgrade your wealth operating system, you want to remove rules. So, I want to talk about debt rules, specific things that you pick up along the way, things I wish somebody had mentioned to me. When you look at things that you have debt on, if they have a high interest rate and
their interest rate’s above 12 percent, you want to pay them off first, because you can generate probably in your investments, if they’re significant investments, you could probably generate 12 percent or greater. So, if you pay off debt and it’s above 12 percent, it’s better to do that, because it’s still an investment. You’re just paying it off. It’s just that you’re not getting the money directly, but you’re saving the money. If the cost of interest is between six and 12 percent, you need to evaluate it. You know, you might be better off paying off that debt. You might not be.
The key thing is take all of your debts and consolidate it down to the least number of units that you have to pay off. Usually when you consolidate debt and you aggregate it together, then the interest rate drops. If it’s a minimal debt interest rate, below 6 percent, you want to make a minimal payment on it, because you’re definitely going to make more money in other investments well above 6 percent. What you want to do is you want to take that cash that you would have used to pay down that debt and invest it into cash flow projects. If the interest rate on your debt is below 6 percent – 6 percent to
12 percent – you need to evaluate it closely. Above 12 percent, you definitely need to pay that stuff off immediately.
Really, the Power Of Compounding is what this is. Let’s take an example. So, $10 invested for 30 years. Simple interest versus compounded rates of return. Let’s say that you had $10 at year one, and you took out $10 at year 30. At a 7 percent rate of return, you’d get $10 principal back. If you had invested without compounding, you would’ve made about 25 bucks, but with compounding, you end up walking away with $80 per $10 invested. That’s the value of compounding. Compounding is essentially a formula that allows you to reinvest that money on a monthly basis, and so you’re making money off of the money that you already invested, and it generates a rate of return. You add that to your principal, so that you make more money off of it. If you don’t have compounding interest, somebody else is eating your lunch.

Let’s just do a little, quick comparison, just because I think it’s important to understand what a huge difference compounding makes. Let’s say that you took an investment at 2 percent versus 10 percent versus 18 percent over 30 years, and you invested $100. You start with $100. What is it worth at 2 percent, 10 percent, and 18 percent over 30 years? At 2 percent, it’s worth $182. At 10 percent, your
$100 has grown to $1,984, but at 18 percent over 30 years, your investment is now $21,000. That’s a huge difference. This is going to become much more relevant shortly, when we start talking about what happens in the stock market and what your real rates of return are. I think you should pay attention to this, because your real rates of return are nowhere near what they’re telling you.

Quick Analysis Compounded ReturnRule Of 72
Another way to look at it is the rule of 72. It’s a quick way to determine the number of years it takes to double your actual cash. Now, this is a quick and dirty way. This is not science. This is just a real simple way — back of the napkin. Take whatever interest rate it is. So, let’s say you’re going to make a 2.5 percent compounded return on something. Take 72, divide by 2.5, and it gives you the number of years it would have taken to double your money.

Debt Rules: Arbitrage Interest Rates
Taxes – the failure to account for taxes is incredible to me. Most physicians are either employees or they’re self-employed. They have an average tax rate of 40 to 60 percent on their income.
Doesn’t that seem bizarre? Because these are the hardest working people we have in our community, and they’re the ones saving the lives, and they’re the ones that we’re taxing the most. Do you know who has the lowest tax rate? Investors and business owners – people that own dry cleaners, people that own convenience stores, people that invest their cash. In fact, if you make money on your money, you probably don’t even pay any taxes at all, but if you’re a hardworking physician, and you get blood on your shoes, and you have to deal with difficult patient situations that are life-threatening, you’re getting taxed 40 to 60 percent. It doesn’t make a lot of sense. This is the issue. The biggest single cost burden that you have to your wealth taxes, and you are in the wrong category, and so you have to understand that and see exactly why.

Retirement Financial Stability
Why is it that physicians don’t feel comfortable about their financial preparedness going into retirement? This is an AMA study that was done in 2018, and over half the physicians are worried about volatile market conditions and depleted savings. 43 percent of the physicians felt like they didn’t save enough. 28 percent thought that they started saving too late. If you look at all of these things, these physicians are heavily focused in on savings, and I’m going to conjecture that this is the wrong thing to do. Focusing in on pure savings is buying into the mentality of what portfolio managers want you to buy into, and I don’t think that you can save yourself enough to get to retirement, based on market volatility, and inflation, and fees. Most people will never be able to retire if you really look at it.

The 4% Rule: (Traditional Investments In A Balanced Portfolio Of Stocks, Bonds, And Cash)
When I look at how much money can somebody take out of retirement at any given time, there’s something called the 4 percent rule, and that’s assuming that you’re using traditional investment tools, like balanced portfolios, bonds, stock, and cash. It says that you can take out about 4 percent of your total investment portfolio in any given year, and that portfolio will last you about 30 years. That assumes, though, that the inflation rate is the historical 2.5 to 3 percent, and it also assumes that the compounded rate of return in your traditional investment portfolio is about 6 percent. It also assumes that taxes don’t go up. It assumes that fees don’t go up. It also assumes that you’ve reinvested all of your dividends. So, what does this mean?
If you invested a million dollars in a balanced portfolio of stocks, bonds, and cash, you could withdraw about 4 percent per year with a steady decline in the principal over the next 30 years. The keyword here is steady decline in principle. At the end of 30 years, you don’t have anything. There’s nothing left. So, if you took $1 million when you were 30, over the next 30 years, by the time you turn to 60, you would have nothing left. Now, the problem is expenses. People are living a lot longer than 30 years, and they’re living a lot sicker. Only 12.2 percent of the U.S. population is now healthy. That means
78 percent plus of the population has significant comorbid diseases, and that’s going to be a very significant factor for most people.
It also assumes that the tax rates don’t go up, but the reality is tax rates are going up, and they’re going to tax your retirement. They’re saying that these are tax free, but when you look at use taxes, use taxes are I buy a piece of bubblegum, and it costs me 10 cents, and I pay 1 cent in tax, because I eat that bubblegum. That’s not a federal tax. That’s not state tax. That’s a sales tax. It’s a use tax. If I buy
a car, then I might have to pay a couple thousand dollars of use tax to the state. I might have to pay a municipal tax.
These use taxes have nothing to do with your deferred tax plans and your 401ks. So, once the money comes out of the 401k, you’re going to be using it. You’re going to use it to buy things, and the things that you buy are going to have definite use taxes. I also believe that real estate taxes will probably
go up. I also believe that the federal government will come up with all kinds of novel ways, because they’ve run out of money, and the only place that they can get their money is from you. So, they’re going to figure out innovative ways to get your money.
The other reality is we have a negative yield bond rate right now. So, that means that there isn’t a lot of money that you’re going to generate off of investments in bonds. In fact, it’s negative. When that happens over a prolonged period of time, stock market returns will start to drop, because people will
not be able to maintain high levels of stock prices as interest rates continue to drop. You have to have a certain amount of economic friction with inflation and you have to have a certain amount of economic friction in bonds in order to maintain elevating stock market prices. When those things disappear, stock market prices start to drop. In the short run, they go up, but in the long run, they drop.

What If Your Income Is Passive, And Is Growing >4% (Non-Traditional, Tax-Advantaged)?
So, if your income is passive, and it’s growing greater than 4 percent in non-traditional tax-advantaged states, it creates a whole different mechanism, because if your average monthly expenses times 1.3
is your number and based upon your number, assuming that you’re constant renewing passive cash flow exceeds your number, it really doesn’t matter what your total savings is, because as long as your monthly passive cash flow exceeds your number, your total savings could be zero and you would still have infinite months of permanent cashflow because that positive cashflow exceeding your number is all that really matters. Now, that doesn’t mean that I would recommend deplete your savings and live purely off of positive cashflow, because the reality is there are going to be fluctuations, but it gives you a different perspective. What you’re really looking for is to increase your monthly positive cash flow above your number, so that you can have an infinite capacity to survive passively, and then your total savings doesn’t really matter that much.

What If Your Income Is Passive, And Is Growing >12% (Nontraditional, Tax-Advantaged)?
So, what if your income is passive and you’re growing greater than 12 percent in a non-traditional tax-advantaged plan? You know, again, the same thing. Total savings plus monthly passive cash flow divided by your number is infinite. What you’re doing is you’re leaving a huge legacy for the people behind you. Your savings is never depleted. You’re financially free, and you’re free to pursue your passions, whether that’s working in medicine, or whether that’s painting, or whether that’s travel. Most people that are physicians have spent so long becoming physicians and they’re so passionate about becoming physicians and are so passionate about delivering awesomeness and care, they’re going to continue to practice medicine, but they won’t feel the stress and the day to day grind of that, and the burnout of medicine disappears.
I recommend that you work the number. So, what that means is cashflow divided by an investment equals a rate of return. For example, if you get $100,000 of cashflow and your investment was $1 million, that’s a 10 percent rate of return. Cashflow is the rate of return times the investment. So, this is just another example. If you take your cash flow and you divide it by 12, you get what you need for your monthly cashflow. What you want is you want your monthly cash flow to be greater than your number.
So, if you take the number, multiply by 12, divided by your rate of return, you’ll get the exact amount of investment needed, so you can work it backwards to figure out how much you have to invest to achieve your number and what the interest rates are.
This is just a different way to look at the same issue, but everyone should go through this to figure out what investment level they need and what their rate of return is. Once you do this, and this rate of return is post-tax, post-inflation, post-fees, once you do this, you have a whole different approach to your investment.

• So, again, what’s your number?
• What’s your rate of return?
• What are your real risk adjusted rate of return after fees, inflation, and taxes?
• How much capital will you need to deploy to be successful?
The reality is is that you’ve already won the money. You’re losing time. You have a high income. You’re 90 percent of the way there. If you just do a few things right, you can be incredibly
financially successful. You can leave a legacy. You can leverage other people’s time with your money and be incredibly successful at a much lower risk and a much higher reward.
Is Red Pill Kapital Right For You?
Are you looking to enhance your financial wealth and truly live the life that you deserve? Are you an accredited investor who’s interested in learning more about passively investing and cash flowing
commercial real estate? Are you interested in investing alongside us? Because we don’t need your money. What we’re trying to do is do bigger projects with more leverage, and the bigger the project, the less the risk because the leverage improves. We only make money if you make money. If you have any questions, please email me at Info@Redpillkapital.Com and that’s Kapital with a K.
We search for value-added real estate for our passive commercial real estate partners, and we actively manage that investment long-term for a successful exit. We are Red Pill Kapital.
Find Us At Redpillkapital.Com
www.redpillkapital.com

If you simply need more information. have questions, or want to discuss a specific deal, I’m always excited to help. Reach out to me at info@redpillkapital.com

If you are ready to start your journey to financial freedom but want specific additional educational materials, we have a course designed for physicians.