Are you a doctor looking to buy multifamily property to build wealth? Dr. Lydia Essary is a doctor who found the power of investing in multifamily real estate. She now shares with others how they too can build wealth and save taxes.
In this episode you will learn:
- Dr. Lydia's journey investing both as an LP & GP
- why a doctor believes investing in real estate is a smart strategy
- how she is looking to bring financial literacy to the healthcare field
Table of Contents:
- Where To Listen To The Podcast
- A Dermatopathologist Decided to Buy Multifamily Property
- Why Physicians Do Not Buy Multifamily Property
- How It Feels Like to Buy Multifamily Property the First Time
- If You Are Planning to Buy Multifamily Property, Get a Good Accountant
- What Is Syndication?
- A Great Partnership
- How To Reach Dr. Lydia Essary
A Dermatopathologist Decided to Buy Multifamily Property
Darin: Dr. Lydia Essary lives in the DFW area. She's a dermatopathologist and she's a multifamily real estate investor. She found that by doing both, it provided her a means of saving taxes and growing wealth faster and more consistently.
So just a little bit on how we know each other and then we'll get into it. Lydia and myself were both part of the same multifamily mentorship group, the Brad Sumrok Group based here in Dallas. But this is the first time that Lydia and I are actually connecting. There's a lot of people in the group from all over the country and we know some of the people and we don't know others. But I was interested to hear her story and her journey and have her share that with others. So with that, Lydia, can you share a little bit on how many properties and how many units you're currently invested in?
Dr. Lydia: I'm invested in 16 properties, both combined passive and general, as general partner. 713 units as GP and over 43 units as an LP.
Darin: Awesome. So Lydia is a doctor, there's a lot of different fields in the medical space. So what type of doctor are you?
Dr. Lydia: I'm a dermatopathologist. I'm a board-certified dermatopathologist.
Darin: So that's like over most people's head. Explain what that means.
Dr. Lydia: You probably heard the word pathologist.
Darin: Yes.
What Is Dermatopathologist?
Dr. Lydia: Pathologists are basically a laboratory doctor. Well, I specialize in skin diseases, so dermato, dermatology focuses on skin diseases. So I did a combined training that focuses on dermatology and pathology. My job consists on diagnosis skin diseases including cancer. There's a lot of cancer nowadays, especially you probably heard, and I include the whole audience, about melanoma. Melanoma is a lethal cancer. So it's very important to detect it early and guess what? My job is to detect those, the early stage of melanomas and all the cancer and whatever you have in the skin. So my clients are the doctors, the dermatologists, and they send me their cases to diagnose and I can help them in the management of the skin conditions of their patients.
Darin: Fantastic. So you do have an accent. So where are you from?
Dr. Lydia: I'm from Lima, Peru.
Darin: And did you practice in Lima and then come to the States or have you been practicing in the States the entire time?
Dr. Lydia: No, actually, right after medical school I graduated, I completed my internship in Peru because that's a requirement, that's part of our curriculum. We have to complete the internship, got my MD and I did my specialty and subspecialty in the US and stay here to practice.
Darin: So you come to the US and you get your specialty here and then you start working. And you're working and you're a doctor and everybody thinks that doctors make huge piles of money and just know how to what they should do with that money. So what's your take on that?
Why Lydia Started to Buy Multifamily Property
Dr. Lydia: Well, yes, doctors have good salary. I would tell you it depends on their specialty. Some specialties are highly compensated. Fortunately my specialties, I would say in the upper 25% for compensation, but other specialties are not. And what we're lacking in training is financial education. All the doctors out there that you're listening to me, you probably know that we're highly trained in our technical part of the specialty. But we are not trained on how we're going to plan our retirement or plan our life in general.
Because you probably heard of the recent changes in how doctors are practicing. There is a lot of bureaucratic administrative changes. The landscape is totally different. So you can see that a lot of doctors are looking for other sources of income, what we call supplemental income. But it's important because I used to invest just in stocks, bonds, and the returns were not consistent or very good until I discovered multifamily. I wish that had happened a few years earlier.
Darin: You and me both. So I started investing about four or five years ago. And so when did you start investing in multifamily?
Dr. Lydia: Well in syndications since 2019, but we got a little encounter with multifamily before that with my husband. That's when we met Brad, actually. That was in 2012. We accidentally landed in a workshop that included both single family and multifamily and we met Brad there. And through Brad we got signed up to a program, you probably heard of Lifestyles.
Darin: Yes.
Dr. Lydia: But unfortunately Brad was leaving the next year, just a few months after we signed up. But he helped us identify one property. You wouldn't believe that we own a 118-unit property in Euless.
The Goal to Help Physicians
Dr. Lydia: Solo owners with the help of Brad, that was a good year when you could afford to buy a property like that, solo owners. And it was such an experience, I would tell you, such a challenge. We were excited because it was our first property but it required a lot of help, a lot of contributions from our mentors. But we turned out okay at the end. We made money when we sold it. And after that we took a break because I took a job that it was required some commuting on my part. Then we rejoined Brad again in 2019 when we joined his own group.
Darin: Fantastic. Before we got going, you were talking about the medical space and you were talking about your community of physicians, and that seems to be a passion that you have. That you want to give back and help educate people in that community on how to get their money to work for them as a supplemental income.
Dr. Lydia: Actually, yes, I do. I really don't know how people seem, but I always think that a way to give back to your specialties is volunteering. I had that for my specialty throughout the years. Now that I'm in multifamily and I noticed that a lot of physicians are not even aware of these good investments with huge tax advantages, well kind of my little goal now. I shouldn't say little really, I'm getting committed to educating physician because I have seen some response.
The few that have seen me progressing, me talking about my properties, they're interested. And I just got one colleague of mine who joined Brad's group in the last R2R, and to me I said I was very excited for him.
Physicians Are Interested to Buy Multifamily Property
Dr. Lydia: How I'm planning to educate the physicians. First, I said, well I'm going to create a newsletter. I started just last January with good responses. I plan to do some short videos because you probably know physicians are not very patient. Something that they can open maybe during their breaks, three, four minutes just to discuss a short aspect of how multifamily is good or how that's going to be making their money work for them.
And then I'm just trying to get feedback from them, know what else, what else? Because I think they're interested. They're interested in that passive income, and they're interested in better returns that nobody wants to deal with the stocks right now, especially now. So definitely the interest is there is how exactly I'm going to do it. But it's probably going to be something that is going to be in progress. It's not going to happen from day to night, something like that.
Darin: Well, the other thing is I, and I don't know, I'm not in your world. I've had a number of doctors on the show and they've kind of communicated the same thing that the healthcare industry is very educated in what they do and they spend their time reading on their field of practice and becoming experts in that practice, but they don't spend as much time on the financial side. I don't know if this is true or not, but I would think that part of it is they think that that world is for other people.
Why Physicians Do Not Buy Multifamily Property
Darin: And knowing people that are in the financial world that have figured out how to navigate both, still be good at your field, be an expert in your field, but also figure out a way to get your money to work more productive for you. I would think that that is going to, that credibility, that is going to spark more interest coming from somebody that's already in the field.
Dr. Lydia: I think you're very right. And there is another aspect too. Doctors tend to think that they know everything, that they know more than other people. And they're capable of learning quickly and they're going to sail in every area. It's a little bit of the ego aspect. I don't think it applies to everybody, but you get the message. A lot of people in my field think that way.
But the truth of the matter is that we don't get any financial education and you’re right thinking that they think it's, "Oh, my financial planner is going to advise me. I'm going to hire somebody's going to do it for me." And I was one of them. I just feel so embarrassed to admit I was paying high fees, paying these financial planners and they were making the money and I was not making so much.
My CPA had to tell me and point out, "Look how much you're making and look how much they return for you this year." So after two, three years after I saw that, it was about the years I was finding all this interesting investing.
No More Financial Plans
Dr. Lydia: So all that came together, I said, "Oh, okay, no more. No more financial plans," so we're going to do it ourselves. And my husband had always had an interest in real estate. I had the good influence that he's always been doing single family. But when he discovered the scalability of multifamily, just like me, no, he say, "Well, we need to start switching."
We have only two single families because the tenants have been so good to us. But really the plan is to exit from there and just do the multifamily. But you're right about personality and the wrong concept that only the financial people do that. Yes, we were wrong about that. And that can be changed through examples not showing how one of them. I'm sure I can find more physicians who are doing multifamily and if they see that, it'll be more credibility.
Darin: Yes, the other thing is when you surround yourself around other people that are doing it, I had people that were pointing me to different books to read. I remember reading this one book that was talking about 401(k)s and that's pretty much what I had invested in, 401(k)s and mutual funds and stocks. It was highlighting that all right, maybe the fees are only 1% but if the returns are 5% and 1% is going to fees, that's 20% of the return is going to fees. And then even in down years when it's down, they're still taking that 1% fee.
The First Time Dr. Lydia Bought Multifamily Property
Dr. Lydia: Yes, that's how I noticed I was not making, my accountant was pointing, "You see a lot of your mutual funds didn't do the return but they still take their money, and whatever is left is for you." So that's the way most financial planners have their contracts set up. So it was me, then I started talking to other physicians, said, "You've been paying too much." They were telling me, "My financial branch charge me a flat fee." I've never seen that, I don't know, I was dealing with one of the major banks at that point and I saw that had a very good plan. I was in the private bank. I was really very satisfied with the client services but with the money, they were really providing, I mean as a return it was not satisfying. Slowly we started getting out of that bank.
Darin: First, talk about the one deal that you did. I mean that's pretty impressive to have 118-unit property and that you guys were the sole owners. So that one was not syndicated. How long did you own the property and what were some of the challenges with managing it? Did you have a third-party property manager?
Dr. Lydia: Yes, it was a requirement. I think we put one-third, 30% down. Yes, we use, I would say, a significant amount of our money, but they still were watching that we had some liquidity. It went well, that part. And it's funny that where we met Mike Becker, do you know Mike Becker?
Darin: Yes.
Getting a Good Advice
Dr. Lydia: SPI. He was our banker, back then he was still working as a banker. He was the one finding our loan. So you can hear from that it was a private loan, recourse. We really didn't know we were risking there too much. But I think we had good advise from both Brad with the little time he had left there and Julian Alexander stay after him. Let me tell you, it was a distressed property. We had to do some work and the occupancy was low. So that was our first goal to improve the occupancy.
Darin: How low was the occupancy when you brought?
Dr. Lydia: It was I think 70% perhaps? Yes, 71.
Darin: 70%?
Dr. Lydia: Yes. 70, 71. It was a little scary to us, but that's why we got the good price too.
Darin: So 70%. So you did not get agency financing? It was a bank loan?
Dr. Lydia: No. But it was a bank loan. It was my Mike Becker. You remember? Mike worked for Wells Fargo back then. And he got us some extra money for some of the rehab we had to do. And the main challenges were the requirements by the county. There were a lot of codes, the way the structure was built that it didn't meet the code. I mean the city of Euless, it's not only the county, it was the city of Euless.
The Challenges Dr. Lydia Encountered After She Decided to Buy Multifamily Property
Dr. Lydia: Boy, they were after us and we used a third-party management. We practically use the money that was supposed to be for rehab, we had to use it to be on code. And we excelled that in less than a year. I would say that with the management company we were really hard and we were on code in less than a year. They saw it was very good.
I really don't know. I cannot tell you because not many people do those distress properties. Then the other challenge was the chillers. The chillers broke the first summer. And a lot of our, the money, because we don't have investors, had to come from our own money and that's why they scary part comes. Fortunately this equipment is not as expensive as trying to get every single unit to have the cooling system. That is very expensive.
That's something that we contemplated that we had to do later. So we repair the chillers and I would say the third challenge was getting rid of the bad tenants because there were people that were late or non-paying. We had to change the local manager like two times because in our opinion they were not working fast enough. And at the end we changed the management company.
I think that happened on month 13. They help us to be on code. At least we were happy with it. But then we changed to another company and with that we started working really hard on the occupancy. That local manager they put for us, it help. But you hear all the stories because I don't know if you're familiar with Euless.
Making Money From the Property in Euless
Dr. Lydia: Euless is in a very nice area. I know it's in the mid-cities and she was saying, "Yes, there is a lot of traffic here. You have a school in front of you." So she was very creative about putting banners. Sometimes we even went out and help ourselves not to put the banners out area with the local people. And slowly we started bringing the occupancy. It was up to 90, 93. I think when we sold it, it was at 94%.
Guess what? Somebody approached us one day saying, "I want to buy your property." And we started checking around. We say, "Well, we're not thinking of selling the property." But Frank, my husband, always keep in the back of his mind, says, "Hey, we're going to have to wire these units to be individual units. So that might cost a lot. I mean, it may not be bad idea to see how much you want to pay." So after we check who they were real guys from New Jersey, we started talking and thinking of selling the property at the end of the third year.
And I was talking to you at the end of the third year, they finally completed all the work and they pay us. Let me tell you, we probably made about 60 or 65% over our initial investment. It really was very good considering this was our property. We didn't have to do distributions.
You may ask some people, they might say, "Yes, they could have made more money, but that was the deal we work," Because Paul Peebles, for example, Paul Peebles, every time he see me he says, "Lydia, look at the numbers. You could have more money." He's always teasing me about that.
The Advantage and Disadvantage of Chillers
Dr. Lydia: He says, "You have a little more, you can make a little money." He has his calculator trying to tease me. I said, "Paul, listen, I think we did very good." And he was a guy who find a property for us. He knew we wanted to try something solo and we're really very grateful to everybody who help us in the transit because it was a true learning experience for us.
Darin: That's fantastic.
Lydia: Yes, the only thing we didn't have to do compared from what we do now is the monthly newsletters, respond to all the questions to the investors because it was just us. I like the idea of having a team. That's why we came back. We were more ready to try the syndications. That's another thing we didn't see much syndications at Lifestyles back in those days. People were doing mainly joint ventures or solo or something like that.
Darin: Before we get into the syndications, few things that I think that you learned that I can maybe share with the listeners. One is people that are in the multifamily world, they understand what chillers are, but some people may not. And basically some of the older properties will have an air conditioning unit that provides cool air to the entire complex. So there could be one chiller for the entire complex or some properties may have two or three chillers. Instead of having individual ACs for every apartment, they have one big unit and so it's more cost-effective. But when it goes down, if there's a problem with it, the entire property is out of AC.
How It Feels Like to Buy Multifamily Property the First Time
Darin: So that's not a good thing to have happen in the middle of the summer. So that's something to definitely take a look at when you're looking at older properties. The other thing you mentioned was you changed out property managers several times.
Dr. Lydia: No, we changed once. What we changed was our site manager. We saw they were not working well, not communicating well with us. It was the same company.
Darin: It was the same company, but you changed the onsite person.
Dr. Lydia: The onsite person now. The management company, we changed that once during that time.
Darin: So I've done that before and I remember the first time doing it, I was nervous. It's a big risk. And it's a big decision. It's kind of like when you're younger and you decide you want to break up with somebody, you know, agonize over it. But then you kind of have to rip the band-aid off and move on. It's kind of like afterwards you drive down the road and you're like, "Thank God I did it." And for us we had dramatic change with bringing in another property management company. And it sounds like for you it moved in the right direction as well.
Dr. Lydia: Yes, definitely we had to make that change. When you think that the numbers are not working, our NOI was virtually in the red. We didn't like that. We were pushing for that. And we always were working with Lifestyles, we had a coach there. But they practically leave it. "Let's say it is your decision, we recommend this, but it's your decision."
The Value in References When You Invest and Buy Multifamily Property
Dr. Lydia: They didn't want like saying we don't want to be responsible for what happened. And they give us a couple of names. So we interview the people and we just like one. I think you better not to say names, because companies change so much.
It worked. I would say fast too. The person they assigned there, the person that I was telling you that went out with the flyers, it look like they put the right person there for us. It was like a dramatic change.
Darin: A dramatic change. And not that you want to change property management companies right off the bat. But I mean, I was at a mastermind and I was around a bunch of other syndicators and I heard them talking about changing property management companies and I was like, "How difficult is it?" And they're like, "Look, if you feel in your gut it needs to be done. You just got to do it and it's not as bad as you think at the end of the day."
Dr. Lydia: It's not as bad. So what would be your main fear on changing the company?
Darin: You know, you hit the word fear. Well, what if you change and it's the same or worse. They might use all new systems and it's an unknown is basically what it is.
Dr. Lydia: Right.
But I think the value of references. We were constantly asking people for references within investors. I mean the coach recommended two people and we still ask people, "How are they doing? Are they giving you the financials timely? Do you have complaints from the investors?" Because that was something we were not getting direct feedback from the other company.
A Scary Yet Necessary Move
Dr. Lydia: I think the main people in the first company were good. Let me tell you, I need to point out that was an out-of-town company. They were based in Colorado. So the owner came frequently. And he's the one that got us under code with the city of Euless. But the local people they were hiring were not as good. So we didn't like that. And you can see it was our first experience doing a multifamily unit.
So my husband turned to tell me, "Hey, give it a chance, we need to wait a little more." But no, I say, "Wait a little more." We financially were still doing okay. But when I saw that the NOI, I mean, our numbers were falling, I didn't like that. So I started talking to the owner. Finally one day he says, "Well, you guys…" He didn't say that we can, no, we're considering maybe we've been talking to other people, maybe we need to bring in local. He says, "If you feel that's helping you better, you're not going to hurt my feelings," because we kind of make a friendship with the owner.
I even remember I went to a conference in Denver and he brought his wife, we went out for dinner. There was some sort of friendship between us. But he also understood that he was not finding the right people for us and that was a risk. No, he understood that. And it was a good move. We had checked this company and like I tell you, the woman worked wonderfully. I don't know where they found her but she worked very well.
The Importance of Hiring a Good On-Site Manager When You Buy Multifamily Property
Darin: That's the other thing is how critical it is to have the onsite staff. So I've been in other situations where we talked about should we change the property management company and then business partners are like, "Well, maybe we just change the onsite person and we keep the same property management company." And that has made a world of difference in at times.
Dr. Lydia: Sometimes that's all it is. That's all you need to change, the on-site manager.
Darin: Right. So those are things for the listeners to pay attention to. The other thing you talked about earlier was taxes. And with your doctors, every investment is not treated the same in terms of taxes. And so why do you say that multifamily or real estate is more attractive than some alternative investments?
Dr. Lydia: Well, we often review the general main advantages of multifamily. And you're right that it doesn't apply the same to everybody. Our particular situation it does, because Frank, my husband retired from being an engineer years ago and he's being a real estate professional for I would tell you maybe 10 years now. It's another example of how we didn't know that with his losses, the passive losses we can offset my earn income because I still practice.
And it have worked in an amazing way, just like Brad tell us that he's not paying taxes, that applies to us. Because you know doctors don't have low salaries and I'm still able to offset a lot of my earned income. Only because I would say the depreciation, the cost segregation depreciation.
The Value of Depreciation When You Buy Multifamily Property
Dr. Lydia: Depreciation is a secondary value we get, but it's through the depreciation and the passive losses that we are able to offset my income. So that's not seen in Wall Street. Other kind of investments doesn't have that. And a lot of doctors, they don't even know. When I mention depreciation, they have no idea what I'm talking about. They feel overwhelmed.
Darin: Okay, so it's husband and spouse and you're in that situation. Your husband is full-time real estate professional, you're a practicing doctor and you're highly compensated. But yet you're able to offset your income against the losses on the depreciation. I believe there are other high-income earners that maybe their spouse is in real estate and could qualify and they don't even know. They're using an accountant that hasn't even advised them that they could use this. And the government's not going to come and tell you that you can.
Dr. Lydia: No. No way.
Darin: I love hearing stories like that where one spouse is full-time real estate professional, has a lot of depreciation losses. The other spouse is a high-income earner and they're able to offset. Combine the two and use the losses and cover the income. And that makes a world of difference. I mean, you think about one year the tax savings, but then when you think about take that tax savings and you put that into an investment, and that doubles over three or four or five years and then the next year you do the same. I mean the compounding is crazy.
If You Are Planning to Buy Multifamily Property, Get a Good Accountant
Dr. Lydia: It is. Sometimes I don't even want to think of all that time I wasted because we didn't know. And listen, I told you that we were doing single family before. We had a general CPA that didn't know. She didn't recommend that real estate professional status to us and we thought she was good for a long time. She didn't know any better probably. But it's not until you got into the network of investors and you start attending conferences and meeting about advantages that then you say, "Okay, where do I go? Who should I use as an accountant?" And we had to change to experience that benefit.
Darin: Yes. And look, you said a lot of good things there about your accountant and I've heard this from other people that are not in the real estate world that, "Look, I've got a really good accountant." And your accountant may very well be a really good accountant and understand how to deduct expenses. But they may not understand real estate and the tax benefits that go along with real estate. So if you want to get into the real estate world, then you need an accountant that understands the tax advantages of real estate.
Dr. Lydia: It's very important. Because like I said, I thought she was a good accountant. We're very happy. Sometimes we didn't have to pay or pay very little, but we didn't get that kind of benefit we're getting now. It is substantial difference.
Read Your Newsletters
Dr. Lydia: So I try to explain that to my doctors in my newsletters and I know, just like when Brad teaches says, "You get a little bit of go-to conference, you retain 5%, especially if you don't take notes. But if you go and read it again, you might retain 30%, you read it the second time you might retain 90%." It's the same, that's all."
You try to pass a message in a newsletter only if they save it and go back and read it and text me say, "What did you say there about the taxes?" Yet some of them are doing that. "Tell me about that." "Can we schedule a call?" "Yes," I say I put the link to schedule a call. But it's only when you review the concept, analyze a little and get it in your head, it really works. Because some people might say, "Ah, this is yes, who knows, advertisement." And as other people who have just like we do when we find a property or we try to find a management company, I'll see if this works for people that you know. They're going to tell you that this works.
Darin: That's so true and it's so important is that one, look, you're a doctor, if you had a cure to cancer, you're going to tell people. And you mentioned melanoma, you help people do the best they can with what the medical state of technology is today. And it's the same thing in the financial world. You're trying to tell people, "Here's how you could benefit, here's how I can help you by passing along this education."
Scientists Require Proof
Darin: But there is a bit of skepticism in the world in that is this a scam? There's a little bit of arm's length until somebody actually invests the time to learn and understand and talk to other people to find out if it's real. In that they have to invest the time to educate themselves and to get comfortable themselves. But you can put the seeds out there.
Dr. Lydia: Yes, you're right. There is a lot of skepticism unfortunately, especially in scientists, I would say we're considered scientists. People want evidence-based for everything.
When we lay out a project, a scientific project and you have your methods, your results and your conclusions, as evidence-based you come to conclusion. And in a lot of the financial world there is something similar but we don't have the time to review all the literature to see how much of that is truth. That's another problem.
Darin: And how much of it is marketing.
Dr. Lydia: Yes, how much of that is just market advertisement because you can see. I mean, we belong, I think, to a very good network but you still need to be cautious, know who is telling you the real thing or say something that really happened. But I would say in scientists, and for the same concept I told you before, they seem they have all the answers. I'm sorry, I don't want to attack my colleagues too much. But yes, a lot of them think they have all the answers. They say, "Well, it just might be a scam."
Take a Little Bit of Chance
Dr. Lydia: But I think the world is changing. I think they're seeing a lot. A lot of the doctors are seeing their incomes affected, they're exploring all their areas for supplemental income, passive income. So they're opening their eyes because they're being victims also of the system. The economy is not working very well right now. I would say it's affecting the inflation, it's affecting a lot of my colleagues. So the situation itself is forcing them to say, "Okay, let's see what else can we do to resolve this."
Darin: Absolutely. Look, I was skeptical when I first got involved like five years ago. I went and I joined Brad's group. But then I went and reached out to a bunch of syndicators and got together for coffee and I'm like, "Is this real?" I wanted to know for myself is it real? And I heard one success story after another and then I decided to take action. You're still never sure until it comes back positive for you. But I decided to take action and then all of a sudden I was like, "Holy cow, these returns are phenomenal," and the tax advantages are phenomenal. So that's fantastic.
Dr. Lydia: You need to be brave. I mean because yes, nothing is guaranteed in investing whether our investment or Wall Street, nothing is guaranteed. So you need to take a little bit of a chance. I think that what we do in life in general, you say, "Well nothing, you need to take a little bit of chance," but at least you have some reference.
Everybody Started With Their First Investment
Dr. Lydia: You’ve seen the success stories. And it could have gone the wrong way for you in the first investment and you cannot blame everything but it went well. So that's even good for you. More reassurance to do more.
Darin: But I've also interviewed people, and here's the thing is every investor, even if they have 5,000, 10,000 units, everybody started with their first investment. We all started with our first investment. So if you are a listener, don't beat yourself up that you don't have your first investment. Everybody started with their first investment.
But I had people that said, "I did an investment and it didn't work out." And I'm like, "Holy cow. I would've thought that would've made you scared and run the other way." And they were like, "Well, the first one didn't work out, but I still believed in the real estate model. I still believed in the cash flow and the appreciation and the tax benefits. But I learned from how that one went down, what not to do. And then I just got better at looking at different opportunities," which surprised me.
For me, I'm lucky that it turned out well right out of the get-go and then I just kind of kept doing it. But for some other people it didn't work out that way and they still pursued it, which is even better. Hey, talk about syndications. So now you're in the syndication world. First maybe describe how would you describe in common language or as a physician language, what a syndication is and then two, what's your role in a syndication?
Dr. Lydia: Oh, you want me to describe syndication like in general?
Darin: Yes.
What Is Syndication?
Dr. Lydia: Syndications in multifamily consists of a pool of funds that several investors put together to accomplish a goal to be able to buy a property that they would otherwise wouldn't be able to buy themselves. Also by putting a pool together of investors, they are also able to qualify for the loan because not everything is going to be paid cash. And that's why we have different roles in the syndication. We have GPs and KPs, we need KPs to sign the loan. And the LPs are going to help raise the final capital to acquire the property.
What is my role? Well, right now I'm going to focus on capital raising even though I had one, the last one who bought a property in Plano. I'm a lead GP in that one. That means I work through all the steps of the acquisition from finding the property, doing the due diligence, the inspection, work with the lender, work with the potential management company, all these steps that need to be accomplished until you finally close on the property.
And now is the asset management. Being a lead GP you are also the manager, what we call the asset manager. You are not a person onsite doing the management. So I'm doing that one for that one. But what I'm finding out is that it really takes time. You know that you're an investor. With the economy we're having right now and the prices of the properties, it takes time to do the underwriting and to find the right property that works. And the other thing is to be able to be awarded that property because there is a lot of competition right now for the few properties where the numbers work.
Now Is Not a Good Time
Dr. Lydia: Of course we're all optimistic. We're hoping that all that is going to change. It seems to be that way that the situation is turning around again. But right now it's not a good time because of the interest rates are very high right now. That’s what’s making the properties very expensive. So the last one we did in Plano was a loan assumption. That's a very good way to go if you don't want to cope with the high-interest rate.
Darin: So explain to listeners how that works.
Dr. Lydia: That means the seller is ready to, for various reason, sometimes they want to change to buy. In the case of them, I think they want to focus on larger properties. The property we bought was only 89 units, but in a very good location. And he also was a former Sumrok member. So a little bit of confidence there. One of my partners know him really well so they wanted to change hands but the loan was really low. I think it was 2.9%.
Darin: That's a great rate in today's market.
Dr. Lydia: Yes. But we also wanted some supplemental. We did a supplemental loan. So the average was like 3.1, 3.2, I think that we paying. The extra money was to do some of the CapEx. That's the renovations we're going to do during the first year. And that's a loan assumption. I mean, they have the loan for I think it was 12 years and we still have nine years to go with that rate.
A Very Important Term to Learn When You Buy Multifamily Property
Dr. Lydia: So we assumed a loan at that excellent rate and we know we have a cap on the payments we have to make because it's a fixed rate. It's an agency loan, that means it's a government-sponsored loan. And that's the kind of loan you want to find as a new person in multifamily.
When you get into the network, you're going to learn there are agency loans which are sponsored by the government and they are non-recourse. That means the only thing you're risking is the asset itself and whatever money you invested there. But if something went wrong and you were to lose, let's say, the whole thing, I’ve never seen that really. They're not going to come after your personal assets because it's a non-recourse loan. So it's a very important term to learn in when you are in the multifamily arena for the new people.
Darin: Absolutely. Were you still practicing? You're a lead GP on that Plano deal.
Dr. Lydia: When you find me today, listen to today, I'm going to mention.
Darin: How do you have the time to do all of that?
Dr. Lydia: Well, my hours are good. I work four days a week. Maybe I'm a workaholic. I've been called that before. I'm working all the time. I finish my work around 4, 3:30 sometimes. And I think I'm a little bit of a multitask too and the kind of person that caries my little notes that I have to do so I can maybe handle a little bit of what I'm supposed to do during the day in between my cases.
You Have to Enjoy What You Do
Dr. Lydia: But it's true that I focus on my patients between 8:00 until 3:30, that I like not to do anything but my patients. Today, I have a day of the week off, like today, and that's probably the day that I do my extra things, whether personal or related to the investments. And a lot of activities are done on the weekends too, whether you want it or not. Sometimes they need to be done on the weekend.
Darin: That's so true. Whether you still have a W2 job or whether you have the flexibility to be full-time, look, you're going to have to sacrifice something if you want to go after your first deal. And some people I've talked to they said, "Look, I just stopped watching TV," and now they're spending that time underwriting deals and looking at deals and sometimes it's, "Hey, I'm going to get up earlier in the morning," or, "I'm going to stay up later at night after the kids go to bed." But it's not going to just be handed to you. You're going to have to carve out time in your life to be able to go after the investment. But then once you get it, then you realize that that time was well spent.
Dr. Lydia: I think it depends on personalities. Some people feel they're working a lot. I don't. You have to enjoy what you do. And it's true, you need to reserve some time for yourself. Like you say, not to reset yourself, to do something that is totally different. But I think it's discipline.
Do Something You Like
Dr. Lydia: If you get organized and you set your times and as long as you don't feel stressed out over work. I know a lot of people like me that are doing practicing and investing a little bit, they don't have exactly my same activity but it has some other business on the side. And they're just disciplined people. I tell them it's time effectiveness. Now they know how to use their time.
But it requires, like you say, a little bit of sacrifice. Let me tell you honestly, when I don't feel it, I don't watch TV. Sometimes I watch TV because I'm with company. I feel sometimes I'm wasting my time unless what I'm watching is super interesting. If you're going to pick outside activities, it has to be something you like. If it’s something you don't like, that's the wrong activity, you probably shouldn't do that because that could become a true sacrifice. So if you enjoy talking to other people, you like finances and you like the multifamily aspect itself because I think it's very interesting when you do the financial part, when you are the lead sponsor.
There are some parts I wouldn't like to do, like go to the site. Like for example, I'm not very good at that, my husband is very good at that, on checking whatever has to do with wiring, plumbing. I mean, I do the aesthetic part. Somebody tells me change the lock, the colors, yes, I can’t do that. But some things are more, in my opinion, more for men.
A Great Partnership
Dr. Lydia: I may have the wrong concept there, but to me they know already something about plumbing, electric become so natural to them. You probably experience that. Something about changing the couch or the cushions or the color, probably men don't feel too comfortable.
I know, I can be wrong because everybody is different, but I feel comfortable about talking to people to volunteer. I volunteer doing the letter for investors and in the area we feel we're strong that’s what we should do. And some people are good with numbers. Like I have a partner who is excellent in reviewing the financials. It's not that I don't know, I just feel he enjoys that. I'm sure he's going to do a good job. And that's how the power of a team comes, that you can divide the different roles and get it all done.
Darin: That is fantastic, it’s when you're in a team to have the team members have complimentary skills and they actually enjoy the piece that you don't enjoy. You know you have a great partnership when that's the case. You get to be doing what you really enjoy and then somebody else is doing what they really enjoy and you're getting it all done. And that's fantastic when it comes together like that.
So where do you go from here now? Now you said you're going to be moving more towards rather than doing the entire deal, being on the capital raising side. You like the team aspect and so that's the role that you want to play going forward is educating your community of physicians.
What’s Next for Dr. Lydia
Dr. Lydia: I think that's why I mention I don't want to forget about the underwriting and acquisitions because I can see how that can be an activity for me if I decide to slow down my clinical days. But I want to be more structured, more ready. My company is new. I form a company to be able to invest now as a GP. And since I built that company I'm able to create my newsletters. They go with the name of the company and it looks way little more professional, more formal when my colleagues are receiving that on the other end.
I don't want to do that right now because the situation in my clinical practice is we only have two dermatopathologists. We need to take care of the practice until we can recruit one more person. I think that's underway. And then maybe, because I know my colleague also works a lot. He's fantastic.
If we talk about time effectively, you got to see that person. He's really very good. And in a way he's been, actually, it's interesting. He was my mentor. He trained me in this specialty. He's a renowned dermatopathologist. I have the honor to work with him. So I feel we need to take care of the practice until we get all stable. I might consider reducing one day, but right now it's not the time. I said no. And with the situation that we don't have many properties to get right now, I said, "Well no, I'll just join somebody and help with the capital raising." I'm trying to create a system to educate.
Milonga
Dr. Lydia: So the timing seems right to do that right now. But I don't want to forget my goal of going back to the underwriting and keep doing that too.
Darin: I get it. So what do you like to do outside of work or investing or fun?
Dr. Lydia: My hobby for a long fun time was dancing. I think I'm artistic naturally.
Darin: What kind of dancing?
Dr. Lydia: You could laugh at me. I used to dance tango.
Darin: I could laugh at you for a lot of different reasons.
Dr. Lydia: Okay. Argentine tango, don't imagine me in a big lunge with a rose in my mouth. That's what people think of Argentine tango, but it's not that way. Argentine tango is a different dance from South America. Argentina is a neighbor country of us, but I didn't start learning that until I was here in the US. It's funny. But my dad was a big fan of tangos. He always played tangos when we were little kids.
Darin: Does your husband like to dance also?
Dr. Lydia: He can dance, he knows, but he's not a big fan like me. I can dance for hours. You know, there are parties, and we have several in Dallas, they're called milongas. A milonga is an Argentine tango party. When you go to milonga, they only play that music and you better have a good vocabulary on all your steps to be able to survive the four hours of the milonga. Because the DJ, there is always a DJ organizes a playlist where they play three songs at a time and they do a break. So you have a chance to change partners. Because this is just tango etiquette.
Tanda Etiquette
Dr. Lydia: Once you start dancing with somebody at the beginning of a tanda, a tanda is a group of three songs, you're not supposed to change partners. That's very impolite. You're supposed to complete the tanda and then you have a chance to break and then start new tender with somebody else. Everybody has a little different style. It's not everybody dances exactly the same. And the music is so beautiful. I think the reason people go to milongas is because the music is so beautiful.
When I was a kid, I used to hate it. I was telling you that my dad used to play. I said, "Ah, music for old people." Sounded like I don't want to hear that. But now I came back to Houston. I mean, I was in Houston before being here in Dallas, and some day I saw an announcement, somebody was doing a workshop in tango. So I said I want to go. I know what that is. And I got hooked. I got hooked to multifamily when I went to see the same thing. So I started dancing.
Darin: That's very cool though. I mean, look, South Americans I think have a lot of energy when it comes to dancing. So it's fun to hear that. I am not the best dancer and probably have, and I don't know, the fear of getting out there to dance. I guess you just do it like anything.
Cabeceo
Dr. Lydia: Some people think they are not good. You just need to try and enjoy it. I would tell you don't start with tango. Maybe the steps are a little difficult compared to other dances. And the reason is because you have to embrace somebody, so you cannot be awkward in your movements unless you can drive.
Darin: You can't be awkward.
Dr. Lydia: You'll be taking that person out of balance. You can take them to the floor.
Darin: So at the end of the milonga, they're definitely going to move away from me. They're going to definitely get a different partner.
Dr. Lydia: They're going to want to say another one. Oh, there is another etiquette that is very fun in tango. They call it the cabeceo. The Argentines call it the cabeceo. Cabece is head. So cabeceo means when you're doing this to the girl? You're looking the girl in the other room, you're doing a little cabeceo. When she acknowledges so you can walk through the room and ask her to dance. But if you’re doing a cabeceo and the girl is looking away, that means she doesn't want to dance with you.
So there is a kind of etiquette there. My husband likes to go to the milonga. He likes to watch. He dances one or two and then he likes to sit. I think the guys have a more difficult role because the guys are the leaders, the women are the followers. So it's easier for me just to follow them.
Lift Equity Invest
Darin: Fantastic. Well, thanks for sharing that. So hey, if people want to get to know you better, what's the best way for them to do that?
Dr. Lydia: Well, they could go to my website. The name of the company is Lift Equity Invest. So it’s liftequityinvest.com or they could email me Lydia@liftequityinvest.com.
Darin: Fantastic. Well, Lydia, I appreciate you coming on the show. I appreciate getting a chance to know you a little bit better and look forward to seeing you at one of the events here shortly. And I wish you much success moving forward. Listeners, I hope that you enjoyed that one. Until next week, signing off.
