In this episode, Dr. Alex Tam joins me in a conversation that delves into the dynamics of trust, experience, and action in real estate investing, particularly within the medical community. Dr. Tam shares insights on the influence of positive experiences in garnering trust and referrals within his network of doctors. The discussion highlights the appeal of syndication for passive income, the significance of financial literacy for medical professionals, and the critical need to take action in real estate education.
Dr. Tam's expertise in real estate investment and his journey from attending a Grant Cardone conference to actively engaging as a limited partner and general partner add depth to the conversation. Additionally, the episode examines the changing climate of underwriting and operational efficiency and the advantages of vertically integrated management. Join me and Dr. Tam as we explore the fascinating intersection of real estate investing and the medical profession, offering valuable insights and actionable strategies for both seasoned investors and those just embarking on their real estate journey.
- 02:38 Educated in real estate investment, now confident.
- 05:39 Different channels attract diverse audience with needs.
- 08:16 Interest, feedback, and experience in the industry.
- 10:15 Real estate investors trust due diligence.
- 16:15 Need connections to get invited, current challenges.
- 20:09 Understanding location, underwriting, and pro forma comparison.
- 23:33 Unexpected easy money from commercial real estate.
- 26:07 Challenges of finding quality vendors in small markets.
- 30:19 Efficiently resolved maintenance issues through internal resources.
- 33:54 Learning about the oil and gas industry.
- 37:05 Evaluate income, debt, make investments, take action.
- 40:26 Educate doctors, expand practice, attract new talent.
- 41:57 Sharing financial literacy to empower others' choices.
Episode Table of Contents
- Trust and Experience in Real Estate Investing
- The Power of Trust and Experience
- Educating Medical Professionals on Real Estate Opportunities
- The Role of Trust and Experience in Scrutinizing Underwriting Assumptions
- The Impact of Vertically Integrated Management
Trust and Experience in Real Estate Investing
Referrals, Trust and Experience in the Medical Community
Dr. Alex Tam highlights that 70-80% of his investors are fellow doctors who already know and trust him from the medical community. These doctors are more inclined to invest in Dr. Tam's real estate deals because of his positive reputation and track record of success in his medical practice. When doctors have a good experience investing with Dr. Tam, they refer their colleagues, leading to more doctors in his network interested in his real estate opportunities. This referral effect capitalizes on the existing trust within the tight-knit doctor community.
Doctors Prioritize Their Field
Both Dr. Tam and Darin discuss how doctors spend extensive time and effort specializing in medicine, often lacking financial education and awareness of investment options. With limited time and knowledge in the financial realm, doctors place high value on investing with someone known and trusted. Dr. Tam's real estate investing provides an avenue for financial growth that many doctors were previously unaware of. His guidance assists doctors in exploring opportunities beyond traditional options by leveraging the trust already established through his medical practice and network.
Financial Literacy and Education: "My job is not to help them make a decision. It's to make sure that they get educated on options that they have so they don't feel like they have to have 1 option."— Dr. Alex Tam
The Power of Trust and Experience
How Syndication Compares to Direct Rental Investments
Dr. Alex recalls his initial experiences with rental properties, noting the greater effort and involvement required compared to his later experiences with syndication. He explains how the amount of work needed for small-scale direct rentals did not seem justified by the limited returns. Dr. Alex was struck by the contrast when he later invested the same amount of capital into a syndication and received passive cash flow exceeding what he had earned from actively managing his own rental properties. This demonstrated to him the compelling benefits of syndication for earning passive income from real estate without heavy involvement in day-to-day management and operations.
Real Estate Investing: "And I don't have to do anything? That's what blew me away, Darin. It's like when I had single family homes before, right, that we rented out as rentals, but I was so involved. I was self managing. I couldn't see myself just for, you know, a $100, $200 a month. See myself going places and trying to figure things out. And to realize I could put the same money I put as my down payment towards a syndication, and for me not to even think about it and cash flow comes in. That was more than me working for it. It was ridiculous."— Dr. Alex Tam
The Benefits That Attracted Dr. Alex to Real Estate Investing
Dr. Alex explains what attracted him to start investing in real estate after initially focusing mainly on stocks and mutual funds. He emphasizes the tangible nature of real estate as something he could see and visit, rather than just shares on paper. Dr. Alex also highlights that real estate addresses a fundamental human need for housing and shelter, distinguishing it from other assets and investments. Additionally, he notes the significant tax advantages available in real estate investing that he was unaware of initially. These benefits combined to make real estate appealing for Dr. Alex as a long-term investment vehicle.
The Power of Syndications: "Those of you guys who are making income, don't just put it in the bank and get, like, half a percent. Put it in real estate or find some sort of investment vehicle."— Dr. Alex Tam
Gaining Trust and Experience Through Action
Dr. Alex stresses the importance of applying knowledge through action, rather than merely acquiring information. He observes that knowledge is only powerful when put to use, otherwise it does not translate into results. Dr. Alex notes there are many people who continuously read, watch, and learn about real estate but fail to take action and thus see no returns. He emphasizes the need to move from education into actual investing and deal participation to fully capitalize on knowledge. This active approach enabled him to build on his learning and grow successful real estate investments and syndications.
Educating Medical Professionals on Real Estate Opportunities
Utilizing Virtual Assistants and Marketing
Dr. Alex Tam discusses his involvement in real estate with a focus on asset management and marketing. His utilization of a team of 10 full-time virtual assistants showcases the dedication to providing value and support to his investors and network. He and his wife also focus on educating doctors on real estate opportunities and hiring other doctors to potentially open a second practice. Their overarching goal is clear: to help medical professionals improve their financial literacy and explore investment options beyond traditional choices.
Building Trust and Experience through Education
The dedication to educating and engaging with his network through social media, webinars, seminars, and meetups underscores Dr. Tam's commitment to attracting potential investors for his deals. By leveraging these platforms, he is able to continuously provide educational content to doctors and establish his expertise in the real estate space. This engagement enables him to build relationships and trust that often leads to doctors investing in his syndication deals once they understand the options available.
The Role of Trust and Experience in Scrutinizing Underwriting Assumptions
Scrutinizing Underwriting Assumptions
Dr. Alex notes that in the current environment, underwriting rents based on aggressive 4-6% annual increases often do not match the reality in many markets, where rents may only be rising 1-2% annually. He cautions against unrealistic assumptions that all units can experience immediate rent increases without any value-add. Dr. Alex emphasizes scrutinizing the pro forma, evaluating if rent increase projections are truly justified and conservative for a given market and property class. He advises being wary of claims that Class C properties can be instantly turned into Class B just because they are near higher-end communities since factors like amenities, age, renovations etc. significantly impact property classes and achievable rents.
Building Trust and Experience in New Markets
According to Dr. Alex, popular markets like Dallas and Phoenix have seen rent growth plateau or decline in some cases. He and Darin discuss how secondary markets like Cincinnati, Nebraska, and Indianapolis can still offer attractive cash-flowing deals. Dr. Alex notes it is still possible to find discounted opportunities through loan assumptions or motivated sellers, even with higher interest rates. The key is focusing on markets that demonstrate stable, realistic rent growth.
Importance of Vetting Operators
Dr. Alex stresses that in the current climate, operations have become even more vital to succeed. He advises asking operators if they have actually executed similar value-add upgrades and achieved projected rent increases on comparable properties in the same market. Dr. Alex says being wary of syndicators without proven teams and relationships with contractors and vendors in the target area is wise. According to him, claims of conservatism in underwriting should be scrutinized by assessing actual track records.
The Impact of Vertically Integrated Management
Dr. Alex explains that vertically integrated operators have properties in the area that they also self-manage. They have their own team including property managers, maintenance personnel, and contractors that are part of the organization. He believes having your own internal team allows you to control much more compared to utilizing a third-party property manager.
Success in Medical Practice: "I'm a true believer in how you do anything Is how you do everything."— Dr. Alex Tam
Some of the deals Dr. Alex is involved with as a sponsor wonder how he is able to achieve better returns. He explains this is because they internally manage their properties and don't have to charge the typical third-party management fee. Since they already have teams in the area, their costs are lower so they can charge a lower management fee overall.
The discussion highlights how vertically integrated operators can plan ahead and proactively utilize maintenance resources across different properties. For example, Dr. Alex mentions how one team finishing up work can then be moved over to a newly acquired property in a couple of weeks.
He emphasizes how having control over the quality of your own staff who understand the core values and know what they are doing improves execution speed tremendously. This shortens the time from idea to implementation greatly compared to going through a middleman property management company.