Vanessa Peters is the Chief Physician Officer for her medical group. In addition to managing a thriving medical practice, Vanessa is focused on investing in Commercial Real Estate syndications. She's not only focused on wealth creation for her family but also teaches others how to build passive income and achieve financial freedom through commercial real estate. Listen and learn!
Table of Contents:
- Where To Listen To The Podcast
- Getting to Know Vanessa Peters
- Desensitization Therapy
- Wealth Creation Requires Partnering with People You Trust
- The Busy Professional's Guide to Passive Real Estate Investing
- When Frugality Becomes a Serious Problem
- Invest with People You Can Trust
- How to Reach Vanessa Peters MD
Getting to Know Vanessa Peters
Darin: Vanessa Peters lives in California with her family. She's a physician with a thriving practice. She's a highly successful commercial real estate investor. And, she's an author, a pilot, and a frequent guest on many commercial real estate-related podcasts. She loves teaching others what she's learned along the way.
Vanessa: Thanks for having me, Darin. I'm excited to be here.
Darin: Absolutely. So just a little bit on how we know each other. Vanessa and I are actually general partners together on a deal with Dustin Miles and Hayden Harrington called The Henry at Liberty Hills in the Houston area. We've been a part of different general partnership Zoom calls, but this is the first time that we're just speaking one-on-one. So I'm interested in hearing about her background and the value that she could bring to the table. So with that, how many properties and how many units are you currently invested in?
Vanessa: Well, that's definitely a moving target since, I guess, I'm invested personally in over 3,500 units. But it's hard to quantify that way because I don't own 100% of those properties. But I'm personally either a co-GP or an LP in about 44 investments currently, and a majority of them are multifamily properties.
Darin: Fantastic. Well, at one point I've read that you're in a lot of different asset classes. So you said mostly multifamily. What are some of the other asset classes that you also have invested in?
Wealth Creation Through Diversification
Vanessa: Yes, I love to diversify. So I'm in self-storage, mobile home parks, land, and land entitlement. I do own a couple of short-term rentals as well. That's about it for real estate. Well, I shouldn't say that. Let me think. Hospitality and assisted living facility.
Darin: That's a lot. So how long have you been doing this?
Vanessa: Well, I've been investing in real estate since 2008. First rental property was in 2008. But I really didn't get into it in a big way until 2018.
Darin: So why do you say that?
Vanessa: Well, the first property that I bought in 2008 was a one-off. I didn't know what I was doing. I live in San Diego. I'm a physician, and I have a realtor friend at the time. This was right after the crash, right at the beginning of 2008. He said, "You know what? Riverside County in Inland Empire is going to go crazy. You should buy a house there," because I had a little extra capital. And so, that's just the county just north of San Diego County. And so, I was like, "Okay, I'll try that."
So, I bought a short sale, a very newish house, big house, like four bedrooms. And so, that was all I did, though, because it scared me a bit. Because the values kept going down for another two years. I was like I don't know if I did the right thing. And so, not knowing that much about real estate, I didn't pursue it and purchased 10 more like I wish I had or 20 more.
Darin: Hindsight, right? Hindsight is 20/20.
A Missed Opportunity for Wealth Creation
Vanessa: So I just set it aside. I'm like, okay, it's cash flowing, good renters. I'm just going to set it and forget it and got busy with life. Then realized about 10 years later that, oh my gosh, that was an amazing investment. I want to do that again. I couldn't do it, the same thing, at that point in time. 2018 in San Diego or Riverside County, anywhere. Nothing was really cash flowing. So I had to look elsewhere for investments.
Darin: Well, talk about that. I mean, you were scared for a couple of years and you questioned whether you did the right thing. Later on, you were like, "I wish I had done more of this." But there's listeners out there, and I know that you come in contact with this also. There's people that want to get involved with real estate, but they're scared. They've never done it before. It's typically a larger investment than just buying some stock. So how do you get other people comfortable with getting in the game?
Vanessa: I mean when I put $40,000 down on that house, that was a lot for me at the time. It was a big deal. There was definitely some sticker shock with closing costs and all this other stuff. It was a little bit of a leap of faith.
This was early in the internet age. There wasn't as many resources available as there are now. But now I mean there's so much out there that you can read about in how to invest in real estate in a way that works for you. So buying single family homes might not be what you want to do. There's some risk involved.
Wealth Creation Depends on Your Comfort Level
Vanessa: For example, when I realized I wanted to get back into real estate, I thought I would replicate what I did before. Because it worked so well. Doing a ton of research, getting a realtor, combing our area, realizing that nothing was going to work. I just was like, okay, well, I still want to invest in real estate. So how can I?
Finding out what other California investors were doing, going to meetups was investing in real estate out of state, and buying homes. Just like the one I did, except out of state, in a cheaper market and buying duplexes or buying small multi’s, that kind of thing.
I've got to be honest, that scared the bejesus out of me. Because owning a house across the country in, I don't know, Tennessee or something like that, where I don't know anybody. I don't know from one block to the next what the neighborhood is like. Putting all of my trust in a property manager that I also don't know. I was like, "I don't feel like doing that." Also, the returns were pretty okay. But not enough to move the needle enough for me to put those types of chips on the table.
So, it really depends on your comfort level how active you want to be. If you want to invest passively. I kept looking and I found syndications. When I found out about multifamily syndications in particular, I talked to some people who were knowledgeable in the business and they explained some deals to me, showed me some deals. I was like, "Oh, wow. This is really cool. Okay, this is something I can wrap my head around."
The Power of Connection in Wealth Creation
Vanessa: Because I don't have liability. I'm passive. It makes great returns. It's scalable. I can put in as much capital as I have. It doesn't add anything to my time. Whereas my thinking is every time I add more single family homes to my portfolio, that's more time that I have to spend, more insurances. I have to make sure I've got all these things checked off. I mean just from owning one house, I had a feel for it, and more asset protection and things like that.
So it really depends on what you're looking for in terms of the type of investment of your sweat equity or your time. It is a chunk of change to put down. But if you're working with people that you trust, getting references, like a warm hand-off from a friend. Someone who's already done it, that's really the best way to go about it, in my opinion. Also, someone who's already vetted the deal, who knows more than you do.
I did it all my own. I didn't know anybody else who had done this. It was very foreign to anybody I talked to. And so, honestly, I didn't tell anybody because they probably would've tried to talk me out of it.
Darin: And if it went bad, you could just be quiet about it. You wouldn't have to tell everybody that you lost all this money.
Vanessa: Exactly. So I told my husband, "I'm hopping on a plane to Dallas. I'm going to go visit this building. I'm going to invest." He's like, "What are you talking about? Really?" "Yes, I'm going to do it."
Vanessa: So for my first investment, to make sure I was comfortable, I did do background criminal checks. I did a site walkthrough of the building to make sure that it was real. That it wasn't a scam. Being in a position, we're targets for scams, even though I sought this one out myself. But once I did all those things, got a gut check on all the people, property manager, and the operator, it's like, "Okay, this is good. I'm going to give it a try."
The first $50K is the hardest, 100%. Wiring that first $50K, you're just like, "Oh my God, I hope this works." Then just like anything, desensitization therapy, as we call it, is the more you do it, the less anxiety-provoking these things are.
Darin: Man, I could relate so much. I mean I remember the first syndication I did. And I think it was a $75K investment. I wired that money and I emailed the sponsor, no response. Text message, no response. I'm like, "Oh man, did I just wire this to never-never land?" Like you said, I'd done my due diligence. I had talked to people that had referred me. I knew them personally. They had a great reputation. It was in a growing market, all the right things. But, still, once you hit that wire button on that first deal, it's like holy cow.
Then after that, now I can get a deal that I'm interested in and wire the funds. I don't even think about it. But I think the big difference too is once you see the returns come back. It wasn't in the first two years with your single family house. It was later on when all of a sudden you saw the appreciation that you were like, "Holy cow, I've just owned this and I'm making all this money."
Losing Money and Learning from It
Darin: With the syndications, putting in $50 grand or $100 grand, and then all of a sudden doubling it in two, three, four years, you're like, "I wasn't seeing that in the stock market." And so, all of a sudden you get that confidence level. Not to say that every deal is going to be a home run, but you're buying hard assets. You're invested in 44 deals. I asked somebody that's invested in 40 or 50 deals, have you ever lost money in a syndication? Have you?
Vanessa: Yes, I have.
Darin: Your original capital, all of it?
Vanessa: Well, it's ongoing, but I believe so.
Darin: Oh, that stinks. Sorry to hear that.
Vanessa: No, and I don't mind talking about it because it's a learning opportunity.
Darin: What could you have done differently?
Vanessa: Yes, so a couple of things. I think what happened is two years ago, in the summer of 2020, I did a transfer of money from a defined benefit plan to a self-directed 401k. So I had some money to play with. I was a little excited about that, to have my hands on this half a million dollars or whatever. For me, that was a lot of money and I wanted to invest it.
So I was part of an investing group. When the deals popped up, if they looked good, I invested. I feel like I was a little rushed. So much so, like you talked about how you wire $50 or $100 grand and don't even think about it.
Wealth Creation Requires Due Diligence
Vanessa: I actually lost track of some of the paperwork because I was doing so many wires in a two-week period. I had a little mini heart attack a couple of months later when I was like I haven't accounted for $50 grand. Where did it go? Because sometimes when you invest in a deal, it has a certain name. Then when you wire, it's to the legal Escrow company or whatever.
Darin: Whatever the LLC is.
Vanessa: It's not the same. Like I said, I felt a little anxious because I wasn't sure how to line it up. I eventually did. But during that time period, I actually did two investments that haven't worked out. I can point the finger at other people, but ultimately it was my choice to do the investment. I feel like I got a little bit swept up in the group.
So, while I just said, "Hey, invest with people you trust and invest with people who've done other due diligence." You can't just rely on other people to do all the due diligence for you and just take it at face value that this is a good deal. So I invested in one opportunity that was a hotel conversion, like a Hilton Hotel conversion. Basically I put $100,000 in, to be transparent, and the deal has never closed.
For a few months, it's like, okay, it was in the middle of COVID. That was part of the pitch was that we're going to reposition this hotel. We're going to sell it off in three years. You're going to make 30% returns.
How to Identify If the Deal Is a Scam
Vanessa: Number one, those returns are high. If you're getting those kind of projections, that should have instilled more caution in me than it did. Then number two, I didn't do a lot of due diligence on this operator. I might have turned up some nasty stuff if I had. Number three, I was just going on the advice of this group I was in. They had an advisor and they gave me advice and I just took it.
After about a year, it still hadn't closed. Every so often I would ping them and I'd be like, "What's going on?" They'd say, "Oh, this and that, Escrow, da, da, da," seller, COVID excuses, basically. Then in September of 2021, I sat down at my computer one night and I just typed in the operator's name, and this whole flood of hits was about fraud.
So, this was fraud and it is fraud. And so, I don't expect to see my money back. I am going to the FBI and I'm collecting information about it right now so that I can take it to them. Not that they don't know about this guy already. But just to make sure that it doesn't happen to other people.
The kicker is that it's in a 401k. And so, I don't even get to write it off as a theft casualty loss, which you can do. If you are ever scammed, you can write it off if it's in cash. But I feel like it's a responsibility that I have to try and make sure that this person is brought to justice for what they're doing.
Following a Bad Call Could Ruin Your Wealth Creation
Vanessa: I'm actually working with a private detective who has traced back the ownership of this hotel. He found out that it's still in the same family ownership that it's been in for many years. It was never even for sale. So it's like that kind of a scam.
Darin: So now you go back to the group. I mean the group is the one that advised on this. Now don't they lose all their reputation, the group, and the advisor?
Vanessa: I left the group.
Darin: Because you're not the only one that gets hurt. There are other people that they were sending that way, too. So did they just make a bad call?
Vanessa: Yes. They didn't have the parameters of due diligence in place that have improved over time. I left that group before I found out that this was a scam. But I've gone back to them and advised them of what I found. Basically I'm the one who found the problem. They were like, "Oh my God." Nobody else had done any kind of checkup on these guys.
Darin: That's scary. I wasn't expecting that response because the other guy that I asked that was in 40 or 50 deals, he's like, "Darin, I've never lost on a syndication." My capital, I've had deals where the projections were off. They say the cash flow was going to be 8% and I got 2%, or I didn't get anything. Or they said it was going to be a five-year deal and it turned out to be a seven-year deal. Or they were going to double my money and I didn't double my money, but I got back some kind of gain.
Wealth Creation Requires Partnering with People You Trust
Darin: So I'm shocked that happened. It does. It opens our eyes that like, look, I'll have people contact me off Instagram and they're like, "Hey, Darin. Do you want to partner on a deal?" I'm like, "I don't even know you." And not only am I not going to invest, but how am I going to bring investors to that deal when I don't even know you? I'm like, "Next time you're in Dallas, let's get together for coffee."
The people that I'm investing with, I typically know for several years, before I even move forward with. That's another benefit of going to meetups and networking. You hear people's reputations from other people, and that builds confidence.
Vanessa: Right. So as a learning experience, I have chosen to only partner on deals with people that I know very well. Or have a close friend who has worked with them already. Really, I've just limited my network of operators to a very small number for my investors' investments. For my own, of course, I branch out on my own and do things that I might be considered a little more risky. But, overall, I'm very limited in who I partner with for that reason. But I also tell investors that the only way to really lose your capital in a syndication is what happened to me.
Vanessa: Yes. I mean, otherwise, like you said, it's all those other things. It doesn't perform as well. It doesn't quite hit the proformas, but you've got a tangible asset. It's not going to just, poof, disappear. Compare that to the stock market. Your stuff can, poof, disappear. That's not fraud and that's perfectly legal. That's not illegal.
A Risk for Wealth Creation
Darin: I had somebody call me and say, "Hey, Darin. Man, I lost a million dollars in the stock market in the last several months," whatever. He doesn't put blame on a person. But if he was to invest in a syndication, whoever brought him that deal is going to be the face of that. It's so different between, "Oh, the stock market. I just lost a million dollars in the stock market," versus, "That guy took my money."
Now I've got another business that trades loans between banks. I've been in that business since 2002. Just personally from my standpoint, I think there is one other risk in these multifamily deals or real estate deals besides fraud is the reset risk on the loan.
A lot of people don't bring it up, but I'm just super hypersensitive to it. Because in that 2008 to 2010 timeframe, I was talking to a lot of bank presidents and chief lending officers, and the deals that went bad were the ones that like, cash flows down, cap rates are up, valuations are down, and the loan comes due. It's a balloon, and nobody wants to lend. Either the owner, the syndicator, whoever is the lead on the deal, it's impossible to raise capital at that time. Everybody's scared. So they're holding everything they have.
So at that point in time, there's risk that the deal could be taken by the lender. I'm a big believer that if you have enough running room, then rents, real estate will come back. But everything is cyclical.
Vanessa: If it's cash flowing, right.
Everything Is Cyclical
Darin: Right, if it's cash flowing. So it's a matter of being able to withstand that downturn and then come out the other side.
Vanessa: Yes, absolutely. People are talking about it now with interest rates going up.
Darin: Yes. I mean I've talked to a number of syndicators that are like, "I'm looking for some of those deals that were bridge loans maybe two or three years ago and they're coming due soon." Interest rates are double what they were, and is the deal going to pencil? Are they going to be able to refinance, or is that going to be an opportunity for us to pick it up?
So I haven't seen any of those deals. I've heard from brokers and from syndicators that it's getting tougher and those deals are coming, but I haven't seen any. Have you heard and seen any of those deals come to market yet?
Vanessa: No. I think it's a little early yet, but I think that time will tell in the next 6 to 12 months.
Darin: So you are a physician. Do you still practice?
Vanessa: I do. I'm here in the office right now.
Darin: So what type of physician are you?
Vanessa: I'm a family physician. I'm also the chief medical officer for the group as well. So it's a leadership role, like the administrative side.
Darin: So in this space, the space we're playing a multifamily, building, know, like, and trust is a big thing. Well, being a physician, you have to do that right from the get-go. Like build trust that you know what you're doing. So you took that and parlayed that into the real estate world. So where's your focus on the real estate world?
Stock Market Is Not the Best Avenue for Wealth Creation
Vanessa: Well, it started out that I was looking for my own personal investments. And so, when I had this realization in 2018, I had been basically plotting my net worth over the last eight years. It was definitely going up, but it was going up because I was saving almost half of my income. I had it all in the stock market, just like I was told to do, and in savings.
When I did a graph and I saw this really very straight line. It was going up. It was in a bull market, things were improving, but it wasn't at all exponential. I really thought, after saving for eight years half my income, putting it in investments, not just sitting under my mattress, that it would have gone more like a curve upward. That was my wake-up call was like, "What? I'm 40 now. What am I going to do? If I keep on this trajectory, I'm going to be working until my mid-60s or later to really reach that freedom number that I was looking for."
That's when I realized I needed to switch gears and look for asymmetric risk reward. Meaning low risk and high reward. I knew that that was real estate because, like everybody else, I read Rich Dad Poor Dad. But I read it back in 2002, when I just got out of residency coming down here to the states. I came from Canada originally. And I came down here to work. I read it and I got it, but at the same time, it was like I can't focus on that right now.
Raising Capital for Wealth Creation
Vanessa: I'm starting a new career. I just got out of medical training and I have a large amount of debt. I can't just pivot and start investing in real estate. But that was in the back of my mind. That's what I need to do.
Like I told you, I went through all these iterations to try and figure out where to invest. Once I started investing as a limited partner, I started getting those checks in the mail, I was completely hooked. So I was like, "This is it." I invested in a bunch of things, like six different things, in six months.
Then, as my personality, I tend to get obsessive about things and just really dive in. One of the operators I was working with was running a coaching program. And so, he said, "You know what? We're looking for people who want to do this for fun." I thought, "You know what? I always felt like I'd be in real estate if I wasn't in medicine. That would be my thing that I enjoy the most." I thought this was a way that I could be a little bit active and also spread this word. Because I couldn't stop talking about how great this stuff was to anybody who would listen.
I started raising capital on some nice deals and just bringing in friends and family. Really, the goal though for me was and still is to invest in every deal. So that's why I have 44 syndication investments in my personal portfolio because I closely track my passive income. I have a spreadsheet that says, okay, this deal's going to give me this much income.
And so, while I'm not completely focused on cash flow, I've actually been very heavily focused on equity. I've pivoted also to looking at cash flow so that I can work towards that number, which would replace my active income.
A Ripple Effect on Wealth Creation
Vanessa: Whatever method to get me there might include, I've learned a lot about debt. How debt will get you to your passive number a lot quicker than equity will. But I like to see a balance of those things in my portfolio.
Darin: Yes. I mean the same experience happened with me that happened with you. And I think it's probably with a lot of people. Initially, you're looking for yourself and your family. How do I build wealth? How do I put us in a position to be able to be comfortable later in life?
But you don't realize that there's a ripple effect. Once you start learning how to do it, one, if you've got the bug, you want to tell other people. Then, two, other people see that you're successful and then they want to learn. So you don't even realize it in the beginning, but anybody that's taken their first investment, initially it's just about you. But two years, three years, five years down the road, now you're teaching your brother and your aunt and your uncle and your parents and your network. It just is exponential how many people you can help.
Vanessa: Yes, absolutely.
Darin: You're a physician. You guys are bred that way, to help other people. And so, now you're not only doing it in the health field, but you're also doing it in the financial field.
Vanessa: And helping other busy professionals. That's my soft spot is for other people like me who are working our buns off every day helping other people and patients. Making good money but also paying a ton of taxes, especially where I am in California.
Physicians Are Not Familiar of Wealth Creation Through Multifamily
Vanessa: And just on that treadmill of buy a big house and get a big deduction and go to private school for your kids. It's just all these expenses so that then they feel like they're drowning. Also very much golden handcuffed to their high-paying job because they can't stop. They have way too many expenses.
Darin: Are most of the investors, or a large percentage, other physicians?
Vanessa: I would say yes. I'm in a lot of different networks, though, that are not physicians. So I would say maybe 40% of my investors are physicians, but then they refer me to their family members who are in business or in tech or whatever. But many of them are working professionals, high W-2 accredited investors.
Darin: I've had a few physicians that have been on that are in that capital raising role. What they've described to me is that doctors, they read a lot. But they're focused on reading stuff that's going to help them in the medical field. And so, a lot of them don't want to dedicate time to learning about real estate and other financial investments. They want to spend their time on their field of practice. So, a lot of them are on that hamster wheel because of that.
Vanessa: Right. They might have an idea that it's a good idea, but they don't know enough about it. They don't have any inclination to learn more, which is where someone like myself comes in and be like, "Hey, I can educate you. You can read my book. You can learn about it in a very quick fashion."
The Busy Professional's Guide to Passive Real Estate Investing
Vanessa: "Then I can present you deals that are vetted by me and I'm investing in as well. So that you don't have to do a whole ton of legwork and find someone online that you trust to give your money to."
Darin: Right. Absolutely. So you mentioned that you wrote a book. Tell us about the book. What's the name of it? What's it geared towards? You got a copy? Show it to us.
Vanessa: So here we go. The Busy Professional's Guide to Passive Real Estate Investing: A Physician's Path to Building Wealth, Creating Financial Freedom, and Leaving a Legacy. So this is not a big book. It's pretty short. I wrote it so that you could probably finish it on a flight, three hours maybe. It's a basic primer on syndication.
So for those of you out there who know a lot about syndication, it's probably not that helpful. I do dive into my story a little bit about how I got to where I am. Some of the pitfalls that I've had and run into and go into a few different asset classes. But it's really nice too for folks that are new to it, for me to have them read that, and then we can chat in more depth about things.
Darin: Absolutely. So where can people find that book?
Vanessa: Oh, it's on Amazon. You can buy it in paperback, and also on Audible.
Darin: Okay, fantastic. That's just another thing. When you started investing, did you ever think you were going to write a book about investing?
Vanessa: Heck no.
Sharing Wisdom About Wealth Creation
Darin: Right. I mean that's the thing is like, in the beginning, it's just about building your own wealth. People that are listening right now that haven't purchased their first investment and you're just thinking about how do I get that first investment, I'm telling you a year or two or three years down the road, you're going to be looking for ways on how you can help other people. Vanessa took the time to write a book to help other people. That's awesome. So before we hit record, we were talking, and a phrase that was very strong to you is financial freedom. So what does that mean to you and mean to other people?
Vanessa: Yes, I know that you can focus on the numbers. Being a person who likes numbers, it's easy to do that. To be like I need X amount of dollars to "retire" or X amount of cash flow to retire or leave my full-time job. I do enjoy tracking that.
However, my perspective is more focused now on cash flow than that net worth pile of money. Because the old school thinking is that you save several million dollars or more, depending on the lifestyle that you want. Then you stop working and then you spend it down, and then you die. So you might have a little bit to leave to your family, but probably not.
The opposite of that is building up a bunch of assets that provide cash flow. So you transition from earning money to living off the cash flow from your investments, which continue to appreciate and value. So, in essence, your net value keeps going up, even though you're not even trying anymore. You're just managing your own investments.
The Meaning of Freedom
Vanessa: We've all heard of the cash flow quadrant by Robert Kiyosaki and that lower right corner is the investor corner. That's where I ultimately would like to be. It's just someone who full-time manages my own investments and have philanthropy and a legacy to leave for my family and for other people. But freedom while I'm still around.
What it really means is not about a dollar number in the bank. But it's about being able to have freedom of time and freedom to do the things that I want when I want with the people that I want. I think there's a Tony Robbins quote that's similar to that. So it was like when I want, where I want, with whom I want, whenever I want. So that's freedom.
I'm not there. It's hard for me. There's only 24 hours in a day. I like a lot of the things that I do, but those things require time commitments. And so, while I like medicine, do I like doing it 40 hours a week? Well, not necessarily. I'd like to have some more freedom. I feel like going back to the numbers, when you get to a certain number, you can say, "Okay, I'm going to work part-time." I get to keep doing what I love. But then I get to also do other things that aren't medicine-related that I love.
Darin: Right. That's a big mindset shift, what you said. I mean I think most of us are taught that just build up to that pile of money. Then I'm a big reader of books, and I was reading one book and it's like nobody wants that number to go down.
Wealth Creation Is a Mindset
Darin: So even when you start to pull from it, retirees, they don't like to see that number go down. So they live extremely frugal. Because they're fearful that they're going to be taken out too much and they don't like seeing it go down.
The other mindset of looking at the cash flow, like you said, even if you're not trying, the assets are appreciating. I think it's a completely different way of looking at things. I was always the guy that would save up money and pay for a car with cash. That's what I thought was the right thing to do.
Then I talked to other real estate people and they're like, well, one, you could get a tax benefit if you're using it for business purposes. Then, two, once you spent that money on that car, well, it's just going to depreciate. Versus if you had invested that and you get cash flow from that. Then you use that cash flow to buy a car, then you've got an asset that's appreciating and you're still getting the car that you want. I'm like that's a whole different way of looking at it.
So meeting other people that are wise, that's the other side benefit of doing this. It’s that you network with other people and then you learn, well, how are you doing it? How are you getting the tax benefits? How are you leveraging the capital that you have? Then you learn different things. Some things you may say, "You know what, that's not for me." Other things you're like, "Holy cow. I didn't know I could do that. That's so smart." It's just an education thing.
Not an Ideal Way of Wealth Creation
Darin: So in any event, talk about mindset and how yours has changed as you've gone through the investment world.
Vanessa: A ton. I mean I actually went through a period of time during that eight years where I was saving half my money. And really what happened was when I was in my early 30s, I talked to my financial advisor at the time and I said that I wanted to retire when I was 45. He chuckled a little bit and then he's like, "Do you know how much money you're going to need?" I was like, "I have no idea." He said, "About $4 million," at the time. That's what he said, including inflation, 4% safe withdrawal rate, da, da, da.
So, I was like, "Oh man, I'm going to have to work hard to get to that by 45. So I better get to work. And that's what I did. I worked hard. I saved a lot and I got extremely frugal. Speaking of fear and frugality, I went a little bit overboard. I mentioned earlier that I get a little obsessed about things. So when I got obsessed with frugality, it was a sad time in our lives. I was at the library. And I would read at Barnes & Noble, but I wouldn't buy. I would go to the library.
Darin: So even the $20 book that can make you way more money, that was a big expense.
Vanessa: I would read it while I was there and take pictures. I'm serious. It was bad. I was so frugal, I got caught up in the FIRE movement, the Financial Independence, Retire Early movement, and thought that that would probably be the way to go.
When Frugality Becomes a Serious Problem
Vanessa: So I borrowed books about how to live on $100 a month on groceries. It is just nuts. I went through this period where we bought solar panels, and they weren't functioning as well as I thought they should in terms of our bill.
So, I went around and measured the electricity of everything in our house with this little thing. You can plug it into your wall sockets and then plug the appliance in, like, "This is how much the blender uses. Can you believe this? This is what the TV does."
Darin: What did your husband say when you go into this mode?
Vanessa: I'll get to that. So I was tracking all the little blinking lights in our house that were on at night. He's a musician. He's got a ton of gear. There's big computers, there's this studio thing. It's driving me crazy. It was eating me alive. I started tracking our solar panels and how much they were producing. I was getting after him and my son about stuff.
One day he just turned around and he's like, "You need to get some help. You have a problem." I was like, "What?" He literally canceled a weekend trip. I had to go away by myself. It was a continuing medical education thing. I went by myself, and I cried. I was so sad and I was upset. Then I got some help. We got some therapy. Then I realized, okay, I was way down this weird rabbit hole of stuff that was going to save me $50 a month, maybe. We're not talking big dollars here.
Big Decisions Are What Will Lead You to Wealth Creation
Vanessa: I'm joking about it, but it was a sad time. It was a tough time. I needed to back away from that and just see the forest instead of the trees. Because I was really just focused on the minutia. And that goes back to the financial guru who recommends the $5 latte thing. It's Richard Bach, I think. It's like if you don't buy that coffee, then you're going to get rich.
No, that's not it at all. It's the big decisions that are going to make you rich. Which is getting a low rate on your mortgage and not paying it off and using that money for something else. Leveraging things and being smart about it instead of squirreling away small dollars to pay off things that really benefit you to not pay them off.
Darin: That's great. I mean there's a lot of books on the frugality. Movements and don't have any debt at all and all that. Pay off your mortgage, and then you meet other people that you're like, "Well, how'd you grow your wealth?" and then they tell you all the different ways. You're like, "Well, that makes sense. Why aren't more people doing it?"
This is advice to people listening. You heard Vanessa say it, you've heard me say it before. You've got to get out and meet other people. You have to go to meet-up groups. You have to go out and meet other people that are doing things that are learning from that. Then taking action and actually see how it's changing their life. When you see that, then it puts a little bit of a spark in you, like, all right, they did it, I can do it.
Vanessa: And another thing is that not just real estate people. So one really big turning point was that I found personal development. It sounds like a cult to outside people sometimes when you join personal development group and get involved in it. But I met so many cool people through this group that I joined. I met the Hal Elrod's group.
It was his Best Year Ever event. I went to that. It was a big deal for me to go because it was $500 and it was in my own backyard. I didn't even have to go anywhere. It's in San Diego. I thought about it for three weeks before I put down the $500 to go to this three-day event. I mean it's insane.
But when I got there, I met all these other people that were doing cool things. They were outside of my field. They weren't doing real estate necessarily. A lot of them do, but not all. They were not doing medicine. It really expanded my horizons in an excellent way.
So, again, join a mastermind. Be around people who are doing great things. Because you want to surround yourself with people who are ahead of you. Everybody there seemed like was writing a book. Which is one of the reasons why I was like, "Oh, okay, I can do this." And they showed me the path for how to get there. We live in our little bubbles. Where we have our group of friends and we have our work and we might have kids and those friends. We do our thing every day.
Wealth Creation Means Pushing the Edges
Vanessa: It's very easy to get very comfortable with the people around us. And not push our edges a little bit to where we might feel a bit uncomfortable. The first time I did a podcast like this, I was absolutely terrified. I had my answers all written down on a piece of paper and I was trying to read it. It was scary.
But that's how we grow, it’s by pushing those edges, because there's no way to grow otherwise. We just become stagnant.
Darin: I completely agree. Look, I'm a host of a podcast and my kids would walk by when I was practicing. I had no idea what the heck I was doing. They would be laughing at me. But I agree with you. So you brought up Hal Elrod. And I bought his book, The Miracle Morning. I had it for a while and I was like, "I don't even really want to read this." I'm thinking it's going to be get up and make your bed in the morning and you're going to feel better about yourself. I thought that that was going to be one of those types of things.
Well, I finally decided to read it and I'm like, "Holy cow, this is great." Then I got my wife. So now we're maybe 45 days in. It's a 30-day challenge. We're maybe past the 30 days. We're like 45 days. But it's very, very cool because it's a bunch of different things that you could focus on. Like reading a book of the Bible every day.
Make the Most of the Little Dash
Darin: Well, some days I would do it and some days I wouldn't. But now this was dedicated time for reading. So I would do it every day. Pushing past your boundaries. I was doing a podcast interview with another guy. He told me something crazy he had done. After we hit stop on the recording, I was like, "I really want to go on one of these motocross backcountry deals where I don't even really know anybody. I just go." He's like, "You've got to do it." I was like, "Oh, man. Now I'm going to be held accountable." I talked to my wife and two days later, I booked it.
So at the end of September, I'm going to Yosemite. I'm flying into California and I'm going to go through Yosemite. It's like a three-day deal. They take away your phone. You're just in the country riding motocross. And so, I don't know, but it's scary and exciting at the same time. But that's part of what's great about life is when you have that both. You don't know how it's going to turn out.
Vanessa: Right. Another one of my favorite quotes is you've got two dates in a dash. Make the most of the dash. So the day you're born-the year you die, and there's that little dash in the middle. That's your whole life. Make the most of it. So that's something that I've been living by as well. Doing things that I really never thought I would do. Because I thought they were too hard or too expensive, or I was too old or they're too scary.
Age Is Just a Number
Vanessa: One of those was becoming a pilot. So that's my passion that I just love. But didn't know that it was even possible for me to even consider doing that course.
Darin: Are you a pilot now?
Darin: You are? How long did it take you to become a pilot?
Vanessa: So it took me six months to become a private pilot. See, I thought it would take years and cost millions of dollars. I just thought it was impractical. I spoke with an investor who was a pilot and I said, "I've always thought about doing that." I was almost scared to say it. I'm like, "But I'm probably too old and da, da, da."
He's like, "No, you're not too old and it won't take you that long. Here's how you do it." He just gave me a quick little rundown. "Go book an experienced flight and go to this school. I know this school. Go there," and I did. I was like, "This is really cool. I like this." And so, I'm doing it. Is it scary? Well, yes, it kind of is. But that's part of growth and growing as well.
Darin: That is so cool. Where do you fly?
Vanessa: I fly, well, mostly just locally here in San Diego. So once I get my instrument rating, which is going to be at the end of this month, which is where you can fly by reference to instruments. So you don't have to be able to see as much. You can go through clouds, mist, that kind of stuff. Then I'll be able to go further. I'd like to explore the southwest. Then as I get more comfortable, maybe go farther.
How Vanessa Source Deals
Darin: That's so awesome. So, listeners, it's not just about real estate investing. We all have this gut sense of what we want in life, what you want to try, and we let fear hold us back.
There are people that sometimes they go through their whole life and there are certain things they never tried. They have regret. You don't want to have regret. That's fantastic. So you're on the capital raising side. How do you source deals?
Vanessa: Well, like I mentioned earlier, I only have a very select number of operators that I work with. And so, I don't really source deals. They ask me when they like me to participate.
Darin: How did you get to develop those relationships?
Vanessa: Just through networking and working. So the original group that I was part of, we were a group that was being mentored or coached. I started with those folks. Then we all branched out to do our own things. So those are my core connections. And so, if they work with an operator and they're looking for new capital raisers, they'll refer me. Meeting other people through conferences, like I just went to the MFINCON, and you were there as well. We meet people through those types of things. But, again, I'm very hesitant, if I just met somebody, to bring in investors. Unless they've got a high profile and I've known them through other people.
Invest with People You Can Trust
Darin: Right, because the reality is, just like what happened with you, there are people in my network and your network that are busy people. High net worth individuals, who have cash and want to invest and like the asset class. But they don't have time to vet the operators. They don't have time to vet the markets. They don't have time to vet the deals and learn everything about it. So there's a bit of trust that you as the capital raiser are doing a lot of that due diligence for them.
Vanessa: Yes, absolutely. It goes both ways. I met a team member from that original group at MFIN. We hadn't seen each other in years. I was like, "Oh, great. Cool." Then he had a deal and he told me about it. I was like, "Okay, great." I was not planning on investing $100K coming here this weekend, but here I am. I'm like I can't turn it down. This is a great deal. I implicitly trust him because we've known each other for years.
Darin: Yea, that's huge. So I'm going to go back in time when you were a child. Did you know that you were going to be a doctor? And did you know that you were going to be successful? Did you know that you were going to be working towards financial freedom?
Vanessa: Well, as a child, I was very studious. I have to say that I was the kid who always got straight A's and was very, very focused on my schooling. I always wanted to do very well at that.
Darin: Was that self-motivation or trying to make parents happy?
Vanessa: Oh, yes, 100%.
Vanessa: It was like self-flagellation if I got a B. I was bawling and crying. I knew I was smart enough to do something good in life. But I didn't have any entrepreneurs in my world at all. I grew up in a small coal mining town where everybody was actually employed by the mine. So my stepdad was a foreman at the mine and everybody else worked for the mine somehow or supported it somehow.
I didn't really know anything about entrepreneurship or anything like that. I don't even think there was real estate entrepreneurship in that town because the mine literally gave people houses. And so, my exposure to entrepreneurship came much, much later.
So in approximately 10th grade, when it was like, oh gosh, I better figure out what I want to do with my life. I really thought, okay, well I can be a lawyer or I can be a doctor. Because those are the things that I hear about that people who do well in school do. I was better at math than the other stuff, like literature writing and things like that. I think I would like science better. And so, I thought being a doctor would be a cool thing to do.
But literally it was almost an arbitrary decision. I also knew that I wanted to make good money. Because I thought the doctors made a ton of money. I also thought that they would be their own boss. And so, I didn't want to be beholden to a boss.
A Practical Decision to Start Wealth Creation
Vanessa: And so, I thought I'm going to be my own boss and I'm going to make a lot of money and I'm going to be a doctor. So that's where it came from. Did I want to help people? Yes, but I can't say that was my primary motivation.
It was more very practical. It was a very practical decision. The other big thing is that I wanted security, which goes against being an entrepreneur completely. But that I wanted a job. I wanted a flipping job when I got out of school, because I was paying for this myself. I did not have any financing from my parents. We were just very middle class, lower middle class. I said, well, if I'm going to do this all on my own. I don't want some bachelor of arts that doesn't get me a job and I'm working at the Starbucks. So I wanted a job title when I got out.
Darin: So did you make good money and were you your own boss?
Vanessa: Initially, no and no. So the original salary of a doctor when you first start is actually not that much, especially in primary care. It's gotten a lot better. And you're not your own boss at all.
In Canada where I'm from, I thought you would be your own boss. You are in terms of like you just hang out a shingle and you're a single office. But the government is your boss up there. They pay you. And so, then here you're generally an employee and you join a group. There's very few docs that just are their own bosses. I'm really glad I didn't try to go down that route. Because I didn't know a thing about running a practice or the business side of things. Because we do not learn that in medical school.
Tangible Asset Is Safer
Darin: Yes. I mean that's crazy that you learn all the medical piece, but you don't learn the business part.
Vanessa: No, I think we got one day near the very, very end of our residency when we were practically checked out. "Oh, by the way, here's how you start a practice," in like eight hours.
Darin: So you're a doctor. You make good money. You're surrounded by other people that make good money. But you get in real estate and you see that there's a different world. To the listeners, say there's a listener out there that they have not invested. They read Rich Dad Poor Dad or somebody told them they should invest in real estate. But there's just that skeptical side. What do you tell them?
Vanessa: When I talk to them about investment, they ask me, "Well, is it guaranteed or insured? Is there any government insurance up on this?" And I say, "No, there's not. It's considered a private placement. It's its own category in the Securities and Exchange Commission rules. There's no guarantee." When you look at the private placement memorandum, you're going to see a whole bunch of a bold print about how risky this is.
But when you invest in really any of the paper assets, except for the savings accounts, up to a certain amount that are FDIC-insured, nothing is insured or safe. And so, my personal feeling is that a tangible asset is safer than paper assets in the stock market.
Average Annualized Returns
Vanessa: Whereby they consider that anything that is risky will get you higher returns. And anything that is safer will get you lower returns. Like your savings account, your money market account, stocks, mutual funds, bonds, and then up to junk bonds and options trading. Those are like, okay, that's going to make you more money. It doesn't have to be that way. It just takes a little bit of education and a little bit of learning, and then getting a good network together to do really well in real estate.
Darin: So I completely agree with that. But now somebody doesn't understand the differential, like what are the returns? So if you put your money in the bank, what are you making? 15 basis points? 25 basis points? 50 basis points? You're making definitely less than 1%, right? What's your experience in, say, syndications, the average annualized returns. You look like you're looking at a spreadsheet right now.
Vanessa: I was like, "Ah, I'm not as prepared as I should be." I did just compile the returns of my investments so far, which includes nine exits. And so, I've been a general partner in, I think, 24 syndications and I've had nine exits.
I was just compiling the returns. I had a nice graphic that I put away and I can't find it right now. But basically the average hold time is just under 30 months and the average return, IRR, is over 30%. I mean that's pretty darn good. As I'm sure your listeners know, IRR takes into account the time value of money. So, yes, 32% for the IRR. And so, that's a good return, in my opinion.
Wealth Creation Gets You in the Investor Database List
Darin: I mean absolutely. The thing is, with these deals, you have to get asked. You have to be on somebody's investor database list. Or you don't even get asked. I mean until four years ago, I didn't even know how to get involved with private placements. Now my email box is flooded with them.
Vanessa: Overflowing. You're like, "Why didn't I hear about this? Why didn't my financial advisor tell me about these investments?" Is the question that I had and the question that people ask me. It took me a while to figure it out, but I learned that financial advisors have their lane. Their lane is in their licensure usually. Some of them are able to give advice on private placements. But many of them aren't comfortable with it, but they don't know about it. And so, they're not going to give you advice on that.
Darin: Yes. Some of the words are just scary. Private placements? Like, oh my gosh, that's for other people. Syndications, it's a scary word. Until you just realize, hey, it's just a bunch of people coming together to buy an asset that's larger than you could buy on your own.
Vanessa: A partnership. It's a partnership.
Darin: Yes. It's just a partnership, but it sounds like it's really complicated. But, hey, you've done so much. What's the next big stretch goal?
Vanessa: Well, my next big thing, apart from continuing what I'm already doing, is I'm going to become an investment advisor representative.
Darin: What does that mean?
Investment Advisor Representative
Vanessa: It's an investment advisor. So a financial advisor, basically. So there's a securities exam that you can take called the Series 65. That's a law exam. When you take that exam, then you are eligible to become an investment advisor. And so, I did take it a couple of years ago with the thoughts of maybe becoming that, a wealth advisor, for physicians or something like that. I didn't do much with it. It sat on the sidelines. Just recently, I joined up with a company that I'll be working with. So I'd like to try my hand at that.
Darin: So what's the benefit? What's the attraction to getting that?
Vanessa: I always like to learn. Although writing that law exam about the stock market, which was what it was primarily about, was not fun. It was a very difficult exam. I learned a lot from the retirement account side of it. But the whole options trading and all that and the legal jargon. It was like, thank God I'm not a lawyer because this stuff is tough.
I feel like at this point, with all of the iterations of different advisors that I've gone through, the different masterminds I've been in for investing, I feel like I have a lot of knowledge. And so, I feel like I could give back in that way to help other people structure their roadmap to financial wealth. Where it's like, okay, I've already done all these things. If I just rattle them off to you, they'll completely overwhelm you. But there is a stepwise process that you can go through. To be official in terms of having that license allows you to actually give advice without getting into hot water with the SEC, which we all want to avoid.
What Vanessa Like to Do for Fun
Darin: Right. Absolutely. So outside of work, what do you like to do? I know you like to fly.
Vanessa: As a family, we love to go traveling, go to the beach and go hiking. We've got a beautiful country down here in Southern California. We have a camper van, go road trips, and things like that.
Darin: Awesome. So camper van. So my wife and I bought an RV and we're traveling around. And so, where's the furthest you got? Do you stay in California?
Vanessa: No. Well, typically we go up as far as, say, like Yosemite or Utah for me. But my husband and son made it all the way to the eclipse in Oregon a couple of years ago. So that's really far.
Very cool. Well, I really appreciate you coming on. I look forward to doing more deals as partners with you. I know that you're a class act and that you're out to help other people. What's the best way for people to get to know you a little bit better?
Vanessa: So you can go to my website. It's VMDinvesting.com. There's a link to my calendar there. You can also just email me directly at firstname.lastname@example.org.
Darin: Fantastic. Well, thank you so much. Listeners, I hope you enjoyed that one. Until next week, signing off.