EM & Medicine - Plans to take today

[emergentmd]

Reading the 555 thread has many/mostly truths, some conjecture, but overall EM and medicine in general are all going downhill. As Rekt stated, it is not if you will go down but what view you have on the way down. What seat may be debatable but if you ask the fore fathers in your field, I suspect they will tell you that the plane is going down.

As the plane is/will go down during your career, best to learn to fly the plan for a soft landing. My first 15 attending years was a nice smooth ride but a CMG turbulence forced buyout happened. Sometimes you need a bump in the road to force you to see what is available outside of medicine. I wish these bumps happened earlier in my career as I would have been forced earlier to look for other options in & outside of medicine. Yes, I too was a big spender and had little to show after 15 years.

To docs who think that this is not an option, not possible, too risky; you can stop reading and continue making a top 5% salary living an upper middle class life. This is not all bad and for most Americans a dream option. To those who believe what was possible 5-10 yrs ago is not possible today, we will just disagree. This is not meant to be the gospel on investing/money management to be debated, but my attempt to educate & help. Yes, one size does not fit all so pick what fits your financial plans.

To docs who want to learn and willing to take some risks then read on. I do not pretend to know everything but comes from my experiences with some failures and many successes.

1. I started/helped open a FSER 5 yrs ago when our SDG was forcibly bought out. I offered over 10 SDG partners this option and only 3 was willing to take this leap of faith. Now all 3 have left the hospital completely. Some of the other 7 are looking to get out 5 years later. FSERs have become a game of best operators as the risk is higher and rewards/income lower. I still think it is a great option for Tx docs. If you are looking for a shift or two, DM me and I may be able to help. There just are not much left but best to get your foot in the door because docs are leaving the hospitals in droves.

2. Look into real estate. This has been discussed ad nauseum and really not much more to add. I have done LTR, MTR, & STR with varying success. For people starting out and especially destination cities, think MTR. I wish I did MTRs instead of LTRs when I first started. DM me if you want some advice. It is less work than you think.

3. Look into syndication investing be it apartment, commercial, or storage. Even during the 2008 RE downturn, the best performing class was apartments/storage. Again, this is a game of operators and you have to pick the best of breed. I have been investing in syndications for 3 years. Bought 7 syndications and all have sold/closed with 2x+ ROI allowing me to double my stake. Even with the current environment, good operators will weather the storm. DM me if you want advice and I can help point you operators I trust. This is a great way to get into RE with complete passivity but you also lose complete control.

4. You are never too old to adjust to another career. Docs are smart, well connected, and have a large shovel. Capital ventures love docs. I am starting my journey into finance and it is quite refreshing to learn something new. Doors will open in places you would not expect once you start to branch out into different investment platforms.

It has not been all roses, I have lost my total investment in an alternative energy venture and more losses than wins in the stock market. I have been offered opportunities in other energy ventures, Physician staffing companies, other FSER operators, a Pet grooming business, beauty venture, Food company but the timing/offer was not right. Even failed and declined investments are a great learning experience and IMO the best educator is failure.

Good luck to everyone on finding a soft landing.

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[cyanide12345678]

I’m big on syndications etc…but there is some blood Bath that is going to happen in commercial real estate soon as liquidity and lending is going to dry up.

This is not the time to go in a risky deal or an inexperienced sponsor. You need to have an experienced sponsor, fixed term debt, debt rate preferably lower than cap rate, cash flow positive, low LTV, high co investment from the sponsor, and preferably an asset being bought for less than replacement value.

A lot of incredible deals will come up within the next 1-2 years, but that’s going to be because of a blood bath in the commercial real estate space as balloon payments become due and properties are unable to cash flow after refinancing at higher rates leading to distressed sales. Inexperienced and over leveraged sponsors are going to bleed. The folks buying properties at 3-4 cap rates will soon start hurting. Unless the economy crashed before that and rates reversed lol. But even then liquidity and ability to acquire funds would drop

 

[GonnaBeADoc2222]

I’m big on syndications etc…but there is some blood Bath that is going to happen in commercial real estate soon as liquidity and lending is going to dry up.

This is not the time to go in a risky deal or an inexperienced sponsor. You need to have an experienced sponsor, fixed term debt, debt rate preferably lower than cap rate, cash flow positive, low LTV, high co investment from the sponsor, and preferably an asset being bought for less than replacement value.

A lot of incredible deals will come up within the next 1-2 years, but that’s going to be because of a blood bath in the commercial real estate space as balloon payments become due and properties are unable to cash flow after refinancing at higher rates leading to distressed sales. Inexperienced and over leveraged sponsors are going to bleed. The folks buying properties at 3-4 cap rates will soon start hurting. Unless the economy crashed before that and rates reversed lol. But even then liquidity and ability to acquire funds would drop

Which deals would you choose right now, if any?

 

[nVictus]

Really, save 50% of your paycheck every month in index funds. Don't care about your other expenses, just make it work.

Have a small amount of capital, 100-200k. Study finance/investing/real estate/etc regularly and follow the markets. Be ready to deploy your capital when the timing is right, which only you can decide for yourself. Be ok with losing it all since nothing in the market is a guarantee. Be ok with the loss since your index funds are likely ok. Hit 1M in index funds, slow down contributions and start putting that money in real estate, businesses, or start your own. Each of these ventures has their own language/math that you need to learn. It's tough, there are sharks and pitfalls everywhere. If it's too tough, just buy more index funds.

 

[miacomet]

I can DM you, but my guess is others have the same question @emergentmd- what exactly is a MTR?

 

[cyanide12345678]

Which deals would you choose right now, if any?

I put 15k on equitymultiple.com in vanwest self storage fund 3. This was 2-3 weeks ago. That was my last investment. It met almost all criteria except their co investment was fairly low as far as i remember.

They are probably close to being fully funded soon though

I also have a thesis on MPW reit being extremely under valued But i don’t hold any positions right now and the options i had on it i closed at a loss because i opted for dropping my long term risk by closing positions and creating higher liquidity for my largest position that is currently worth 80k of premium for the next 3 months. I think anyone that does covered calls or the wheel strategy by selling puts on this can get an easy 15-20 percent on this over the hold period. And since it’s a reit, it is backed by the safety of real estate assets.

 

[JacobMcCandles]

1.) Live beneath your means. Yes, you can live nicely off of <$100k and have a nice house, vacations, etc. No, you cannot do that and live on the ocean.

2.) Work as much as you can without burning yourself out. You need to treat your career like a race. There can be periods where you can sprint but, overall, you need to maintain a reasonable pace.

3.) Put all of your money into a low cost S&P 500 or US Total Market Fund. Physicians love to think they're special and that special investment products are available to them. They think the more complex something is the better. People much smarter than us do this all day every day and a vast majority cannot beat an index fund over a career.

4.) When you feel like things are working start back over at #1 because this is a winning plan.

 

[bravotwozero]

Really, save 50% of your paycheck every month in index funds. Don't care about your other expenses, just make it work.

Have a small amount of capital, 100-200k. Study finance/investing/real estate/etc regularly and follow the markets. Be ready to deploy your capital when the timing is right, which only you can decide for yourself. Be ok with losing it all since nothing in the market is a guarantee. Be ok with the loss since your index funds are likely ok. Hit 1M in index funds, slow down contributions and start putting that money in real estate, businesses, or start your own. Each of these ventures has their own language/math that you need to learn. It's tough, there are sharks and pitfalls everywhere. If it's too tough, just buy more index funds.

All good ideas, thanks for the suggestions.

I save and invest about 30% every month into index funds. At the current rate, should be completely debt free (i.e. house paid off) and have $1 mil in liquid assets by the end of the year, which will be 8 years out of residency, starting working in texas in the golden years of 2015.

My hope was to be able to continue this track, and just come up with $10k of investment capital every month to put in the stock market. This would get me to $2.5 mil in about 8 years time. With the current changes facing EM, I am becoming less certain it will be possible for 8 years straight. When it doesn't I probably will seek out a supplementary side gig of some sort to ensure I can still come up with $10k a month till I hit FIRE. Being an owner is awesome for reasons a lot of people have mentioned. But being able to save and invest from a steady paycheck is, for many, the path of least resistance, with the highest return on investment.

 

[valianteffort]

Consider selling a service or item to one or two people and then have that person sell the same thing to another two people. Then you can have those two people also sell to more people. You take a small commission for each sale and eventually you will be high up enough that you can live off the commissions. Incentivize them to sell more by offering a pink vehicle to the highest seller.

 

[bravotwozero]

With all these med schools popping up left and right, what about a teaching gig at a medschool? Where you teach classes but aren’t required to do clinical work?

Anyone look into that?

 

[Pudortu]

All good ideas, thanks for the suggestions.

I save and invest about 30% every month into index funds. At the current rate, should be completely debt free (i.e. house paid off) and have $1 mil in liquid assets by the end of the year, which will be 8 years out of residency, starting working in texas in the golden years of 2015.

My hope was to be able to continue this track, and just come up with $10k of investment capital every month to put in the stock market. This would get me to $2.5 mil in about 8 years time. With the current changes facing EM, I am becoming less certain it will be possible for 8 years straight. When it doesn't I probably will seek out a supplementary side gig of some sort to ensure I can still come up with $10k a month till I hit FIRE. Being an owner is awesome for reasons a lot of people have mentioned. But being able to save and invest from a steady paycheck is, for many, the path of least resistance, with the highest return on investment.

What is your fire #? You might have hit coast FI and don’t need to invest more and just go on cruise control

 

[bravotwozero]

What is your fire #? You might have hit coast FI and don’t need to invest more and just go on cruise control

$2.5 million. I suppose coast FI can become an option, would have to crunch some
Numbers and assume a certain rate of return, to figure out how long it would take…

 

[miacomet]

$2.5 million. I suppose coast FI can become an option, would have to crunch some
Numbers and assume a certain rate of return, to figure out how long it would take…

Save more than 30% for a year or two to front load- you can do it, totally worth it.

$2.5 million and a paid of house? Dream house?

 

[aafisahar]

Save more than 30% for a year or two to front load- you can do it, totally worth it.

$2.5 million and a paid of house? Dream house?

Dream house is a paid off house. We bought a modest 4 bed 3k sqft house fresh out of fellowship for like 400k in a very good neighborhood on >500k total salary. I sock away 60-70% of my paycheck and still have more than enough money to do whatever we want.

Too many people buy the 911, buy the mcmansion, buy the fancy furniture and then in 5 years have nothing but trinkets and no savings. Being content is one of the best strategies to build wealth. Otherwise you end up like that gas guy making a million and being stuck.

 

[emergentmd]

I’m big on syndications etc…but there is some blood Bath that is going to happen in commercial real estate soon as liquidity and lending is going to dry up.

This is not the time to go in a risky deal or an inexperienced sponsor. You need to have an experienced sponsor, fixed term debt, debt rate preferably lower than cap rate, cash flow positive, low LTV, high co investment from the sponsor, and preferably an asset being bought for less than replacement value.

A lot of incredible deals will come up within the next 1-2 years, but that’s going to be because of a blood bath in the commercial real estate space as balloon payments become due and properties are unable to cash flow after refinancing at higher rates leading to distressed sales. Inexperienced and over leveraged sponsors are going to bleed. The folks buying properties at 3-4 cap rates will soon start hurting. Unless the economy crashed before that and rates reversed lol. But even then liquidity and ability to acquire funds would drop

I agree with this and choosing the operator is most important. When the economy goes down, people can't afford homes then rents. Rents then goes up by demand which is what sets the apt complex pricing. Everything you said is correct. Commercial will hurt but I believe apts will weather this well. I have been involved with 4 fantastic operators and this is where my money will go until I am able to Vet more. If anyone is interested, DM and I can talk about this in more details and even share some of the ones I am involved in.

 

[emergentmd]

Really, save 50% of your paycheck every month in index funds. Don't care about your other expenses, just make it work.

Have a small amount of capital, 100-200k. Study finance/investing/real estate/etc regularly and follow the markets. Be ready to deploy your capital when the timing is right, which only you can decide for yourself. Be ok with losing it all since nothing in the market is a guarantee. Be ok with the loss since your index funds are likely ok. Hit 1M in index funds, slow down contributions and start putting that money in real estate, businesses, or start your own. Each of these ventures has their own language/math that you need to learn. It's tough, there are sharks and pitfalls everywhere. If it's too tough, just buy more index funds.

Index funds should be part of everyone's portfolio but there are better options for high net worth people. It took me 15 years to learn this. With index funds/stock market in general you can not leverage. Leveraging is more risks but much higher rewards.

With Apt syndications at most you can lose is what you put in but if the syndication puts 20% down and sells for a 20% premium then you have doubled your money. This is essentially a 5x leverage.

 

[emergentmd]

I can DM you, but my guess is others have the same question @emergentmd- what exactly is a MTR?

Mid term rental. I have been involved in Short term (VRBO/airbnb) but this typically is for sought after sites like near down town/beach/lake/snow. Long term is your typical 1-2 yr contracts unfurnished. Mid term are typically furnished catering to traveling workers which are the best tenants.

I have two adjacent duplexes. One is LTR doing $3k/mo for both sides, my MTR does 5k/mo for both sides after utilities. Over the past year my MTR has about a 5% vacancy, has very little wear tear.

 

[miacomet]

Mid term rental. I have been involved in Short term (VRBO/airbnb) but this typically is for sought after sites like near down town/beach/lake/snow. Long term is your typical 1-2 yr contracts unfurnished. Mid term are typically furnished catering to traveling workers which are the best tenants.

I have two adjacent duplexes. One is LTR doing $3k/mo for both sides, my MTR does 5k/mo for both sides after utilities. Over the past year my MTR has about a 5% vacancy, has very little wear tear.

Thank you. Makes sense, but would it sill be an advantage in a resort/snow/beach/lake area? My guess is traveling workers are great tenants, but that they can't pay as much as STRs in tourist towns?

 

[emergentmd]

Any docs who wants a low risk avenue to retirement should just throw 10K in the S&P each month and in 5 years have over 1M. Sit back, never check it, and at age 50, you should be over 4M. Nothing wrong with this but you also missed a big benefit of being a high income worker which is leverage.

RE/Syndications are all about leverage. If you put 50K into a syndication and it goes up 20-30%, in 3 yrs then you have doubled your money. If you put it in a Stock market REIT then your 50K has gone up 20-30%. When the syndication closes, you can 1031 into another tax free. If you want to sell a REIT and put it into another, then you have to pay 20%+ taxes.

Both you can lose all of your money and no more.

Its a no brainer to me. If you have access to good operators, Apt/storage syndication all the way.

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Camden and Mid America are some of the larger REITS operates in the Class A/B sector. Both over 5 yrs has gone up 20-40% with about 5% yield.

The syndication I have been in over 2-3 yrs have doubled with 8% yield. This makes sense as the syndication are leveraged 3-4x

 

[emergentmd]

Thank you. Makes sense, but would it sill be an advantage in a resort/snow/beach/lake area? My guess is traveling workers are great tenants, but that they can't pay as much as STRs in tourist towns?

Resort areas should be STRs b/c you can charge 4-5x as much for a similar property during high season. So you benefit from higher income plus less occupancy during low season to decrease wear and treat.

I have a 4/3 place on the lake during the summer that typically is completely booked from May through September averaging

MTRs works great for high travel working sectors such as nurses, near downtown, near large corporate industries etc.

 

[GonnaBeADoc2222]

@emergentmd what do you think of Ashcroft value add fund 3?

 

[emergentmd]

Ashcroft is a great operator and one I have invested with many times for single syndication and currently in some of their active projects. I believe you have to know someone to invest in their single funds as equity gets bought out by larger investor funnels. Single you get to know what site you are getting into. I currently get about 64K in distribution each year or 1/2 of my basic living expenses.

The Value III is a continuous funded fund where they buy multiple properties. The IRR and waterfall payout at closing is not as good compared to single. I would go with single syndication for higher return but also higher risks as all your eggs is in one site and not across multiple.

 

[bravotwozero]

Save more than 30% for a year or two to front load- you can do it, totally worth it.

$2.5 million and a paid of house? Dream house?

Got 24k left on the mortgage, hope to be paid off by the end of the year. It’s not a McMansion, but nice enough to be a forever home for us. 3 years old, in a nice neighborhood, 4 bed 3 bath 3,000 sq Ft with 2 kids is quite comfy.

 

[cyanide12345678]

Resort areas should be STRs b/c you can charge 4-5x as much for a similar property during high season. So you benefit from higher income plus less occupancy during low season to decrease wear and treat.

I have a 4/3 place on the lake during the summer that typically is completely booked from May through September averaging

MTRs works great for high travel working sectors such as nurses, near downtown, near large corporate industries etc.

The biggest advantage of short term rental however is that if you work >100 hours in a year on the property, and you claim that you worked more hours than anyone else on the property, then you can claim depreciation against your W2 income.

This you cannot do in medium term rental.

I'm toying with the idea of my first STR, but just holding off because it's a rough market for newbies and there is some degree of saturation in the STR rental space.

 

[emergentmd]

The biggest advantage of short term rental however is that if you work >100 hours in a year on the property, and you claim that you worked more hours than anyone else on the property, then you can claim depreciation against your W2 income.

This you cannot do in medium term rental.

I'm toying with the idea of my first STR, but just holding off because it's a rough market for newbies and there is some degree of saturation in the STR rental space.

There are some small games you can play for increased tax advantages. I don't have the time and truthfully my time is more valuable than what I pay someone to manager my LTRs/STRs. I currently do my MTRs as I probably spend 2 hrs/month doing flips.

 

[cyanide12345678]

@emergentmd what do you think of Ashcroft value add fund 3?

I don't like their waterfall structure. But they are solid operators who will return what they are promising. If you want to go in on them, go in early and you'll get the extra 10% bonus cash flow payments that they are promising since they just started the fund.

I'm personally in their fund 2. Potentially foregoing fund 3 for now, might go in later on once the assets are identified and bought, so essentially right before the fund closes lol.

 

[Mbekweni]

+1 for living below your means. My total spending this year barring any catastrophes will be less than 50k. Half of that is on rent. Gross income before taxes will be 450k. Would like to buy property but not confident in the market and would like to be settled in my job for 2 years/board certified and not yet ready to take on the stress of homeownership. Interesting thread about lifestyle creep:

Interesting quote here and I can relate. I have also been hustling, and while I am now close to FI 5.5 years out from residency I sort of regret it. I was working 17 shifts a month with no additional responsibilities and really enjoying my first few years out of residency. Now I work 14-16 shifts a month but many of them are 12s, and the hours add up. Over 2100 hours per year for the last few years, plus additional admin jobs to bring in extra income. I'm making 2x regular ER physician salary, but a good portion of that is simply because I'm working 2 FTE. There is always another project on the back burning, another meeting or spreadsheet. Savings can snowball and I'm easily CoastFIRE but it would be so strange to go back to 1.0 FTE and the associated 50% income drop. I guess after taxes it would be less of a drop, but it's a hard rip cord to pull. At least I've controlled my fixed expenses so just need to make the changes. On the other hand, as all the catastrophizing on this thread evidences, there is a lot of reason to push hard for another few years in case medicine really does fall apart then any additional involvement would be truly optional.

 

[GonnaBeADoc2222]

@emergentmd @cyanide12345678 great advice. Do you have any single site syndicatiions you recommend currently?

 

[cyanide12345678]

@emergentmd what do you think of Ashcroft value add fund 3?

After searching the entire internet, and reading so much literature, ashcroft value add fund 2 was my first ever syndication. They have a great reputation.

 

[GonnaBeADoc2222]

Interesting quote here and I can relate. I have also been hustling, and while I am now close to FI 5.5 years out from residency I sort of regret it. I was working 17 shifts a month with no additional responsibilities and really enjoying my first few years out of residency. Now I work 14-16 shifts a month but many of them are 12s, and the hours add up. Over 2100 hours per year for the last few years, plus additional admin jobs to bring in extra income. I'm making 2x regular ER physician salary, but a good portion of that is simply because I'm working 2 FTE. There is always another project on the back burning, another meeting or spreadsheet. Savings can snowball and I'm easily CoastFIRE but it would be so strange to go back to 1.0 FTE and the associated 50% income drop. I guess after taxes it would be less of a drop, but it's a hard rip cord to pull. At least I've controlled my fixed expenses so just need to make the changes. On the other hand, as all the catastrophizing on this thread evidences, there is a lot of reason to push hard for another few years in case medicine really does fall apart then any additional involvement would be truly optional.

Goddamn i wish I had this drive. Im already pretty crispy only working 1400 hrs/yr.

 

[emergentmd]

I don't like their waterfall structure. But they are solid operators who will return what they are promising. If you want to go in on them, go in early and you'll get the extra 10% bonus cash flow payments that they are promising since they just started the fund.

I'm personally in their fund 2. Potentially foregoing fund 3 for now, might go in later on once the assets are identified and bought, so essentially right before the fund closes lol.

Their waterfall is one of the worse I have seen from them maybe due to this being a much larger/work intensive project? Maybe b.c they are so well known and know people will put their money in with them?

A great operator but there are as good with better waterfalls out there.

 

[emergentmd]

Interesting quote here and I can relate. I have also been hustling, and while I am now close to FI 5.5 years out from residency I sort of regret it. I was working 17 shifts a month with no additional responsibilities and really enjoying my first few years out of residency. Now I work 14-16 shifts a month but many of them are 12s, and the hours add up. Over 2100 hours per year for the last few years, plus additional admin jobs to bring in extra income. I'm making 2x regular ER physician salary, but a good portion of that is simply because I'm working 2 FTE. There is always another project on the back burning, another meeting or spreadsheet. Savings can snowball and I'm easily CoastFIRE but it would be so strange to go back to 1.0 FTE and the associated 50% income drop. I guess after taxes it would be less of a drop, but it's a hard rip cord to pull. At least I've controlled my fixed expenses so just need to make the changes. On the other hand, as all the catastrophizing on this thread evidences, there is a lot of reason to push hard for another few years in case medicine really does fall apart then any additional involvement would be truly optional.

You and the Anesthesiologist, I must give big props too bc I could not do this. I have 3 kids and I enjoy being at home as much as I can. If you are in Tx, ask around. If you can get into a good site/operator as an equity owner, you can make 2-3x/hr what you are making in the hospital while seeing half the volume with mostly lower acuity pts.

 

[emergentmd]

Got 24k left on the mortgage, hope to be paid off by the end of the year. It’s not a McMansion, but nice enough to be a forever home for us. 3 years old, in a nice neighborhood, 4 bed 3 bath 3,000 sq Ft with 2 kids is quite comfy.

Nothing wrong with paying off the house but the last debt I will pay will be RE debt. With the low interest rates in the past 10 yrs until recently, it is essentially free money accounting for inflation. Im still carrying 600K home debt at 2.5% and this will be the last debt to be paid.

If I had 600k laying around, I would put it in syndications, take the 45K distribution and use that to pay the mortgage. If the syndication has 2x return in 3-5 yrs, then I am way ahead.

It is not like anyone really owns their homes anyways esp in tx where property tax is 2.5-3+%.

 

[cyanide12345678]

@emergentmd @cyanide12345678 great advice. Do you have any single site syndicatiions you recommend currently?

This is what I recommend if you want to make a real estate play. This is my personal opinion only and NOT official certified financial advice Do your own due diligence.

MPW - REIT - 19 billion assets under management. Not only survived 2008, but didnt drop their dividend during 2008. Own 400+ hospitals/FSERs/Rehab facilities/surgery centers. 10 billion long term mortgage debt on their 19 billion of assets. Huge cash flow positive. FFO (funds from operations) of something like $1.6 per share. Paid $1.16 dividend in trailing 12 months.

Stock has crashed because of rising rates, then it dropped because of financial troubles of Steward (largest MPW tenant). These problems are now resolved and have resulted in an advantagous buy out of some steward facilities by Spirit health which is a more stable system (aka better qualified tenant). Then the last massive drop was because of prosper health financially struggling which is 11% of their revenue - But some of those assets are being bought out by Yale so they are expecting to come out with all the rent that Prosper owes them. They also guided significantly conservative on their low end which freaked out wallstreet - essentially a forward 12 month FFO of $1.5 per share on the low end (a drop from $1.64 last year), which assumes $0 in revenue from 11% of their portfolio occupied by Prosper. Plus the stock truly has been heavily shorted and shorts are sitting at 20% right now, which is incredibly high compared to historical number around 4-5%. So, all of the above have resulted in MPW dropping 67% from it's last peak just last year. As someone who follows a LOT of real estate - Their real estate portfolio definitely did not drop 67% and still has significant inherent value and most importantly, they are still a cash flowing machine. The biggest question people are arguing over is if they will drop their dividend of $1.16 per share (15% based on todays close). The question isn't if they will go bankrupt, literally if they will continue paying a 15% dividend -_- Regardless, if they drop dividend, it's for the long term health of the company - Like if they drop their dividend payments from 700 million to 500 million, then they have an extra 200M a year to do whatever they think is the best for the business - like buy back stock, debt pay down, buy more assets etc. Regardless, you have a company with 19B in real estate, 10B in long term mortgage debt, trading for a market cap of 4.7B. They are literally trading at almost half their book value right now -_- That's undervalued.

So the play I would personally do is this (i probably will do it on the next negative day). I would sell 50 put contracts for July 2023 for $6 strike (120 days - aka 4 months). I personally do naked puts, so this would only use $10k of my cash. But if you did completely no leverage and risk free cash covered puts, then you will need 27500 cash for this trade (You basically receive $50/contract in premium, so you basically require $550/contract for a cash covered put. So essentially you receive $50 in 4 months for every $550 cash sitting in the account). So, worst case scenario - MPW continues to drop to $5 or 4 or whatever. Then you acquire a company with a book value of 9B for roughly around 3.3B market cap (essentially your cost basis would be $5.5 ($6 stock price minus 0.5 premium)). Then you play the wheel - you sell covered calls for $8 strike for example, continue getting premium (double digit percentage), continue getting a great dividend (currently 15% but will likely drop as they conserve cash) - and you keep doing that until the stock closes above $8 (or whatever strike you choose) - which then also results in a capital gain of 2.5 per share as well (2.5 comes from your cost basis of $5.5; so $2.5 gain /5.5 cost basis = 45% capital gain return) - So in essence, you get paid double digit dividend and premium while you wait for some 40 ish percent equity return. I'll probably do this soon myself.

On the other hand, if stock remains >$6 by July 2023; you just made $50 on every $550 in 4 months (9% return in 4 months aka 27% annualized return) - Rinse and repeat. Keep playing the game.

This is why I love options. Even worst case scenario is also a really big win of acquiring something at a VERY low cost basis. It's just a win win situation here. I've done the whole 3 fund portfolio of VTI, VXUS, BND/VTEB. That's beginner stuff. Sure you're buying an individual company so there's an individual company risk - But this company owns 400+ physical assets in dozens of countries and on the low end of their guidance are projecting FFO of $1.5 which actually is plenty to cover their $1.16 dividend if they continue to keep it the same. It's a solid REIT, owns a lot, and cash flows - Has 23 years of operational experience and honestly checks all the boxes as I mentioned earlier.

Edit: did exactly the above today. Sold 50 contracts $6 strike and received $54 per contract in premium. If trade goes against me, i will dollar cost average and sell more puts and increase my position to get even more premium. This is basically a starter position.

 

[bravotwozero]

There are also funds that allow one to own fractional shares in real estate property for as little as $100, City funds by Nada as an example.

Anyone have any experience with them? Thoughts?

 

[PianoMedic]

There are also funds that allow one to own fractional shares in real estate property for as little as $100, City funds by Nada as an example.

Anyone have any experience with them? Thoughts?

I looked into that City Funds a bit. You don’t get the pass through tax benefits you can get with some syndications and funds, all of the idiosyncratic risk, and their returns seemed low compared to what I could get elsewhere. If you’re going to use crowdfunding, there are better options imo.

 

[HemorrhagicShock]

Is there an ideal or an optimized way to invest in syndications to maximize tax benefits/strategy? Are there approaches to absolutely avoid (like the above fractional share thing that doesn't count for pass-through benefits)?

Of course the details of the individual deal matter more, but I'm wondering in generalities. Assume that one has a 1099 clinical income and not W2.

 

[cyanide12345678]

Is there an ideal or an optimized way to invest in syndications to maximize tax benefits/strategy? Are there approaches to absolutely avoid (like the above fractional share thing that doesn't count for pass-through benefits)?

Of course the details of the individual deal matter more, but I'm wondering in generalities. Assume that one has a 1099 clinical income and not W2.

Any syndication that treats you as a partner, that is they give you a k1 form at the end of the tax year, is essentially the best way to invest in real estate from a tax perspective. You want to make sure that the sponsor is planning on doing a cost segregation study to get the 80 percent bonus depreciation as well.

last tax year i had 90k of depreciation losses, all the rent i received in 2022 will essentially be tax free because of 2021 and 2022 depreciation losses. I’ll probably add to those depreciation losses this year significantly as well. The idea is that you keep adding more real estate to your portfolio over time, the older deals will eventually sell and spin off capital gains, but the depreciation losses keep making those gains tax free and keep kicking the tax payment into the future to a day where your gains are greater than your depreciation losses - which will start happening eventually when you stop buying more. But otherwise until then you keep enjoying tax free growth and rental checks

 

[HemorrhagicShock]

The idea is that you keep adding more real estate to your portfolio over time, the older deals will eventually sell and spin off capital gains, but the depreciation losses keep making those gains tax free and keep kicking the tax payment into the future to a day where your gains are greater than your depreciation losses - which will start happening eventually when you stop buying more. But otherwise until then you keep enjoying tax free growth and rental checks

Appreciate the explanation. One other question. How does one unwind this strategy when one is ready to move on, or retire, or just sit on the cash flow from these houses without worrying about too much additional expense and tax burden?

 

[Mbekweni]

Any syndication that treats you as a partner, that is they give you a k1 form at the end of the tax year, is essentially the best way to invest in real estate from a tax perspective. You want to make sure that the sponsor is planning on doing a cost segregation study to get the 80 percent bonus depreciation as well.

last tax year i had 90k of depreciation losses, all the rent i received in 2022 will essentially be tax free because of 2021 and 2022 depreciation losses. I’ll probably add to those depreciation losses this year significantly as well. The idea is that you keep adding more real estate to your portfolio over time, the older deals will eventually sell and spin off capital gains, but the depreciation losses keep making those gains tax free and keep kicking the tax payment into the future to a day where your gains are greater than your depreciation losses - which will start happening eventually when you stop buying more. But otherwise until then you keep enjoying tax free growth and rental checks

This is the idea behind a few evergreen funds that exist (Origin IncomePlus Fund and DLP Housing Fund that I know of). K1 distributions and pass through depreciation protecting about 6% dividends. Target 10-12% growth per year so about half dividends you can reinvest and half NAV adjustments. They maximize returns and then do internal 1031 exchanges as new properties are added to the fund. That way there is no tax bomb once your deal runs out of depreciation and has to sell. It’s hard to find a syndication that will 1031 from one investment to another. You are really married to the sponsor with this strategy though, but with annual redemption you can still take the tax hit and get out if needed. With individual deals or smaller funds you can push for higher overall returns or higher cash flow but I like the evergreen structure for net after tax returns and built in diversification, and put the bulk of my private RE money into these two with about 20-30% floating around with other deals.

DLP Housing Fund at 26.29% IRR through q4 2022 since founded Jan 2020. Origin returns 2022 of 9.3%, 2021 21.2%, 2020 1.4%. I expect both to regress to the 10-12% target long term as we get further from the 2021 boom in real estate prices.

 

[GonnaBeADoc2222]

This is the idea behind a few evergreen funds that exist (Origin IncomePlus Fund and DLP Housing Fund that I know of). K1 distributions and pass through depreciation protecting about 6% dividends. Target 10-12% growth per year so about half dividends you can reinvest and half NAV adjustments. They maximize returns and then do internal 1031 exchanges as new properties are added to the fund. That way there is no tax bomb once your deal runs out of depreciation and has to sell. It’s hard to find a syndication that will 1031 from one investment to another. You are really married to the sponsor with this strategy though, but with annual redemption you can still take the tax hit and get out if needed. With individual deals or smaller funds you can push for higher overall returns or higher cash flow but I like the evergreen structure for net after tax returns and built in diversification, and put the bulk of my private RE money into these two with about 20-30% floating around with other deals.

DLP Housing Fund at 26.29% IRR through q4 2022 since founded Jan 2020. Origin returns 2022 of 9.3%, 2021 21.2%, 2020 1.4%. I expect both to regress to the 10-12% target long term as we get further from the 2021 boom in real estate prices.

As someone exploring this space, I like this type of setup. Keeps it "simple." It seems like more reputable sponsors have higher minimum investments (makes sense). 100k for origin oncome find and 200k for DLP housing find.

 

[cyanide12345678]

As someone exploring this space, I like this type of setup. Keeps it "simple." It seems like more reputable sponsors have higher minimum investments (makes sense). 100k for origin oncome find and 200k for DLP housing find.

Ask them for lower and they would usually do it for first time investors.

I put 40k instead of 50k with Bam capital. I also asked open door capital for a lower min and they were willing to do 50k instead of 100k for their last fund 8.

 

[cyanide12345678]

Appreciate the explanation. One other question. How does one unwind this strategy when one is ready to move on, or retire, or just sit on the cash flow from these houses without worrying about too much additional expense and tax burden?

Eventually uncle sam wants his money. Everything is tax deferral. There are very few things that are tax free like hsa when used for health care or 529 when used for education. Real estate, 401k, are all tax deferred. The idea is that when you are no longer actively working, your tax bracket should be fairly low, and long term capital gains tax as of right now even in the highest bracket is taxed at 20 percent. Though i read a news report about some ideas being thrown around regarding raising capital gains tax rate so who knows what the future holds.

Having said that, the ultimate strategy tax strategy could be eventually when you are nearing retirement, buying syndications that are doing opportunity zone investments. So in theory, if eventually you get all previous capital gains off set by new deals that happen to be opportunity zone deals, then the depreciation of new deals off sets the previous capital gains, and the fact that it’s an opportunity zone deal, so after a 10 year hold, there’s no capital gains tax, could mean you walk away tax free.

I’m not sure how it would work for syndications, but theoretically the ultimate tax write off is death. If you have a large portfolio, at death your heirs receive a step up in basis, essentially they can sell everything then tax free. Since this is the law with normal real estate, i would think it should be the same for a partnership in a syndication as well. If you owned physical real estate, it’s easier, your heirs just sell everything when you die and there’s minimal capital gains tax because the money received should be very similar to the value of the property the day you died.

Or…. You can just pay the tax. So if you had a 1 million dollar portfolio, cost basis 500k, everything liquidated, you get 1M, 500k capital gains, you just pay 100k long term capital gains taxes and can just move on in life.

 

[cyanide12345678]

By the way peloris debt fund is worth looking at - it’s on equitymultiple.com - debt is safer than equity. 14 percent monthly return as mortgage is paid. You are the bank.

 

[HemorrhagicShock]

By the way peloris debt fund is worth looking at - it’s on equitymultiple.com - debt is safer than equity. 14 percent monthly return as mortgage is paid. You are the bank.

This one? Pelorus Fund - The Pelorus Fund: A Cannabis REIT

Cannabis real estate? The numbers look good, but the website gives me snake-oil investment feelings...

 

[cyanide12345678]

This one? Pelorus Fund - The Pelorus Fund: A Cannabis REIT

Cannabis real estate? The numbers look good, but the website gives me snake-oil investment feelings...

go through equitymultiple.com. The minimum is 25k instead of 100 or 150k or whatever minimum that they have if you go through directly through their website.

They legit are the largest mortgage provider to the cannibis industry which large banks typically do not finance.

Edit: the minimum is now apparently 5k. It was 25k previously

 

[cyanide12345678]

This one? Pelorus Fund - The Pelorus Fund: A Cannabis REIT

Cannabis real estate? The numbers look good, but the website gives me snake-oil investment feelings...

They actually have a legit investment grade rating. I mean it's not AAA like a government bond, but still...

"
Investment Grade Credit Rating -

• In Q3 2021, the Sponsor successfully closed a $42.3M private placement of senior unsecured notes and became the first cannabis related Mortgage REIT to receive an investment grade credit rating of BBB+ by Egan-Jones Rating Company. The bond has a 7% interest rate and is due in September 2026."

 

[cyanide12345678]

This one? Pelorus Fund - The Pelorus Fund: A Cannabis REIT

Cannabis real estate? The numbers look good, but the website gives me snake-oil investment feelings...

EquityMultiple

Connecting accredited individuals with exclusive, pre-vetted commercial real estate investment opportunities. Start investing for as little as $5,000

app.equitymultiple.com

 

[Apollyon]

This one? Pelorus Fund - The Pelorus Fund: A Cannabis REIT

Cannabis real estate? The numbers look good, but the website gives me snake-oil investment feelings...

The whole business is going to pot.

Literally!

 

[HemorrhagicShock]

EquityMultiple

Connecting accredited individuals with exclusive, pre-vetted commercial real estate investment opportunities. Start investing for as little as $5,000

app.equitymultiple.com

I've been reading this now ever since you posted it and honestly it looks promising. I need to do some more DD, but I'm wondering why you haven't already put money into this?