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White Coat Investor Podcast
MtoM #249: Emergency Physician Becomes a Multimillionaire by Mid-Career and Finance 101: Real Estate Syndications
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This is the White Coat Investor Podcast Milestones to Millionaire Celebrating stories of success along the journey to financial freedom.
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This is Milestones to Millionaire podcast number 249. Emergency physician becomes multimillionaire by mid career and finds his silver Sword Mortar Group is a premier real estate investment firm focused on multifamily properties in both ground up and value add projects in the competitive markets of New York City since the early 2000s. With over $300 million in assets under management and over 30 investments since inception, their fully integrated firm model allows Mortar to maximize efficiency and value across their investments in these niche markets. Mortar leverages over two decades of experience in architecture, development and asset management in their projects to build value and minimize risk for investors. Invest in tax efficient high return risk adjusted strategies with mortar group@whitecoatinvestor.com Mortar Mortar all right, welcome back to the podcast. I just got back from a canyoneering trip. I try to do a couple of those a year and it's always a lot of fun. This one was great. I got to take Michelle, who is my sister, but also many of you may know because she's represented us on social media for years now. So if you've met her at the conference or if you've interacted with her on social media, you know who she is. Took her along for her first kind of high level canyoneering trip and you know, mind blown of course, when you realize these sorts of places exist in the world. But on our first day we got into a pretty technical canyon that was in what we call hard mode, which usually means the amount of water in the canyon is not very high. And so it makes some of the challenges we deal with even more challenging. This is not a published canyon. It's a canyon that's maybe only been done about four or five times and it was my third time doing it. So I've been on most of the trips that anybody's been through this canyon. But we got toward the end part of it after a long day because it'd take us much longer than we expected. We were getting close to dusk and we didn't have nearly as many headlamps among the group as we should have. And we found that one of the things that helped us get through faster in prior times was not there, which was a log that stretched across this silo, essentially a big deep pothole that we needed to cross to continue to go down the canyon. And so as we slowly worked our way across, there were some of our more talented members climbing across and everybody else being shuttled across with ropes and assistance and then we got to the final pothole in the canyon, which has to be jumped by both the first and the last person. And then we found ourselves arranging an anchor to rappel out of this canyon, which has no fixed anchors whatsoever in order to get us all out. And by the last time the last three of us were rappelling out of there. It was basically dark and we were rappelling on an anchor we had constructed there and discovered after we all hit the ground that we could not pull the anchor. So we ended up leaving a bunch of gear in the canyon and having to come back and rescue it later in the week. But a fun adventure, always a good time. We had beautiful weather, a good group of people, and really a lot of fun. Now we're back at work, so it's hard to get as excited about work as I was about my canyoneering trip last week, but we do have a lot of cool stuff coming up here. For example, our sponsor for this episode was a real estate firm and if you're curious about real estate but not sure if it's the right move for you, join me on Thursday, November 20 at 6pm Mountain for a live session where I'm going to walk through what physicians need to know before investing in real estate. We're going to talk about the reasons real estate can fast track your path to wealth health. We're going to talk about the massive tax advantages that most doctors don't take full advantage of. We'll talk about the different types of real estate investments and how to choose the right fit for you. We're going to talk about how to avoid common mistakes to derail returns. And we're going to give you some tools to evaluate real estate opportunities. So whether you're looking for passive income or diversification or a more hands on approach to investing, this session will help you decide your next steps. Plus, I'll stick around and answer any of your real estate questions as afterwards register@whitecoatinvestor.com REI and three people who join LIVE are gonna get our no Hype Real Estate Investing course. That's a $2,199 value, totally for free. So register now. Whitecodeinvestor.com Rei all right, we got a great interview today. We have somebody who didn't do anything special with real estate, in fact, didn't do anything special at all. Just did the regular old stuff we talk about here on the podcast all the time and amazingly it worked very well. So let's get him on we're going to do that interview and then I'm going to talk just for a few minutes about real estate syndications and what they are and help you understand how they work. Our guest today on the Milestones to Millionaire podcast is Mario. Mario, welcome to the podcast.
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Thank you.
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Can you introduce yourself to the audience, tell them what you do for a living, how far you are out of training, what part of the country you're in.
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I'm an emergency physician and I'm about 13 years out of training. After residency, I came and worked at the same level two trauma center the whole time. I do a few extra shifts in the PZR and then some of the surrounding smaller ER standalones. And my wife is a part time school nurse, which is not a get rich quick scheme, but just to get out of the house and have some social life and keep up her skills as a nurse. We live in kind of the Great Plains area in a mid sized city that is a bit boring, but we, we spend a lot of our time traveling to more beautiful areas, but we have enough here. We have an airport and a major university and we're very comfortable here.
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And tell us what milestone we're celebrating with you today.
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C
I recently just crossed into $2 million of net worth.
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B
Wow, you're a multimillionaire.
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C
That's right.
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B
That's pretty awesome. How long has it been since you became a millionaire, do you know?
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C
We got the first million about three years ago.
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B
Okay, so the first million took you 40 years, second one took you three years. That's pretty typical. Yeah, pretty awesome. Okay, well, tell us the story, right? Tell us your financial journey from the time you came out of medical school until you became a multimillionaire.
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Okay. I signed my first contract and I was making what I thought was good money back then. Just worked the shifts. I was ready to go with a plan in place. I just paid into my 401k, we set up Roth IRAs and then I've just paid into them as much as the government will allow. I was very blessed that within my first few months here, a young man came up to me at church and introduced himself and said, I'm a PhD in financial planning and I was wondering if I could be your financial planner and do basically my thesis on you. And he spent hours with us, just walked us through the basics and had us set up wills and walked us through all the different funds that we wanted to invest in at Vanguard. And so every month we transfer a certain amount of money into the 401ks the Roth IRAs or 529s, we just do simple dollar cost averaging and use a four fund portfolio of American stocks, about 40%. And then we have about 30% in international stocks, 15% in bonds, and 50% in the REIT. And that will slowly get more conservative as I get older. It started off with just 10% bonds. I decided to use the Vanguard 2045 Target Date Fund as kind of a benchmark that doesn't include REIT. So we take 15% out of the stock portfolio of that and add in the REIT on the side, mainly in the Roth ira.
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So basically, you just did what we've been saying to do here at White Coat Investor for the last 15 years. You made a bunch of money, you saved a big chunk of it. You stuck it in boring old index fund investments in retirement accounts when you could. And now, 13 years out of training, you're a multimillionaire.
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Yes.
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Pretty awesome. It's amazing how well it works. It seems like it should be more complicated than that, right?
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No, no, I don't do anything fancy. There's no leverage, no direct real estate, no syndications, no crypto. It's simple, boring, and incredibly effective.
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Yeah, yeah. And the fun part about it is that's all going to double. Even if you add nothing else to it. It's going to double every 7 to 10 years going forward from here. So it's pretty cool. All right. Well, there are people out there who are like you were, you know, 13 years ago, 16 years ago. They're coming out of medical school, they owe student loans, they don't really know much about finances. They're not even sure who they can trust if they needed advice. They want to be like you. What would you recommend they do?
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I would recommend to the residents out there, especially the residents that have families, just to tread water during residency. If you're married to the hospital CEO or if you have a six figure side gig, then you should do all the attending stuff. But when you have dependents, I actually would recommend spending what money you would on index funds and instead on your family. And have a good plan set up so that when you do graduate you can jump right in with the plan. But I fear there's a lot of residents who have FOMO that almost feel like failures because they're not putting $3,000 a month into their retirement funds. They just don't have the money for it. I would plead with you, please do not make your kids eat ramen so that you can buy a share of vti.
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What if your kids really like ramen and beg for it? Is that a problem? Because I got a. My kids have a real ramen addiction.
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Well, you might need a sex referral. You'll save a lot of money that way. And as a kid, my brother and I played a lot of video games where back then the games were very complicated. We would just walk back and forth on the screen for three hours, just fighting the same enemies over and over again to build up enough gold so we could go buy the silver sword or the next weapon so that then we could be able to beat the boss. And that's how I feel about going to work. We're just seeing the chest pain, abdominal pain, alter mental status, fever, you're walking back and forth, and so you got to go spend your money. I had one friend that played that same game as I did that would amass a huge amount of resources, but he didn't like to spend it. And I never understood that. So that's my next prayer advice is to go find your silver swords. Go spend your money. Find something that you enjoy. As a resident, it's not a huge amount of money. If we were just to do the math, let's say a resident was able to scrounge you up like 2, $3,000 a year from eating ramen, and then they put it in vti, in a Roth IRA on the day they graduate residency. How much in earnings would they have? Maybe $2,000. And I can make that in one day as an attending, whereas all that money that you put into the Roth, you could have spent on your family. And that's what I would encourage you to do to don't try and hoard that when you're not making very much. Go on vacation, send your kids to summer camp or swimming lessons, take your spouse out to dinner a little more often. But don't make your family suffer just so that you can have a few more index funds when you're only making $50,000 a year, especially since you're going to be making much more than that in the coming years.
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So the time to get rich, the time to build wealth, is as you become an attendee. And it sounds like you planned for that. You had a written plan, as I so often recommend as you come out for your first 12 paychecks or whatever. What did your plan look like when you became an attendee?
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I had it ready to go to plug into what was offered at work, to make full advantage of that, to start my own and my spousal Roth Ira, I actually would almost think about, in residency you don't have the money to do that, but it kind of like a fantasy football team that you want to have your fantasy financial life. And if I did have 10,000, what would I do with it? If I had 100,000, what would I do with it? And I just had set up how much I was going to put into the loans each month. We went into attending hood in a rented duplex and we slowly got everything plugged in, paid off a lot of debt and promises that I had accrued in residency, not credit card debt. But probably the biggest mistake I've ever made financially was buying a house in residency. And that was in the teeth of the great recession. And then after residency, I had to sell that house from a different time zone and it finally sold in October of that year. And I had to bring $15,000 to sell the house, despite all that I paid into it in the prior years.
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I tell people about this all the time. Nobody believes me. The last five years, right, because housing prices have gone through the roof. But certainly historically, there are many time periods where that happens.
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It definitely happened to me. Please do not make that same mistake that I made. It's just fine to rent.
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Okay, so give us a sense for what your incomes look like over the last 13 years since you came out and what your savings rates look like over that time period.
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I've made between 4 and $500,000 a year. Our pre tax savings is in the range of 15% to 20% right now. I think I checked on that. We have about $1 million in the 401 and the 457. We have $200,000 in our Roth IRAs, $200,000 in the taxable account, and about $600,000 in home equity.
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B
Okay, so you said 15,000 to 20,000 just in pre tax accounts. How much total have you been putting away toward building wealth since you became an attending? Are we talking 30%, 35%?
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No, no, really, it's only meant about 20% just of the pre tax amount that I would have been paid.
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Okay, so you came out of. Oh, of your pre tax amount. I see what you're saying. So you came out of residency, you really didn't have, you know, you still had a negative net worth at that point. You had a family, you started making what doctors make and you, you put 20% of it away, you invested it in some reasonable way and at mid career you're already a multimillionaire. Yes, you, you're like you're like the poster child for white coat investor. This is basically what we're trying to get all doctors across the country to do. And you've shown that not only is it possible, it wasn't even that complicated, right?
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C
No, it was really easy. Just set it up and don't do anything rash when the market goes down. Be generous to yourself and to your family and don't make big, extravagant purchases that you're not going to enjoy doing. But I really would recommend everybody go find their silver sword and enjoy it. Spend lavishly on those things that you really love, and don't waste money on things that you don't care about.
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You can have an awful lot of fun with 80% of a physician income, can't you?
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Yeah.
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Yeah. Pretty awesome. All right, well, what's next for you? What's your next financial goal you're working on?
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I don't like the idea of retiring early. I love the idea of financial independence. But I just want to kind of asymptote off in my career and slowly over the next 20 years, just go down in shifts. I already live like I'm retired. I spend about $100,000 a year on traveling and language study. That's my passion, I guess. My silver sword. And I've been to 45 countries, 25 states, 25 national parks. I speak four languages. I hire private tutors to tutor me in the languages I'm studying, and that's my passion. I'll often be up at three in the morning researching a trip I don't plan on taking for five years. Kind of like you and your, you know, canyoneering and river rafting. And so what's next is just to keep exploring the world, keep learning and broadening those horizons.
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Yeah. Well, we do have one thing in common. My country count is also at 45. I'm about 10 countries behind my wife, though.
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C
Oh, wow.
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And she's about 10 countries behind her parents. So I think it's a genetic thing or something on that side. My daughter, I think, is already up to 25 countries, so travel is a lot of fun. I hope everybody gets a chance to do as much of it as they like. And what they may find is they may find, like me, that it's okay. I like going to a couple of foreign trips a year, or you may find you're more like my wife, and you could go every month. So it just depends. But you don't know until you try it. You know, a lot of people put it off until it's too late. And if you wait until you're 65 to start traveling, you might not get to all the places you want to see.
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And that is a warning I would have. My father and my wife's father both died young. In their 30s and 40s. They had elaborate plans for their retirement that they never got to. Those dreams never came true. And I feel like there's going to be a lot of white coat investors that are a little too stingy, that don't spend their money and and that die with 100 million in the bank. So don't have those regrets. Enjoy your money for whatever your passion is. My brother loves baseball cards. His baseball cards are worth way more than my house. Other people would just want to give to charity or pursue those passions they might have developed at a young life. Going to concerts, exercise or whatever it is. Canyoneering. I would say to definitely don't cheap out on those things. Cheap out on everything else. If you don't really care about your car, drive a 20 year old car. But take care of your health and your passions and your family and you won't regret it.
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Yeah, awesome advice. Well, I appreciate you not only finding your silver sword, but coming here to tell us about it and to show that what we talk about so much really works. If you just apply it, be patient for a few years, it really does work and you've shown that. So thank you so much for being willing to come on and inspire others to do what you've done.
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You're welcome. Thank you for all the help that you've given to everybody. I teach a lot of PA students. I let them read your book, my copy of it, all our scribes. I give your student book to to go through it. I let them write on the margin their name. I have the whole list of names that have gotten their feet wet with these principles and it is so very important.
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B
Awesome. Well, thank you for doing that and appreciate everything you've done to help the next generation.
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You're welcome. Thank you for having me.
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B
Okay. I hope you enjoyed that interview. I love the fact that there's nothing special here. Right. He didn't have a paper route that he started a Roth IRA in his teens to do this right. He didn't have to start his own veterinary practice to do it. There's no big inheritance or he didn't get lucky in crypto or something. All he did, and he didn't even get started all that much as a resident, he just hit the ground running. In the most important year of your financial life, your first Year of attending hood and he had a written plan and he followed it. He spent 20% each year toward retirement and he spent the rest on whatever he loves, which in his case happens to be travel. And it worked, right? He's mid career, he's a multimillionaire, and by the time he retires, you know, after a great career, working no more shifts than he wants to, he's going to be, you know, a penta millionaire or more. And it's just going to be awesome. That's what we're talking about. That's the pathway ahead of you. If you take care of your money and you have this high income that you have, if you're listening to this podcast or soon will have, it works out very, very well. So congratulations to Mario and congratulations to each of you. No matter where you are at on this pathway, whether you're still at that stage in medical school where you owe $300,000 in student loans, or whether you are a Deca millionaire retiree and living the good life and trying to figure out who to leave your money to, we're happy to have you here. We're glad you're in our community. Now, I promised you at the top of the podcast, we're going to talk, not about more canyoneering, although I'd like to do that. We're going to talk a little bit more about real estate syndication. So what is a syndication? It sounds like some criminal enterprise or something, but what it typically is is it's an apartment building. It's an apartment complex maybe, okay? And you can't afford the whole stupid thing yourself, so you go into it with a bunch of other investors. Maybe it's 99 other investors. So there's 100 of you that bought this thing and you hire a manager to manage it, and they go out and they buy the property and they maybe fix it up some and they raise the rents on people and they try to run it well, and three or four or five years later they sell the property. In the meantime, they've been sending you a distribution every quarter and three or four or five years later, they sell the property and send you your principal back, hopefully with some gains. That's what a syndication is. And they usually split up the money. Typically you'll get all your principal back first. That's the first priority. And then you'll get a preferred return that might be 6% or 8%, but basically you get that before you start splitting any additional returns with the operator or the manager, the general partner, if you will. You're the limited partner, you're the investor. And so above and beyond whatever the preferred return is of 6% or 8%, you split returns in some way. Maybe that's an 80, 20 split, or maybe it's a 50, 50 split. Just depends on the individual syndication deal. But that's what a syndication is. The downside of investing in syndications, aside from the fact that it's an illiquid investment for like five years, is some syndicators aren't that experienced. You know, they're not that experienced. Maybe they use a little bit too much leverage. Maybe they use adjustable rate leverage and 2022 happens, and all of a sudden they're like, we need more money to operate this place so we can get it to where we can sell it. And they start doing capital calls to you. Okay, Those are some of the downsides. The other downsides is the minimum investment tends to be high. Might be $50,000 or $100,000 or even more. And so in order to diversify a portfolio of syndications like this, you gotta be fairly wealthy. Let's say you want at least five of them, maybe. Well, if they're $100,000 a piece, that's $500,000. And if you're only putting 25% of your portfolio into real estate, well, you've gotta now have a $2 million portfolio before you can really diversify these investments. So these maybe aren't the investments to use your first year out of residency. Right. But if this is something you're interested in doing, it is something you can do down the road. One of the easiest ways to do it is to use a fund. You know, this is mostly what we invest in when it comes to private real estate. So for your $100,000, instead of getting one apartment building, you get 15 of them. Right. Or parts of 15 of them. And so you got quite a bit more diversification there. If one of them goes bad, the manager can mail in the keys. And that has happened in one of the funds I own, I can mail in the keys and you still get a reasonable return. That fund, I think, had 10 or 12 properties in it that mailed in the keys. On one of them. We still made 10% a year on the investment. So it wasn't some terrible catastrophic outcome. But be aware that that sort of thing is a risk when you're using leverage to invest. Hope that's helpful. Our sponsor is actually one of the few companies on our list that does individual syndications like this Mortar Group. They're a premier real estate investment firm focused on multifamily properties in both ground up and value add projects in the competitive markets of New City since the early 2000s. With over $300 million in assets under management and over 30 investments since inception, their fully integrated firm model allows Mortar to maximize efficiency and value across their investments in these niche markets. Mortar leverages over two decades of experience in architecture, development and asset management in their projects to build value and minimize risk for investors. Invest in tax efficient high return risk adjusted strategies with mortar group@whitecoatinvestor.com Mortar all right, I hope you're enjoying the podcast. Without you, it's not much of a podcast, so thank you for listening. Thank you also for being willing to come on as our guest, right, the person we're featuring to inspire others that day. If you'd like to apply to do that, go to whitecoatinvestor.com Milestones keep your head up, shoulders back. We'll see you next time on the podcast.
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The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.