In 2004, I made the monumental decision to leave full-time medicine after starting a side business that was growing exponentially. On this episode, my guest is someone who got to witness that firsthand!
On this episode, I interview Dr. Vanessa Peters, a family physician and former colleague of mine who I worked together for two years. You will learn what was the fallout after I left our medical group. More importantly, you’ll also learn her own fascinating journey on how she grew passive income streams, investing in everything from single-family homes apartment communities, self-storage, and land entitlements and how you can do it too!
Dr. Vanessa Peter’s Website – Get 3 Free Chapters of Her Book “The Busy Professional’s Guide to Passive Real Estate Investing“
Dr. Vanessa Peter’s contact info: vanessa@vmdinvesting.com
Transcript:
Dr. Mike Woo-Ming: Hey guys, this is Dr. Michael Woo-Ming. Welcome to another edition of Bootstrap MD. This is the podcast for physician entrepreneurs. Thanks for listening in and tuning in. This is pretty exciting for me because really this is a first in terms of. The interviews that I’ve been doing at bootstrap and D here on the program, we’ve got another physician, entrepreneur investor… That’s not unique.
What is unique is that this particular physician knows me from way back in the day. If you know a little bit about that history, I was a family physician. I worked in a group practice with a lot of family practitioners, internists, and I did that for about five years before I finally decided to go out on my own journey, my entrepreneurial journey.
And then ended up here at this podcast. So this particular physician actually knew me back in the day, when we were colleagues and friends. And what was interesting is I was basically on social media, just talking with other investors and entrepreneurs. And I actually heard an interview with her with, I believe at the time it was a Peter Kim, if you know him from the, and then she, I heard, interviews from her, I say, Hey, I got to reach out to this particular physician.
And we did recently had a cup of coffee and that’s why I said, we, we got to have you on the podcast. So when we talk about who I’m interviewing today, she’s a full-time family physician. She’s a chief physician officer for a primary care owned a medical group that I know pretty well here in north San Diego.
She’s originally from practicing about 19 years. And from that she has been invested for about what? 13 years, Vanessa. Yeah, that’s about right, in single family homes, commercial retail, apartment opportunity, so storage. And interestingly, we can talk about land and tournaments, and that’s something that it is a really unique that I don’t hear.
A lot of people talk about. She is the founder of VMD Investing. She’s also the author of The Busy Professional’s Guide to Passive Real Estate. And she’s passionate about helping doctors and other festivals build wealth through passive income producing real estate, please.
Thank you again, Dr. Vanessa Peters for joining us today. How are you doing Vanessa?
Vanessa Peters, MD: I am great, Mike. It’s great to see you. Thanks for having me on,
Dr. Mike Woo-Ming: This is actually a little bit nervous for me too, because you really know some of where I was back in the day when they had a lot more hair.
It’s funny because we all talk about our journey. And, sometimes we talk about, I’ve interviewed doctors and they talked about, places where they are and, maybe sometimes they’ve had great experiences. Sometimes they didn’t even have not so good experiences.
I would say I would probably be, in the middle. I certainly loved my colleagues, I love working with them, but not necessarily with some other parts in medicine and the paperwork and things like that. What’s interesting is that, you can really see how things have changed in terms of what we’re talking about 2004 is actually when I left and, things such that we talk about, and we were talking about that when we had our I had, or a cup of coffee is about physician and side gigs and doing something and investing you really don’t really talk about that too much, and now at least what would I see it, it just seems like it’s now more out into the open and then, having a, a colleague of mine actually producing her own book, is really exciting for me. So I don’t feel like such a lone Wolf out there. Talking. So I’m going to shut up now.
Thank you Vanessa for coming onto the program. And it’s a pleasure having you here today.
Vanessa Peters, MD: Thank you.
Dr. Mike Woo-Ming: So let’s talk about this. As we mentioned we known each other for a long time, so let’s just talk about your journey. You’re a family physician. You came from Canada, a little bit of a language barrier dealing with us, Southern Californians, niches and whoever, however you say it. But… you know what I remember, busy, hardworking family physician. And what got you started on this journey about trying to build passive income?
Vanessa Peters, MD: Yeah it’s really cool to be talking with you and bringing our stories to light because we’ve had fairly different paths, but at the end kind of converging a little bit, which is really cool.
Because when I started at the medical group, you were already there and I looked up to you as, a senior doctor there for me. And I don’t know if you remember this, but you taught me how to do flexible sigmoidoscopy. These.
You still do them. Nobody does flex things anymore. For those of you out there who don’t know, that’s a short colonoscopy, a really great way to start every day.
Dr. Mike Woo-Ming: Learning that, learning a skill that’s now obsolete, I appreciate that.
Vanessa Peters, MD: So he was a great teacher and you got me up to speed on the flex SIG, which I did for many years thereafter, and I always ate breakfast a little bit later, because of that. But really when you left the group, it was really a strange thing, honestly, because nobody did that. Now, like you said, physician entrepreneurs, side gigs are everywhere on social media and conferences and Peter Kim and all this stuff that he’s promoting.
And I think it’s really cool. You’re definitely a pioneer in the space. I’m a little later to the party for sure. And I’m still fully, full-time medicine works. So I straddling right now. But I worked super hard. And as at our group, we worked extremely hard. So for the first eight to 10 years that I was there there was a lot of night calls going to nursing homes, working in the evenings in an urgent care and just doing a lot and not getting as much sleep as I should have.
And things like that. Fortunately, the culture has started to change and improve our work-life balance, but I still found that after I got married and had a family, I was a little disillusioned with, is this all there is because I’m working really hard. My son is growing up and I’m not taking very much time off because this positions, we don’t really get paid when we’re not at work.
We, we get what they call PTO, but it really isn’t. It’s just, you get paid on productivity when you basically when you see a patient, you get paid. If you’re not there and you don’t get paid we average it out over 12 months, but so it doesn’t hurt as bad, but there’s a subtle disincentive to taking time off.
Many of our colleagues are on their path to burnout with just working too much and not spending enough time with the family. And I realized when I was on a vacation with my family, about five years ago that I was really happy and calm and it was like a weird wake up call. Oh my God, this what’s this weird feeling I have.
And I was like, oh, it’s contentment. Wow. Duh, being a smart person, you think that would be a simple thing to figure out, but it wasn’t, it was complicated. And I said to myself, that being the very practical person that I am I really like this feeling and I’d like to have more of it.
This was in Minnesota. And of course we live in Southern California. So it wasn’t, I felt like I needed to recreate that exact experience. Which is. I just took it very practically. I’m thinking, okay, logistically, how am I going to recreate riding a bike around a lake in Southern California? So I thought to myself, I think I should buy a house in lake Tahoe because I thought real estate is a good way to do it.
So what I’ll do is I’ll buy a vacation home in Tahoe and and then we can go up there and I know there’s a light there, so that started my journey. It was the weirdest thing.
Dr. Mike Woo-Ming: It’s one thing about passive income. You’re just like, “hey I really enjoyed this. I really enjoyed owning a vacation home.”
Vanessa Peters, MD: Yeah. So I, it really made me think I want more of those experiences. It wasn’t about money. And it started me on this journey, which, has taken so many turns, but it turns out that Lake Tahoe, wasn’t a great place to buy a short-term rental because. Permits that are limited okay. That didn’t work out, but it got, it opened that door into real estate investing.
And I liked what I saw, and so I said to myself, this is how I’m going to increase my net worth. And then I started realizing I wanted to. Have more passive income and things like that. Of course. At that point in time, here’s other California buying houses, wasn’t the way to make money because the prices were already too expensive.
And so I had to keep looking and looking and I, I was determined to find something in real estate because what I had been doing up until this point was saving a lot, like half of my income and putting it into the market and the market was doing. But my income was only going up in a straight line.
And I didn’t see that, that J curve, that hockey stick that I wanted to see with my net worth. And I realized in retrospect that over five years, you’re not going to see a lot of compounding and things like that. So I was like then I’ve got to find a better way to invest. It’s going to make me more than eight to 10%.
Supposedly you get in the market. And eventually I came across syndications and when I learned about what’s indications where the type of returns they provided the tax advantages to a high net worth or high W2 earner And the fact that they’re completely passive. I was totally hooked after doing a walkthrough of a building in Texas where I met the property manager operator and did background checks with everybody.
I was like, okay, I’ll give them my 50 grand and we’ll see how this goes. And the checks started coming in and I was like, that was like, okay, this is perfect. I have cash. I don’t have time. This is how I can build up my net worth, build up my. Passive cashflow and start to create the life that I’m looking for, because I don’t want to be that doctor that dies at their desk when they were in their eighties, not that’s an extreme example, but that happened to someone from our group.
And I plan to retire much, much earlier than that and have a balanced life throughout, instead of just that target of later, like I’m gonna, I’m gonna enjoy my life later. I’m going to save up on the money now I’m going to retire. And later is when I’ll live. You know what later your kids are grown up, they’re out of the house.
They don’t want to hang out with you anymore. You have to make the time now.
Dr. Mike Woo-Ming: Yeah. You know, it’s funny, you talk about a doctor passing a leg. I told this story before, but it may be the first from you. One of the things that really. Changed me in terms of wanting to leave was a physician that you probably know we can talk off and I’m not going to give the name too.
We were doing a call and, we always put the newbies on the. The holiday call, I always got New Year’s Day or Christmas or Thanksgiving and the doctor that who was associated with our group, but not really, it was in our group was on call with me on a, I believe it was like a Thanksgiving.
No, it was a Christmas morning. We’re both in the ER, like at four in the morning. And he said that I asked him like, what are you doing here? Like, why are you here? Why don’t you with your family? And this doctor was in his seventies, he looked a lot pretty unhealthy to be honest with you.
And he said that he got, like an extra, I think a few hundred dollars more. So if he worked during the holidays and for me, it was just like… Oh, is that what I have for to look forward to, 30 years from now, making a few, I know maybe it was $500. I can’t remember what it was, to work an extra call during the holidays.
And I said, There’s gotta be more in life and that’s why I pursued entrepreneurship. But I’m going to talk about, I’m going to take you back to those real estate. So you had the vacation route. Did you keep it, did you, or did you sell it or…
Vanessa Peters, MD: No, I don’t have that, but I do have two vacation rentals currently. Yeah. So I did. And that’s been a much more recent purchase. I did that in 2019. 2021.
Dr. Mike Woo-Ming: So you decide you bake maybe. So what years are we talking about? Is this in the last several years that you bought your first property?
Vanessa Peters, MD: Oh, I did purchase a property in 2008 and that was just a one off at the recommendation of a realtor.
And that… probably the best investment I’ve ever made, but I didn’t know better than to buy a whole bunch of it at the same time. So then I had this long lag and then in the past five years I’ve been buying lots of real estate.
Dr. Mike Woo-Ming: That’s what I, that’s actually a common story that here, you know, a doctor or, high net worth and fed and professional buys a vacation home.
And then realizes, Hey, I’m actually making money here. You just it’s appreciating. Or, I can do Airbnb or whatever that is, but then they never go and getting that second property. They never go and actually purchasing it. And maybe they’ll do other types of investing stock market. What have you, what was the, like the trigger for you to like.
Was there a certain incident? Was it just like other colleagues who got involved in real estate? What made you, go from that doctor who, because there’s many doctors who own that one vacation property and that’s it, but what made you go into, deciding I want to go in, into, getting involved in hotels or apartments, complexes syndications. What, what compelled you to do that?
Vanessa Peters, MD: The first one that I bought back in 2008 was just because the market had just crashed and I had a little extra money and the realtor friend of mine recommended it. And I said, okay, I’ll buy a house in Marietta. And that was a rental. So it’s a long-term rental.
And so of course it kept going down in value and that scared me. Because we bought at the beginning of the downturn and I should have waited probably a year to, to scoop up like a short sale at an even lower price. However, that place now has more than doubled in value, even, probably like 2.5.
And it was when I looked at that value. And in conjunction with the realization that I wanted more time with my family, that was when I was ” “oh,” the light bulb went off real estate and I did read rich dad, poor dad early in my training, probably when we knew each other.
I had read that book and I was fired up about it. But at the same time, I had just put all this effort into my medical training and I wasn’t about to just leave it. And I had bills to pay and I had student loans and stuff like that. So while I knew in the back of my mind that, that was a really good way to go.
I didn’t feel comfortable acting on it. And honestly, a beginning doctor salary back then barely covered the rent and the bills. So I felt stuck at that point. But later on I realized no real estate. I was pretty sure in my center. I was like, that is the way that I can do this. And I understand it.
It’s not like other types of investing, which are a little more complicated or. Potentially risky venture capital and angel investing and all that kind of stuff. So I,
you were looking at different avenues of investing. And if I remember to you also got involved in teaching. Now was that for, just for your own health benefits, were you trying to start another company and was that about,
that was purely for fun and I enjoyed it and I literally just teacher training because I want to learn more and I loved it.
In terms of making money, I wouldn’t recommend it. Being teacher is a tough gig. I think I actually had a position at LA fitness for a couple of. Just, I don’t even know why I did it, but I was like, wow, this is a lot of work and not a lot of money. So I quit.
Dr. Mike Woo-Ming: But what I love about it is that you had it like another avenue.
So there was something that maybe in medicine wasn’t being met and you found her outlet that you could get more.
Vanessa Peters, MD: Yeah, it was absolutely, it was about fun and joy and it turns out that teaching for me wasn’t as much fun as being a student. So I opted out of that eventually.
Dr. Mike Woo-Ming: So let’s talk about the the rental. And what was there any. Issues having a single family home where you, the landlord, or did you have a property management company that, that you dealt with?
Vanessa Peters, MD: No, I managed it all myself and honestly it’s been knock on wood trouble-free and it’s gone from, I bought it for two 25,000 and it’s worth I think the latest was 600.
It’s done well. Like I said, I’ve had longterm renters in there. I keep the market, I keep the rent a little below market so that they don’t move on me because I think now for about five years, I’ve said, if they leave, I’m just going to sell it because it’s been going up. And I consider doing a 10 31 recently into another short-term rental, it’s a good property.
It cashflows, it’s got a ton of equity, so I’ve decided to keep it, but I understand. When I got back into real estate, about three to four years ago, that was not the path to wealth for me right now, because it’s just too expensive now to buy anything that cashflows. So I had to keep looking until I found an alternative that worked for me.
Dr. Mike Woo-Ming: So that’s one of the things that I hear with single family homes. If you have one home, why don’t you just have nine other homes, and then you’re going to have positive cash flow. No, they talk about the 1%, in terms of the purchase and rental easier said than done to actually find those homes.
Almost impossible to define it here in California, someone did you think about doing. No purchases by property, out of state. I absolutely went through that because when I started going to meetups and doing a lot of research on real estate investing, I did a, a full scour of the market here realized that nothing, not even a condo would work.
Vanessa Peters, MD: So I moved on to, okay… Let’s maybe consider a turnkey out-of-state investing where you purchase a single family home. That’s very cheap, like a hundred grand or 120. And like Memphis or something. But you still own the house outright and you’re responsible for it. And you all, you need to rely on property managers because you’re not there.
They have to place the tenants have to take care of the place. And what bugged me about it was I’m fully responsible for it. And then if something goes wrong, say it needs a new water heater or a roof or something like that, it wipes up my profits for a year, maybe two years because the profit margin isn’t that great.
And I didn’t feel like it was worth the risk because I might earn a couple hundred bucks a month. But at the same time, I’m taking on a mortgage personally, and I’m responsible for all this stuff. And I have to keep an eye on the property managers. It’s not passive. I don’t care if you have property management, you still have to keep an eye on them or they will nickel and dime you.
So that was not, I just felt like that. Wasn’t where I wanted to go. And I didn’t think it was really that scalable either knowing that you can only get 10 mortgages her, and so 10 mortgages times, 200 bucks a month, that’s just. That’s not moving the needle in where I want to replace my doctor income.
Dr. Mike Woo-Ming: You could work at a yoga… As a yoga teacher. That’s more fun. Yeah. And certainly we’ve had experts here. They talk about, the pros and cons of single-family homes. I just love seeing different perspectives. I just know, from my perspective I’ve talked about, I had some homes in Missouri and I trusted my management company, but… one tenant who runs out now you have no way. Coming in and depending on the type of property you have, I didn’t necessarily have not necessarily had class a properties. I, it C properties. And and so sometimes you’re obviously, there’s a roof leak or something like that and just writing checks for there.
So I think if you consider doing it, you really should know the location. I probably saw that house. You know what I actually purchased it, but not saying that you can’t do it, but it didn’t sound like that was the past, and boots on the ground would be important too. If you happen to have family somewhere that can keep an eye on it then.
Great. But I didn’t have that option. The syndications really spoke to me because they were truly passive and I felt even less risky. And for the money you put in, the amount you get back on a regular basis was even better. Because the places that you invest in where the houses are cheap, they don’t appreciate, they don’t appreciate it like they do here on the coast.
And I just also want to make you, you mentioned turnkey accompanies too, and. There are some companies out there. You got to definitely do your due diligence. I think there was a scandal where, you know, turnkey company, really a scandal out of people, but there are some, turnkey companies and bigger pockets that you could look into, but you also have to think too, when you’re buying it well, they need to make money too.
So you’re probably in terms of you’re getting profits, you understand that the turnkey company is making money from that as well. So let’s talk about syndication. For those who don’t know what real estate syndication is. Can you just summarize it?
Vanessa Peters, MD: Sure. Yeah. It’s basically pooling of investors to purchase a large asset.
Now that’s in the real estate world, so it could be an apartment building. It could be a group of self storage facilities or mobile homes. It could be a hotel. It could be a lot of different things. But in the most basic sense, it is the easiest one to visualize as an apartment building that is say 200 to 250 units that costs $50 million to purchase the people who want to buy it are called the general partners or the syndicators, the operator, those are all synonymous.
And they. I want to basically guarantee the loan and get a mortgage and then they want to fix it up and flip it and sell it in three to five years. Now, the down payment on a $50 million at 25%, you’re looking at a fair amount, these $10 million that you need to raise for that.
And some syndicators have that in their network and other others don’t, but basically they need to bring in these limited partners, which are the passive people who essentially bring the down payment and the cap ex means capital expenditures or construction costs. So they usually will say, okay, we’re good.
We’re going to allocate $5,000 per unit to renovate it. And so we’re going to raise all that money up front and keep collecting money because these are not they’re usually not completely downtrodden assets are usually the ones that I like to invest in are either B or A. Th they’re already earning money.
So you don’t kick everybody out and do a renovation and have no money. You you let people leave as they would normally leave, or you take care of people who aren’t paying rent. You start renovating the units on a kind of attrition basis. And therefore it takes several years to do that. So it’s basically like a long flip and they have a forced appreciation by making it more attractive.
They can raise the rents, maybe clean up the clubhouse, put in a new jail. Et cetera. And then that increases the value of the property because some people don’t know this, but commercial properties are valued based on their net operating income, not based on comps. So everybody knows that your house is going to be worth.
Whatever the houses around you are worth that are equal in, similar type, those are called comparables. But for commercial. Not it’s net operating income divided by the cap rate. And so the capitalization rate is not something that can be made up. That’s just what it is. And so if you increase say a hundred dollars rent per door and you have 200 units, then you know, you’ve increased your net operating income, you divide it by a percent, which is the cap.
It really jumps the value. So it’s a great business model. And most operators don’t hold a property for long-term cashflow. They usually sell it after five years and then they provide the distributions to the partners, the limited partners.
Dr. Mike Woo-Ming: And so in this case, it sounds like you, you do value act. Again a new you’re building a property, is that correct?
Vanessa Peters, MD: Correct. Yeah. I tried to I have personally invested in things that I wouldn’t bring my investors in worth, and that includes ground up development. I find it to be slow and risky, honestly. In hindsight,
Dr. Mike Woo-Ming: Let’s talk about your entry into syndication. How. How did that work for you? Did you read it in a book? Did you start going to some meet-ups locally? Did you have a mentor?
Vanessa Peters, MD: I had to find it. I had to find out about it myself because when I was learning about it, it wasn’t really out there. And maybe it’s out there more or it’s just because it’s once you see something, you can’t unsee it.
I was on BiggerPockets. I was trying to figure out a way to invest in real estate. And honestly, I’m pretty sure my husband was just waiting for this fad to pass and go away because really real estate books everywhere. And I kept seeing the word certification pop up on BiggerPockets. And literally I ignored it for like weeks.
And I was like, I don’t know what that is. Like Seinfeld reruns. What does that mean? I don’t know. And eventually a doctor, his name was drew. Somebody thought it was an ER doctor. He posted about a syndication. I’m like, okay, fine. Let’s figure out what this is. And I was like, oh, this is interesting.
When I learned a little bit went online, tried to do some searching, couldn’t find hardly anything about some occasions. So I ended up having to talk to an operator and find out what these things were really all about. And that was when I learned that at the time, most of the deals were 5 0 6 B which means that you must know somebody to get into the deal.
And that kind of made me realize, oh no wonder nobody’s told me about these because I don’t know anybody who does them. And so unless, You can’t get in, you have to have a prior, existing, substantial relationship with the operator to,
Dr. Mike Woo-Ming: it’s funny, like what you’re talking about with the five or 6 billion, it’s almost it’s the boys club, the way that that it sounds fro now, you have to know somebody like lady for going to a club, you gotta acknowledge to get through that rope. You got to know somebody in to let you talk about that. Versus, when people hear syndication, they think of all the older, the sites, like a fund rise at crowd street and all that. Can you speak to that? And how are those differ than the type of syndications that you’re talking about?
Vanessa Peters, MD: So there’s different categories of sec approval is called regulation D Bible six, a B, C. Those are the main ones. So these, what we just mentioned, five or six feet, you need to know somebody to do to get in are much more open and they can be advertised. So when you see a lot of those out there now, on Facebook and on the internet are the crowdfunding.
And so the thing about crowdfunding is that you don’t need to be an accredited investor. For those deals. And so you, and you can also invest smaller amounts for some of these deals for some of them. Yeah, exactly. But you’re more likely to find ones that have a minimum of 5k instead of 50, most of the bigger deals are 50,000.
And I don’t really do any of the crowdfunding, because I personally feel that even in big deals like these real estate is a relationship business. And if you are going online and shopping, The syndication. It might look, everything looks pretty and glassy in the th the deck, it’s like like propaganda, it’s meant to look nice.
It’s meant to look very attractive, but you don’t know if who’s behind it. You haven’t got, you don’t necessarily have a clue who they are. And it really annoys me when I get a deck sent to me say, Hey, what do you think of this deal? And there’s no pictures. There’s no names. Forget it, I want to know who’s behind the deal because multi-family especially as a pretty small world and I probably know, or have heard of somebody.
And so I feel like when you do the cross, your bunny it’s a little more risky. And I have had colleagues who have put in five or 10 K and they haven’t ever heard back, so I feel like there’s more accountability when you actually speak with the operator on the phone. If you have a personal connection.
Dr. Mike Woo-Ming: There’s so much that we could cover on syndication. You have a book on it, then I invite you guys to check out the busy professional guys to pass the vesting. If they’re like, let’s say you get invited. You’re our newbie to real estate. Somebody offers you a civic deal.
In fact, this actually happened to me around a month ago. This was from a colleague that, someone I respected what would you. Whatever, maybe a couple of things that you could share with them in terms of what should they look at? Should it be, familiarity with the city that, that it’s in, should you, should it be, are there certain key terms?
It’s just it’s just like in medicine. Yeah. There are a nomenclature, right? We need to know these terms. You need to know some terms like I are there in tap rate and things like that. What are some things that they should be. At least start thinking about out w when looking at a syndication.
Vanessa Peters, MD: Yeah, for sure. So I always tell people it’s all about the team. So make sure that you dig into the team. What is their track record like? And do you find them trustworthy? Does a drive with your gut? When you see that. I like to always attend a webinar if I can’t talk to them directly and just see their faces and see how they talk about the deal.
And usually I can get a feel for people. Of course, there’s always going to be salesy people out there that you’re not sure about. And then it would have had they done this before. Have they done this exact type of deal before? And if there’s a big name stamp on the deal, Are they actually involved or is this person a student of that group who is just really just putting a rubber stamp on it and taking the profits, but not managing it?
There’s a lot of new syndicators out there and, everybody has to get their start somewhere. I totally understand. And the best way is to partner with a more experienced person who is going to be actively involved. So I would dig into the team and make sure that the people who are truly going to be managing your money.
I have a good experience in this area. I usually look for the timeline. I like to see five years or less. It’s good to have distributions. Not everybody has distributions for a brand new investor. It’s comforting to get. Money back sooner rather than later. But some of my best deals have been lean mean operators that don’t provide distributions at all until they basically one deal I did in Phoenix, my investors were like, when are we going to get distributions?
What are we going to get distributions and the performance at 2% in the first year? And so it was meant to be low. And then in 18 months they sold for two X, so they knocked it out of the park, but it was because they were so lean. So you need to be, just make sure you have your expectations in line, but if it says that there’s a 7% preferred return, make sure you find out if you’re actually going to get it or not.
So that if the operator says, you know what, no, you’re not going to see that right away because we’re doing construction. We’re ramping up. You’re not a disappointed or B unhappier worried that something is going wrong. Make sure that, what kind of distributions you’re going to get.
The team and the market is important too. Of course. I do prefer the larger. The tertiary markets, not to say that you can’t find some good deals in the secondary markets, but you do want to dig into the demographics of the area. You can go on different websites to look at crime and demographics and see if just to back up the deck, because there’s always a section of the deck, which is the investment summary that will highlight the area and how great it is for employers.
Dr. Mike Woo-Ming: Yeah. When you first got involved in syndications, it sounded like you actually feel. To the location. Is that right?
Vanessa Peters, MD: I did. I went to Dallas and I made it for about there and I don’t usually do that anymore just because I have a comfort level with the operators that I work with. And and if I know somebody in the area, I’ll absolutely call them up and say, “Hey, check out this property. Let me know what you think.”
Dr. Mike Woo-Ming: The minimum, like on these deals, it’s 50,000, usually that, that’s a chunk of change there. So let’s talk about your let’s talk about too, in terms of what to expect, sounds like the going rate now is you should be able to double your money in five years. Yeah, it does. Is that what we’re going with now? It used to be three years now. It’s five years.
Vanessa Peters, MD: Yeah. Yeah. And two X and five years is still what I’m shooting for. Which means that I do less deals because there are deals out there that are providing less than that.
Dr. Mike Woo-Ming: Yeah. What is your concern with the economy as it’s falling?
Vanessa Peters, MD: Yeah. It’s hard to predict inflation is going up, which is good for tangible assets. So it’s a good place to put your money in real estate because it will continue to go up with inflation. It really seems like the whole COVID scare hasn’t affected real estate in the same way that with audit woah, like there’s no deals.
People are clamoring for real estate and single family homes in particular have jumped up so high that it’s making the people who would probably want to buy homes, not able to afford it and stay in rentals. So in terms of the multi-family market, I think it will remain strong in terms of buying single family homes for investment.
I don’t think that makes a ton of sense to buy them directly just because the prices are so up right now.
Dr. Mike Woo-Ming: You know what I wish I would’ve listened to a bigger pockets podcast. And what they would say is in terms of single family homes is that. That 1% that we talk about is really more, it’s… we’re seeing it less and less in certain cities for when, just because in terms of the rental that you’re going to increase the price saying it’s it’s to the point because of the interest rates are so low, they actually can.
For the most part or just to start buying your own home and maybe there’s less rentals because of that. So I don’t know. It’s interesting. We don’t have a lot of time left and I know you’re busy, but I did want to talk about something that I now think a lot of people know, we’ve never actually talked about it in terms of ministry and the land and land entitlements. Talk to me about that. What does that all about? That’s something that you’ve been involved in.
Vanessa Peters, MD: Yeah. I’m excited about a land fund that I’m a general partner on, and it’s basically a way to take advantage of this very hot single family home market without buying single family homes.
So there’s a 4 million.Home deficit nationwide right now. So that’s how many single family homes we are short. And of course we’re looking for affordable homes, not McMansions and big fancy homes. So the the process by which national home builders build their homes is they obviously. Put them on land and land that has not been built on.
So the process of taking land, which is raw and unimproved to permitted or entitled is the process that this investment is the niche that they’re in. National home builders used to purchase land when it was raw and they would do the process of enticing. And then they would build. The process of entitlement takes nine to 18 months, depending on how big the land is.
We’re talking about big sections of land, like at least 500 homes per piece. And I just, so the listeners are, you’re talking about make sure it’s graded. What else does it, is it no, you’re not touching the lamps. No, it’s just getting it ready. So shovel-ready is another term.
Grading is like a shovel. It’s really boring. It’s like I did a talk on it and it was so boring. It was so boring that I really felt bad for the audience, but I wanted to show them what it is. What is involved in land entitlement? It’s multiple steps. It’s 50 steps. It involves permits zoning to determining about.
It’s determining if there’s any waste in the soil, that’s anything radioactive. Is there anything weird? Is there any giant boulders? What’s the soil content like? So it’s you have to go to the city, you have to talk to the city a lot, whatever your local jurisdiction. So you’re talking to the government, which is a lot of fun doing a lot of paperwork, which is also not very much fun.
So these are the steps of land entitlement. It’s a very specialized process. And so the folks that the operators that we work with for this fund, that’s all they do, and they do it only in South Carolina. So they really just know this one little area. The national home builders don’t want to buy land raw anymore.
And the reason is that in 2008, when the market crash occurred with the housing market, they were caught with a whole bunch of raw land. That was literally worthless overnight because nobody wanted new homes. All the new home starts just completely evaporated. And so they’ve made some corporate internal structural changes that they don’t buy raw land.
They buy entitled land. And so there’s, this popped up this opportunity for people who really are good at that, just to do that. And they usually actually get an LOI from a national home builder. Before they even start the process. And the operator that we work with does not actually buy the land until they are 100% sure that it is buildable.
So there’s some due diligence process that they have to do… say you don’t have to buy a land and then find out, how the nuclear waste.
Exactly. So it does, it’s a couple hundred grand up to, even up to a million and due diligence costs, but that’s better than buying, a $10 million piece of land that’s suddenly worth.
But the national home builders will tell these, this group, but we would like land over here. Please find a, some land and we’ll buy it. And the profit margins are astounding, honestly, for them to do that. And so part of this fund is we actually lend money to the operator and then the operator is doing all the.
Entitlement stuff work, and then they pay back the funding. Then we split the profits with our investors.
Dr. Mike Woo-Ming: You yeah just so I understand it. So what the investor gets, they get so they can attribute it purchasing. No. What is that? Nope,
Vanessa Peters, MD: it’s a little bit different from most indications. So the fund is a lending fund.
It’s like hard money lending. So if you’ve ever lent somebody money off of the house, so say you say here’s a hundred grand. I want you to flip that house and then pay me back with profits. Usually that’s a fixed percent I want 12% for that money. And if you keep it for 12 months, then you can make 12%.
If you keep it for six months, you pay me half of that. So this is a similar function in that we are lending money to the operator, who’s doing the entitling and then they pay it back as quickly as they can. And then we split our profits with the investors. So it’s not an equity play equity, meaning you’re improving land.
And then you get the money from the sale. It’s more about.
Dr. Mike Woo-Ming: I see. I see. And you don’t have to go into this specific terms, but what do you think in terms of turning around? How does that,
Vanessa Peters, MD: It’s a pretty cool, it’s pretty cool because you don’t want to do these in a single deal, just because they’re so fast, it takes really nine to 16 months to do it.
So you want to do a whole bunch in a fund and that’s where we have a fund for us. So we can keep rolling the money and get re recycling. We’re paying our investors in 8% preferred return. And then on top of that, there’s a profit sharing. And they’re both paid out quarterly. So we’re targeting 8% profit sharing, 8% preferred, which is 16% annual.
And that’s annual cashflow, which is a lot different from a multi-family deal where you get your preferred return of 7%, which is the going rate right now. And then you, that’s all you get until the very end. In the five years when you get your big chunk of equity and your capital back?
Dr. Mike Woo-Ming: It sounds fascinating. It’s something that I haven’t heard a lot about, but for sure, it definitely is. And it just, like you said, we’re not making more land, we’re not invading any more countries as far as I know. So there’s only so much land that we have here in our country. So where can they go to get all this information?
What’s the best place to go, or either contact you if they find it. More about what you do and the investments that you’re doing.
Vanessa Peters, MD: Yeah, absolutely. My website is VMDinvesting.com and there is a link to if you’d like to get the first three chapters of my book for free. You can sign up for my legacy club, which allows you to be a price of a new deals that come out.
I hardly send out any emails otherwise. And then also there’s a link to. Rockstar capital fund, which is the land entitlement fund for by email. I’m happy if you want to reach out to me directly. It’s vanessa@vmdinvesting.com.
Dr. Mike Woo-Ming: All right. Okay guys, Vanessa, it was been a pleasure. It was a great just educating you about.
Different things what’s really cool is I can tell you the excitement that you have and all these different ventures maybe a little bit more exciting than flexible sigmoidoscopy. I dunno, a little, just
Vanessa Peters, MD: a tad,
Dr. Mike Woo-Ming: any last minute thoughts before we end
Vanessa Peters, MD: the call today. Now I’m having a great time.
Thanks for having me on.
Dr. Mike Woo-Ming: Thank you, Vanessa. Thank you guys for listening. If you’re in a situation where you’re working. And you’re the only income that you’re doing is based upon the amount of patients that you see on there. Look at what you’re doing and look at. Start looking about passive income streams, even just start researching it, whether, picking up her book, picking up Vanessa’s book on bigger pockets, just seeing what others are doing, but it’s more of a just by research again, then it’s actually taking the time to like saving up.
You said you saved up half of it, half your money. That definitely takes a lot of willpower and being really conservative what you’re doing and taking that time and realizing that this money that I can do, I can make. A lot more later on and it’s going to take time. Like I want it really quickly, Vanessa, how long did it take you to save up for your first property?
Vanessa Peters, MD: The first indication that… yeah, I had money in the bank, so I didn’t have to pay for it. Yeah. And then after that I tapped my 401k and took out whatever I could out of there and just kept the ball rolling. And what’s really amazing is that when you start to get the passive income, then your investment account quicker so that you can do another investment.
And so a lot for me, At the beginning, scrimping, oh my gosh, it’s $50,000, but now the more you put out there, the more comes back to you. And then it’s easier to do the investments because you have more money and it’s I’m amazed at where I am now compared to three to five years ago.
Dr. Mike Woo-Ming: Again, congratulations much just success for you for always guys. It all starts, but just putting out money to start, you start investing and keep moving forward.