080 - Generating Real Estate Wealth: Learn How To Create a Compelling Passive Income In Your Medical Training Stream from Our Physician Guest - (Replay)

Ever wondered how real estate can be a game-changer for your medical career? In this REPLAY episode of The Independent Physician's Blueprint, Coach JPMD dives deep into the world of commercial real estate with Parikstih Singh, MD, a board-certified internal medicine physician turned real estate mogul.

Dr. Singh, who has transformed from a small-town physician to a powerhouse in medical real estate, shares invaluable insights on how real estate investments can substantially increase your wealth and create sustainable income streams. From his early missteps with real estate to his strategic successes, he reveals the secrets behind finding profitable properties, the importance of due diligence, and the art of leveraging real estate to support your practice.

In this episode you will learn: 

1. Strategic Investment: Learn how Dr. Singh’s early mistakes shaped his approach to real estate, emphasizing the importance of the ONE thing in commercial real estate that is crucial to generate wealth.
2. Creative Strategies: Innovative methods for acquiring and developing real estate, including how to turn ordinary deals into extraordinary opportunities.
3. Financial Management: Understand the nuances of financing your real estate ventures, balancing practice income, and managing risks.

Whether you’re a seasoned physician or just starting out, this episode is packed with actionable advice to help you harness the power of real estate in building your financial future. Don’t miss out—tune in now and start your journey to real estate success!

Subscribe now to The Independent Physician's Blueprint and take the first step toward financial freedom while maintaining your medical practice!

Discover how medical graduates, junior doctors, and young physicians can navigate residency training programs, surgical residency, and locum tenens to increase income, enjoy independent practice, decrease stress, achieve financial freedom, and retire early, while maintaining patient satisfaction and exploring physician side gigs to tackle medical school loans.

Transcript

Coach JPMD (00:00.162)
By the end of this replay episode, you'll discover the most important thing you must consider when looking to purchase real estate and why. Welcome back to another episode where I help younger physicians decrease stress and increase income by transitioning from corporate to independent practices, even without any business experience. In this fan favorite episode, you'll discover three things. How to have a methodical and systematic approach to property acquisition. Number two,

The reason to keep your practice and real estate entities separate. And number three, why you should consider owning the building where your practice is located to generate passive income and build extraordinary wealth. So let's listen to this fan favorite that was recorded a couple of years ago with Dr. Singh. Hi, thank you for having me here. I'm Pariksith Singh. I'm a physician. I've been in Spring Hill, Florida for almost...

25 years now. Initially, I started as an employed physician for five years. And then when our employer kind of retired, then we bought his practice. At that time, essentially, we were two physicians, one office, Dr. Maria Scunziano and I. And over the last 20 years, it has grown. It is actually exactly 20 years because in June, we started, in June of 2001.

And we have, thank God, done well and things have grown in our medical practice and our real estate portfolio. yeah, it's interesting. Go ahead. No, I was interested. I'm thinking about the timing because I've been here since 2002. So really it was a year after you started Access that I started. That's right. You that's crazy. Yeah, you were the first one.

And you were very good with Excel sheets. So I still remember those. And those are very helpful, by the way, even though I, yeah. You didn't say that 20 years ago when you, you tortured me in that conference. Right. That's right. So a lot of things we have learned over the years, you know, practical things. And I think there is something to be said by the way you approached it in a very methodical systematic way, breaking down the numbers.

Coach JPMD (02:24.15)
And how I used to approach it was more gut feeling, instincts, getting a kind of a horse sense, if one may use the word. And that's a personality trait. And then you need both, you know, the, you need the yin and the yang to balance out the creativity with crunching the numbers. And that, that is critical because otherwise that's when you make mistakes. A lot of people are overly critical, then they get paralyzed.

A lot of people are overly emotional and instinctive, but then they don't do the homework and due diligence. So both have to be focused on both have to be prized. And if you've read that book from Malcolm Gladwell, blink, you know, instinctively, you know, a few things as you do more, you know, instinctively, but then you have to break it down because you have to make sure you authenticate that you validate your instinct. And then you know, the more you break it down, the more, know, the whole.

you know, any practice and the real estate that you're looking at. Yeah. So you're, you're talking about things that maybe you didn't know when you first started access. Cause access has, was very, was a smaller organization. And now we're, I don't know how many physicians we are now. We're about 500, you know, owned and affiliate. So we've grown a lot. And when, in terms of, real estate, do you own every single practice?

or every single building where those 500 physicians are or how do you manage that? Because that's something that, you when I first started, I was renting the office space, you know, through my income guarantee, through one of the local hospitals. And I realized, my gosh, there's a lot of money going out and just rent payments. So. No, it's absolutely. So we don't own every property where we have offices for various reasons. One is that the owner doesn't want to sell it. And we like that location.

And that's okay. You can try to have a great tenancy model where you are a tenant and it's okay. Or places where you have a good property with good numbers and that's where you put your office and then they kind of augment each other. And then there are, have buildings where we have no offices and those do well too. So you've got to balance. It's, have to look at it as a separate business in itself at some point.

Coach JPMD (04:49.358)
see, make sure it makes numbers. Although at times you have to change that too and say, okay, this location is too important for a medical practice. So I'll make a little, you know, step outside the box and get it in just because I want the location. But ideally you should look at it as a separate business in itself. So, so obviously the healthcare business didn't start off as a, as a real estate business. So you had access healthcare, you grew that to 500.

plus physicians and affiliates, generating a significant amount of revenue, I'm sure, with that. But then there's the HMO and the IPA and other organizations. how or when did you kind of separate out the real estate business from the medical practice? It happened very early, Jude. In 2001, we bought the practice from the employer who wanted to kind of phase out. And so we bought it. And then...

A friend of ours offered to sell us land on 19, which is the road that connects Pasco and Hernando County. And I was very naive. know, I, he, two acres, $235 ,000. He said, you can have it, you can have a location, you can have an office and knowing nothing. And that's the problem with us physicians. Since we are good at one thing, we think we're good at everything.

So I asked our attorney attorney said, no, that's not a good deal. I still went ahead and bought the property. And I can tell you that area has not grown in the last 20 years. Nothing. That area is still as dead and dry as it was 20 years ago. Don't ask me why. If you go down south and from your office on 19, you will find this patch from her Nando to Pasco. There's almost a patch of four or five miles. Nothing. It's like a desert in terms of commercial activity.

And so that was a mistake. Although we eventually took advantage of it and made money out of it, but really that was a poorly executed real estate deal. And I'll tell you why also no, diligence. So there were wetlands. One third of it is wetlands. Just to put up an office is a disaster because you have to do a lot of mitigation. And since there is no real population around.

Coach JPMD (07:19.49)
There's no point even putting up an office there because if you put an office, nobody will come there. And so why buy this land? was land bought for the, everything that you should not do. Or maybe I should write that book. What you should not do in real estate. Because when you learn not what not to do, you, I think you'll do everything else the right way. So that was everything, a classic textbook case of how not to buy a property. So it boils down to location, right? So location, location, That's what's bad in real estate.

And so if you, I mean, there's not much you can do with that location unless things change drastically in the community. So how do you find property? What are your, what are some of the criteria that you use? Distress properties, income properties, how do you find properties? So over the years, I've worked with different brokers who kind of have access. have all these, you know, systems on which all the new properties that come on the market.

have access to, they'll bring them to you, but then you have to have certain exclusivity. I know of certain brokers who don't, what is it MPS systems or MLS system. So everybody, whenever a property comes to market, all the brokers put it on there. I also like to deal with brokers who are outside the system. Who work kind of subliminally. and so then you get access to properties early on where.

Once it goes in the market, it goes crazy, right? Everybody's going crazy with it. What you want to do is early on, you want to know, you have to have an idea of what is coming on the market. And if it's the prices, right. And you want to just take it right there at that time. So you don't want it to come on the system, but for that, you have to have deep roots in the real estate community. And I will tell you, I mean, there are very few brokers that I have found who are.

Probably it's just me, but very few brokers who will work with you in a very conscientious manner. The challenge here is the goal of the broker is not to get you the best deal. The goal of the broker is to get a deal. So, a great example is suppose it's a hundred dollars and the broker is 5%, they get $5, right? But if they don't work hard and you have to pay 102.

Coach JPMD (09:44.718)
They're only going to get a little bit increased. So they have no incentive. Or if you get it for 95, they're still going to get 4 .7, 4 .8. So to them, it's not that margin is very little, but to get that big chunk, they want to get the deal done. And so I'm not saying everyone is like that. There are many brokers who are not like that. They're very conscientious, good brokers. And then there are some brokers who are poor in due diligence. They don't care.

if the due diligence has been done correctly or not. And that's where you get in trouble. These wetlands, research with the county, making sure you can get a permit. All this has a methodical approach. Just like the checklist manifesto, you have to have a checklist. You go one by one by one that you make sure that the property is clean. Because once you buy it, you cannot sell it so easily. That's challenge with the property is unlike cash.

it is not as easily tradable. You can't even do it, on, know, stock market. Okay. You made a wrong deal. Okay. Get it out. Take your losses here. You can't, it is once you're stuck in it, it will take a long time to sell. And if there is a defect in a major problem, then you have to disclose it. And then it becomes a massive asbestos. what is that? Iridium, radium, radon. is that? All those issues you have to do.

proper diligence, wetlands, sinkholes, because if you got it, if you have it and you don't disclose it, then you're liable for it. Yeah. And I had some experience with some wetlands where we have to actually talk to the Environmental Protection Commission in order to get approval to be able to build structures on a piece of property. And that can be very costly and it can also be time consuming. So if you think you can build an office building within six months,

You know, with EPC, may take a year, two years. And to add on to your question, also some connections with the banks, bankers who deal with foreclosures, sometimes helps physicians have good relationships with banks. Then there are records you can get from the court where there are distressed properties, but that's a lot of work. So I couldn't do it. There are some people who look at those distressed properties and they go through all those records.

Coach JPMD (12:11.938)
and then they find properties that are on auction. That's another way of getting properties. But, you know, these are different, different options that you might consider. it sounds like you have to have a good broker relationship or someone that you can trust that can do that due diligence. But, you know, I know you and there's a little bit more to that because I know that there's certain properties that you buy that seems like you always make money off of them.

So is there a overwhelming theme in properties that you're buying for practices that you could say, yes, that's what I would do? So now, see, I'm going to break my own rule. We said it has to be a separate business, business separate in itself. But when I look, when I look for a location, I don't look for land or property per se. My first goal is where would a practice make sense?

because we are still the practice is what will, if the practice is strong, it will feed the property. So you have, see the map behind me, every zip code, probably a little more compulsive than you would like someone to be, but every zip code, how many members, the streets, everything is mapped out. can look at, a mastery of your geographic area. I'm not saying master all Florida, that's excessive, but Hernando County,

You, you master the location. have to be like a Napoleon, right? How did Napoleon win the wars? Napoleon knew Matt was a master of geography. knew every nuance of the terrain. And then he knew how the weather was. In fact, we can somebody talk about his, his ward, several wars. He one because he knew the terrain better than the enemy. And he even knew what time the sun comes out.

And what time the fog dissipates. And so again, we'll talk about it someday, but learning from him, you have to know how many cars are passing by on yours on the street. How many footfalls? If you're in a big Plaza where there's publics, how many footfalls are there? How many people live around you? How many Medicare legibles, if you're into a Medicare business, if you're Medicaid, then how many Medicaid patients?

Coach JPMD (14:35.926)
And then how many other physicians are around and how you can leverage that. So that thought process now, if the thought process comes out, say, okay, I want to practice here. Now you start looking at the real estate and then you will find subliminal or as George W. Bush used to say, subliminable, properties that you can start. Then you start looking around, see the real good properties don't come in the market and you buy them. My experience, of course, not.

Don't take that as a blanket statement. There are some great properties we've got that are on the market that came on the, on MLS system. But a lot of times you start, start prodding, poking around. Someone is here, an elderly gentleman who has a house there and an elderly lady who wants to sell her home and has been, has a dream that her home will become something new because her mom lived there. And suddenly you say, I want to put an office there. Boom, you got the deal. And so.

Things happen, you just have to figure out, meet people, creative real estate. How can you be creative with real estate? And that's something I learned from my employer. He bought a piece of property, I think 10 acres. Within one month, he had sold carved out a carved out area of one acre for 1 million. So whatever he had taken 1 million to buy those 10 acres, he sold that one acre and he paid off and nine acres are free. Right? A lot of creativity.

He picked up a big chunk because that big chunk, what am I going to do with the big chunk? But he knew that it wasn't a proper, that corner was important. So he sold the corner. Now he has nine acres sitting free, right? So same thing we did in a citrus around the hospital. was that? Seven rivers or in Crystal River. There was, I think one acre or two acres, but then there was a whole block of 10 acres around it and their homes, all homes.

Old homes, they for 30, 40 years, we just bought one by one by one. We bought all homes. We packaged them in with that one acre property. we got 10 acres. Now think about it. 10 acres, complete block next to the hospital. Yeah. Right. So you have to think like that. And how can I, how can I creatively pull this property or our own Plaza? You worked here in our Plaza. it was a condo and we bought.

Coach JPMD (17:00.59)
bought the hardware store, which was in the middle, 8 ,000 square feet. got it when nobody would support us. Nobody would believe in us. We got, we were lucky to get those eight. First step is very difficult. and now we were lucky to get that. Then we bought the rest of the Plaza and we bought the one third acre in the front and we bought the one third acre in the back. And now you have enough parking, you have enough shops, have enough, area that you can.

provide care for patients. So creative real estate, you gotta think outside the box. Yes, you can do cut deals fast, but here if you approach it in a methodical way, you can do a lot of good things. So you're talking about commercial properties, you're talking about putting practices and buying land and developing land, but how are you mortgaging these? How are you paying for this?

Is it the practice paying for it? Are you getting private loans or how do you go to a bank and say, I want to buy 10 acres? Yeah. So I don't do a lot of speculation. I've been very careful with that. And you have seen in the last 20 years, you know, the market has gone like this 2007, almost like the bottom fell out of the whole real estate market and everybody got in trouble. And, know, everybody thought I was a genius because I sold all our properties right before it crashed.

All are real. Did you really do that? You saw that 10 acres I talked about the hospital right next to the hospital. I sold it. Brooksville. We had a bank building. these are beautiful properties. I absolutely cried when I sold them, but I sold them. County line. had nine acres. Again, I cried. had four acres right at 50 and 19. Beautiful pieces. But see Warren Buffett is a very beautiful thing. When everyone

is greedy, then be very afraid. And when everyone is afraid, then be very, very greedy. every, the market was exploding. Everybody was, had become a real estate maven and they were buying things and we knew it was not the right time. So I got rid of everything that was

Coach JPMD (19:22.018)
So anything that was held as land, which was not in actual use, we got rid of. Okay. and the reason is this. See the advantage of having a practice and a real estate business at the same time, the properties, the real estate businesses. It doesn't matter if the market goes up and down. If the fundamentals are right, your practice will continue to sustain your real estate. Right. So if you do that right, and if your practice is cash flowing properly,

It'll bear your real estate. originally, of course, I went and got mortgages. Banks were very, were not interested in helping this hardware store that we bought at the last moment. The bank pulled out. Nobody would guarantee it. Fortunately, we were able to get sympathetic friends who bankrolled it, of guaranteed it. And that's how we got our first property. And once you're able to turn one thing around.

then you can keep getting more and more. Initially, suggestion is take small pieces. Now, don't go for the three million, four million, five million dollar properties. Go for 200, 300 ,000, 400 ,000. Because your practice, if you're starting a practice, if it's small, do small and then slowly, slowly build on it. Real estate is a consistent long -term process, 15, 20, 30 years. Consistency means a lot. So to answer your question, yes, banks have bankrolled it.

mortgaged, we've taken the mortgage and the mortgage is paid really by your practice, the cashflow from the practice. But the fundamentals have to be right. You don't artificially increase the rent just to pay off your mortgage. That's not very wise. You do it, tweak it in such a way that your rent should be enough to pay for the mortgage. As if you were buying from, as if you're renting from someone else and you have to keep the properties of the practice entities separate, the corporations or the partnerships have to be separate.

Don't mix the two, that would be a disaster. Because if you have any lawsuit one side or the other, whether on your property or in your practice, then they can own your whole thing. But if you keep it separate, then even if you have a lawsuit in your practice, it cannot go after your property.

Coach JPMD (21:34.412)
And so that brings up one of the thoughts I had was about owner occupied versus tenant occupied. So you can buy the practice and you can lease it to another physician or own it for yourself. And I know that banks are more favorable if you actually are occupying the facility. So how does that work with if your practice doesn't necessarily own that building, but you're leasing it out to someone else? Then the numbers have to be really good. Numbers have to be so good.

that banks don't worry about. Banks may not give 80%, may give 60%. They have their different rules, but the numbers have to be so good that you can put down 40%, 30 % and justify it. So, or you find a reason where the banks like you to occupy 50 % or more. And if you do, then it becomes easier for them because they know your business, especially if you've been here for a long time, your business is good. And healthcare has been a strong industry.

you know, last 15, 20 years, it hasn't gone down. I don't expect it to go down anyway. Sure. And what about sharing space with other doctors? I am trying to, cause I know that there was one time I tried to do that and you were leery about self referrals or sharing patients or what? Can you give me some insight on? Yeah. it gave us some insight. Yeah. So the tricky part is if you are renting someone and if, they are generating referrals for you,

then it could be seen as inducement. If you remember the case we had about what, 15, 20 years, 20 years ago or so, where some physicians rented space to a lab, clear water lab, if you remember. And they've got the attorneys blessed, they gave them a letter, an opinion letter that was clean, the lab was paying them money. And then when the attorney general's office went after the lab, the first thing the lab did was, okay,

All these people, these I've been paying them rents. have their offices and the understanding is they will refer patients to me. So what happened? The lab got out because, know, I kind of became a, what is the term? They started some helping the attorney general's office in their investigation. So suddenly they have bailed out and all these physicians are on the line and the attorney general's office is very happy because yeah, wow, we can showcase now.

Coach JPMD (24:02.062)
How many big fish we have caught who are abusing the system and what rent are we talking about? Five in those days, 20 years ago, I think it was $400 for a small room, $350. But the mistake they made was they got some tickets for hunting clubs or some special tickets, some games. And once you do that, you get in trouble with, and these physicians lost their licenses and went to jail. was, it was not good.

So you're talking about a physician who rents space from a lab, but then also receives things from the lab? They were renting space to the lab. To the lab. They're renting space to them, but then guess what? All their patients are going, and it's convenient, right? All the patients go here, right here, right? And then the lab was conveniently turned around and said, no, it was not a fair market value arrangement. It was an inducement -based arrangement.

We have seen a podiatrist, right? A podiatrist in Newport, Ritchie, who was doing research for a wound care company and they use these special dressings on the wounds, especially the feet. And he got $300 for research for every patient. Well, the research was really, you know, kind of not really research. And then when the feds found out what happened, they went after the lab.

The lab immediately said, okay, these are the guys who get paid, that's inducement, and the physician had to give up his license. Yeah, it's horrible. Yeah. So be careful with that. And so back to real estate. Yeah. So what's the one thing you would tell a physician about commercial real estate that would help them make their lives easy and avoid some of these crazy things that you've just described?

especially for new physicians. So new physicians listening to the podcast today, how do they potentially get involved? What's one thing you would tell them? One thing if I were to tell you, never be cash poor.

Coach JPMD (26:14.862)
Don't leverage yourself so much into buying real estate that you have no cash and you're totally dependent on month to month cash flow to survive. I've seen too many physicians get into trouble. their practice is doing well. suddenly, look at this restaurant available for sale on, what is that? The road going on 50 going to go to Pine Island. And they buy this great restaurant.

the restaurant suddenly three months later, bales out on them. And for five years, six years, they have not found another willing to go there. Market has changed. You've seen how the area has changed. There are so many national level restaurants around. Nobody wants to go to that mom and pop restaurant anymore. And that property has totally gotten dilapidated. Do not become cash poor. made the same mistake. I love real estate. So I bought so many properties and guess what?

Suddenly I didn't have, I was living month to month. said, my God, do I, if I don't get a income this month, how do I pay off my mortgages? So never become cash poor. Always keep that margin, have that discipline. You're not going to lose your whole career or your whole business. If you don't get that one deal, there is no such thing as that one deal that'll make you or break you. It doesn't exist.

It never has existed. It never will exist. And if it happens, it happens great. But don't go crazy on any deal that you have to make happen. you go with that mindset, you're going to get in serious trouble. So there may be hospitalist physicians out there, hospital -based physicians who don't have a practice. They're working for the hospital, but they want to get into commercial real estate. And, you know, some of them are making good income. Yes.

What would you, what would you tell them? Then you have to approach it again as a business. You have to make sure that, you look at the cashflow most important thing. Cashflow. It's valued at a hundred thousand dollars and your cashflow is zero. It may be a great deal. If it doesn't make money, what's the point? Unless you're to be able to turn it around. Right. so there is no such thing.

Coach JPMD (28:37.618)
as, as, an amazing deal. There's no such thing. You have to work hard. You have to look at it. There may be deals where the property is overpriced. You know, it's overpriced, but the cashflow is so strong that it can sustain you. And we have done those too. And if your cashflow is able to sustain you, guess what? In three years, you have refinanced the property. You have paid off everything and you're in a great position. You have to do your due diligence. Cap rate is a concept that often comes.

And cap rate is basically what it means is your return on investment. Suppose you put a hundred dollars in, you bought the property for a hundred dollars, whether through a mortgage, whether you put your own cash in. And if you got $8 every year as profit cap rate is eight. So if these physicians who are hospitalists want to buy real estate and they have to study the real estate, they have to look at what the value is, what are the costs, including everything, your taxes, your utilities, your.

pay amount for roof, for the roof, for the parking lot, for the sign, everything you have to, for the handyman that you're going to bring all those things. And then you have to look at what you're going to, what will be the actual cashflow. Ideally physicians should get someone who knows how to manage the property. Physicians are not good property managers. And just like property managers are not good physicians. So you get good property managers who are

thorough who are diligent because there are laws about, you know, the land, the tenant doesn't pay you. Can you kick them out? They have their rights, right? You have to send proper notices at the beginning of the month. You have to send them a letter. If they're not, if they're not within seven days, they have to get a letter that they're not paid. and then it has to be followed up. You have to, you know, everything has to be documented just like in medicine. If you don't, and you suddenly after a month said, okay, you didn't pay anything, you're out.

That's not they're going to fight it and you may lose so proper documentation a system Preferably a software to manage properties Yeah Well, this has been a great conversation. Dr. Singh and I really appreciate you taking the time and I know you're busy and Can I invite you in advance to talk about managed care next time? Absolutely. I would love to there is so much to talk about real estate we can go on for another couple of hours, but

Coach JPMD (31:04.374)
I think that should be good. think people should read and do research. And there are some very good books on how to do good real estate properly. Keep learning, keep asking the experts, keep researching and never be complacent.