Good Real Estate Investments | Excellent vs. Average Deals for a Physician Investor
“If you are the kind of person who is waiting for the ‘right’ thing to happen, you might have to wait for a long time. It’s like waiting for all the traffic lights to be green for five miles before starting the trip.” – Robert Kiyosaki
Features of an Excellent Real Estate Syndication: Why Are Some Real Estate Syndication Investments Better Than the Others? Good Real Estate Investments – Excellent vs. Average Deals for a Physician Investor.
If you are reading this article, I assume that you are a curious physician investor, looking for an opportunity in Real Estate Syndication investments. This article is one of the final blog posts in the series of articles on Real Estate Syndication investments for physician investors. In order to understand this article better, make yourself familiar with the basics of Real Estate Syndication investments—What, How, Why, and etc. In this blog post you will learn about good real estate investments – excellent vs. average deals for a physician investor.
How Do You Identify Good Real Estate Investments?
Introduction to Real Estate Syndication Investments – Good Real Estate Investments
As a physician investor looking for a Real Estate Syndication opportunity, you will come across more than a few options that are worth considering. The onus is completely upon you to assess every syndication investment thoroughly and make a decision on selecting a deal that fits your long term wealth creation aspirations and also fits into your appetite for risk tolerance. When I am comparing and assessing several properties, I usually go through a list of items that I commonly find in properties that perform better than the other. Mentioned below are the characteristics of a syndication investment that is projected to give you better real estate returns.
Niche Boutique Commercial Properties in a Medium Size Segment Located in a Gentrifying Neighborhood that Have a Value Add Component–Run by an Experienced Operator
What does that mean? Let’s try to unpack that statement!
What Makes a Real Estate Investment a Good One?
6 Features of Good Real Estate Investments – Real Estate Syndication
(1) Gentrifying Location
- Properties in areas that are gentrifying are properties that are located in a desirable areas, but have not yet reached its peak potential (up and coming neighborhoods).
- These properties usually need renovation. Often times, properties in gentrifying areas are currently experiencing an influx of population.
- Location of the city must have an overall influx of population with growing employer base.
(2) Panoramic Knowledge of Real Estate Sponsor
- Your real estate sponsor must have extensive knowledge in the local factors such as employers, rents, crime, neighborhood vibe, population traffic flows, and comparable market.
- The real estate sponsor’s team must have decades of cumulative experience in the neighborhoods that they are investing in, along with a wide range of local real estate business related relationships. They should know what works and what doesn’t.
(3) Optimal Property Size
- Look for commercial properties that are usually between $1 million and $8 million USD. There is less competition in this size segment, hence, properties are available at a much better price.
- These types of properties are too big for an individual retail investor, hence they cannot afford it. Also, these are too small for big investment firms since they usually do not deal with properties that are less than $8 million to 10 million USD.
- These big firms usually have a typical high level formula that helps them assess a property. They usually do not like to spend resources to learn about local neighborhoods and local factors that influence a niche investment in a gentrifying area – all for a medium size investment. It is just not worth their time and money.
- That’s a niche opportunity for you and you must be prepared to take advantage of this sweet spot.
(4) Value Add Opportunities
- Buy properties that need some work to reach their full income generating potential. They should either need to be renovated or need an addition of a few more rooms to the property, and etc.
- The rationale here is that the ready-to-rent properties usually do not give high returns in this current market situation. Adding value (value add) to the properties builds in sweat equity.
- This will allow the property to get refinanced at a higher value, hence, the ability to liquidate the profits and use that money to pay out the investors soon, or buy another property.
- This strategy allows real estate sponsors to return most of the investors initial capital within 2 to 3 years.
(5) Risk Mitigation
- Value add properties are usually riskier investments (as they require construction teams involvement for renovation) compared to stabilized (ready-to-rent) properties.
- Your real estate sponsor must work diligently on mitigating risks by partnering with teams that have a high level of construction knowledge, intricate property management experience, neighborhood awareness, intricate networking skills, and social presence in the community.
(6) Investors’ Real Estate Returns
- Due to the above-mentioned strategies, select few properties are able to generate significantly more profits compared to a syndication investment that is buying a stabilized property (turn-key properties that have already reached their peak income generating potential). Read this blog article that exclusively speaks about the profits from Real Estate Syndication investments.
- Financial structure for the investors can be uniquely structured compared to your traditional syndication investments. Being a physician investor, one of the main reasons I founded this platform was to improve financial awareness among physicians, that would in turn help physicians accumulate assets and generate wealth (not the same as being rich).
- Personally, I structure my deals to align with the above-mentioned values. We optimize our structure to pay out the investors their original investment as soon as possible (usually 2 to 3 years), in addition to having the investors keep their equity in the property throughout the life of the project. We work hard to meet the estimated projections and reward the investors trust in the project.
- Since the investors are projected to get their initial investment returned in 2 to 3 years, the investors can use this capital to reinvest in another project that can increase passive income. Hence, not only will the investors receive profits from this deal, but they would also receive their initial investment returned sooner, allowing them to divert this capital to other projects. Rinse, and repeat!
- Every property is different, every project is structured differently based on the inherent factors. Hence, I am unable to quote any specific numbers here. Eventually, when we work together on a particular project, all the specific details will be shared with a private placement memorandum and/or offering before you make a decision on investing.
Overall goal is to educate physicians about good real estate investments, improve real estate investment awareness among them, to provide physicians with stable yet lucrative syndication investment opportunities in a trusted and transparent environment, in an easy to understand simple verbiage, without any fine print business jargon that puts the real estate sponsor at an unfair advantage. The better choices you make today, the more wealth you make tomorrow.
In addition to the above-mentioned points, it is vital to have an overall understanding of the real estate process, pros and cons of Real Estate Syndication, real estate returns, real estate tax benefits, and other opportunities in syndication investments.
Here at PhysicianEstate, we welcome all physician entrepreneurs to learn about commercial real estate investments, rental property investments, and wealth generation. We encourage all physicians to eventually become real estate physician investors. We know a great deal about Who – What – Why – How.
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