docworking_logo

Passive Income and Real Estate Syndication as a Path to Financial Independence with Dr. Cherry Chen

by Jen Barna MD, Financial Independence, Money and Finance, Physician Coaching, Physician Job Change, Physician Side Gig, Podcast

“One thing I do want to point out to investors is when we look at investments, the first thing we look at is the return. I’m guilty of it because that’s the whole point of the investment to see how much my money can grow. And then maybe the last thing we’ll look at is, oh, who is running it? But I think the more you invest, the more you really look into these, it should be the other way around. It should be who is running the property.”

Dr. Cherry Chen

Although Dr. Cherry Chen specializes in internal medicine, she’s also an expert in real estate. Dr. Chen is also the founder of The Real Estate Physician, a business she created in 2018 to empower her physician colleagues in commercial real estate investments. Dr. Chen received her M.D. at Texas A&M College of Medicine with honors and completed her training at Oregon Health Science University. She has experience with commercial real estate investments across multifamily, self-storage, manufactured home parks, and as a limited passive investor, as well as raising private equity capital.

After contributing to her 401k and IRA, Dr. Chen grew curious about other investment opportunities outside of the stock market. She was also curious about the potential for early retirement, financial independence, and growing her net worth, even though she was fairly young in her career. Although she loves being a physician, Dr. Chen began wondering what her alternatives would be if she decided to stop practicing medicine and how to make her money work hard on her behalf. This inspired her to pursue real estate and share her wisdom with other doctors through The Real Estate Physician. Through her business, she helps others grow their wealth independent of the time they put in as doctors.

Dr. Chen shares what the process of diving into her first real estate investment was like and how to make intelligent investments. She also highlights the important characteristics investors should consider if they’re interested in passive investments, one of them being a thorough assessment of the property management company. Dr. Chen also explains how syndications work and the advantages they provide to investors. We wrap up by discussing the difference between multifamily investments and commercial investments like self-storage and mobile home parks.

What’s Inside:

  • How Dr. Chen became interested in real estate and why she started The Real Estate Physician.
  • What investors should look for when considering passive investments.
  • Key criteria to assess when considering a property manager.
  • What syndications are and how they work.
  • The difference between multifamily investments and self-storage or mobile home parks.

Mentioned In This Episode:

The past few weeks have been busy at DocWorkingWe have been working behind the scenes to add more CME credits to the THRIVE memberships. Now you can get a credit for each small group coaching session as well as for each 1:1 coaching session, so 12 credits/year from monthly small group coaching sessions plus 8 credits for our foundational StressPal course+community coaching. That means there are now up to 32 credits in our THRIVE Platinum subscription!

How many coaches do you think your favorite actors and athletes have worked with over the years in order to achieve such extraordinary success?
What if you had a team of trusted thinking partners, experienced coaches who have helped hundreds of physicians overcome obstacles and who know what works? 

What if you were part of a community of like-minded physicians from across the nation, across specialties and career stages? Your collective brain trust, sharing ideas and experiences, so you would no longer feel like an island, surrounded by people yet alone?

What if you had small group coaching sessions, could interact with your coaches and community as often as you wish, and had virtual courses at your fingertips 24-7 that could help you with things like time and stress management, resilience, and mapping out your future to achieve what matters most to you?

What if you could have all of this for less than the cost of a single 1:1 coaching session per month?

DocWorking THRIVE is the Physician Coaching and Community Subscription Package that Guides You as a Doctor to Embrace Life in the way that is most meaningful to you, integrate that with your work so you can truly thrive, and be a valued member of our growing private community of doctors from across the nation.

Join our community by clicking here.

Coaches and Courses at DocWorking

Please check out our Trusted Resources! The Trusted Resources businesses are paid advertisers or have an affiliate relationship with DocWorking. An affiliate relationship means that DocWorking may receive a commission if you use their service by clicking through our link. Thank you for supporting businesses that support DocWorking’s mission of prioritizing Physician wellness.

Are you a physician who would like to tell your story? Please email Amanda, our producer, at [email protected] to be considered.

And if you like our podcast and would like to subscribe and leave us a 5-star review, we would be extremely grateful!

You can also find us on Instagram, Facebook, LinkedIn, and Twitter.

Some links in our blogs and show notes are affiliate links, and purchases made via those links may result in payments to DocWorking. These help toward our production costs. Thank you for supporting DocWorking: The Whole Physician Podcast!

Occasionally, we discuss financial and legal topics. We are not financial or legal professionals. Please consult a licensed professional for financial or legal advice regarding your specific situation.

We’re everywhere you like to get your podcasts! Apple iTunes, Spotify, iHeart Radio, Google, Pandora, PlayerFMListenNotes, Amazon, YouTube, Podbean

Please enjoy the full transcript below

 

Dr. Chen: One thing I do want to point out to investors is when we look at investments, the first thing we look at is the return. I’m guilty of it because that’s the whole point of the investment to see how much my money can grow. And then maybe the last thing we’ll look at is, oh, who is running it? But I think the more you invest, the more you really look into these, it should be the other way around. It should be who is running the property.

Jen: Welcome to DocWorking: The Whole Physician Podcast. I’m your co-host, Dr. Jen Barna. If you’re a physician looking to put yourself in the driver’s seat of your own life to define success on your own terms, you’ve come to the right place. And if you could use a team of coaches as trusted thinking partners, combined with a peer community of physicians from across the country, and easy access to the tools you’ll need to help you accelerate your path to that success, please check us out at DocWorking.com. I’m thrilled today to have a guest with me that I know our audience will be very interested in because she specializes, in addition to internal medicine, she specializes in real estate investment. I have with me here Dr. Cherry Chen, founder of The Real Estate Physician. She has created this business in 2018 to empower her physician colleagues in commercial real estate investments. Dr. Chen received her M.D. at Texas A&M College of Medicine with honors and completed her training at Oregon Health Science University. She has experience with commercial real estate investments across multifamily, self-storage, manufactured home parks, and as a limited passive investor, as well as raising private equity capital through The Real Estate Physician. Dr. Chen, welcome to DocWorking: The Whole Physician Podcast. 

Dr. Chen: Hi Jen. Thank you so much for having me. Really looking forward to our conversation and hopefully be able to share from my experiences and my journey to other fellow doctors out there. 

Jen: Well, I’m really excited to talk with you and hear about your experience and ask you so many questions. I would like to start out just finding out what led you to real estate. How did you come to this area? 

Dr. Chen: Yeah, I would say it was definitely not planned or not, you know, had any intense insight or foresight. It pretty much started about a year after I became an attending at a residency. And, you know, we’re not taught these things, right? So, I wanted to know I had contributed to my 401k, had an IRA and was just curious, hey, is there anything else I could possibly be investing into? So, you know, I was pretty young in my career, right, about a year out. So I wasn’t thinking about retirement, early retirement, financial independence, like my net worth. I didn’t even know what those things meant or had even come across that in my realm or being exposed to that. So it’s just more out of curiosity, I think looking back, realizing, hey, yes, I love being a physician, but I know my whole life it’s not just being a physician. That’s why I love your podcast, being the whole physician. So I realized, yes, I could work, but at some point I don’t maybe I don’t want to work or, you know, being a doctor is definitely fulfilling, but I can’t do it all the time. So it kind of just poured out of a curious question of, well, what else could I possibly invest into? And then, you know, you lead yourself, you ask one question leads to another question. And that’s kind of when I really began to ask myself, you know, how can I make my money work hard for me? There are other ways you hear businesses, investments, and that’s how people can grow their wealth and independently of the time we put in as doctors. So that’s kind of how it started. 

Jen: You bring up so many good points there in terms of just thinking about ways to put ourselves in a more stable position financially so that we have options. And like you said, you may not want to work forever as a physician or maybe having something outside of your work as a physician gives you the power and the confidence to negotiate your schedule as a physician so that you can bring purpose, you know, to what you do and really feel fulfillment in the physician side of the work that you do. Has this side gig essentially, has it become a full time gig or has it been something that actually gave you a little bit more freedom in terms of your approach to your practice? 

Dr. Chen: Yeah, both, So, Real Estate Physician was cofounded in 2018 and so ever since then, we’ve grown a lot. You know, we have over 2000 physician members engaging with us. I describe what I do on the real estate side has been really fulfilling because, as a physician, we help others synthesize a large amount of data and try to help them come to an informed decision in as objective way as possible. So when I guide other physicians into real estate investing, I feel like it’s playing on the same strengths and passions I have as a physician. It’s just a different subject being real estate investments. And so that has brought me a lot of fulfillment outside of medicine in what I think now can identify as a secret power or whatnot. So it gives me a lot of fulfillment. And then it has become, I would say, can become its own full-time business the last two years, building it and still working full time as a hospitalist. But this year I will be able to cut back, which is really great. And it’ll be a transition for me in deciding, right. You know, having that opportunity and freedom to decide, do I want to work less in medicine? Do I want to stay the same? But it is an option. And that’s always great.

Jen: Absolutely. A lot of us, I think, are interested in real estate. And I definitely hear physicians in the DocWorking community frequently ask about options that have to do with business and managing money outside of their work as a physician and how to grow that, you know, how to make investments intelligently and asking for more knowledge about that. One thing that I also hear people talk about is being afraid to take the first step, that sort of analysis paralysis. And so I would love to hear about your first step and how that experience went for you, like your first real estate investment. 

Dr. Chen: Yeah. So, you know, and this was about six years ago and I am an internist, so I kind of like to know everything. And so my education was, you know, for many, many months just on my own. You know, I searched Google, I listened to podcasts, I read books, I went to live meetups in the area from the Dallas area. So it was all just me. Kind of my way of learning is to basically like bathe myself in as much information as possible and then slowly over time I can make sense of it. That’s kind of how I learned. And then realizing, okay, I’ve learned enough about commercial real estate like an apartment. Oh, why is this different than a single family? Which I didn’t even know we could invest in apartments. So then kind of understanding the basics and the fundamentals, if you will, of an investment as much as possible, then you have to find people who are actually doing these things, because inside the hospital, I don’t talk about this. I don’t know anybody who even knows about this. So surrounding yourself with people who who’ve done it, who know a little bit more than you, and that really was kind of the I would say one of the main reasons for starting The Real Estate Physician is I created kind of this community in a way I would have liked to have found this information. And so I would definitely say we are very analytical and so we do fall under that paralysis analysis. But it’s also I think what’s hard about it is as doctors, everything is a straight path, everything is there, seems like most of time there is a right answer. But in investing, in business, in life, there’s not a right and wrong. It’s not black and white. It’s a spectrum. And a lot of it is it doesn’t fit me. And so I think what makes it hard is we’re forced to ask ourselves really hard questions. And to be really honest, sometimes you don’t know the right questions to ask, right, if you’ve ever been exposed. So that’s kind of what I try to help new investors through or experience investors through just a different way of thinking and being a doctor who’s invested, so just trying to find somebody who’s kind of like you and who’s done something that that you want to do is very helpful. 

Jen: Was your first investment a single family or multifamily property? 

Dr. Chen: So it actually ended up being a multifamily investment as a passive investor because I learned you know, hey, well, I felt like it was just less risky by having an apartment that’s professionally managed, that has a business, somebody to look over it. I don’t have to be actively investing. So that’s one major delineation point I think for investors because when it becomes active, it may not be an investment any more. It may be a full-time job or there might be other liabilities. But when I’m purely a passive investor, it does not become a full-time job. Somebody else is managing the property. I don’t have liability in it. I will never be called on to make any decisions. So that’s why I think passive investments can be attractive for physicians or just, you know, people who are working full time busy professionals. You have a good income that you can put to work, but you don’t want that investment. I think investment should enhance our life, improve our life, right. And so it just becomes naturally a very good fit. And so I realized all of that mostly I didn’t want to be active. And so I made my first investment into a multi-family apartment complex in Dallas. 

Jen: What are some important characteristics that we should look for if we’re interested in doing a passive investment like you’re speaking about? What would be some tips of how to evaluate an investment and make sure that it’s actually well managed and can be a positive income stream? 

Dr. Chen: Yeah, I feel like there was probably a thousand answers to that question, but I think so what investors really are asking right, is how do I know “it’s a safe investment”understanding every investment has a risk, but really any question you ask, you’re trying to direct it as, okay, what are the risks and how can I mitigate it? So when you’re looking at syndications, typically it’s broken down into three categories. One, you want to look at the market, right? Because real estate, most of us have heard is location, location, location. That’s very important. So one very specific category to look at is just the market. And those are looking into real estate or have some general understanding know the Texas markets have been really good or the Carolinas or Florida is because there are so many jobs moving there, a lot of economic diversity fueling the population growth, the demographic migration. So it doesn’t mean every apartment in Dallas is a great fit. It doesn’t mean there’s not a great apartment in Los Angeles or New York, right. But when you’re an investor, you want to see as many eggs as I can put in this basket to where okay, that makes me feel better. Okay. That makes me feel better. It’s decreasing my risk as much as possible. So there could be a really great sponsor in Los Angeles, but I’m never going to talk to them. I’m never going to look at the deal at all versus a sponsor in Dallas, for example, where I know the market is really strong, so many jobs moving it, right. One category is just looking at the market and seeing if it has all the fundamentals that bring the tenants that are living in the apartments for your investment, specifically. After you look at the market, you look at the property itself. Well, how does this property itself support itself in terms of numbers, the people renting, what is the rent? What are the rental comps? The great thing about real estate is that it is all very all this information you can gather, right? We’re not making it up. You can walk across to the apartment complex and say, what is a one-bedroom renting for today? And so the property then itself supports the returns that we can project to investors. And then you look at the sponsor group. And what I love about being a passive investor is the sponsor groups, they’re doing this 24/7. This is their main job, right? My main job is a doctor. But their main job is to look after these properties, manage them, lease them, take care of them and the tenants so that you don’t have to be active as an investor. So those are typically the three main components you look at. Of course, they do all interplay because each sponsor, maybe they only do focus on one market or one specific asset and one specific type of property they like. And so it does intermingle. I would say it’s not isolated evaluation. One thing I do want to point out to investors is when we look at investments, the first thing we look at is the return. You know, I’m guilty of it because that’s the whole point of the investment to see how much my money can grow. And then maybe the last thing we’ll look at is, oh, who is running it? But I think the more you invest, the more you really look into these, it should be the other way around. It should be who is running the property. Because when you are investing into these for three years, five years, you need to feel that you can go to sleep at night, that it’s being managed well, and that you have confidence, the team can actually execute on the investment that I signed up for. And that’s where I think new investors can get into trouble if you just look at returns without understanding how those numbers actually got there or are they being very aggressive? Yeah. I know it’s long winded, but kind of in general looking at those three categories.

Jen: So when you’re starting to work with a company that or I would assume that it’s, as you say, a partner that would be willing to manage the property. What criterion are you using to decide that you will work with this property management company? 

Dr. Chen: Yeah. So one, you know, going back to right market, I’m not talking to partners in New York or L.A. just because I don’t think the investment environment is as solid or as attractive as one in Dallas, Texas. So one, we find really good markets that we feel are really strong and healthy. And then within the market, you start to identify who are the players in this market. It might sound daunting, but just like any other industry, word gets around and once you’re in it, you start knowing the same names pop up where people will have reputations, right? So once you identify a market, then you identify the sponsors working that market, and then you look at their track record. You know, when you’re talking about private investor’s money and most of these the minimum is 50,000. Right? And they’re raising typically multimillions every time to buy an apartment. If you don’t treat your investors well or you treat them poorly or the investment goes bad, you’re not going to be able to do your 20th project. You’re not going to be around ten years, 20 years, right. So the track record is supposed to help you filter that, right? It doesn’t mean they’re the best, but if they’ve been around ten years, they’ve done 20 projects, they own thousands of units. They’ve probably been successful. Right. And so that’s kind of a way to look at it.

Jen: And did you say that the investment typically is 3 to 5 years, or do you invest long term in these units? 

Dr. Chen: Right. Right. So when you’re talking about multifamily real estate and through syndications, and that’s just us pooling money to buy a project because most of us can go buy a single family home, but most people can’t go purchase a $50 million apartment. Right? So we all come together to do it. And so the majority of syndications that investors will see will be probably a five year timeline, I would say between 3 to 7 years. Every team has a different business plan, but the majority will fall under that, and that’s not kind of out of thin air. So there’s two reasons for that. One is, you know, it’s not your we have money, we go buy a property and we’re just happy with it, we’ll just let it sit in cash flow, right. When you have, you know, hundreds of investors, you need to give investors some sense of clarity and objective of what their money is going to do. So when you have hundreds of investors, most people can digest, okay, I understand this money is going to be for five years. And I understand ideally, we’re going to double my money in five years, for example, through this investment. People can digest that. But when you say maybe it’s seven, maybe it’s ten, you know, then it just becomes more and more nebulous and people need certain criteria. So that’s one reason why you see that timeline. The other reason is, for example, a lot of the properties I and our group invest in are what we call stabilized value add properties. These are the apartments you see that are already built, people already living in them, but they may be outdated, right? We go in and improve them. So you can think of that as a big fix and flip, if you will. So that takes time. You can’t do it all in one day or even a month. Usually takes about 12 to 18 months to have tenants have their leases expire, go in and renovate, improve the clubhouse, the gym, the leasing office. So that takes 12 to 18 months. So that’s why. And then you improve the operations, improve the value. So that’s why it’s about a 3-to-5-year timeline. 

Jen: Perfect. That’s really helpful. Do you do 100% syndications or do you also own some properties yourself? 

Dr. Chen: So I’m pretty much 100% in syndication, so I feel like I have a really great in-depth understanding of it. I just don’t want to be active. And so that’s again, going back to, hey, understanding you just because syndications or you hear from colleagues that real estate is a great investment, it doesn’t mean you have to do it. I think as doctors or if you save enough of your salary, you don’t really have to do that much. And so you have to ask, okay am I comfortable with somebody else running the project? For me, I very much am because I’m giving up that control as a passive investor, because I don’t want that control. For some people you might. And then syndications, you wouldn’t be able to sleep very well at night if you don’t have that control in running the properties, for example. And then being honest, am I okay with this money being illiquid? Right, for three, five, seven years? It’s not like the stock market where I can just change my mind or get scared and run away and take it out. But you know that has the flip side of the coin where your investment is not going to fall 30% overnight. So there’s typically two sides of the coin. And where you can then assess for yourself, where do I fall? Does it make sense? Does it actually fit me as an investor rather than just it’s a great investment? 

Jen: What have you found in terms of the differences between multifamily units, self-storage and manufactured home parks? 

Dr. Chen: Yeah, no good question. Yeah. So those are the three, I would say most common, typical commercial real estate investments. You’ll see as an investor, I would say as an investor, you’re probably going to see similar returns in a similar way to evaluate. So if you can, you feel comfortable investing in one, you’ll probably feel comfortable investing in the other two just to diversify your portfolio, right? Because it’s multi-unit. There’s a manager, right? And you still have to pick a real estate market that makes sense because this all involves people and housing, right. And so the main differences being so multifamily is just much more prevalent. Everyone needs an apartment or a home at some level. And so mobile home parks definitely falls under affordable housing, but also with COVID or just changes in lifestyle, there are people who just don’t want to own a home. They like downsizing. They want to be able to be, they don’t want to worry about a house. But mobile home parks, you can’t just build them. They’re limited by the government. And so where there’s very limited supply and growing demand, that always causes a constraint.  And so when you’re looking at investment, more demand than supply is always a good thing. And you can evaluate those very similarly, but also when you think about mobile home parks, I don’t know if you’ve been to one on vacation. I love them. As far as, you know, RV camping is, there’s not a lot to maintain. You kind of have a parking lot. You have utilities and you have general amenities if it’s a nicer mobile home park. So as an investor, I don’t have to worry about as much going wrong. It’s not like an apartment where people are leasing. I need to fix their kitchen; I need to fix their toilet. Typically, in the mobile home parks, people are owning or leasing that home, so they have to maintain it. So that’s just kind of some of the difference between that. Self-storage, a little bit different, but people are housing their things, right. And so typically is that you think about self-storage in times of transition. And so that’s why they also do well when the economy’s great, you’ve got lots of stuff you wanted to store somewhere, but also businesses rent them out, military, students. So it’s not just for homes, but also when times change, right? You want to downsize or you’re moving. And so self-storage is just so, I think, flexible in that way. Many uses plus the leases are typically one month rather than a year in multifamily, for example. So those are some differences. But overall, as an investor, I think they’re very similar in terms of your evaluation of them. 

Jen: Because there has been so much interest in investing in real estate over the past ten years or so, and so many more people have gotten into the market of real estate and investments. Have you found that it’s become saturated or that it’s much more difficult to find a really good deal in terms of finding the right place to put your money? 

Dr. Chen: Yeah, and I would say it probably differs from single family versus multifamily, right? So even though it’s all residential or it’s homes or people living in them, there are very two distinct ways of evaluating these. And so that’s why I focus on multifamily, but because when you have 200 units, there’s a lot of scale, there’s a lot of leverage, there’s a lot of efficiencies we can basically put into the underwriting because I don’t just have one unit that I’m looking after. And I can have a professional team to look after it because the property itself supports and needs a professional team to look under. But I would say overall, yes, like the real estate market has done so well over the last decade or so, right? And so it just really depends on the market. That’s why I think when I see, you know, CNBC or headlines or investors getting really excited or really scared, it’s usually a general headline. And that’s why it’s important to educate yourself. Even with COVID, the Texas properties continue to increase in value because more and more people moved here. That’s why it’s important to really, you know, educate yourself, find somebody who knows a little bit more than you because not all real estate is equal. And certainly, every real estate market is very, very different.

Jen: Terrific. Well, I really appreciate you coming and talking with us about this area of investment. I think a lot of people are interested in real estate investment, but don’t know which direction to turn and whether to invest as individuals. And as you point out, as physicians, the passive strategy may be more appealing to a lot of people. And it sounds like people can reach out and contact you. What is the best way for people who are interested in learning more to reach you? 

Dr. Chen: Yeah, Jen, so the easiest is just the website it’s The Real Estate Physician dot com. That’s easy enough. If you sign up, I’ll shoot you a welcome email and you can schedule a call. Again, like what I said, what I find so great about this is I’m just connecting with docs and trying to share and empower you to make a decision, right. So basically on those intro calls is just us chatting kind of like what we’re doing now and see, hey, does it fit you? Does it make sense? Or you want to understand how syndications are structured? And we just go over that. I’ve also written a guide, and so that’s free for people who sign up again, just to learn and educate yourself more. So yeah, the easiest way is just to go on the website and sign up, if it’s interesting.

Jen: Terrific. Well, thank you. Dr. Cherry Chen, thanks again for coming and talking with me today on DocWorking: The Whole Physician Podcast. 

Dr. Chen: Thank you for having me.

You May Also Like….

212: Ways To Stress Less Over The Holidays

“And so what I play with a lot with my physician clients is you're really good at being highly capable people who handle challenging and complicated things. But in this setting, can we shift, gear down to something that's more simple, that's more in line with your...