Earning passive income can be a dream for busy individuals. It offers additional income on the side while you continue with your main job. Today’s guest believes his profession should take advantage of passive investing. In this episode, Ava Benesocky and August Binjaz interview Dr. Tom Burns, a speaker and the author of Why Doctors Don’t Get Rich, a personal finance book he wrote to give hope and guidance to those who want to create the life they desire. Join in as Dr. Burns brings great value to physicians, dentists, surgeons, and other healthcare professionals looking to earn passive income on real estate. Find out how it is beneficial to those in the healthcare sector. Tune in to find out more!
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About Dr. Tom Burns
Tom decided early that passive income was the path to a more fulfilling lifestyle. With over 25 years of experience, he was building passive income before anyone thought it was necessary. Early in his career, many of his colleagues did not understand why he worked after hours to develop his investments. Doctors had been making so much money that it appeared there was no reason to focus on real estate investments. But Tom could see the early markers of economic decline within the medical economy, and he knew it wasn’t sustainable.
Fast forward to today, and most physicians are looking for a “side hustle” to supplement their medical income. As one of the original Pied Pipers of passive income, Tom is on a mission to use the experience that provided his freedom to guide you on your journey to financial independence. He has spoken to thousands of fellow doctors on how they can create streams of passive income. His latest book, “Why Doctors Don’t Get Rich”, summarizes the issues physicians face, and outlines an actionable plan on how you can solve your financial burden and begin the life of your choice.
Why Do Doctors Love Real Estate Investing – Dr. Tom Burns
We have another great show for you. We’re grateful because we’re joined by Dr. Tom Burns. He is an author, speaker, and coach. He is an Orthopedic Surgeon in Austin, Texas, and is a Physician for the United States Ski Team. Dr. Burns is the author of Why Doctors Don’t Get Rich, a personal finance book for professionals, and he’s listed in the acknowledgment section of Robert Kiyosaki’s book, Rich Dad Poor Dad. He’s also the Cofounder of Presario Ventures, a real estate private equity firm. We believe this interview with Dr. Burns will bring great value to physicians, dentists, surgeons, and other healthcare professionals looking to earn passive income from real estate private equity investments.
Thank you so much for being here, Dr. Burns.
Thanks, guys. I’m glad to be here.
We could start off by you telling us about your start in real estate investing and what was it about this asset class that interested you enough to dedicate your time to learn more about it and eventually become an active real estate investor?
It found me. If you’re a professional or a doctor, you go to college, then you go to medical school for a block of time, about four years, then you go to residency, and sometimes a little more training. During that time, I had no business classes. I was fairly entrepreneurial. I was an athlete, but I wasn’t going to get paid to do that, so I became a doctor who took care of athletes.
This was the key point. I was in the middle of my training, and we were trained by other doctors. These were the guys that I was supposed to emulate and be like for the next 20, 30, and 40 years. I started noticing that these fellas a lot of times complained about their life and the lack of control. Somebody else was determining their pricing structure. I found them in the hospital at 10:00 and 11:00 at night, when they had guys like me who had to be there. Yet, they were still in the hospital late at night. They might have been on their 2nd or 3rd marriage. They weren’t smiling all the time.
I don’t know if it was a touch of God or something, but something made me think that I need to look for something else because I don’t want these guys’ money if I have to have their life. I didn’t like the lifestyle that they were living and the feelings that they had about their life, so I started looking. At first, I thought maybe I’d wear a suit and go into administration. That was a dead end because I turned out not to be very employable. I looked at the stock market and it moved a bit too fast for me. You have to look at that closely, and I didn’t have any money anyway, so I started looking at some other things.
I understood numbers. I went to a little free seminar or two and understood compounding, money coming in, interest, and things like that and fell on real estate. The reason I ended up in real estate was that I thought it would bring me money that wasn’t correlated with my job as a doctor. I needed something outside of medicine. I found I could do it. I moved slowly, which worked well for me. I didn’t have to be first in or last out. I could do it with partners, part-time, full-time, or by myself. It fits the life of a busy person or professional. I was able to at least get a foothold in the asset class and grow from there.
To add to that, the simplicity of real estate, buying something that people live in, doesn’t get simpler than that concept when it comes to the asset class.
Allow me to ask this question. Why do doctors don’t get rich? It’s the title of your book. Please answer that question.
It’s a shocking title given to me by my friend who wrote the forward for the book, but it turned out to be a good title. It’s not that they don’t and it’s not doctors in general, but if you have to work for a living, you might make a lot of money, no matter what you get paid per hour, per procedure, or per contract, if you don’t perform that service or put in that hour, you’re not going to get paid.
If you get paid a lot, that’s great, but as soon as you’re unable to do that, the music stops and you don’t have that money coming in. That’s not necessarily my definition of wealth. The thought process is that if you have to work for your money, you’re not necessarily wealthy. Others will debate that, saying, “I worked and I have billions of dollars,” but usually, that extra money is in some investment that’s continuing to grow.
Why are doctors forced to work into their 70s?
This goes back a little bit, but they didn’t get a good financial education. Sometimes some people, not all doctor or professionals, might spend what they earn. It’s nice to spend less than you earn and use the rest to invest somewhere for later on. In that profession, they’re not necessarily in charge of their pricing. You can be the best doctor on the planet, be right next door to the worst doctor on the planet, and the insurance company is going to pay both of you the same.
What that means is that the insurance company is the one that’s going to determine your pricing. It’s not necessarily been an upward trend the last several years. It may have gone up a little or stayed flat while inflation’s gone up like that. What happens is there’s lifestyle creep, and a lot of people have experienced this. You think, “If I could make X amount of money, I’ll be set.” Once you make X amount of money, you are spending X amount of money, so you think, “If I make two X, I’ll finally be okay.” You get that expense creep. A lot of professionals get trapped into that without the thought of paying themselves first and putting that money into something that’s going to grow without your effort. That’s sometimes the thought process.
A lot of physicians are employed now. Back in the day, you set up your practice and you work as much or little as you wanted, hence, you made less or more money. At least in the United States, over 50% of them are employed. They don’t have much choice, so they have to keep working if they want to have a good nest egg. If they’re using the bucket theory and trying to create a big nest egg, they got to keep going.If you have to work for your money, you're not necessarily wealthy. Click To Tweet
I was going to say that in my communication with our good friend, Dr. Drew, he talks about the options that exist for a physician. Particularly here in Canada, as soon as you’re done with your residency and your med school, eventually, you come to a meeting. Royal Bank is there is one of our main banks here in Canada and they offer options to you, “RSP options. Here are mutual funds and some life insurance.” That’s the options that they know, and that’s what they invest into. Most of these investments have returns of 4% or 5% gross. The options don’t exist. It’s interesting that you mentioned that.
Those industries might even be fishing that doctor pond. They will sometimes prey on physicians, and doctors, lawyers, or architects may not know. I’ve had a number of people say, “I’m an investor. I’ve got a mutual fund account.” That’s often sometimes more profitable for the person who sold you the mutual fund account than it is for you.
The last several years have been a great time to be in the stock market. Some folks only know that as a means of investment than what you talk about on your show, and what I talk about all the time is it’s the passive income. Once you have enough passive income to pay for your bills, you can decide what you want to do with your time and money.
I was curious, what was it about multifamily in particular that enthused you?
I didn’t start there. I’ve done all kinds of asset classes, but those are some years ago. My partner and I have done retail land, manufactured housing, student property, and a lot of office property. We did a lot of stuff. We’ve both been through a couple of recessions and found that multifamily property and partners with granularity, if it’s built or bought right, meaning good location in an area that’s got growing jobs and population, even in a recession, they can hold their head up. If you can hold your property through a deep recession, they tend to rock it out of that recession.
I felt for many years that some recession was coming. We all know it’s coming. It’s just that we’d be famous if we knew exactly when it was coming. We wanted something that was a little bit more recession-resistant. Nothing is recession-proof, but that’s why we like the potential to live through a recession. The debt on multifamily is superior. We like debt and everybody needs a place to live. It just fits nicely. That’s where our main focus is.
As I always love talking to investors and I say through the 2008 financial crisis and the 2019-2020 COVID Pandemic, it was one of the best-performing assets in multifamily. Now, tell us what your connection is with Robert Kiyosaki and the Bible of the real estate investors, Rich Dad Poor Dad.
To this day, you hear people say, “I’ve found this cool book, Rich Dad Poor Dad.” That’s changed a lot of lives. Robert and I have known each other for many years, for better or worse. I’m the guy that bought the first ever book that was sold. I gave that back to Robert a couple of years ago and signed it up. He’s framed it in his office. We became friends back then and we’ve done some projects together. I’ve been to his seminars and his house. We’ve been friends for a long time.
The genesis of the book was we were sitting at lunch one day and I asked him what his next book was going to be, and he told me. He turned and looked at me and said, “You should write a book. You’ve got a story.” I looked at him funny, thought about it for a while, and decided maybe it was time. That’s why I wrote the book.
I would love to get a signed version one day if we meet in person. That would be great.
For the next question, let’s discuss founding a real estate private equity firm. How did the idea come about? What’s Presario Ventures’ investment strategy, and why is multifamily the preferred property type you invest in?
My partner and I met several years ago, back in 2001 and I was speaking for Robert Kiyosaki. I was on stage. He announced me and said, “Tom is from Austin, Texas.” I didn’t think much of it. I finished my spiel on stage. At the break, a couple came up to me and said, “We’re so and so. We’re from the Bay Area. We’re moving to Austin, Texas. Will you be our contact?” I said, “Sure.” They came and we met. I continued to run into Darin, who’s my partner. In fact, I ran into him a lot. His shoulder got bad. I ended up operating on his shoulder.
That’s my best tip. If you ever want a real estate partner, you need to operate on them, and then you can get to know him well. After a couple of years of seeing each other, he was doing land deals and building the suites, and I was doing bank deals and offices and things like that. We realized we had the same philosophy, so we teamed up together and did some stuff. We did our first larger multifamily development in 2008 and 2009.
This was ground-up development?
Yes. We developed it and cut our teeth on that. That’s where we learned about the HUD program. It was right in the middle of the recession. I could tell you all those horror stories if you wanted to know them. That’s when we started. It was under one name and we changed the name about half a dozen years ago to Presario. We pretty much focused on ground-up development. We’ve acquired a few things, but most of our DNA’s built into the development. We develop multifamily and build-to-rent communities now.
Build-to-rent is up and coming popular one.
Focusing on this idea to promote passive investing for doctors, you are a seasoned real estate investor. We assume that your ventures have been financially beneficial, but you are still practicing medicine. Is it fair to say that the plan is not to leave medicine but to create other sources of income? Not to get burnt out and not to be forced to work rather than doing it because you love what you do.
For clarification, not all ventures have been good to work. It’s been probably several years since my income from real estate eclipsed what I made as an orthopedic surgeon. I kept being a physician. I enjoyed it. I liked it. Why did I enjoy it? I grew my real estate business as I grew my practice. As the passive income started coming in, if there was something that was uncomfortable, disliked, or took too much of my time, I could eliminate it because I had the passive income and did not care about what revenue I might be missing.
I enjoyed my practice. Up until April 2021, it was great. I only worked in the mornings. I worked 2 to 5 mornings a week. I did not work afternoons and I had a perfect team. I loved the practice of medicine. I enjoyed meeting my patients. I could spend as much time as I wanted, but due to some other factors, I didn’t want to leave medicine, but I was pulled out of medicine. I retired in April of 2021.
Thank you. It took me a couple of months to decide. I didn’t know how it was going to be to miss medicine, but it’s been a good decision. It cut my geographic ties so I can do my business from anywhere in the world. What I like to do is travel. I’m off and out and about a lot, but that’s the premise of the book. You’ll rarely find a physician that got into medicine for the money. It’s too hard. There’s too much work. It’s ten years of work. There are easier ways to make money. There’s some surety of a reasonable lifestyle for sure.
Nobody should feel sorry for doctors because they make good money, but they didn’t get into it for money. They got into it for one reason or another. They liked the white coat. They wanted to help people. They had some seminal events where they decided they wanted to be a doctor. The reason to talk to doctors and others about creating passive income is it does what it did for me. I didn’t realize how blessed I was to have this happening. I was able to enjoy what I did for a living and eliminate the negative things.
It’s what I want and hopefully, what you want. You guys are younger than I am, but we want happy, passionate doctors taking care of us when we’re old. Fifty percent of them or every other doctor you meet, at least in the States, at one time or another, wanted to quit. We’re not rescuing people from cubicles. We’re enhancing a profession and a calling for a lot of people. That’s why I talk so much about creating passive income. You’re right. You mentioned that some people don’t understand that always, but it makes a better doctor.
Thanks for sharing that. Now, let’s discuss this concept of financial literacy and particularly here in Canada. What is the mindset here? I want my physician to be financially well off rather than having them have to go to work.Once you have enough passive income to pay your bills, you can decide what you want to do with your time and money. Click To Tweet
If you’ve got a physician that only makes money, if he charges you more, does more procedures on you, sees more of you, sees more people, and sees you less time, that’s not a great relationship. A lot of them are under that pressure and it’s not their fault. It’s a pressure that’s being put on them from above or economically. If you can eliminate some of that stuff, you can enjoy what you do a lot better.
The topic of investment in wealth building is taboo in most physician circles.
It’s silly. Long ago, I was spending my extra time learning about financial literacy. I was spending the money and the time to buy the books and go to the meetings. At one time, they said, “That makes you not as good of a doctor. You should be focusing on medicine.” That’s like saying you shouldn’t play with your kids. You should be focusing on medicine. I was taking the extra time. I burned the candle at both ends for quite a while to create that lifestyle.
At one time, it was a bit taboo, but I don’t think it is now. There’s a big upsurge in a lot of people in the medical and dental world that are trying to learn about this. It’s become a thing in the last several years, and so it’s less taboo. That probably runs parallel with the way medicine’s going because it’s becoming more corporate. A lot of private equity firms are buying out practices. Those get run efficiently, which means they get run corporately, which is not always the best for the patient or the doctor.
There are a lot of mergers and larger organizations. As medicines become more and more corporate, freedom and autonomy have declined, so people are starting to search. I was on a call with a physician and he used the word trapped, which I’ve used in the book and used a number of other times. They often feel trapped because they weren’t educated on what to do.
They’re told to go, “Talk to your financial planner and give them all your money.” “I don’t need to invest. I’ve got a guy.” That’s what some of them will do and that’s all they know. They don’t know what they don’t know, but I would say a higher percentage of people now are interested in learning how to take care of their own financial house than there were years ago.
Let’s switch the conversation a bit to how to service and help physicians who want to invest in real estate but might want to do it passively. Physicians are known to be autonomous. They’re specialists in a certain field. At times, they’re one of the only people in the world that understand the most about that particular aspect.
It’s difficult to now bring them this concept of real estate private equity or syndication, where there are investors who are silent partners and the general partner who manages the project but is pretty much hands-off for the investors. How do you convince a physician investor to invest in a partnership where they’re sitting back, writing a check, and for someone else to steer the ship?
Believe it or not, I never convinced anybody to invest in anything. I educate and make things available, but the good news is physicians are experts at learning stuff. I’ve known plenty of doctors that I’m in awe of what they’ve done outside of medicine. They started businesses and real estate companies. They’ve certainly got the mental goods. It’s a process of education and explaining the leverage of having somebody that has the money, time, and experience. If you marry those two together, everybody wins and profits. That’s how I explain it.
Furthermore, if you’re a busy doctor, what better way to leverage your time than if you’re making extra money, which most doctors do, but not all? You can keep doing what you do. Do what you trained ten years to do and what you may have done for 10, 15, or 20 years. That’s what creates the gun powder that you use to put into syndication and it takes none of your time.
It may take a little time early on because if you educate them, you explain to them how to evaluate things. If you do one deal, you learn a lot and it takes maybe a certain amount of time. The second deal you do takes less time because you got the experience from the first. If they do 1 or 2, they get good at it. That’s how I explain it. It’s how you can grow your money without putting any of your extra time in. That extra money will hopefully buy you more time in the future.
I’m curious. What are your predictions for the multifamily sector in 2022?
I wish I had a crystal ball. I’d be super famous. Our projections are that it’s still going to do well through 2022. The Feds are starting to get a little shaky, and the indications are interest rates are going to go up. That’s going to decrease asset prices a bit, but again, if you’re a passive income investor, you don’t as much have to worry about the asset prices, but cap rates will probably stay compressed through the year. They’ll lag a bit behind the interest rate rise.
We’re okay through 2022 and who knows what’s going to happen. if the interest rates can’t go too high because the Fed can only take rates so high, at least in the US, it’s going to impact the Federal Debt pretty heavily. We’ll go sideways for a while, but I think we’re okay. At least we’re projecting it because we’re starting projects that take two years to build, so fingers crossed.
I appreciate that. Now, we’re going to move on to the next segment of our show.
The Ten Championship Rounds to Financial Freedom. It’s whatever comes top of mind. I’m looking forward to your responses. The first question is, who is the most influential person in your life?
I’d say Robert Kiyosaki from the business standpoint.
Now, what is the number one book you recommend?
If you had the opportunity to travel back in time, what advice would you give your younger self?
I’m not sure. I would probably tell me to always think of the other guy still. I wouldn’t change anything because where I ended up now is where fate and life have brought me. I’m pretty happy to be here. I would try to tell myself to always keep my mouth closed a little longer and my ears open a little bit more.
Next question. What’s the best investment you’ve ever made?
It’s a doctor’s investment. It was in a surgery center. I put in a certain amount of money and in two and a half months, I had that money back, and it produced money for years. You don’t get those very often outside of our sector, but it was financially the best IRR I’ve ever had.
What’s the worst investment you ever made and what lesson did you learn from it?
I tried to buy an apartment complex by myself. It’s a small 22 units in the town of South Austin. I didn’t know what I was doing. I learned that management is key because I hired what I thought was a good manager. He put his son in there to manage, who decided that he wanted to go to the bar rather than manage. It came with a big block of tenants that came from another place, like a halfway house place, and soon as I bought the place, that contract dried up. I learned a little bit more about the asset class or the property before taking it on. I barely got out of it with my shirt.
Earlier, you mentioned that you have retired. This question is about retiring.
Let’s see what you have to say. How much would you need in the bank to retire now? What’s your number?
I never had a number. People always ask, “What’s your net worth?” Certain circles ask not over cocktails, but I never knew. I only knew when I had to send it in. I get underwritten a dozen times a year by the banks. All I wanted was enough passive income to cover what it costs for me to live. I had that on a QuickBooks spreadsheet. I knew what my utilities were, my house payment, my car payments, and all those things. I watched that each year and I knocked a section off here and there.
That’s the bucket theory. If you get a big bucket full of money, you live off of that until you die. The problem is our buckets get leaky sometimes. They get rusted and holes in them. The money leaks out faster. How big of a bucket do you need? Are you going to live for 20 or 50 more years? I’m hanging out with a guy who says that he is trying to keep me young for the next 50 years. He says we can live from 100 to 120 years old. That’s a big bucket of money. My answer is that I don’t have a number. I have a passive income number, which is whatever my expenses are and my lifestyle. As my lifestyle creeps, I’ve got to creep my passive income up with it.
If you could have dinner with someone dead or alive, who would it be?
We’re down here in Texas. Have you all heard of a place called The Alamo?
It’s a history thing. It’s where Mexico came and invaded, and there’s a last stand at the Alamo. The commander there was a guy named William Travis. He had his chance to save his men and surrender, which might have some negative consequences for the Texas bid for independence from Mexico. He decided to stay and fight against 286 guys against 3,000 opponents that he knew they’re going to die. I’d like to sit with him and ask him how he had the courage to press forward in the face of obvious and imminent defeat and death.
Is his picture on your website? There is somebody on horseback. Is that him?
It’s close. That’s Stephen F. Austin on a horse to signify that we were founded in Austin, Texas.
Next question. If you weren’t doing what you’re doing now, what would you be doing now?
I would either be a professional hunter or a travel agent. I like to travel. That’s a simple answer. I know that’s what I’d want to do.
My favorite question is book smarts or street smarts?
I prefer street smarts any day. I’ve been too book smart before and realized I needed some street smarts. It keeps you out of trouble.
Last question, if you had $1 million cash and you had to make one investment now, what would it be?
I’m conservative. I’d find something that produced a good 8% or 10% cashflow, at least with some upside. I’d probably stick it in one of our apartments. There are some technology investments as well. If it was an extra $10 million, I’d pop it into one of my tech funds. In a perfect world, I would always be in some real estate because it’s not going away.
We appreciate that.
Dr. Burns, what’s the best way people can reach you?
We appreciate your time. Thank you for coming on, giving us your time, and advice. I’m sure many physicians around the world will take advantage of all the advice and wisdom
Also, your wealth and knowledge. Thank you so much for being here.
I appreciate you guys. You are all great. Thank you.