How to Scale Commercial Real Estate

Mar 21, 2022

Can full-time physicians invest in real estate?

You may think high-income earners don’t have the luxury of time to invest in real estate deals, but Sam Giordano discovered a process that makes it possible. By discovering how real estate syndications work, Sam was able to invest in real estate and share his experience with his colleagues. 

He is now educating both medical cohorts and residents to start investing passively in various properties, allowing them to make the choice of going on with their day jobs or retiring comfortably at a relatively young age. 

[00:01 - 03:10] Opening Segment

• Samuel Giordano is a full-time physician
• • Here’s how he learned real estate
• The importance of real estate syndications for high-income earners like him

[03:11 - 13:29] The True Meaning of Financial Independence

• Sam shared the story when he realized he needed another income stream
• How PassiveAdvantage.com was born according to Sam
• Sam breaks down what financial independence means for him

[13:30 - 21:53] How to Handle Debts The Right Way

• Sam prioritizes teaching resident physicians about debt
• • He shares the reason here
• Physicians are often misinformed about debt and Sam wants to correct it
• • Listen to his explanation
• Sam offers an interesting thought about mortgage payments you don’t want to miss

[21:54 - 24:56] Closing Segment

• A tool or resource you can’t live without
• • passiveadvantage.com
• A real estate mistake you want our listeners to avoid
• • Consolidating student loans abruptly and without any plans
• Your way to make the world a better place
• • Educating both physicians and passive investors
• Reach out to Samuel
• • See links below 
• Final words

Tweetable Quotes

 

“When you combine the syndication investing with the traditional investing, it's just so powerful at how quickly you can [achieve financial independence].” - Samuel Giordano

“I think it's important to take your education very seriously. Focus on it, spend the appropriate time, and then be detailed at what you do with that.” - Samuel Giordano

“The ability to be a detailed person in terms of what I need to do to educate myself has allowed me to get where I am...” - Samuel Giordano

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Email samuel_giordano@hotmail.com or sam@passiveadvantage.com to connect with Samuel or follow him on LinkedIn. Is real estate syndication too complex for you? Learn how to simplify it by visiting Passive Advantage. 

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Email me → sam@brickeninvestmentgroup.com

Want to read the full show notes of the episode? Check it out below:

Samuel Giordano  00:00

The ability to be a detailed person in terms of what I need to do to educate myself has allowed me to get where I am everywhere in terms of everything. Whether it's in my medical profession and my real estate investing world, I think it's important to take your education very seriously focus on it, spend the appropriate time, and then be detailed that what you do with that. And that's probably something that personally I don't I'm not sure if that's sort of allowed in terms of the way the answer, but personally, it's most important to me from that standpoint.

 

Intro  00:29

Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we will teach you how to scale your real estate investing business into something big.

 

Sam Wilson  00:41

Samuel Giordano was a physician based out of New Jersey. Sam, welcome to the show.

 

Samuel Giordano  00:46

Thanks for having me, Sam. I appreciate it. This is the first time I've ever had an interview with another Sam. So right away, we have something in common. So that's great. Thank you for having me.

 

Sam Wilson  00:55

Absolutely. Man, this is fun. Thanks for coming on. I know it's early for you. It's certainly earlier even for me. And you know, that's maybe that's one of things we can talk about today is just kind of what it takes to get things done in the real estate space, especially when you're a full-time practicing physician. I know I've had a few others come on and it's, you know, 5 am for them, and they're just finishing up the shift. But you know, before we get into all that. The same three questions I ask every guest who comes on the show, in 90 seconds or less, can you tell us where did you start? Where are you now? And how did you get there?

 

Samuel Giordano  01:21

Yeah, no, thanks for the opportunity. And thanks for having me on Sam. I'd really gotten a lot of valuable information from previous guests and I, hopefully, I can provide some of that myself and thanks for having me. Yeah, so my name is Sam Giordano as you said, I'm a practicing gastroenterologist in New Jersey, I've been practicing about 10 years now. And, you know, had gone through the traditional personal finance sort of continuums that one does, as a new newly graduating physician about 10 years ago, trying to pay off student loans, you know, contribute to my children's 529. And then once you get enough capital, then you maybe have the opportunity to max out your retirement accounts, and then invest in sort of taxable brokerage accounts. But up until that point, most of my investing had been through the equities or the stock market, sort of the traditional path. And then I would say about three or four years ago, I was sort of enlightened to some opportunities in real estate and how it can benefit high-income professionals from a tax standpoint. So I started to do some due diligence on the different methods, you know, whether it be investing through real estate, turnkey opportunities, active involvement in real estate, and I very quickly realized, you know, I didn't want to be getting the nighttime calls about you know, leaky faucets and broken toilets and things like that, just because I'm a full-time physician, my wife's a full-time physician. And so we were made aware of investing in real estate syndications, like I said, about four years ago, and it just opened up this sort of rabbit hole for me to where I'm trying to dove right in, spent the full year kind of investigating things. And now since then, I've now gone, I've now been in over 12 deals over the last four years. So it's been a part of my investment thesis now. And I tried to allocate a certain amount of my investable assets to it, and it's definitely made a difference in my life, and I think it could make a difference in others as well.

 

Sam Wilson  03:11

Yeah, absolutely. And it's amazing. And this goes for, and I've said this on the show many times, but this goes for military professionals. This goes for high-income earners, and really across the board, but especially I see in those two groups a lack of financial education. In the physician space, you know, you get out and it's like, wow, these are really smart people. You guys are way smarter than I sucked at school. Oh, and it's like, oh, wait, there was never this, like just the basic knowledge on how to invest across, you know, non-traditional assets. It's like, wow, why is this so not taught in school?

 

Samuel Giordano  03:45

You're absolutely right. It's a big issue. And I work at a hospital that has about 700 physicians, we train residents, we train fellows. So I, even prior to investing in syndications, I do some education with the fellows that I train, instead of doing my traditional gastroenterology lectures, they buy on-demand, they basically want me to do some of the personal finance stuff. So I try to make a difference in that. But you're right, there's definitely a lack of opportunities for them to learn personal finance. So we try to bring it in because it's not like it takes that much knowledge or information to make a huge difference from that standpoint. So we try to make a difference in that as well. But you're right. There's a lack of that, no doubt.

 

Sam Wilson  04:25

Yeah. What was the scenario when you use the words enlightened and made aware? What was that scenario about four years ago when someone kind of brought this idea across your desk? 

 

Samuel Giordano  04:35

Yes, so you know, I really around 2017, when with the tax cuts and JOBS Act was enacted as somebody who lives in New Jersey, you know, I really got hit pretty hard as a two-position family with the tax implications when I couldn't deduct my state and local income taxes anymore. And so we had been sort of a traditional expectation of what our taxes would be on an annual basis and then that following year, I probably should have thought about some tax planning. But that following year, I was like holy cow, I can't believe we have this huge tax bill that we got to kind of write a check for. And even my wife and I are both W2 employees, and even though we're happy in our jobs, and we didn't want to really diversify out of that sort of W2 situation, I wanted to look for ways that I can sort of at least come up with a second sort of income stream that's more tax-advantaged. And that's when I started to come up on the real estate investing. And so a friend of mine had invested in real estate syndications and was trying to, you know, give me some information on the tax advantages. And even though you know, if you're not a real estate professional, you may not be able to offset your actual income, but you can definitely offset some of the cash flow from the syndications. And then there's sort of methods that you can do to sort of pass a pairing sort of effect that you can then invest in subsequent syndications when the syndication is concluding that year and try to offset some of the any of the capital gains and some of the depreciation recapture. So it just opened my eyes, I did it, I read as many books as I could, as many podcasts as I could, and then I got comfortable with finally investing. And then since then, you know, it's been great. So I think hearing about the opportunity to invest in the TAT in the real estate syndications. And then learning about the tax advantages was just like, I guess it opened a whole new world for me.

 

Sam Wilson  06:23

That's absolutely fantastic. I love the, you know, the kind of on-ramp, if you will for you. I mean, it took an entire year, educating yourself and saying, and for those of you who are raising money, myself included, that's something we just need to keep in mind is that it takes time to educate our investors. I'm comfortable with this idea. I mean, I know it took my own family allowed, like, Okay, watch me watch me, watch me. Okay, cool. Yeah, what you're doing there, tell me about what you guys are doing on that front on PassiveAdvantage.com.

 

Samuel Giordano  06:50

Yes. So basically, as I said, I work at a hospital that has over 700 physicians and I had, you know, being someone who's involved in the teaching of the personal finance and start, when I started to get into the real estate, it started to come up in more casual conversations in particular, over the last couple of years, like for the first couple years of my investing, I was kind of doing it just for myself. And then for the last couple years with the impact of COVID, on physician burnout, and more physicians kind of thinking about cutting down, either cutting out altogether and retiring or just cutting back to maybe a four day work week or a three day work week, real estate started to come up and more and more of the casual conversations I had with these physicians. And I would have, I would point them to certain podcasts or books that I liked, maybe some real estate forums, but it kept having the same conversation over and over with them. And then eventually, you know, I brought up sort of a tool that I've put together at the time for myself when a real estate syndication comes through my email, what I use to kind of look and see if there's any obvious red flag or risk points in the deal that if none of it, if it checks all the boxes the appropriate way, then I move on to a further deep dive into that deal. And so a number of people wanted to have access with that which I have no problem sharing. But the difficulty is, you know if I'm going to share it with other people, I wanted to make sure it was tidied up and you know, dot dot and I's and cross the T's. So then I partnered with my current partner who is sort of an Excel spreadsheet whiz and someone who vets deals for syndicators or pre-vets deals. And we sort of combined to form a deal syndication vetting sheet that allows you to kind of see some of the risk points and then that product then parlayed into a business that we have, which we call it with our website’s name, passiveadvantage.com, where our focus is in is educating investors and helping people be aware of some of the things to look for and some of the risk points when looking at real estate syndications.

 

Sam Wilson  08:47

That's really cool. So just so I understand a little bit more clearly, like you kind of have a secondary spreadsheet. I know for me when I invest as a passive investor, because I do that as well, obviously, yeah, there's just too many good opportunities. And I want to participate with my friends as well in those deals, but where you know, you have a secondary Excel sheet that you guys have created that then because I always get their Excel sheet because I want to see their underwriting. But then you'll go and plug it into your own proprietary Excel sheet and then kind of spit out a whole different set of numbers. Is that what I mean? 

 

Samuel Giordano  09:15

That's right, and the way that sheet is organized in that, it's basically it's organized for ease of use. So you input some of the data on one particular page, we call it the key metrics page, and then it sort of pre-populates into the rest of the sheet. So and then when we do look at specific deal metrics, a lot of it is drop-down based, so you don't have to go in and worry that a formula is not working or this isn't working. And then when a metric is outside of the range of normal, then it either highlights the cell red or green or yellow depending on what the desirability of that particular metric is, for example, like an exit cap or rank growth rate or something like that. It may then highlight that this should be something you may want to ask the sponsor about. So yeah, so we use the metrics that we get from the investment summary or any materials we get from the sponsor, and then input that into our sheet and kind of go from there.

 

Sam Wilson  10:10

That's fantastic. What a heck of a resource for passive investors. That's really cool that you guys are sharing that with your group there. Talk to me about financial independence. I mean, I'm gonna make an argument here and see if you can support or, you know, what's the other word I'm looking for there? Anyway, find the holes, deny, yeah. I say, “Hey, man, this isn't right.” Because I also have a passive investor and a lot of deals. But it's not enough, especially on a cash flow basis to really offset my, you know, working my call this my working income, right? Sure, for me going out and actively doing deals. And I would say the same for you. Even with 12 investments, it's not going to really change or offset your income. So what does that look like for you, when you use that word, financial independence? Obviously, you know, a lot of these deals, you get a big payday upon disposition? You know, in the interim, it's not an independence game, per se, as a passive investor, am I wrong?

 

Samuel Giordano  11:04

No, that's 100%, right. So when you look at financial independence, in the traditional sense, a lot of the personal finance blogs, look at what's called The Trinity Study, where they look at, you have to save X amount. And if you use sort of the 4% rule, meaning that you know, if your goal is to have, say, $100,000 in passive income, when you retire, you then have to save 25 times that to get to a 4% withdrawal rate. So then you would need to save 2.5 million to get to that point before you can retire on 100,000 annually, roughly, if you want to assume that that retirement will last a period of like 30 years based on that Trinity Study. So that's sort of the holy grail of how financial independence or retirement appropriateness is looked at in the personal finance world. So the advantage of incorporating the real estate syndication is that, instead of using that 4% rule, if you have, I mean, just assuming what sort of syndications on average is good from a cash flow standpoint, these days, when you take into consideration, both the cash flow and the disposition amount, say you conservatively do that as 8% so now you have maybe half of your investable assets in syndications that are garnering an average of 8% whereas you still do the traditional stuff where you can maybe assume that it's a 4% withdrawal rate if you want to take money out of the stock market. So then all of a sudden, that timeline to get to that 2.5 million, now, you could maybe when you do the combination approach get to that same place with 1.5 million, roughly. So it sort of truncates the timeframe to financial independence. And so if someone's goal is 10,000 a month passive income, then if we have a calculator within our sheet that sort of opens people's eyes to this ability to attain financial independence to where one example that we default to in that particular seed is that if somebody invested 100,000 annually, so you know, two depending on the, 50,000, minimum or 25, or you know whether it's two to four deals on an annual basis, and assuming reinvestment of any of the proceeds assuming an 8% return, assuming a 2% inflation rate, if you needed to reach that 120,000 a year or 10,000 a month of passive income through syndications only with that 100,000 A year investment, you could get there in seven to eight years. So instead of spending it and that's not even taking into consideration the stock market, so instead of spending your 25-year career on saving 2.5 million or you know something in that, or even 15 years, you can get there in seven, eight years on syndications alone, but you have to invest 100 grand a year, right. So to me, when you combine the syndication investing with the traditional investing, it's just so powerful at how quickly you can do that even if somebody doesn't want to retire, even if they want to cut down the four days a week, you may not need that full 10,000, you may only need 4,000 a month to sort of offset that one day or 5,000 a month or something like that. So yeah, I think that the cool thing about syndications is it really gets to sort of truncate down that process that it would take you to get there.

 

Sam Wilson  14:14

Yeah, and that's a really valid point. And I love that two-prong approach. Yeah, because there I mean, the returns that we typically project and see in real estate syndications. I mean, I couldn't sell an 8% return to investors over the life of the deal if I tried I mean, cuz that's just, I want to invest in that. Like I don't want 8% I want 12 to 15 like that's, right need to be in order for me to put money in. So you know, and not just obviously accelerated even further, not that you're always gonna get that but that at least, you know, the types of opportunities we look at. So to even further your point, it's like eight percent’s really low in a real estate deal. 

 

Samuel Giordano  14:47

And that's just being conservative, but you're right, you say a deal does perform like what we're looking at in the traditional IRR is lately like in that 12 to 14 or 14 to 16 then all of a sudden that seven years goes down to six years or five years. So you can be amazing. And you never you want to take conservative assumptions when you do these kinds of planning. But yeah, if things sort of continue as they were, then you can even truncate that even more.

 

Sam Wilson  15:11

That's fantastic. I love that. When you talk to the people that are coming on when you, I think you said residents or people coming in, and they kind of give them because I know that you are asked to speak about financial topics, what are some of the things initially because you can't just fire host, people with hey, real estate IRR? Is all this stuff? Like? What are some of the more basic things you start with?

 

Samuel Giordano  15:30

Yeah, so basically, the way that I sort of outline is it the physician world, like the big thing for physicians, in particular in training is like the student loan burden. So it used to be when I came out, it used to be $100,000, in student loans with a lot. But now unfortunately, in talking to a lot of residents and fellows, it's not uncommon for them to have 250 to 400,000 in student loans coming out, especially if it's like a two-physician couple. So this kind of burden is almost like a second mortgage payment. So when I teach personal finance to these residents and fellows, I always start with the debt piece. So I go over debt in more detail and what the plan is to attack the debt, you know, in terms of whether it's credit card debt, whether it's just student loan debt, whether it's other debt that they have, personal debt, and how to attack the debt piece first. And then I sort of go into the insurance metrics and you know, things you want to cover yourself from, insurance cover for catastrophe, whether it's life insurance, disability insurance, umbrella insurance at some point in time. So those are sort of the foundations of getting you got to get through that first. And then we sort of transition into what do I want to invest and I, even though I believe in real estate, I usually do start with, you know, equities investing and stock investing. And I would say the point of physicians about, I would say at least five to seven years out is when they would start to think about these alternatives that we're talking about. So it's not someone that is probably going to invest in this kind of thing right off the bat, they kind of have to get that foundation, build it up, have some disposable assets, then they can transition once that's all set in place to these more sort of alternative investments. 

 

Sam Wilson  17:12

How do you feel when talking about the debt piece? I don't know what student loans are, interest, you know, what they're charged on interest now, but it's got to be sub 3%? No?

 

Samuel Giordano  17:23

For some of them, believe it or not, there's some that are still in that five to 6% range. So the tricky part is in the physician world, there's something called like Public Service, Loan Forgiveness, or PSLF is a federal program that allows you if you work in an underserved community, or you work for a 501(c), charitable organization, which a lot of hospitals are, for a period of 10 years in total, those full amount of loans can be forgiven if you're paying what's called an income-based repayment plan. So if you're paying a certain percentage based on what your income is, then that can be forgiven. So in someone like me, for example, if I'm a gastroenterologist that requires four years of med school, three years of residency in Internal Medicine, assuming the four years of college, then four years of med school, three years of residency, three years of fellowship, so we're, just the medical training is 10 years, if you start that public service, loan forgiveness, or the Income-Based Repayment in the three of residency and the three of fellowship, you only need to work as an attending or a full-fledged physician for four more years to get those loans forgiven. So what people often don't know is if they consolidate those federal loans to a private loan, they disqualify themselves for being eligible for that. For some of these people, or they may have a 6% loan, but they consolidate into something lower, but they could and they're like, oh, great, I got a 3% loan now, but then they could have gotten forgiven if they worked three or four years. And they didn't even realize that. So there's a lot of misinformation out there. And we're, physicians don't aren't aware of all the implications, depending on the type of loans you have.

 

Sam Wilson  18:58

Right. That's intriguing. And guess the follow-up question to that would be if inflation is you know what it is now at six 7%-ish? Yeah. Do you change any of that if someone has a 3% loan and say, hey, you know what, maybe we won't pay that debt down as fast? Or is it one of those things where you just find getting that out of the way is just helpful to do?

 

Samuel Giordano  19:18

Yeah, so if they qualify for that Public Service, Loan Forgiveness, then I would still stick with the income based repayment plan and then you where you can maybe get it forgiven completely. Because say, you start with 300 grand and you're paying the income base, because the residents and fellows only make about 50 or 60 grand a year. So you know, maybe paying like 500 a month, then you may as well do that for the six years but you, net of what you're bringing down on that 300 grand, you may still owe 270 grand but when taken into consideration the interest rate. So if you can then forgive that over four years, it's still I think, a smart move to do that. But in someone who doesn't qualify for that PSLF and just has a fairly low-interest rate and they're just going to be paying it, then if you think you can manage that delta between the 3%, and what you can make on your investments, whether it's through equities or real estate, or whatever else it is, then yeah, I wouldn't rush into paying those off unless from a mentality standpoint, or there's some mental benefit to paying it off. But financially, if you can make that delta and the difference between the 3% of whatever you can make in investments, then there's no reason to pay that off any quicker. I agree with you. 

 

Sam Wilson  20:27

Right, yeah, that's interesting. It is. I mean, for me, personally, I don't have any debt on my primary residence. And it doesn't make financial sense, right? Like, rates are so low, but it's a nice little warm blanket that I put on him like, oh, I don't owe anybody anything for my house. So yeah, I don't like Yeah. And that's a personal decision more than it is a business one. But I just wondered how you coach people on that, you know, when they come in, like, Okay, here's my debt piece, because that's what you start with, you know, what that looks like. So thanks for breaking that down. Say, um, this has been a ton of fun. Thanks for taking the time to come on the show today. It's only got one more thing here you'd love to share with us before we jump to the Final Four.

 

Samuel Giordano  21:01

Yes. So what I was saying is, you see a big a wide variety of people's views on that mortgage component, like what you said, it feels good just to be able to know like, I have a place to live, I'm not, I don't have to worry about mortgage payments. And the other thing, depending on the size of your mortgage, it can free up a good amount of cash flow, which then you can earmark for other things. And you don't have to worry about that. But then you get the opposite end of the spectrum where you hear and you know, a lot of people in the real estate community, not to say it's the wrong thing. But it's just interesting. The difference is where some people say, take out a home equity line and you know, on your house, if the where the interest rates are and then use the Home Equity Line to invest in syndications, which, you know, it's I'm not quite to the point where my home is paid off, but I definitely have some equity. And I've thought about it, but I'm not at the mental space where I can just take some of that money and you know, take it out of my house to put it in some syndication. So it's an interesting spectrum.

 

Sam Wilson  21:54

It is. And there's again, it's more of a personal just comfort decision more than it is just a strictly numbers, dollars and cents decision. So yeah, resting was just curious what you had on that, say on the final question to this, what is one tool or resource you find you can't live without.

 

Samuel Giordano  22:10

So I would say my tool in the passiveadvantage.com site is one that I couldn't live without, but I think separate from that, you know, I would say that the ability to be a detailed person in terms of what I need to do to educate myself has allowed me to get where I am everywhere in terms of everything, whether it's in my medical profession and my real estate investing world, I think it's important to take your education very seriously, focus on it, spend the appropriate time, and then be detailed at what you do with that. And that's probably something that personally I don't, I'm not sure if that's sort of allowed in terms of the way the answer but personally, it's most important to me from that standpoint.

 

Sam Wilson  22:49

I love it. Question number two, what is one mistake you can help us avoid and how would you avoid it?

 

Samuel Giordano  22:54

Yeah, so I think, you know, getting back to the student loans, I would say, if you are a physician, listen to this podcast there you have student loans, even if you're not a physician, look into the PSLF program and make sure that you're not consolidating your loans before two that would disqualify you from starting with that. Because if you can wipe off three 400,000 in loans, it's a big mistake I've seen a couple of fellows make before I've had the ability to educate them. It's something worth looking into if you have a lot of student loans, and you may be working for a nonprofit down the road.

 

Sam Wilson  23:26

Right, man, that's fantastic. Question number three, when it comes to investing in the world, what's one thing you're doing right now to make the world a better place? 

 

Samuel Giordano  23:33

You know, I think the biggest thing and it comes back to the point one is educating, I think I'm a big believer in like, we get what we give, and whether it's through charitable donations, which my wife and I do through our donor-advised fund, or whether it's through educating others. I think it's my passion to help people whether it's, you know, some of our fellows and residents that we do on a personal level in the personal finance space are just helping guide them and their life decisions, or whether it's helping other passive investors invest in real estate syndications, maybe alert them to some common risk points or deal points. I think giving back to education is one of the biggest things that I try to impart as a way to help.

 

Sam Wilson  24:09

That's fantastic, Sam, if listeners want to get in touch with you or learn more about you, what is the best way to do that?

 

Samuel Giordano  24:14

So you can reach me through our website at www.passiveadvantage.com or you can email me personally at Sam@passiveadvantage.com and I'm happy to help any way I can.

 

Sam Wilson  24:25

Man, thanks for your time today. Appreciate you coming on the show. 

 

Samuel Giordano  24:29

Oh, it's my pleasure, Sam. Thanks so much for having me. It's been a great time. 

 

Sam Wilson  24:32

Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen, if you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners, as well as rank higher on those directories. So I appreciate you listening. Thanks so much and hope to catch you on the next episode.