Specializing in Multi-Family New Construction with Tom Burns

Full Transcripts of the Show for the Hearing Impaired:

Victor Menasce: Welcome to The Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. This is the weekend edition where we interview notable people from the world of real estate investing. Today is no exception. We have an amazing guest. He’s Dr. Tom Burns out of Austin, Texas, still practicing orthopedic surgeon, heading into surgery after tonight’s talk. Sorry to hear that, Tom. And we’re just really glad to have you with us. He’s the co-founder and one of the partners in a venture called Presario Ventures out of Austin, Texas, specializing in new construction apartments, although they’re in many different asset classes, including medical offices and various other things. But they specialize in new construction apartments, where they build literally hundreds and hundreds of new construction units every year, while Tom is still actively running his surgery. So, with that, great to have you here, Tom.

Tom Burns: Thanks, Victor. I appreciate it. And Victor as well a dear friend but you weren’t very nice to me making me follow Russell Gray, so I understand why that was 87% exciting. So, what a great person to have and a deep thinker and a real organized thinker.

Victor Menasce: Yeah, he sure is. He sure is.

Tom Burns: Glad to be here.

Victor Menasce: So, Tom, maybe the place to start, why don’t you give us a little bit of your origin story as it relates to real estate? I think there was a little purple book at the beginning of it somewhere.

Tom Burns: Yep. Pretty inauspicious beginning and as Victor mentioned, I’m a surgeon by trade. So, I started in the medical world. I actually started as an athlete but wasn’t going to get paid for it so I went into medicine. Had no financial training. In my medical training, I started noticing people that I was supposed to emulate that do what I do and they were complaining. And I thought they were making tons of money, but they were complaining about control and things like that and they were just basically working for their money. I felt that there probably ought to be something that wasn’t correlated to medicine. I thought it would be prudent to have some income outside of medicine. That’s where I fell on real estate. I looked at a number of things, but real estate fit the schedule of a busy surgeon. I could do it part-time, I could do it on weekends with partners or not. And it was slow enough moving that I could learn as I moved along. So, that’s really how I started with zero training. So, if anybody out there has never done anything before you can start and you can do well and probably do it faster than somebody like me.

So, I just started learning about real estate, started going to seminars, started reading books, and basically was moving along in my medical career; was kind of just burning the candle at both ends. Somewhere in that process about 1997, I had sort of been on the path already and had picked up a little bit of real estate and ran across a purple book. Kind of has its own story. But I did read Robert Kiyosaki’s book, that really cemented and crystallized what I was doing, at least in my mind, kind of submitted the term passive income to me. I knew I wanted stuff I didn’t have to work for or have to do surgery or see patients for. And so that’s where I kind of learned the word passive income. Became friends with Robert and we’ve been friends for the last 22 years or so, and read every book he brings out and he’s a consummate teacher. But kind of as I learned, I started small. I mean I started with like the statistics you showed at the beginning, my first product was a single– a two-bedroom one bath condo. Still own it today, just got the check today. I was looking at it to see if I’d had any issues. So, I learned that market, bought some crummy little house in North Austin one time but the reason I bought it is because it had a cell phone tower on it, and that was constant income. You know, it was wired to my account every month and it was enough to cover everything. So, the houses were extra, was not a pretty property. So, I started small, I became really, really educated in the student world, particularly at the University of Texas. And I got to a point where I could buy something over the phone, I knew it was a deal. And that went on for a while until it got more discovered. And as you’re in the market doing things and learning things, people sort of know you’re there. They come to you, they bring deals to you, they want to do things together. That started happening and as I got to where I wanted to learn more, I was reading and I was doing stuff.

You can take seminars, you can read books, but you really learn the most when you’re out there doing it on your own and making mistakes and I made tons. I made zillions of mistakes. And so I went up to a guy and said, “Look, I–” He was a friend of mind, he was a developer. I said, “I like what you do, will you teach me? And he said yes. And so I worked for him for two years. As an orthopedic surgeon, I did land deals and build [??? 05:07] with my friend for free. But that morphed into a good size medical office project. He’s still a friend. We’re still partners. We still own the project. At one point, right around the turn of the millennium around 2001, I was at one of Robert Kiyosaki’s [05:24] seminars. And he got me up to speak. And he said, and basically the reason he got me up was because he wanted to say, look, even doctors can do this. Because you know, doctors, they know everything, right? And so he was trying to show that even doctors if they kind of listen and stow their ego a little bit can learn some stuff.

Victor Menasce: And he’s railing against doctors. In fact, if you play the cashflow game, if you’re the doctor, you say, “Oh, shoot, I didn’t want to get that card because I’m gonna lose now.”

Tom Burns: Absolutely. Yeah. Yeah, exactly. And that was the point of why he brought me up was to say, you know, like Tom sort of broke the mold. He’s a doctor and even he can do it. So, if he can do it, anybody can, is kind of was his point. And so at that conference, nice young guy, and his fiance came up and said, “Hey, we’re from the Bay Area. We’re moving to Austin and going into real estate, will you be our friend? Will you be our contact in Austin, Texas?” I said, “Sure.” And that’s my partner, Darren, that you know very well. And that was close to 20 years ago. And we’ve been friends and partners for a long time. So, it just did, it did this, it just did that. So, as they always say, you learn, you make mistakes, two steps forward, one step back. The deals just get bigger, the amount of work sometimes is the same. But as your education grows, it just feels like you’re doing the same amount of work. So, it started with an $83,000 condo and now we do 300 units at a time. So, that’s kind of where we are now. We develop apartments, we acquire when it makes sense. We haven’t acquired anything in the last couple of years because it hasn’t made sense. And right now we’re pretty much developing new apartments and here we are today.

Victor Menasce: Yeah. I love it. So, talk a little bit about who you surround yourself with. I know you’ve got some friends that are big brand names guys like Gary Keller, you don’t talk too much real estate when you hang out with him mostly play guitar. But how important is that been in your personal development as well?

Tom Burns: It’s hugely important. You know, like Jim Rohn says you’re the average of the five people you hang around the most. And so a lot of the people that I’m with they are– they push you, they push me. And I often look at most of the people, you know, in fact, Victor and Rich, I look and say how do they do some of the things they do. So, it teaches you, it pushes you how to stretch. And sometimes you stretch without even knowing it and you look back a year before you realize that you’re sort of the bigger person and your capacity is more. So, I learned from them and everybody thinks different. You know, as you say, Gary Keller. Gary’s a philosopher, we barely talk real estate because he likes to use cash and I like debt, but we love guitars. So, we talked together about guitars. You can see I’ve got one in the background there. But his collection’s fabulous. I’ve held some really expensive guitars from Gary. But we talk, and he helps talk to me about writing books and we talk about real estate occasionally. Kiyosaki has been a friend, the advisor meeting, we are privileged enough to meet with Robert and his advisors a couple of times a year.

And those guys are, they’re bright guys, Kenny McElroy, I think is one of the best multifamily mind in the country. He’s laid back, he’s experienced, and he’s owned 8,000 units. So, I learned from them. I generally use both of these and keep the one mouth shut and just try to listen. So, I like masterminds because they’re different. So, I get into masterminds that sometimes don’t have to deal with real estate so that I can keep my hand on the pulse of other people that are excelling in their professions. And I learned from them all, just keep learning. When I bought that condo, I wasn’t thinking I’m going to go do big deals but it became easy. Buying the condos became easy, literally. People would just call me and I’d say I’ll take it because I just knew that market so well. What happened was it was that stretching thing. Don’t be afraid to stretch a little bit. Somebody would come to me and said, let’s do this thing together. My first stretch was buying– I bought apartments back in early 2000s. And I got my hat handed to me because I hadn’t learned it yet, but it was a good lesson.

So, don’t be afraid to dive in. You always want to dive in prudently and not leave any money on the table, but it happens. It’s happened to me so don’t rush, don’t be impatient. Be impatient to learn but don’t be impatient to succeed. It will follow you, it will come. We do learn the most. You don’t learn that much from successfully buying a condo. You learn a whole lot from crapping out on a 22 unit apartment complex when you didn’t know what to do. I learned a bunch of lessons and it helped on the next one which was 200 units [??? 09:53] so they’re painful. Sometimes they’re monetary, sometimes they’re something else. But try to look at them as lessons. I didn’t always when I was in the heat of the moment, something always comes out of them. Just know that you’re going to come out the other end. Something good’s gonna happen. Now I know even if I’m upset I know something good is gonna come from it. I just know.

Victor Menasce: So, right now we’re obviously in an odd set of market conditions where I think a lot of people are saying, “Ooh, shoot, I wish I hadn’t done that.” You obviously went through it in 2008, you experienced some of the pain of that. This is obviously different but it has some similarities. Where is your head out today? Are you saying “Ooh, I wish I hadn’t done that, or I’m feeling pretty good about things we didn’t do or things we did do”?

Tom Burns: I’ve kind of stopped saying I wish I hadn’t done that because I usually make it with the best information I have at the time, but we’re calm. I would have checked calm on your list, maybe happy place just because I’ve been through it a couple of times. Got crushed in 2001, did some better stuff in 2008, still made mistakes, doing okay now. It’s just because I have And found out what I forgot to do or what mistakes I made during this one. I promise you, catch me in a year, I’ll tell you what mistakes I made and what I overlooked. But you know, I just have to keep going through them. So, we are calm. We as a company, me, I’m calm. Now 2008 taught me a bit, so did 2001. So, I wanted to make sure that I was prepared for this. So, I was building my foxhole for this recession six years ago, removing all variable debt, removing any debt that had my name on it, everything’s non-recourse, or paid for. That was what Tom Burns did for the past several years because I expected this to come earlier. But there’s opportunity, it’ll come.

Victor Menasce: So, one of the forms of debt that you use, and you and I’ve talked about this quite a bit, you mentioned non-recourse debt. And I know you use a product in the United States that doesn’t exist in Canada, although there’s something similar through CMHC, use the HUD 221(d)(4) for a lot of new construction, and maybe talk a little bit about why you use that particular type product and why it’s so central to what you build?

Tom Burns: Sure. I’ll take you back to 2009, coming out of the recession, we had a piece of property, we wanted to build some apartments. GE Capital was going to be our debt. And some bad things happened in 2008, 2009, GE Capital went away. Nobody was lending money and somebody said, “Go check out this HUD program.” So, we learned on the fly, we went to HUD, HUD gave us money. That was very beneficial because we were the only apartment complex to come out of the ground in Austin, Texas in 2010. And so that gave us a nice big head start. We like HUD because it’s 40 years rather than 30. The rate is fixed from, it’s essentially fixed for 42 years because you get 20 months of interest only for your construction then you get 40 years beyond that, and it’s fixed from the day you lock your rate. So, that eliminates one of your two biggest variables which are debt, and then your taxes. So, we eliminate the debt. And on this particular project, we eliminated the taxes too, and I can explain that if you wish, but that’s a nice deal to eliminate those two things. But we liked it, and it’s got a lot of backstops.

Reportedly, I have not confirmed this yet, and our HUD attorney’s the top one in the country or one of the top three in the country and she hasn’t confirmed yet. But we hear anywhere from less than one to not yet 2% default rate on her loans. They’re very low. We keep hearing 1%. [??? 13:34] confirm that yet. So, they don’t want the properties back. They will work with you. If it’s Armageddon, they will lower your payment, they’ll do a refinance and reset your loan rate. You eventually have to pay it back but they don’t want that property. There are escrows, there’s money set aside when you build a HUD project. They force you to put a big chunk of money aside to build a HUD project. So, if you have a change order, you want to go from granite to marble, or if you want to change your cabinets or you want to upgrade the pool or something, there’s a pool of money that you can use and draw down on. If there’s other construction issues, there’s money for it. If you lease up slower than you want to, there’s money to cover that. So, we’d like the security and so do our investors. And because it’s such a secure loan, it’s a little bit less than most conventional loans, a few basis points; 15 to 25, just depending on where you are. And it’s not perfect, though.

There’s a lot of hoops, a lot of hoops you got to jump through. It’s an expensive loan to start off with, with fees. It has worked well for us. And the reason we’ve stuck with it is because it’s a consistent product. There aren’t as many people in that niche and we’ve become experts at it and you know, people in the state of Texas they know that’s what we do. Our project was the national apartment of the year in HUD in 2010. So, we got some notoriety. So, we decided knowing that there was going to be something like this coming, we decided to stay within our niche because when the business contracts, at least people are going to look for somebody that’s at least expert in their field. So, we decided we’d stay expert in that field and stay in that niche.

Victor Menasce: Oh, look at that. It’s Robert Kiyosaki.

Tom Burns: [??? 15:19] it’s Robert.

Victor Menasce: Let’s see what he has to say here.

Robert Kiyosaki: “Congratulations on your new book; why highly educated doctors don’t have any financial education. It’s greatly needed because I’ve met a lot of them and they may be a highly educated [??? 15:36] people. And they’re very important, especially today in this fake pandemic we’re in. But anyway, they really do need financial education. And thank you for being the doctor that provides it to them. Also, once again, as you know, you’re the guy that bought the first ‘Rich Dad’ book years ago in Austin, Texas at a carwash. And so I always wanted to congratulate you, thank you, and personally say thank you for being a friend and a teacher in this time of great economic change [??? 16:05]. Congratulations on your new book.”

Tom Burns: How did you get that? That was very nice. Thank you.

Victor Menasce: So, I had Robert recorded that yesterday and sent it to me. And I thought that that would be a nice little surprise for you. So, maybe– [crosstalk]

Tom Burns: That is a great gift, so thank you very much. That was really nice. You are so nice. Thanks.

Victor Menasce: So, maybe now’s the time to tell the purple book story.

Tom Burns: Sure.

Victor Menasce: Since you mentioned it, and then, of course, talk about your new book, “Why Doctors Don’t Get Rich”.

Tom Burns: You bet. I’ve been so lucky. It’s just things just fall sometimes, you know. I think if you stay open things happen. So, I’ve always been a reader. And this was 1997, right? So, I finished my doctoral training in 1991. And it was about 1989 when I thought, crap, I need to learn something outside of medicine. I love medicine. I’m still, as you said I’m still doing it. I make all of my money in the real estate world, but I still go in in the mornings and I like seeing patients. So, I’ve been reading along and what happened was my family left town. And when my family leaves town I do errands. So, one of those errands was to get my car washed. So, I went to this car wash, that’s where they take your money, they run it through and the guys wipe it down and everything and put all the stuff on it and so it’s kind of a higher-end car wash where you go inside to pay your bill. I go to pay my bill and I look on the back and there’s a book. I mean it’s a car wash, nobody sells books in car washes and it was just a little stack of books and it had ‘rich’ on there and it said, ‘Rich Dad Poor Dad’ And I go, “Let me see one of those.” [??? 17:40] “What the rich teach their kids about money and the poor middle class don’t.” I said, “Put it on my bill.” Because I read everything, right?

So, I finished my car wash, and I go home and I do whatever. I toss it on my desk and I go do my stuffs. 11:30 at night, I’m the only one in the house. I’m going to go to bed, I passed by my office. I just kind of opened the book to see what it’s going to be about. It was kind of interesting. And I stood there for a second and I read a page or two [??? 18:08] that’s interesting. I kind of leaned against the desk and read some more. And eventually, I sat down and read some more. By about 3:30 in the morning, the book was finished, and there I was. It’s 3:30 or 4:00 in the morning and I had nobody to tell. I had just read the best book I’d ever read in my life. I was at the time in network marketing. I was in the Amway business. So, I wait till about 6:30. I call up a friend and said, “You gotta read this book. I read the best book.” And he, of course, “Yeah, okay, sure.” You know, “Next time I see you, I’ll give it to you.” So, I just made sure he got it. In about a week he got the book. He calls me up and he goes, “You were right. Best book I’ve ever read in my life.”

So, he calls, there’s a number on the inside cover of this book. He calls the number expecting to get the publisher. He just wanted to find out who this Kiyosaki guy was. It’s really Kiyosaki, but people mess up the name. And so he calls and Robert Kiyosaki answers and says, “Who is this?” And he says, “My name is Joe.” And he said, “I got your book.” He said, “How’d you get it?” He goes, “One of your friends gave it to me.” He goes, “Great.” And you know, Robert said, “How many books did you [??? 19:12] bought at a car wash because Robert said, “Well, I put a couple dozen in a carwash.” And my friend says, “How many you got left?” And he goes, “All of them. Nobody’s bought a book yet.” And my friend says, “I’ll take them all.” Robert says, “Who are you?” He goes, “I’m an Amway and we teach people how to make money and stuff like that.” So, I had the next day gone and bought all the rest of the books in the car wash, handing them out to friends. I wish I’d kept more of them, but I kept the one that I bought. And we flew to Arizona, met Robert and Kim. He sits us all [??? 19:43] there was probably you know, eight of us, eight or 10 of us. He sits us all down and we learned to play cash flow.

So, cash flow’s a board game that Robert– so he teaches us how to play cash flow. The book was designed as a brochure to advertise the board game cash flow. We played, my wife won. So, I’ve got in my closet, I’ve got the game that Robert gave her that day for winning. And so we spent a day there and we go to Roberts’s house, and he starts hauling books out of his trunk. And I said, “Dude, I don’t want to take all your books.” He goes, “Nobody’s gonna buy them anyway, go ahead.” And so I took more of his books, handed them out to friends. My friend in Amway was sort of high up, he starts getting Robert inserted into Amway, and eventually Roberts talking to 50,000 people or 20,000, however many are in those big auditoriums, gets on Amway. He gets into their system, a bunch of books get bought. And then as Robert tells the story, then one day Oprah calls and he said, the day after he was on Oprah, he became famous.

So, that’s kind of the story, 41 million books later, and side story, I kept that book. And I saw Robert one day and I’m talking and I said, “You’re keeping those books?” He goes, “No.” I said, “I got that book. I got the first one.” He goes, “You got it?” I said, “Yeah.” I said, “You want it?” He said, “You’d give it to me?” I said, “Well, sure. It’s your book.” So, I gave Robert the first book, and they’ve now got it hanging in the Rich Dad offices as the first book ever bought. So, that’s the purple book story and it’s changed a lot of lives. It really did change mine. And I’ll promise you, and this is a true story. Whenever I kind of would get down or depressed or need something to cheer me up, I would read Rich Dad, again. I’ve read Rich Dad 20 times. I just think Robert’s a fabulous communicator and that’s the beauty of his book. And so he teaches you how to think, not necessarily how to go out and flip a house. He just teaches you how to think about and let you use your own faculties to decide how you want to make money.

Victor Menasce: So, tell us a little bit about the book.

Tom Burns: You know, hanging out with Robert, Robert, at one point or another he said, “Tom, you’ve got a story.” And I didn’t think there was much to it. And I had written some book chapters and a lot of articles and things like that. And he said, “You ought to write a book.” And so it’s called “Why Doctors Don’t Get Rich”, full credit for the title to Robert Kiyosaki. You know, he’s just a master and it’s a great title and it has stood the test of the two years that it took me to write it. I didn’t want a ghostwriter, I wanted the journey. I wanted to learn. It has been a journey, I’ve changed a lot, and I’ve learned a lot of things. And so I wrote every word in the book. It initially started out as a way to kind of help doctors or any professional, anybody that’s busy, or anybody with some discretionary income, that wants to do something extra. Even if you don’t have extra income, it’ll help you get there. During the process, I found out that a lot of my colleagues are really unhappy. In fact, it hovers around 50% at one time or another wanting to quit medicine. And if you ask them they’ll say I hate medicine. I said, “What do you hate?” And they’ll talk about all the bureaucracy and all that stuff. They say, “But I love my patients.”

So, doctors want to practice medicine. They just don’t want to do all the stuff they have to do. You could say they don’t get paid as much as they used to. But that’s baloney. We get paid really well. I mean, we just do. And so I’m trying to change their mindset and let them use a little perspective in the fact they’re blessed to have such a job. But they can be even more blessed and bless the world if they can take a little pressure off themselves and heal with the passion that brought them into medicine rather than trying to make sure they’re feeding their family. So, that’s what the book’s about. It’s a personal finance book and you can insert engineer, lawyer, street sweeper into the word doctor, it’s kind of written to doctors, but all the tenants are basic tenants. And so I wrote it for them. I wrote it for anybody that wants something in simple words that will help them kind of figure out how to start starting from why do you really want to have anything extra all the way through partly what to do. I don’t necessarily tell you how to go buy an apartment complex or flip a house, but I can give you the resources to get there. And it’s more about mindset. That’s why just to try to be useful, you know, everybody thinks you have to replace your income and quit your job. Well, a lot of people really don’t want to quit their job. Those that do, this book is going to help them do that. Those that don’t, I just want to take a little bit pressure off. So, they enjoy both. You just need to take a little bit of pressure, a little bit of financial burden off and life gets a little softer, it gets a little more fun, you smile more.

So, my mantra has always been to have fun no matter what you’re doing. So, that’s why I travel. That’s why I meet a lot of people. That’s why I hang around all those folks, you talked about, Victor because I just run into a lot of people and it’s a hot button, you know. Put me on a plane or put me in a group of people and I’m happy. So, that’s why I wrote the book. Maybe it’ll get me around some more people.

Victor Menasce: I love it. And one of the things that’s always impressed me about you I know a number of doctors and physician burnout is a big thing. It’s not just talked about in the press, it’s very real. A lot of them experience a lot of pressure to produce because the overheads are high. By the time they pay their malpractice insurance premium, and the front office staff and the back office staff, the rent; the overheads are high. So, there’s a lot of pressure to produce. You’re feeding a lot of families. A single doctor is feeding upwards of a dozen families at times.

Tom Burns: Right. Right.

Victor Menasce: You’re still carrying that overhead, but you’ve taken your foot off the gas, it’s not right to the floor so that you can actually enjoy what you’re doing.

Tom Burns: Exactly. Well, not to boast but over 10 years ago, and it’s close to 12 years now I replaced my orthopedic income. So, I didn’t need it 10 years ago, and I don’t always get paid. I don’t work so hard. So, my foots really off the gas. I’m coasting downhill, but I love it. I could compare W-2s for 2019, and it would be lower than most people like probably everybody on the call. I almost make close to zero, but I enjoyed the year. So, I still haven’t found anything that as that’s as fulfilling, I love doing a deal. It’s fun. I liked writing the book. I love speaking to groups. That’s nearly as fulfilling as being a doctor. I think the two are kind of the same. So, I don’t think I’m anything special. I’m just doing what I really like. So, now I got the money to do it. So, I can do both. So, I’m just lucky, maybe.

Victor Menasce: So, if someone wants to buy the book, if they want to get in touch what’s the best way?

Tom Burns: So, it’s not out yet, but it’s coming. If you will go to RichDoctor.com, you can sign up, you can pre-order. And if you preorder, I’ll send you a free ebook copy along with it.

Victor Menasce: I love it. Well, thank you, Tom. Thanks for sharing your thoughts and your wisdom with us today. And for the listeners at home, definitely reach out to Dr. Tom Burns at RichDoctor.com. And in the meantime, have an awesome rest of your weekend. Go make some great things happen. We’ll talk to you again tomorrow.Dr.-Tom-Burns–Victor-Menasce

Victor Menasce: Welcome to The Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. This is the weekend edition where we interview notable people from the world of real estate investing. Today is no exception. We have an amazing guest. He’s Dr. Tom Burns out of Austin, Texas, still practicing orthopedic surgeon, heading into surgery after tonight’s talk. Sorry to hear that, Tom. And we’re just really glad to have you with us. He’s the co-founder and one of the partners in a venture called Presario Ventures out of Austin, Texas, specializing in new construction apartments, although they’re in many different asset classes, including medical offices and various other things. But they specialize in new construction apartments, where they build literally hundreds and hundreds of new construction units every year, while Tom is still actively running his surgery. So, with that, great to have you here, Tom.

Tom Burns: Thanks, Victor. I appreciate it. And Victor as well a dear friend but you weren’t very nice to me making me follow Russell Gray, so I understand why that was 87% exciting. So, what a great person to have and a deep thinker and a real organized thinker.

Victor Menasce: Yeah, he sure is. He sure is.

Tom Burns: Glad to be here.

Victor Menasce: So, Tom, maybe the place to start, why don’t you give us a little bit of your origin story as it relates to real estate? I think there was a little purple book at the beginning of it somewhere.

Tom Burns: Yep. Pretty inauspicious beginning and as Victor mentioned, I’m a surgeon by trade. So, I started in the medical world. I actually started as an athlete but wasn’t going to get paid for it so I went into medicine. Had no financial training. In my medical training, I started noticing people that I was supposed to emulate that do what I do and they were complaining. And I thought they were making tons of money, but they were complaining about control and things like that and they were just basically working for their money. I felt that there probably ought to be something that wasn’t correlated to medicine. I thought it would be prudent to have some income outside of medicine. That’s where I fell on real estate. I looked at a number of things, but real estate fit the schedule of a busy surgeon. I could do it part-time, I could do it on weekends with partners or not. And it was slow enough moving that I could learn as I moved along. So, that’s really how I started with zero training. So, if anybody out there has never done anything before you can start and you can do well and probably do it faster than somebody like me.

So, I just started learning about real estate, started going to seminars, started reading books, and basically was moving along in my medical career; was kind of just burning the candle at both ends. Somewhere in that process about 1997, I had sort of been on the path already and had picked up a little bit of real estate and ran across a purple book. Kind of has its own story. But I did read Robert Kiyosaki’s book, that really cemented and crystallized what I was doing, at least in my mind, kind of submitted the term passive income to me. I knew I wanted stuff I didn’t have to work for or have to do surgery or see patients for. And so that’s where I kind of learned the word passive income. Became friends with Robert and we’ve been friends for the last 22 years or so, and read every book he brings out and he’s a consummate teacher. But kind of as I learned, I started small. I mean I started with like the statistics you showed at the beginning, my first product was a single– a two-bedroom one bath condo. Still own it today, just got the check today. I was looking at it to see if I’d had any issues. So, I learned that market, bought some crummy little house in North Austin one time but the reason I bought it is because it had a cell phone tower on it, and that was constant income. You know, it was wired to my account every month and it was enough to cover everything. So, the houses were extra, was not a pretty property. So, I started small, I became really, really educated in the student world, particularly at the University of Texas. And I got to a point where I could buy something over the phone, I knew it was a deal. And that went on for a while until it got more discovered. And as you’re in the market doing things and learning things, people sort of know you’re there. They come to you, they bring deals to you, they want to do things together. That started happening and as I got to where I wanted to learn more, I was reading and I was doing stuff.

You can take seminars, you can read books, but you really learn the most when you’re out there doing it on your own and making mistakes and I made tons. I made zillions of mistakes. And so I went up to a guy and said, “Look, I–” He was a friend of mind, he was a developer. I said, “I like what you do, will you teach me? And he said yes. And so I worked for him for two years. As an orthopedic surgeon, I did land deals and build [??? 05:07] with my friend for free. But that morphed into a good size medical office project. He’s still a friend. We’re still partners. We still own the project. At one point, right around the turn of the millennium around 2001, I was at one of Robert Kiyosaki’s [05:24] seminars. And he got me up to speak. And he said, and basically the reason he got me up was because he wanted to say, look, even doctors can do this. Because you know, doctors, they know everything, right? And so he was trying to show that even doctors if they kind of listen and stow their ego a little bit can learn some stuff.

Victor Menasce: And he’s railing against doctors. In fact, if you play the cashflow game, if you’re the doctor, you say, “Oh, shoot, I didn’t want to get that card because I’m gonna lose now.”

Tom Burns: Absolutely. Yeah. Yeah, exactly. And that was the point of why he brought me up was to say, you know, like Tom sort of broke the mold. He’s a doctor and even he can do it. So, if he can do it, anybody can, is kind of was his point. And so at that conference, nice young guy, and his fiance came up and said, “Hey, we’re from the Bay Area. We’re moving to Austin and going into real estate, will you be our friend? Will you be our contact in Austin, Texas?” I said, “Sure.” And that’s my partner, Darren, that you know very well. And that was close to 20 years ago. And we’ve been friends and partners for a long time. So, it just did, it did this, it just did that. So, as they always say, you learn, you make mistakes, two steps forward, one step back. The deals just get bigger, the amount of work sometimes is the same. But as your education grows, it just feels like you’re doing the same amount of work. So, it started with an $83,000 condo and now we do 300 units at a time. So, that’s kind of where we are now. We develop apartments, we acquire when it makes sense. We haven’t acquired anything in the last couple of years because it hasn’t made sense. And right now we’re pretty much developing new apartments and here we are today.

Victor Menasce: Yeah. I love it. So, talk a little bit about who you surround yourself with. I know you’ve got some friends that are big brand names guys like Gary Keller, you don’t talk too much real estate when you hang out with him mostly play guitar. But how important is that been in your personal development as well?

Tom Burns: It’s hugely important. You know, like Jim Rohn says you’re the average of the five people you hang around the most. And so a lot of the people that I’m with they are– they push you, they push me. And I often look at most of the people, you know, in fact, Victor and Rich, I look and say how do they do some of the things they do. So, it teaches you, it pushes you how to stretch. And sometimes you stretch without even knowing it and you look back a year before you realize that you’re sort of the bigger person and your capacity is more. So, I learned from them and everybody thinks different. You know, as you say, Gary Keller. Gary’s a philosopher, we barely talk real estate because he likes to use cash and I like debt, but we love guitars. So, we talked together about guitars. You can see I’ve got one in the background there. But his collection’s fabulous. I’ve held some really expensive guitars from Gary. But we talk, and he helps talk to me about writing books and we talk about real estate occasionally. Kiyosaki has been a friend, the advisor meeting, we are privileged enough to meet with Robert and his advisors a couple of times a year.

And those guys are, they’re bright guys, Kenny McElroy, I think is one of the best multifamily mind in the country. He’s laid back, he’s experienced, and he’s owned 8,000 units. So, I learned from them. I generally use both of these and keep the one mouth shut and just try to listen. So, I like masterminds because they’re different. So, I get into masterminds that sometimes don’t have to deal with real estate so that I can keep my hand on the pulse of other people that are excelling in their professions. And I learned from them all, just keep learning. When I bought that condo, I wasn’t thinking I’m going to go do big deals but it became easy. Buying the condos became easy, literally. People would just call me and I’d say I’ll take it because I just knew that market so well. What happened was it was that stretching thing. Don’t be afraid to stretch a little bit. Somebody would come to me and said, let’s do this thing together. My first stretch was buying– I bought apartments back in early 2000s. And I got my hat handed to me because I hadn’t learned it yet, but it was a good lesson.

So, don’t be afraid to dive in. You always want to dive in prudently and not leave any money on the table, but it happens. It’s happened to me so don’t rush, don’t be impatient. Be impatient to learn but don’t be impatient to succeed. It will follow you, it will come. We do learn the most. You don’t learn that much from successfully buying a condo. You learn a whole lot from crapping out on a 22 unit apartment complex when you didn’t know what to do. I learned a bunch of lessons and it helped on the next one which was 200 units [??? 09:53] so they’re painful. Sometimes they’re monetary, sometimes they’re something else. But try to look at them as lessons. I didn’t always when I was in the heat of the moment, something always comes out of them. Just know that you’re going to come out the other end. Something good’s gonna happen. Now I know even if I’m upset I know something good is gonna come from it. I just know.

Victor Menasce: So, right now we’re obviously in an odd set of market conditions where I think a lot of people are saying, “Ooh, shoot, I wish I hadn’t done that.” You obviously went through it in 2008, you experienced some of the pain of that. This is obviously different but it has some similarities. Where is your head out today? Are you saying “Ooh, I wish I hadn’t done that, or I’m feeling pretty good about things we didn’t do or things we did do”?

Tom Burns: I’ve kind of stopped saying I wish I hadn’t done that because I usually make it with the best information I have at the time, but we’re calm. I would have checked calm on your list, maybe happy place just because I’ve been through it a couple of times. Got crushed in 2001, did some better stuff in 2008, still made mistakes, doing okay now. It’s just because I have And found out what I forgot to do or what mistakes I made during this one. I promise you, catch me in a year, I’ll tell you what mistakes I made and what I overlooked. But you know, I just have to keep going through them. So, we are calm. We as a company, me, I’m calm. Now 2008 taught me a bit, so did 2001. So, I wanted to make sure that I was prepared for this. So, I was building my foxhole for this recession six years ago, removing all variable debt, removing any debt that had my name on it, everything’s non-recourse, or paid for. That was what Tom Burns did for the past several years because I expected this to come earlier. But there’s opportunity, it’ll come.

Victor Menasce: So, one of the forms of debt that you use, and you and I’ve talked about this quite a bit, you mentioned non-recourse debt. And I know you use a product in the United States that doesn’t exist in Canada, although there’s something similar through CMHC, use the HUD 221(d)(4) for a lot of new construction, and maybe talk a little bit about why you use that particular type product and why it’s so central to what you build?

Tom Burns: Sure. I’ll take you back to 2009, coming out of the recession, we had a piece of property, we wanted to build some apartments. GE Capital was going to be our debt. And some bad things happened in 2008, 2009, GE Capital went away. Nobody was lending money and somebody said, “Go check out this HUD program.” So, we learned on the fly, we went to HUD, HUD gave us money. That was very beneficial because we were the only apartment complex to come out of the ground in Austin, Texas in 2010. And so that gave us a nice big head start. We like HUD because it’s 40 years rather than 30. The rate is fixed from, it’s essentially fixed for 42 years because you get 20 months of interest only for your construction then you get 40 years beyond that, and it’s fixed from the day you lock your rate. So, that eliminates one of your two biggest variables which are debt, and then your taxes. So, we eliminate the debt. And on this particular project, we eliminated the taxes too, and I can explain that if you wish, but that’s a nice deal to eliminate those two things. But we liked it, and it’s got a lot of backstops.

Reportedly, I have not confirmed this yet, and our HUD attorney’s the top one in the country or one of the top three in the country and she hasn’t confirmed yet. But we hear anywhere from less than one to not yet 2% default rate on her loans. They’re very low. We keep hearing 1%. [??? 13:34] confirm that yet. So, they don’t want the properties back. They will work with you. If it’s Armageddon, they will lower your payment, they’ll do a refinance and reset your loan rate. You eventually have to pay it back but they don’t want that property. There are escrows, there’s money set aside when you build a HUD project. They force you to put a big chunk of money aside to build a HUD project. So, if you have a change order, you want to go from granite to marble, or if you want to change your cabinets or you want to upgrade the pool or something, there’s a pool of money that you can use and draw down on. If there’s other construction issues, there’s money for it. If you lease up slower than you want to, there’s money to cover that. So, we’d like the security and so do our investors. And because it’s such a secure loan, it’s a little bit less than most conventional loans, a few basis points; 15 to 25, just depending on where you are. And it’s not perfect, though.

There’s a lot of hoops, a lot of hoops you got to jump through. It’s an expensive loan to start off with, with fees. It has worked well for us. And the reason we’ve stuck with it is because it’s a consistent product. There aren’t as many people in that niche and we’ve become experts at it and you know, people in the state of Texas they know that’s what we do. Our project was the national apartment of the year in HUD in 2010. So, we got some notoriety. So, we decided knowing that there was going to be something like this coming, we decided to stay within our niche because when the business contracts, at least people are going to look for somebody that’s at least expert in their field. So, we decided we’d stay expert in that field and stay in that niche.

Victor Menasce: Oh, look at that. It’s Robert Kiyosaki.

Tom Burns: [??? 15:19] it’s Robert.

Victor Menasce: Let’s see what he has to say here.

Robert Kiyosaki: “Congratulations on your new book; why highly educated doctors don’t have any financial education. It’s greatly needed because I’ve met a lot of them and they may be a highly educated [??? 15:36] people. And they’re very important, especially today in this fake pandemic we’re in. But anyway, they really do need financial education. And thank you for being the doctor that provides it to them. Also, once again, as you know, you’re the guy that bought the first ‘Rich Dad’ book years ago in Austin, Texas at a carwash. And so I always wanted to congratulate you, thank you, and personally say thank you for being a friend and a teacher in this time of great economic change [??? 16:05]. Congratulations on your new book.”

Tom Burns: How did you get that? That was very nice. Thank you.

Victor Menasce: So, I had Robert recorded that yesterday and sent it to me. And I thought that that would be a nice little surprise for you. So, maybe– [crosstalk]

Tom Burns: That is a great gift, so thank you very much. That was really nice. You are so nice. Thanks.

Victor Menasce: So, maybe now’s the time to tell the purple book story.

Tom Burns: Sure.

Victor Menasce: Since you mentioned it, and then, of course, talk about your new book, “Why Doctors Don’t Get Rich”.

Tom Burns: You bet. I’ve been so lucky. It’s just things just fall sometimes, you know. I think if you stay open things happen. So, I’ve always been a reader. And this was 1997, right? So, I finished my doctoral training in 1991. And it was about 1989 when I thought, crap, I need to learn something outside of medicine. I love medicine. I’m still, as you said I’m still doing it. I make all of my money in the real estate world, but I still go in in the mornings and I like seeing patients. So, I’ve been reading along and what happened was my family left town. And when my family leaves town I do errands. So, one of those errands was to get my car washed. So, I went to this car wash, that’s where they take your money, they run it through and the guys wipe it down and everything and put all the stuff on it and so it’s kind of a higher-end car wash where you go inside to pay your bill. I go to pay my bill and I look on the back and there’s a book. I mean it’s a car wash, nobody sells books in car washes and it was just a little stack of books and it had ‘rich’ on there and it said, ‘Rich Dad Poor Dad’ And I go, “Let me see one of those.” [??? 17:40] “What the rich teach their kids about money and the poor middle class don’t.” I said, “Put it on my bill.” Because I read everything, right?

So, I finished my car wash, and I go home and I do whatever. I toss it on my desk and I go do my stuffs. 11:30 at night, I’m the only one in the house. I’m going to go to bed, I passed by my office. I just kind of opened the book to see what it’s going to be about. It was kind of interesting. And I stood there for a second and I read a page or two [??? 18:08] that’s interesting. I kind of leaned against the desk and read some more. And eventually, I sat down and read some more. By about 3:30 in the morning, the book was finished, and there I was. It’s 3:30 or 4:00 in the morning and I had nobody to tell. I had just read the best book I’d ever read in my life. I was at the time in network marketing. I was in the Amway business. So, I wait till about 6:30. I call up a friend and said, “You gotta read this book. I read the best book.” And he, of course, “Yeah, okay, sure.” You know, “Next time I see you, I’ll give it to you.” So, I just made sure he got it. In about a week he got the book. He calls me up and he goes, “You were right. Best book I’ve ever read in my life.”

So, he calls, there’s a number on the inside cover of this book. He calls the number expecting to get the publisher. He just wanted to find out who this Kiyosaki guy was. It’s really Kiyosaki, but people mess up the name. And so he calls and Robert Kiyosaki answers and says, “Who is this?” And he says, “My name is Joe.” And he said, “I got your book.” He said, “How’d you get it?” He goes, “One of your friends gave it to me.” He goes, “Great.” And you know, Robert said, “How many books did you [??? 19:12] bought at a car wash because Robert said, “Well, I put a couple dozen in a carwash.” And my friend says, “How many you got left?” And he goes, “All of them. Nobody’s bought a book yet.” And my friend says, “I’ll take them all.” Robert says, “Who are you?” He goes, “I’m an Amway and we teach people how to make money and stuff like that.” So, I had the next day gone and bought all the rest of the books in the car wash, handing them out to friends. I wish I’d kept more of them, but I kept the one that I bought. And we flew to Arizona, met Robert and Kim. He sits us all [??? 19:43] there was probably you know, eight of us, eight or 10 of us. He sits us all down and we learned to play cash flow.

So, cash flow’s a board game that Robert– so he teaches us how to play cash flow. The book was designed as a brochure to advertise the board game cash flow. We played, my wife won. So, I’ve got in my closet, I’ve got the game that Robert gave her that day for winning. And so we spent a day there and we go to Roberts’s house, and he starts hauling books out of his trunk. And I said, “Dude, I don’t want to take all your books.” He goes, “Nobody’s gonna buy them anyway, go ahead.” And so I took more of his books, handed them out to friends. My friend in Amway was sort of high up, he starts getting Robert inserted into Amway, and eventually Roberts talking to 50,000 people or 20,000, however many are in those big auditoriums, gets on Amway. He gets into their system, a bunch of books get bought. And then as Robert tells the story, then one day Oprah calls and he said, the day after he was on Oprah, he became famous.

So, that’s kind of the story, 41 million books later, and side story, I kept that book. And I saw Robert one day and I’m talking and I said, “You’re keeping those books?” He goes, “No.” I said, “I got that book. I got the first one.” He goes, “You got it?” I said, “Yeah.” I said, “You want it?” He said, “You’d give it to me?” I said, “Well, sure. It’s your book.” So, I gave Robert the first book, and they’ve now got it hanging in the Rich Dad offices as the first book ever bought. So, that’s the purple book story and it’s changed a lot of lives. It really did change mine. And I’ll promise you, and this is a true story. Whenever I kind of would get down or depressed or need something to cheer me up, I would read Rich Dad, again. I’ve read Rich Dad 20 times. I just think Robert’s a fabulous communicator and that’s the beauty of his book. And so he teaches you how to think, not necessarily how to go out and flip a house. He just teaches you how to think about and let you use your own faculties to decide how you want to make money.

Victor Menasce: So, tell us a little bit about the book.

 Tom Burns: You know, hanging out with Robert, Robert, at one point or another he said, “Tom, you’ve got a story.” And I didn’t think there was much to it. And I had written some book chapters and a lot of articles and things like that. And he said, “You ought to write a book.” And so it’s called “Why Doctors Don’t Get Rich”, full credit for the title to Robert Kiyosaki. You know, he’s just a master and it’s a great title and it has stood the test of the two years that it took me to write it. I didn’t want a ghostwriter, I wanted the journey. I wanted to learn. It has been a journey, I’ve changed a lot, and I’ve learned a lot of things. And so I wrote every word in the book. It initially started out as a way to kind of help doctors or any professional, anybody that’s busy, or anybody with some discretionary income, that wants to do something extra. Even if you don’t have extra income, it’ll help you get there. During the process, I found out that a lot of my colleagues are really unhappy. In fact, it hovers around 50% at one time or another wanting to quit medicine. And if you ask them they’ll say I hate medicine. I said, “What do you hate?” And they’ll talk about all the bureaucracy and all that stuff. They say, “But I love my patients.”

So, doctors want to practice medicine. They just don’t want to do all the stuff they have to do. You could say they don’t get paid as much as they used to. But that’s baloney. We get paid really well. I mean, we just do. And so I’m trying to change their mindset and let them use a little perspective in the fact they’re blessed to have such a job. But they can be even more blessed and bless the world if they can take a little pressure off themselves and heal with the passion that brought them into medicine rather than trying to make sure they’re feeding their family. So, that’s what the book’s about. It’s a personal finance book and you can insert engineer, lawyer, street sweeper into the word doctor, it’s kind of written to doctors, but all the tenants are basic tenants. And so I wrote it for them. I wrote it for anybody that wants something in simple words that will help them kind of figure out how to start starting from why do you really want to have anything extra all the way through partly what to do. I don’t necessarily tell you how to go buy an apartment complex or flip a house, but I can give you the resources to get there. And it’s more about mindset. That’s why just to try to be useful, you know, everybody thinks you have to replace your income and quit your job. Well, a lot of people really don’t want to quit their job. Those that do, this book is going to help them do that. Those that don’t, I just want to take a little bit pressure off. So, they enjoy both. You just need to take a little bit of pressure, a little bit of financial burden off and life gets a little softer, it gets a little more fun, you smile more.

So, my mantra has always been to have fun no matter what you’re doing. So, that’s why I travel. That’s why I meet a lot of people. That’s why I hang around all those folks, you talked about, Victor because I just run into a lot of people and it’s a hot button, you know. Put me on a plane or put me in a group of people and I’m happy. So, that’s why I wrote the book. Maybe it’ll get me around some more people.

Victor Menasce: I love it. And one of the things that’s always impressed me about you I know a number of doctors and physician burnout is a big thing. It’s not just talked about in the press, it’s very real. A lot of them experience a lot of pressure to produce because the overheads are high. By the time they pay their malpractice insurance premium, and the front office staff and the back office staff, the rent; the overheads are high. So, there’s a lot of pressure to produce. You’re feeding a lot of families. A single doctor is feeding upwards of a dozen families at times.

Tom Burns: Right. Right.

Victor Menasce: You’re still carrying that overhead, but you’ve taken your foot off the gas, it’s not right to the floor so that you can actually enjoy what you’re doing.

Tom Burns: Exactly. Well, not to boast but over 10 years ago, and it’s close to 12 years now I replaced my orthopedic income. So, I didn’t need it 10 years ago, and I don’t always get paid. I don’t work so hard. So, my foots really off the gas. I’m coasting downhill, but I love it. I could compare W-2s for 2019, and it would be lower than most people like probably everybody on the call. I almost make close to zero, but I enjoyed the year. So, I still haven’t found anything that as that’s as fulfilling, I love doing a deal. It’s fun. I liked writing the book. I love speaking to groups. That’s nearly as fulfilling as being a doctor. I think the two are kind of the same. So, I don’t think I’m anything special. I’m just doing what I really like. So, now I got the money to do it. So, I can do both. So, I’m just lucky, maybe.

Victor Menasce: So, if someone wants to buy the book, if they want to get in touch what’s the best way?

Tom Burns: So, it’s not out yet, but it’s coming. If you will go to RichDoctor.com, you can sign up, you can pre-order. And if you preorder, I’ll send you a free ebook copy along with it.

Victor Menasce: I love it. Well, thank you, Tom. Thanks for sharing your thoughts and your wisdom with us today. And for the listeners at home, definitely reach out to Dr. Tom Burns at RichDoctor.com. And in the meantime, have an awesome rest of your weekend. Go make some great things happen. We’ll talk to you again tomorrow.