Student housing and balancing your medical career with REI

THE SHOW TRANSCRIPTS:

Nick Raithel:               Hi, fellow investors and welcome to 7 Rules for Real Estate Investing. I’m Nick Raithel, your host and the creator of the 7-Hour book. Now, if you spent any time with real estate investors, being an investor yourself, you’ve undoubtedly become aware of the fact that many in the medical profession gravitate toward real estate investing. They’re either doing it passively, participating, for example, in a multifamily syndication or, in many cases, they’re even becoming active investors themselves.

Our guest today on the show is proof of that. As a practicing surgeon, he’s been involved in real estate investing for over 25 years. In addition to that, he’s also co-founded and sold a hospital. Right now, he currently serves too as the physician for the US ski team. Now with all of those experiences, he’s undoubtedly gained some incredible insights to share with us. Most importantly, though, where has he found the time to do it all? To find that out and get his insight, let’s meet our guests for this episode. That would be Dr. Tom Burns. Tom, welcome to 7 Rules for Real Estate Investing.

Tom Burns:               Hi, Nick. Thanks for having me on.

Nick:               Glad to have you on the show and looking forward to hearing all your insights. Particularly that last one about how you found the time to do all of these things and do them effectively and competently too. To begin, though, give our listeners a sense of how you came to be in your current role with Presario ventures.

Tom:               Well, starting back to it — so, as you said, I’m a I’m a physician by training. I’m an orthopedic surgeon. Most of my early years were mild entrepreneurship, nothing crazy. Did not have any business training and I was just about at the end of my orthopedic training learning how to do what I was going to do. Well, as I was doing that, I was watching the other physicians, the people that I was supposed to emulate and what I was supposed to do for the next 30 years of my life. Noticed that while they were making significant amounts of income, they weren’t necessarily happy.

There were there were complaints. There were complaints about time and how they made their money and control and things like that. That was just enough to spur me to look for something that might not be correlated with medicine. I thought it might be prudent to have a little bit of income that came in maybe outside the world of medicine. So, I looked at a number of things. Eventually landed on real estate for a number of reasons. You can do it with partners. You can do it part time. You can do it full time. I landed on real estate started learning that. Finished my training.

Started becoming a doctor and my real estate business, that started at five o’clock in the afternoons and on weekends. Did that for a long time. Small properties, little things. Learning here and there. Making a mistake. Make one mistake two victories. Two steps forward, one step back. Just started learning. Over time, people started noticing that I was in the market. I was in the student market at the time. That was where my niche started and I got to know that market like the back of my hand. People started to know that I was in that market. Deals would come my way. Partners came my way.

Eventually, hooked up with one partner and essentially, we developed a large medical office complex. The reason I hooked up with him was I went to him as I was going through my real estate kind of training and I said, “Look, I like what you do.” He was a real estate developer. I said, “I like what you do. I’d like to learn.” So, he allowed me to work for him. I worked about three years for him for free doing build the suits, buildings for banks, finding land, working and learning. That morphed into this large medical complex. There was a good synergy there with my background.

Through the process of that I was at one time giving a giving a talk in Phoenix, I was talking at a real estate conference and the guy introduced me as a physician and a guy from Austin. At the break, another person and his wife came up and said, “We’re moving to Austin. We’re going to be in real estate and we’d like you to be our contact.” Well, go forward 18 years and that’s another one of my partners. So, I just slowly started learning what I was doing and slowly zeros added, the scale of the projects added.

I was always looking for cash flow. That’s the one thing I did and that certainly stemmed from Robert Kiyosaki book. I was doing real estate and looking for passive income prior to his book. I didn’t know to call it passive income, but as soon as I read that book, I had one focus and that was basically to put assets in the asset box that would provide income for me and I ended up here.

Nick:               So, the big question. Going back, not only to the introduction of our show, but to everything you’ve just been talking about, the big question is how do you manage the time for all of that? How do you manage the demands really, of being a surgeon with also speaking, as you were saying, working for your mentor, and really just balancing it all, making it all work?

Tom:               If you need something done, give it to a busy person. It’s time management, focus, leverage. Certainly, leveraging other people as partners. I was determined. So, I would focus 100% on my job as a physician, but that would sometimes stop at five o’clock in the afternoon. Sometimes there were other things for me to do. But when the time was free, I just switched hats and switched focus. So. what happened was that was burning the candle at both ends for quite a while. Real estate’s not a fast game. It’s not designed that way but over time, the focus and the burning the candle at both ends developed extra time for me.

As I developed some passive income, I was able to back off just a little bit on what I was doing as a physician. I was able to take Friday afternoons off. That was the best decision I ever made. That gave me more time to work on some real estate. I became more efficient. The more you do something, the better you get at it, the less time it takes. So, I just was balancing those two and as the levels would change, it’s like looking at a scale. The scale just started changing. The time as a physician dropped a bit and the time in the real estate raised up and so they just of moved together. So, I think you can always find time for something you have a passion for.

Nick:               The last part you said about finding time for something you have a passion for. Is that along the lines of the advice you would give to our listeners who might be physicians themselves, or at least have friends and relatives in the profession, in terms of balancing their medical career with real estate?

Tom:               Yeah. There’s a lot of physician blogs and physician sites out there, and physicians are certainly looking at stuff like this. The question is should I be in real estate? My question back is what do you like and why do you want to be in real estate? We all got into medicine with some passion, some desire to help people. Going into medicine is not a financial decision. It’s too hard. There’s a lot of better things you can do to make money. So, almost every physician you know got into it because they like what they do.

So, if you find that you like real estate or something else, it’s an extra benefit if you’ve got a passion for it. You have to find out what you want to do with that extra income. That is where your passion will really be found is what you’re going to do with that.

Nick:               All right. Speaking of medicine and the interplay with real estate, let’s talk a little bit about your experiences: co-founding, managing, and eventually selling a freestanding full-service hospital. I think that’s certainly not the sort of thing that our listeners hear about every day. So, in your case, what led you to co-found the hospital?

Tom:               Well, I wouldn’t recommend it. My partner and I built 155,000 square foot medical office complex. At one point, we were approached to put a surgical facility inside that complex, which was a pretty normal business plan. Well, eventually, through our due diligence, we had enough people that wanted to turn that rather from a surgery center, which is just where you do outpatient surgeries to a true hospital. That was a big jump. So, we did our research. We gathered the people who basically syndicated the financing of it. We got the debt. We put the put the operating business inside of the real estate and ran that.

March 23 2010 was the institution of the Affordable Care Act, and that did put the clamps on physician-owned hospitals, but we were grandfathered into it. So, we ran that hospital from 2000 — I think we opened it in 2005 and sold it in 2018. So, that was 13 years of running a hospital and doing good work. We were number one in the state for patient satisfaction at one point. So, one, it was a good project. It’s a landmark now. It’s an excellent hospital. Thankfully, somebody else is running it. That was not my skill set, but it was something that was forced on me. So, it was interesting. We’ve done some good. There was a little profit in it, but it was it’s not a business path I would suggest.

Nick:               For what you’ve described with founding the hospital or co-founding rather, it sounds like you’ve sort of bumped into it by accident. What advice though, would you give someone who goes out and actually wants to start a hospital? Where would they even go about –? Where would they even start in doing so?

Tom:               First advice is don’t do it. Second, advice is if you know nothing, you’d have to find somebody that’s done it, as in anything partner, leverage the experience and knowledge of somebody else. So, if there’s a need for a hospital or a surgical facility, if somebody is inexperienced, I would partner with somebody that’s done it. You can certainly bring value. You can bring physicians to the project. You can bring some other things. You can bring some equity. Find some debt, but as far as operations go, you absolutely must have somebody that’s done it before. There’s way too many regulations. A lot of government hoops that you need to jump through and you need to be real careful about. So, you have to run it just right.

Nick:               Then about the opposite end of that: selling off the hospital. Assuming someone listening still goes past the advice, what you’re saying of not starting hospital, assuming that they do start the hospital, maybe they’re even crazy enough to try to manage it or have a team managing it, despite your advice, again, and they get to the point where they want to sell off the hospital. What does that process entail and how exactly does it happen?

Tom:               Oh, sure. Well, it’s a fairly small community. Most people will know if something’s up for sale. Hospitals are purchased hospital or surgery center. That’s two different entities. One’s a smaller entity and one’s a big place where people spend the night and we did heart surgeries in the place. There are private groups and public groups. There are large private equity groups that privately own and manage and run hospitals. Then there’s also large hospital systems.

 Wherever your listeners live, there’s a large hospital system there, whether it be Kaiser or Ascension or HCA, those are big national chains. They will often be your first pool of buyers. If you’re lucky, you can get a private entity competing against a public entity and you can just decide which closing timeframe and surety closing fits your needs.

Nick:               If an investor wants to become involved with a hospital on maybe a more passive income basis, what sort of cash flow could they expect? I’m assuming it would vary based on the market and the hospital dramatically, right?

Tom:               Yeah, it varies. I tell you most hospitals are owned by hospital companies. So, there’s no ability to own shares in that. Some of the private companies might allow somebody to be an investor, but that’s usually on the private equity stage. Then the other investors, if it’s a truly physician-owned surgery center, they’re only going to want a physician to own it. They’re typically going to want a physician that’s a surgeon to own it. So, it doesn’t leave a whole lot of options for the typical investor to invest in a hospital. Hospital real estate, absolutely, but maybe not the operational hospital.

Nick:               When you say hospital real estate, how would you define that?

Tom:               Well as in our case, we own the real estate and the hospital was a tenant. Sometimes some hospitals wish to not own the dirt. Some do. Some will buy the dirt. Get the contractors and build the hospital. Sometimes they’ll buy one that’s in place. I’ll tell you and this is something that we do with our company is another good option is to take a large hospital campus that’s anchored by a named hospital. There are generally multiple pads within that campus to build medical office buildings and ancillary services that support that hospital. Those are well received by tenants and heavily nicely underwritten by the lenders and by purchasers. So, probably the best way is find a piece of land near a hospital. Medical office building, it’s a nice somewhat recession resistant asset.

Nick:               One more question for you, Tom, with respect to hospitals. For our listeners who maybe in need of a hospital a future or they may have family members or friends who are seeking hospital, what advice would you give them beyond just insurance covering it on how to pick the right hospital for them?

Tom:               Sure. Always ask your friends. You’re going to run into a doctor somewhere who knows a hospital, a friend of a friend or physician you know. There are Medicare star ratings, which you can look at it. There are five-star rating. You can look at a four versus a five star, those are pretty much the same kind of place. You’re just looking for someplace that’s got one or two stars; you want to avoid that. Most of the time, your physician will guide you there. What’s going to happen is you’ll probably go to a — if you’re getting surgery, you’ll go to where your physician goes, typically.

If you’re just in need of a hospital, often it’s convenience and you don’t have time, you’ll just go to the emergency room that’s close to you. But if you really got that time to sit back and think about it, just ask around for friends. They’ll tell you their experience and try to gather that pool of information and kind of make a decision.

Nick:               Transitioning now. I want to go back to something you mentioned earlier: your first stage of real estate investing, where you were involved in student housing. What are some examples of student housing projects that you’ve been involved in?

Tom:               It started small. I mean, it was single condos. Buy a condo, lease it out to students. I liked it because at the time it hadn’t been discovered as much as it has now but at least where — mine was at the University of Texas. Large university. Close enough to walk or use the bus system. It was a small condo that rented for well above that 1% rent ratio that you’ll see sometimes in print. The vacancies are miniscule. I mean rent vacancies, essentially 100% minus the 10 days it takes for turnover in August. So, you got a 96% vacancy rate constantly every year.

So, I bought those in onesies. I bought one and bought another one. All of a sudden, the brokers kind of knew that I was the guy out there buying condos and started calling me. One good example is one of my managers called me and said, “Hey, I’ve got a condo.” He gave me the numbers — I’ll give you two examples. He gave me the numbers and I said, “Those are fabulous, how come you’re not buying it?” Because he did that too. He goes, “I don’t have the cash.” It had to be a cash buy, but it was probably a 25% discount. I went in there. Looked at it once and bought it. Also knew the property well enough.

Some of your listeners might not remember, but there’s this thing called a newspaper. Back in the old days, I used to look at Sunday and Sunday evenings there would be the real estate section. I looked and I found a condo down on campus. I turned to my wife and said, “I’m buying this tomorrow.” She said, “It’s just an ad in a newspaper. How can you tell?” I said, “Unless it’s gutted with fire or filled with rats, this is a good deal.” So, you asked how I get time to do this. I was seeing patients in my office. This property was eight blocks from where my office was. So, I got everybody squared away. Walked out the back door. Went over there. Went through it as fast as I could. Saw the broker. Wrote an offer and got back to my patients before they knew I was gone.

So, that is one way to do it, but this was a student property. It was bought by a father for his daughter. Four years before, the father was in Houston, this was in Austin, didn’t realize that the student market had taken this exponential growth over the last four years. The broker was just a friend who did downtown real estate and didn’t do student real estate. So, I bought the property for less than they offered it for which was well underpriced anyway. Got it reappraised and that was one of those Robert Allen no money down deals. I literally went to the closing table, they wrote me a check for $1,000 and it’s cash flowed for the last 15 years.

Nick:               Apart from those early condos, what would be some other examples if you have been involved in them of larger student housing projects?

Tom:               Sure. So, that turned into just larger condo units and apartment units, 40 units, 100 units. We took one apartment complex, did a condo conversion. We did that for a number of years until the student market got a little bit oversaturated and a little overheated. We moved out of that. We ended up just doing larger properties instead of from onesies. I got one of my partners and I we started doing larger units and those are very profitable.

Nick:               Your involved though beyond just student housing these days in multifamily, in some land developments, other asset classes, what’s the appeal of student housing compared to those other assets?

Tom:               Man, once you get a hold of a student housing property, it is just always full. For example, 2008 recession, my student properties at worst for one year just had flat rents and they went up after that. So, student housing is extremely secure. At least with the availability of student debt and all that everybody, the schools fill and these units always fill up. I tend to own smaller units, either one or occasionally two-bedroom units. The larger ones, they’re a little harder to lease. They have to lease earlier, but I have, gosh, since the ‘90s, I’ve had student housing. I still have it and it’s never been less than 100%. Other than problems with people moving out, but they always lease.

They always lease and they lease for a high rental rates. We’re over $2 a foot at the university. There’s a little higher costs. Students are not as gentle on your property as maybe your grandmother might be but that’s why at least primarily one-bedroom units because that’s usually not the party site. It’s usually the larger one’s site. At least one bedrooms. A little bit extra expense. High rent. They cash flowed nicely.

Nick:               In this discussion of student housing, something that our listeners may be thinking about, which certainly is a consideration, is the growing popularity of online education. How would you see online education and the fact that there are now, some would consider them to be viable educational offerings where you don’t have to actually go to a university –? How would you see that impacting student housing as a viable real estate asset class in the future?

Tom:               Well, I’ve not been asked that before, but I don’t think it’s going to touch it. I think university is more than just an educational experience for a lot of people. It’s a big social experience. It’s where you kind of grow and become at least part of who you’re going to be. So, I think the social interaction and the face to face contact is always going to be there. I still think the universities are going to offer some things that you just can’t get online. With the growing population, I don’t see that as an issue. Most of the places where we’re building multifamily in university areas, the projections are staggering the growth of the of the university. So, I’m not seeing that as a problem in the future.

Nick:               So, student housing is not going the way the dinosaurs or anything like that, it’s still going to remain viable, you’re saying?

Tom:               I’m telling you I think so. They’re putting up towers left and right at these universities, and there’s big money doing it now. So, I think they’re there to stay.

Nick:               One more thing I want to ask you about. One more area before we get into your seven rules is the fact that you’re involved right now in Class A multifamily properties. Now, for our listeners, that’s not a mistake. That’s not an error. I did say Class A. The reason that might stand out is the fact that many podcasts out there that are talking about multifamily, a lot of forums, bigger pockets, the common refrain is to go after mom and pop properties, your Class B’s, your Class C’s. You and your colleagues at Presario are focusing on Class A. Why is that?

Tom:               Well, in Class B and C and the value-add spaces and excellent business plan, this is just another way to skin the cat. We ended up, early in our career back around the recession, we actually had a piece of land and ended up developing the apartments and found a debt product that we really liked. This is a 40-year government backed debt product with fixed rates through 40 years. So, through that, we built that project. It was rough. It was during the recession. So, it was credit cards and lines of credit and making sure we got everything done because everybody was scared in it running at the time.

We developed an expertise in the Class A and so rather than buying something and increasing its value by upgrading the units or the exteriors, which increases the NOI and increases the value, we chose to build our equity, so to speak. If you take a raw piece of land, get its entitlements, and go vertical with that, you build at a higher cap rate. By the time you’re filled up with tenants, you’re at a lower cap rate. So, that cap rate spread, gives you your equity. It’s just another way to skin the cat. We have a lot less deferred maintenance.

It’s usually about 9 or 10 years before you start spending much money to repaint and redo lobbies and leasing centers and things like that so they’re stable. The primary reason is the debt. We love the debt. It’s low rate. It’s long amortization. It’s backed by the government and it just allows us to eliminate interest rate risk for 40 years and we like that

Nick:               With Class A properties, there’s undoubtedly a degree of risk, since it is all very, very brand new. How do you mitigate that risk?

Tom:               Well, having done it so long we know what the value is going to be when it’s filled up. Absolutely, there’s always construction risk. We do it with contingencies. We do tend to over raise. So, we’ll over raise and the loan product we use has a large number for construction overruns and a large number for contingency if, say, you don’t lease up fast enough. So, we have lots of money in the project. It’s there to be used if needed. So, that’s one way and if things go as planned, then you just get that money back. So that’s nice.

We do market studies. We do our own market study, and then our lender does a large market study. So, we pay for one big one, the lender does another one. I think they allow us to pay for that as well. So, we have two market studies. We look at the similarities, and generally won’t even consider your building unless there’s a significant need for housing in that area. We look at other projects that are in the pipeline. We want to make sure that if there’s a 2000-unit need, we want to make sure there’s not 3000 units in the pipeline. We want to see that there’s 500 units in the pipeline and we’re another 240.

So, once you do that, it takes us about 14 months to go from dirt to leasing the first buildings. Our investors are patient. We tell them, “There’ll be nothing the first year and a little bit the second year and then the third year when things are stabilized is when you start getting your money back.” We make sure they accrue a preferential return during that kind of no dividend period.

Nick:               Well, considering what you’re saying now about Class A properties and your experiences, particularly how you do mitigate that risk, and all the other insights thus far on student housing, I think it’s pretty clear that you are an expert on this, to say the least. So, let’s dig in then and hear more of your expertise specifically in the area of your seven rules. Would you say those seven rules for real estate investing are?

Tom:               All right. I could probably give you 70, but I just sort of free associated a few of them here. The first one, and I mentioned it before is to kind of know why you want to get into real estate. We all like to have a little extra money, but it’s not really the money we’re after. It’s what it buys. Money buys different things for a lot of people. It buys freedom. It buys time. It buys time for your kids. Gives you a chance to give.

Kind of know why you’re doing it because sometimes it’s not all that fun. It’s the same thing as going into medicine. You have to know why you’re going into medicine. Everybody gets the same, the same piece of paper, the same coin, but everybody’s use for it is different. So, I always like to start with why, no matter what you do. That’ll drive you when things aren’t going as smooth as you’d like.

The next get educated. That’s what I did. I mean, I started, truly — as I said, I knew absolutely nothing about finance or real estate and I just started reading. I read everything available. So, I read books. I listened to podcasts like yours. I, truly, went to a mentor and said, “Tell me what you do.” These days there’s meetups. There’s social media that you can — there are Facebook groups. There are all kinds of Facebook groups about real estate. Don’t be afraid to make mistakes. As you’re getting educated, you will make some mistakes. I made plenty.

As I said, two good things. Your mistakes is where you learn and I learned a lot. We’re in apartments now. I bought a small apartment building before I knew what I was doing. I barely got out of there with my shirt, but I learned a lot and that had helped me the next time I bought an apartment complex. So, as you get educated, just get in the game. That’s where you’ll learn the most. It’s where you’ll make a few of those mistakes. You’ll meet the people that will help teach you. You might meet your mentors.

So, as part of that education, decide if you want to be active versus passive. My mindset was I like to control. I like to help other people make money and I like the active portion of it, but you can be passive. I have a physician friend who focuses on his practice and all he does is invest with other people. He’s basically created enough cash flow that he doesn’t have to be a physician if he doesn’t want to and like me, he continues to do it because we both kind of like what we do. So, you just have to decide what you like best. It might be multifamily or office or mobile homes or storage or hospitality.

Real estate is not just one thing. It’s a large aggregation of millions of local markets. Last thing about education, if you’re going to be active, you need to learn what makes a good deal. That means kind of getting in the game and finding out what’s good and bad about it. Using your mentors. If you’re going to be passive, it’s helpful to know what makes a good sponsor. I won’t go through everything, but there are sponsors that are out there to take care of their investors, and that’s how they keep a long-term business and that’s the kind of sponsor you want to be with. There’s a number of attributes that go with that.

Number three, the Tom Burns model, I’ve literally got it from Robert Kiyosaki. I think I was doing it before that. It’s just I invest for cash flow. I figured that whenever my income was going to be, if I could bring in $1 that I didn’t have to perform a service or use a portion of my time, then I was ahead of the game. Hopefully that dollar would grow to 10, maybe 100, maybe 1,000. Over time, that passive money that’s coming in starts making babies then it starts creating its own passive income.

Eventually, you can either lessen the financial pressure that you may or may not be under, or you could even maybe replace your income. Then you can decide what you want to invest for. Then you can roll the dice and maybe invest for some big capital gains. There’s nothing wrong with capital gains. That’s another great way to do. It’s just my way I like cash flow because you can monitor it, you can really see the results quickly. As you invest for cash flow, as Kiyosaki would say, use good debt. Find assets that pay for themselves.

I didn’t pay very much for those little first student condos and the students have paid for the rest of them for the last good, gosh, 15 or 20 years now. It’s actually 20 years. They’re still kind enough to pay my mortgage every month. Create a team, tune every book, but it’s true. You need a team. Your team might just be a good sponsor team that you really trust you know them, you like them, you understand what they do. You need an attorney and you need a CPA even if you’re investing with somebody else.

You need to have your attorney to look over the agreement and make sure there’s no landmines and your need to CPA. Preferably a CPA, that’s kind of versed in what you do, whether it’s real estate or something else. Along with that, there’s mentors, partners and managers. Teams create leverage. I’m all about leverage. You asked about how I had the time to do this. Well, time management plus leverage and delegation. So, leverage is a key wealth building factor. It’s also more fun to have a team. It’s a lot more fun to bounce stuff off of people.

So, the last thing about creating a team is, as I said, I made a lot of mistakes. So, I would say listen to people who have been there and done that. Nothing beats good experience. Truly, I ran a deal past somebody that I trusted. He said he kind of didn’t like the structure, but I was young and obviously smarter than him. So, I did the deal anyway and lo and behold, it became true. So, that’s when one of my rules was if somebody has been there before me and I asked him for advice, I’ll take that advice. Don’t assume that the lessons that he learned are going to be different for you. Listen to those that have been there.

We’re down to five if I still got time here. Number five is have multiple exit strategies. Be wary if your only plan is to sell in two years or three years or five years because markets change. Markets change and people change. So, be prepared to hold something for 30 years. I heard that — that’s from Warren Buffett, I think. He said always be prepared to hold the property for 30 years. So, if you’re in real estate, make sure you like that property because if you bought something in 2007, there was no way you were going to get anything sold or refinanced in the next couple of years. So, be ready to refinance it, change the debt, have some options for things don’t go as planned.

We’ve had almost 10 years of an up market. So, if you were to buy something now in this market and plan on selling it for more than five years, that might happen but don’t count on it as your only business plan. You make your money on the buy, not to sell that’s off. That’s in every book as well. Just don’t depend on a sale. Think of a business plan to cash flow that project. Don’t get emotionally attached. Number six, don’t get attached to real estate. It’s business. Friend of mine basically says do the numbers. If the numbers make sense, you’ll know what to do. If they don’t make sense, it’s not a good deal.

So, just because it’s a pretty property in a nice place, just because it’s only a hospital or something like that, if the numbers don’t work, it’s not a good deal. Personally, I love nice buildings but I’ll take a nice pretty check that comes from an ugly building any day. So, even though we do Class A, I’ve got my share stuff that that comes in from not such pretty buildings, but boy, the cashflow is beautiful.

Number seven is just, this is important in everything, but I think it’s important for people in real estate is to keep your word and be honest. Real estate world is filled with a lot of people. Every industry is filled with a lot of people but if people can’t trust you or trust that you’ll follow through with what you say, they won’t do deals with you. They need to know that your word’s good and that you’re honest. People prefer a quick no as opposed to a long drawn out maybe. So, do what you say you’re going to do and say what you’re going to do and people will appreciate that and they’ll respect that.

I’ll finish with another Warren Buffett quote, he basically said, “You can’t make a deal with a bad person.” So, make sure you keep your word but make sure the people that you’re working with are of the same mind. We pay for relatively expensive background searches on anybody that we’ve not done business with if we’re going to joint venture with them. I can just tell you that come from previous mistakes. Been burned before. So, keep your word. Always do what you’re going to say. That’s my seven, Nick.

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Nick:               Continuing on then from your seven rules, want to shift now and ask you about something completely unrelated to real estate investing. But, which, it sounds like from our discussion before this interview began, you’re pretty passionate about which is hunting and specifically doing it on African safaris. So, I think probably the best place to begin in that conversation would be what sorts of safaris have you been on?

Tom:               Okay. We got another couple hours to talk about this. I’ve been almost every country in Sub-Saharan Africa. So, Tanzania, Botswana, Mozambique, South Africa, Zambia. Just depends on the area. I don’t necessarily go for any particular animal. I go for the new experience of being in a new place. So, I always go with somebody different. I just love being out in the middle of nowhere, where you’re a part of the food chain. So, most of my hunting is dangerous game. I’m at risk, and that’s just part of my makeup. I like being out in the middle of nowhere. I’ve been charged by large angry animals before and it’s an adrenaline rush, and I enjoy it.

Nick:               When you say you’re out there in the middle of nowhere, are you in a Jeep or you’re in a campsite? How does it look? Paint a scene for our listeners.

Tom:               Oh, you bet. So, when you go you go hunting, even if it’s just you, sometimes you go with partners and friends. But the last one I went on, it was in Zambia, I went to a camp and there’s you, there’s a professional hunter, there’s usually an assistant hunter, there’s two or three trackers. That’s the group that goes out in the hunting truck. Now at camp, there’s probably 20 or 30 people there getting everything else done. They’re cooking the food, cleaning the camp, keeping the water hot. Some of these camps now you can actually take a hot shower in your tent.

They have boilers, and they’ll heat the water with a campfire. They’ve rigged up a deal where you can take a warm shower. So, that’s where you spend your evenings. You’re usually out all day. You’ll take the hunting truck and you’ll sometimes drive for two hours to get to a place where there might be something that you’re looking for. Then once you catch the tracks of something, you might hop out and then you start tracking. So, there are times when you step out and you track for five minutes, and there have been times when I’ve tracked 16 hours, 27 kilometers on foot tracking one particular quarry. It’s a lot of fun.

There’s a lot of camaraderie. You stop and you set up a little table and you’ll have lunch in the middle of the day, just in the middle of nowhere. There’s nothing out there, but you and the animals. Most of it ends up being viewing, which is a lot of fun. So, you finish your day. Maybe you get back, usually you get back after dark. That’s when you sit around the campfire with whatever your favorite beverage might be. You have dinner. You tell a few stories and then you just crash exhausted in your tent and wake up at four or five o’clock the next morning and repeat the process. It’s a lot of fun.

Nick:               When you say just out tracking, for our listeners who might not have the hunting expertise that sounds like you clearly have, what does that mean specifically and how would you track an animal in basic sense?

Tom:               What you do is if you’re — maybe you’re moving along in your hunting truck and you see tracks. You look at the tracks, and I look at them and do the best I can but I’m with the locals, these trackers are local natives who have lived there their whole lives. Some of them are Kalahari Bushmen trackers, which are some of the best trackers in the world. They can tell you this is a male. This is a large one. This would be one worthwhile tracking. They’ve went that way and everybody gets their gear on. The truck stays where it is and you start walking.

You look on the ground you follow the tracks and typically look for bent leaves on bushes, grass that’s bent a little strange on the ground. Sometimes the tracks are real easy to see, it just depends on the ground. If you’re tracking across rocks, you’ve got to look for different signs or kind of guess the direction they might go and you just keep moving until you run across something. Sometimes you don’t. Sometimes you do. That’s when the blood pressure goes up is when you when you come across what you’re looking for because they’re usually a lot bigger than you are.

Nick:               As the blood pressure does go up, how do you control and manage the fear and the adrenaline that is rushing through your body, especially, in some cases, like you were saying, when you’re being charged by an animal?

Tom:               Unlike the real estate world, it’s practice and education and training. So, because I want to be a responsible hunter, if I’m going for big game, I will go and practice before. Literally, go to a place where animals pop up out of the grass. I get used to handling the gun. That’s one thing. The other is some experience and some knowledge that if you actually know that if you turn around and run that’s when bad things happen. You actually have to stand your ground and often if you stand your ground, the animal will back off if you’re not there to do them harm or they just want you out of their way so you just have to be calm.

I don’t know how to explain why, but you just have to. In my experience, it truly kind of happens in slow motion like you hear on the movies. You just move slow and smooth and things happen properly. So, I don’t know. That’s how I do it.

Nick:               Clearly it works because you’re still here and you’re not somewhere out there in the African savannah on the ground.

Tom:               Exactly.

Nick:               For our listeners who are getting excited now with respect to safaris, I think I am too. How would you go about picking or recommend that we go about picking a good versus a bad safari?

Tom:               Got you. Well, it’s just like finding a mentor and just like finding a good hospital. Ask people. You’ll find somebody that — you could ask me and I’ll give some contact information. You could ask me but as people that have done it, they’ll point you to the people that are good. There are booking agents. Booking agents, they have to use good people because if they use a bad person, nobody’s going to book them again and their business will drop. Likewise, the outfitters that they choose have to do a good job or they’re not going to get clients from that booking agent again. So, there are actually hunting booking agents out there.

As well, there are booking agents for wonderful photo safaris. I do a lot of those as well. I just like to look at the animals. So, there are people that can book you great photos safaris. I guess I would say this, if there’s contact information at the end of the trip, if somebody wants, at the end of this podcast, if somebody wants to send an email, I’ll be happy to point them in the right direction.

Nick:               There will definitely be contact information and you’ll have that opportunity at the end. Transitioning now from safaris, want to ask you about another experience, another travel related experience which is going to Tajikistan. Now, how exactly did that even happen? I mean, it’s not really a country that many of us think about when planning holidays or really just planning somewhere to go period.

Tom:               You guys are going to think all I do is hunt. I actually do some doctor work and some real estate work, but this was a hunt as well. I still haven’t found a good reason to go to Tajikistan other than for why we went there, but this was something we booked two and a half years ago. It’s very exotic. Took 65 hours to get from Austin, Texas to our campsite. So, we went there for a certain type of sheep that is well managed and is growing by the way.

I’ll throw in this advertisement that the sheep population is growing because of the hunting money that comes in and that’s the same thing that happens in Africa. All that money is designed to kind of help the animals grow. It’s the only province in Tajikistan where these animals live. They live above 10,000 feet. So, we flew through Istanbul to Dushanbe to Tajikistan and then something like 21 hours along this muddy dirt road, dodging mudslides, snow avalanches and boulders. We were tracking the Afghanistan border for 400 kilometers and we finally get to our camp which was at 14,000 feet and we went up from there. Driving across frozen lakes. Getting stuck in the snow. Hiking and five deep snow at 22 degrees below zero. It was a great vacation.

Nick:               Sounds like a far cry from being in a hospital or doing any of your other things.

Tom:               I will tell you passive income from real estate provided the opportunity for me to be away for two and a half weeks to do that.

Nick:               For our listeners who have never even located Tajikistan on a map, much less being familiar with the culture, what is it like?

Tom:               It used to be a Russian protectorate but happy people. Basically, it’s between Pakistan, Afghanistan and China and I had to look it up myself. It’s the Pamir mountains which is basically the northwestern tip of the Himalayas. So, people were wonderful. They took us in. Took good care of us. When we were up in the mountains, basically what we ran into was yak farmers, which is a long-haired bovine species. They’re farmed just like our cattle for meat and milk.

They’re standing out there with a cane and maybe a gun for wolves and protecting their yak herds and they heat their houses with compressed yak dung. That’s because there’s no trees at 14,000 feet. So, that was interesting. Provided a unique smell to the inside of their houses, but that’s how they cooked all their food. That’s how they created their heat. They were happy as they could be. So, it was a great cultural experience. We really enjoyed ourselves.

Nick:               While they’re using that, as you were saying, yak dung to heat their homes to cook, what sort of food are they cooking and do people eat in general in Tajikistan from what you saw?

Tom:               I saw the yak. I did have a yak burger. It was very good. So, they eat yak. They eat sheep. They eat goat and then grains, typical — it’s sort of a combination of Eastern and Middle Eastern cuisine. So, not quite as tasty as the cuisine in Istanbul but it attempted along those lines: peppers and pickled vegetables and things like that. A lot of rice, couscous, and then there’s always a meat dish with it. So, lots of little bowls of food. It was pretty tasty.

Nick:               Now that you’re back from Tajikistan and not hunting as well, you also are focusing on being a physician for the US ski team. It’s another of your many traveling experiences. How did it even come about that you were with the US ski team, given that you’re in Texas, which is an area that isn’t exactly a ski Mecca?

Tom:               We do not have ski slopes in Austin. I’ve more ski coats I think than anybody in Austin. I’m trained as an orthopedic surgeon. I’m also trained as a sports medicine specialist and my fellowship was at a place called the Steadman Hawkins clinic in Vail, Colorado. The head physician there, Richard Steadman, was the pioneer of ski medicine. So, he was the rock star of physicians that took care of the skiers before anybody else did. So, that’s where I get introduced to a lot of skiers. Was trained actually by a couple of them. I never did pick it up as well as they did but started hooking up with the ski team.

Took care of the Alpine team, the downhillers, the ones that go really fast. Took care of them one year. Then my first year out, and in practice, I was the physician for the Olympic Training Center in Lake Placid. There, I met the freestyle team. Those are the guys that jump off ramps, do all those flips, and the ones that do the mobile course where they go down the bumps and then do flips. This was a long time ago. This was back in 1991. So, we didn’t have cell phones, so I had to be there. I couldn’t go out hiking or anything. I had to sort of have a little clinic at nine o’clock and one in the afternoon, so I had nothing to do.

I started hanging out with the aerial team, which is the guys that jump off ramps and do those crazy flips. I was pretty athletic at the time, so they trained me and I got to jump with the team. So, it was so much fun that I stuck with the freestyle team since 1991. At the time, none of those were Olympic sports. So, now aerials and mobiles ore Olympic sports. Everybody’s seen that on TV and I still get out with them maybe once a year. I haven’t for the last year or two because real estate business has been busy, but last trip was to Minsk, Belarus for a World Cup Championship.

Nick:               As you’re hanging out with the aerial team and being around all these skiers, I would imagine that some of the insights and knowledge they have of mental toughness and getting more out of the body has probably rubbed off on you or you’ve at least become aware of it. Do you have any thoughts or any knowledge like that, that you’ve gained?

Tom:               Yeah, it’s really fun to watch them. They’re young, of course. They’re anywhere from 16 to mid-20s. It’s sometimes what separates an elite athlete from a really good athlete is the mental toughness. I could almost say to a man or woman, the ones that last for a while are the ones that are, they’re grounded. They’re solid. They know how to separate their emotions from their focus on their sport. I’ve tried to do the same: separate my emotions from my focus on creating passive income, whether it be in real estate or something else. So, it has been a big help to me. It’s nice to get that reinforced every year too and watch them do it because they’re masters at it.

Nick:               What about getting more out of the body in the sense of physical performance on the slopes or even just basic training each day? Do you have any takeaways that you’ve gained from being around the skiers that you could share with us on that?

Tom:               Again, I’d say it’s mental. Although all of them are — they’re students of their body because that’s their job. So, the diet, obviously the diet, they have their own ideas, and often they’ll have coaches, diet coaches, and then the Olympic Committee or the governing board will have somebody that will help them with their diets. So, they’re pretty focused on making sure they eat the right thing. If it’s if it’s in season, they’re eating right. They’re not doing stupid things. They’re resting their bodies when they need to. They understand the importance of rest.

These are young kids and you watch them and they’re not partying, they’re socializing but they’re getting to bed early. They’re eating right. They’re studying. They’re watching film. So, it’s discipline. I guess, again, it goes back to the mind. It’s discipline and discipline is something you need in sports. You need it in the real estate world, and in the investing world as well.

Nick:               Considering that we’re talking about Olympics and the Olympic team, I’m curious for your thoughts on the fact that skiing, doing all of the jumps that you’ve mentioned, doing the tricks that’s clearly an exciting thing to watch and do too, yet the Olympics where skiing is a prominent part are poorly attended. They don’t really have too many viewers when they’re on TV. Do you have any thoughts or just any feedback on why that is?

Tom:               Oh, I’d just be guessing. It might be an exposure issue. Skiing is not an inexpensive hobby and is wildly expensive now. We have a place up in the mountains and have watched the ski lift tickets go from $33 to $178 a day. That’s a lot of money to get in 10 rounds of skiing. So, that could be it. It’s not something that everybody gets to partake in. So, they don’t get the familiarity. They maybe don’t understand what’s going on or aren’t that excited about it. So, I think that’s — I’d probably put it to the availability to the mass market.

Nick:               So, you think that the fact that skiing and other winter sports have a high barrier to entry explains or helps to explain the fact that the Winter Olympics really aren’t watched by very many people?

Tom:               Yeah, maybe and realize you’re just getting an opinion from somebody who’s not an expert in media and all that. It’s just kind of a guess. It’s hard to get to ski slopes. Hard to pay to go do that. So, one, people don’t have personal experience doing it. Number two, if you want to go watch the Olympics or watch a ski thing in person, it’s not that easy to go get up to the ski slopes. So, maybe that’s one thing and maybe that translates to the TV. I didn’t realize that the viewership wasn’t so good for the skiing on the Olympics. I guess that would be my only explanation is basically familiarity with the sport itself, personal familiarity.

Nick:               Fair enough. Beginning to bring this interview to a close with a few more questions. I want to ask you now about books. What are some of the books that you would recommend whether for skiing, whether for real estate investing, or even for areas like personal development?

Tom:               Okay. There are so many and I always blank when people ask. I’m sure I sound like a broken record, you may have had other guests, but Rich Dad Poor Dad is still a great book. It’s a mindset book. It’s not going to tell anybody how to make money. It’s going to help you think about money. I would follow that quite honestly. I wouldn’t just read Rich Dad, I’d read it as a one two punch. The second book Cashflow Quadrant really helps give an idea of how we make our money because some financial freedom can sometimes be derived from how you make your money, not necessarily where you make your money. So those two are good.

Then in the real estate vein, I’d still like my friend Kenny McElroy’s book, the ABCs of Real Estate Investing. Those three books, if you’re in real estate, that’ll give you a good handle on where you might want to go. Good gosh, personal development books. I mean, I just read Eckhart Tolle’s book, Stillness Speaks, deep. [Dem’s? 00:59:00] books, they’re about self and kind of separating from self and realizing that we all have a little voice in our head that’s always yapping at us. Telling us you can’t do this or you can do that.

I think personal development is really what helps people grow in sports and in real estate and in anything you want to do. So, there are many of them out there. I’m currently reading a book called Making It Stick. It’s about it’s about creating ideas that stick in people’s mind. So, that’s not about personal development or real estate, but that’s what I’m currently reading.

Nick:               Any other good personal development books beyond those two from your past experience?

Tom:               Oh, I got to go to old favorites still Think and Grow Rich, The Magic of Thinking Big, they’re old, but they’re good. Oh, gosh, I’m blanking. I have a whole library but it’s 10 feet away from where I am right now. There’s a lot out there. I can’t give any specifics right now.

Nick:               No worries. I think we can leave it at that then. With respect now to Presario ventures what’s in the pipeline for you as far as upcoming projects and developments?

Tom:               We’ll be starting a new development in New Braunfels, Texas. Anything between Austin and San Antonio is gold these days. New Braunfels is basically a sub market of San Antonio which is one of the fastest growing markets in Texas. So, we’re starting a 188-unit project there that’ll be coming out shortly. We’re looking at a medical office building within a hospital campus, big surprise. We like the medical office space as well as somewhat recession resistant real estate. It’s part of why we like multifamily as well. We know rents do decrease but built or bought right in the right area and planning for rent declines. If the numbers make sense, we’ll go ahead and build.

Nick:               For our listeners who are hearing about this and have also heard your story earlier on this episode about the safaris and are interested in that too, what would be the best place for them to go to learn more about you?

Tom:               You bet. Our website is presarioventures.com. That’s P-R-E-S-A-R-I-O ventures. Then I’m just tom@presarioventures.com and I’ll be happy to answer any questions about real estate or safaris.

Nick:               While we are giving out links like this, do you want to name drop or do you have any links handy for a safari or two that you could just recommend right off the top of your head?

Tom:               Well, quite honestly, I would point you to the booking agent that books all my trips. His name is Greg Brownlee and he’s in Tulsa, Oklahoma. No links, though. Well, it’s neilandbrownlee.com.

Nick:               All right. Fantastic. We’ll be sure to link to that as well in the show notes. Brings us to the end of this episode, Tom. I want to thank you for coming on, sharing all your insights, including your seven rules.

Tom:               Thank you. It was a pleasure being on the show.

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