Wealth Formula by Buck Joffrey

If you are part of our Wealth Formula Investor Club you know that we do a lot of multifamily real estate. In fact, 95 percent of what we do is working class, value-add multifamily real estate with the same two operators. Some of you have invested literally millions of dollars into these deals. I’ve got my own money and my dad’s money in this stuff too so I’m not doing anything different. I know it seems boring. The entrepreneur in me wants to bring you and me some brand new bright and shiny objects in which to invest. But I just can’t do that—at least not right now. Right now, boring is good. For those of you who have been urging me to branch out, I promise you that I am looking at new stuff all the time. The problem is that the risk adjusted return just never seems on par with what we already have. To make my point, let me give you a couple of examples. A very respected private equity shop approached me about a joint venture with them in which we would construct several well known burger franchises across the country and then roll them up to private equity for a big multiple and an exit. Sounds good on the surface. The investor IRR was projected at 20 percent which was respectable and it certainly could be better if other things went just right. However, there were no tax benefits, so even an 8 percent yearly dividend sounded less than attractive. Furthermore, there is no doubt in my mind that the risk to operating businesses in this economy is far greater than working class residential real estate. So, bottom line—shiny object, cool business plan, great team…but for what? The return profile was similar to our real estate proformas with far greater exposure to a volatile economic climate and no tax advantages. I’ll take boring. Another deal I passed up on was a really interesting commercial real estate play where the group was buying from pension plans that had to sell per mandate and was getting steep discounts on the properties they were buying. But these properties were in tertiary markets like Louisville and Cincinnati. And when you did a deep dive, cap rates were still at 8 despite the big purchase price discounts. This is with vacancies at historical lows! What does that tell me? It tells me that this is a great model but the timing sucks. Am I really going to load up on office space in tertiary markets in 11th year of the longest expansion of GDP in US history? In an election year??? Again, the answer is no but I promise I’m still looking! It’s just that right now, very little beats our boring little real estate deals on a risk-adjusted basis. So, for now, I’m going to just keep investing the same way and you may find it prudent to do the same.  Now, if you are making a lot of your investments out of retirement accounts (SDIRA’s, Solo 401Ks) or thinking about doing so, I highly recommend you listen to this week’s podcast interview with Damion Lupo. If you’ve been on the fence about using your retirement funds for real estate, some recent legislation may just change your mind.  Find out why on this week’s episode of Wealth Formula Podcast! P.S. Don’t forget to sign up for our LIVE meetup in Phoenix Arizona on April 24th and 25th! To sign up, click HERE! American Sensei. Yokido Founder. 5th Degree Black Belt. Financial Mentor to Transformation Nation. Best selling author in personal finance. Rewriting the rules and plan for retirement. Shownotes: What is the difference between an IRA and a 401k Damion talks about UBIT and UDFI What is a Backdoor Roth? Why do a QRP? QRPbook.com

I don’t really like basketball and have never watched a full game in my life. Despite that, I knew who Kobe Bryant was and was shocked by the news of the tragic accident that took his and his daughter’s life. His passing actually reminded me very much of Princess Diana dying in a car crash in 1997. I remember that I was at a bar attending a medical school new student orientation event when the news came up on a TV.  I was shocked and disturbed the same way I am now. I also remember that a friend of mine turned to me and said, “So what, people die all the time.” My initial response was to see him as a heartless jerk. However, it does beg the question of why someone like me, who could really not care less about the British Royal Family or the NBA, gets so disturbed when unexpected tragedies like this happen. I think that the reason high profile tragedies affect us the way they do is because they somehow strip the world of its makeup. In order to not go crazy, most of us have to create a reality in which things happen for a reason. Thinking of life as cruel and disorderly is not compatible with a sense of well-being. So, we slap some lipstick on reality and pretend that we are in control. Kobe Bryant’s death puts that sense of order into doubt. He was a successful and beloved athlete with four children. He was strong and smart and seemed to be just getting started. If someone like him dies suddenly, then it could happen to anyone at any time. That’s not a comforting thought. But change and loss are inevitable for everyone—rich or poor, powerful or weak. The question is how do you get through it? I certainly don’t know the answer to that but my guest on Wealth Formula Podcast this week, Russell Gray, is doing his best to help himself and others do just that. Russ is a good friend and a wise man. Don’t miss this episode. Russell Gray Best known for being Robert’s side kick on the radio since 2004, Russ is a financial and business strategist. With over three decades in sales, marketing and financial services, Russ has written several business plans and consulted with hundreds of investors on their personal financial strategies. Russ also co-authored The Real Estate Guys™ highly rated book Equity Happens and taught real estate finance for the California Associations of Realtors® GRI program. Shownotes: The people who have success aren’t the ones that avoid loss because it’s common to all. Russel talks about two books that helped him cope with losing his wife. What is Russel’s strategy to cultivate positive energy? Thinking about it, talking about it, dreaming about it, hoping for it, none of that gets it done. You’ve got to act and you’ve gotta act relentlessly.

People send me real estate deals to look at all the time trying to get an opinion on whether or not they should invest. Usually it’s some glossy executive summary showing nice pictures and impressive proforma numbers. “What do you think?”, they ask. My answer is pretty much always the same. “I don’t know these people so I can’t comment”. You see, real estate is not like publicly traded stock. If I buy Apple stock from E-trade it’s the same stock that someone else might buy from Ameritrade or some other brokerage. You don’t have to worry that you aren’t getting the same stock. No matter where you buy Apple, it will perform the same. Real Estate is different. Every property in which you invest is unique. Furthermore, the performance of the asset is highly dependent not only on the intrinsic nature of the property, but also on its operator. The same asset in two different sets of hands will almost certainly result in different outcomes. Some operators are good and some are outright bad. So, it’s probably a good idea to get to know who they are. That may seem obvious but think about how many people blindly invest in real estate through various on-line platforms where they have zero clue about the operator. The platform gets paid to bring money to the deal. Why do people trust these platforms so much? Is it because they have nice looking websites? Is it because what they say sounds official? I don’t get it. You see, apart from being good or bad, operators typically have different business models as well. A few weeks back, you heard Dante Andrade, my colleague in Dallas, talk about our hybrid value add/cash flow model. That’s very different from what my partners at Western Wealth Capital do. Their entire focus is on the creation of equity for velocity and a big bump at exit. So how do you decide with whom to invest? Well, first of all, let’s go back to the the idea that real estate is not a commodity and highly dependent on people. That being the case, my general rule of thumb is to know, like and trust the operations team. That’s what I spend my time doing in investor club. Of course, liking and trusting is only part of it. I like and trust many people with whom I would never trust my money. You also have to make a judgment on competence. How do you do that? Well, how about taking a look at the company’s track record? If you know, like and trust a group AND they have a great track record, you can at least start looking at proformas and taking them seriously. Anyone can make a proforma look good. Some glossy paper and excel worksheets and you can make swamp land in Florida look good. But not every opportunity is good and most won’t achieve proforma—especially in a market like today. Look at the track record. As for Western Wealth Capital, I won’t pretend that I am not biased. Apart from them being a partner of Wealth Formula, I have invested a lot of my own money in their offerings. Perhaps more illustrative, I have invested just as much of my 80 year old father’s money in these deals. I don’t take that lightly as you can imagine. Western Wealth Capital has become a big part of my life and my guest today, Tim McLeary has become like a brother to me. Tim is a major part of the Western Wealth machine and is my guest on Wealth Formula Podcast this week. Don’t miss it! Tim has more than 25 years of experience in business development, financial management and client relationship management. He was responsible for the oversight of more than $1 billion in assets and managed a 40-person team at TD Bank Financial Group. As a Senior Consultant at Standard Life, Tim worked with a group of high net worth advisors throughout BC, helping them increase the efficiency and profitability of their businesses. At Cassels Blaikie, Tim was responsible for the relationship management of institutional and high net worth clients. Shownotes: Tim McLeary’s background Why invest in multifamily real estate? What is the Western Wealth Capital Money Machine? Under Promise, Over Deliver Tim talks about Western Wealth Capital’s philosophy when selecting properties.

I have a question for you. Did you make any significant New Year’s resolutions or set some serious 2020 goals for yourself this year? I bet when you set those goals, you likely felt a lot of energy: “This time I’m going to do it!”. You felt like nothing was going to stop you. Now, four weeks into the year, are you losing steam on that goal? If so, why do you think that is? Personally, I think we humans have a series of set thermostats in our lives. We are set at a particular state of health, wealth and happiness.  In order to reset any of our thermostats requires considerable effort. Self-help book enthusiasts swear by visualization techniques like putting up photos of things you want in order to let them creep into your subconscious. Positive affirmations have the same intent. The idea is to reset those thermostats. These kinds of rituals create constant reminders to your subconscious of a new reality you are trying to create. Any significant goal requires a lot of energy and effort. If you don’t fundamentally believe something is possible, it’s hard to put in consistent effort. If you change any one of these thermostats, you will change your life. I truly believe that and I wish I understood that when I was much younger. If you buy into this idea that you can fundamentally change your life by changing your mindset, and you wish to do so, you are not going to want to miss this week’s interview with best selling author, Hal Elrod. Hal Elrod is on a mission to elevate the consciousness of humanity, one morning at a time. As one of the highest rated keynote speakers in America, creator of one of the fastest growing and most engaged online communities in existence and author of one of the highest rated, best-selling books in the world, The Miracle Morning—which has been translated into 27 languages, has over 2,000 five-star Amazon reviews and is practiced daily by over 500,000 people in 70+ countries—he is doing exactly that. Shownotes: What is a miracle? The first part of the Miracle Equation: Unwavering Faith The second part of the Miracle Equation: Extraordinary Effort What is the Faith Effort Feedback Loop? What is the most important lesson you can learn from The Miracle Morning?

Our private group, Wealth Formula Network, has a biweekly zoom video call to discuss anything and everything about personal finance. These calls are a lot of fun for people like me who like to geek out on money stuff. If you are the only one in your social network who likes this topic, Wealth Formula Network is a great way to get your fix through an on-line community instead. On our most recent call, someone brought up a fund and wanted to know the groups thoughts on it. We broke it down and realized that there was really nothing AT ALL appealing about the opportunity. These marketers understand that the podcast space creates a world that can grant immediate legitimacy for them through brand association. Let’s say you have a podcast that you really like and feel like you really trust the host.  So what was it about this deal that attracted attention in the first place? Well, it was packaged well and presented in a way that, on the surface, made a whole lot of sense. You see, there are a lot of good marketers in the podcast ecosystem. If you hear someone interviewed on that podcast, it immediately legitimizes the interviewee as someone who can be trusted. I learned this the hard way as a podcaster. Early on, I would interview anyone with an interesting idea or concept just to get the content out there. But some of these people were raising money for deals that I wouldn’t touch with a ten foot pole! I soon realized that I had essentially legitimized these opportunities by having someone explain them on my show. So…now I am very careful about who I interview and also give frequent disclaimers when someone is raising money. Anyway, the point I am making here is that it is critically important to use what you are learning and pick these deals apart. When you do so rationally with an objective stance, the negative elements of an offering are usually pretty glaring. It helps to do this exercise with a group of individuals of like mind. If you do it over and over, I promise you will get better at it and get really good at identifying bad deals quickly. We do this all the time in Wealth Formula Network where several of the real investors of Wealth Formula Nation share their experiences together. One of those investors is Dr. Ian Kurth, MD. Ian has become a real leader within our group. He is smart as a whip and works diligently at mastering personal finance concepts. For high paid professionals who work full time and want to create wealth efficiently, there is no better role model. And for that reason Ian is my guest on Wealth Formula Podcast this week. Don’t miss it! Dr. Ian Kurth Dr Ian Kurth is the poster child of successful high paid professionals taking ownership of their personal financial situation. He is a neuroradiologist and he is also a member of our private community Wealth Formula Network. He’s an active participant there and in Investor Club and Physicians Wealth Formula. Shownotes: Find out when Ian decided that hard assets are the way to go and to take personal finance issues into his own hands Ian talks about how he found Wealth Formula What is Ian’s approach to setting up his portfolio? Ian’s approach to Asset Protection: own nothing control everything

Happy New Year! This is my first podcast of 2020 and I’m looking forward to another great year. I don’t know about you, but I get very reflective this time of the year and it is usually pretty helpful. I have a suggestion for you. Write down where you are today and where you would like to be next year. This exercise can really help to focus in on what is NOT working. You see, it’s easy to focus on what is working. We are naturally programmed to run to pleasure and away from pain. It is much harder to acknowledge those things that are not working and to figure out how to make them go away.  This applies to all parts of life—relationships, investments, jobs, and businesses. If it isn’t working and you know, deep down, it’s not going to change… Then it’s time to get rid of it. As a serial entrepreneur, I can tell you that I have had to do this several times. Sometimes businesses do great and sometimes they don’t. The entrepreneur’s curse is to get emotional and not let go of a dying business idea or one that no longer provides joy to the owner. We’ve all been there—90 percent of your life is great but the 10 percent of it that is not consumes all of your energy. If that’s the case, get rid of it. There may be some temporary pain—emotional or financial, but it will be worth it. A few years ago, I decided that I didn’t want to practice medicine anymore and I wanted to move to Santa Barbara. It was a tricky transition and one that was not without substantial risk. However, had I not eliminated medicine and my Illinois home address, I would not have focussed on what has been the most successful and enjoyable businesses of them all for me—multifamily real estate. I’ve been lucky for sure. You see, the success of any venture depends not only on the endeavor, but also on the people with whom you partner. On my road to success in my real estate business, finding the right people has been the most difficult part. Building relationships is time consuming. It requires perseverance in getting to know people and businesses personally and professionally. But it has really paid off for me and, frankly, to our Investor Club. Had I not eliminated the practice of medicine a few years back, I simply would not have had the time and energy to build the infrastructure our investor group has today. Some of you in Investor Club know Dante Andrade. He’s my partner in a newer company that we formed together called Touro Asset Management Group. Touro focuses on working class multifamily real estate specifically in the Dallas submarket.  Our model is a hybrid cash flow and value add strategy. I’m very lucky to have Dante as a partner. He’s one of the most meticulous underwriters and operators I’ve ever known and has facilitated over $1 billion in apartment transactions as a buyer’s broker in Dallas. He really knows his stuff. In this week’s Wealth Formula Podcast, I sit down with Dante and talk about all facets of investing in apartment buildings. Whether you are old hat at multifamily investing or just thinking about it, I’m quite sure you will take something away from this conversation!  Dante Andrade Dante is a man of many multifamily real estate hats. He is a buyer’s broker in Dallas, meaning that he is dedicated to the buyer side of acquisition of large multifamily real estate. He’s been involved in just under a billion dollars worth of transactions, focusing again specifically in the the Dallas/Fort Worth market. He’s also a real estate coach and mentor and finally, and probably most importantly, he is my partner in our group called Touro Asset Management Group as we acquire a cash flowing multifamily real estate in Dallas.

Last summer I had a drug reaction that made me pretty sure I was going to die. There was nothing terribly remarkable about the day it happened. I was with my wife and kids visiting my parents in Minnesota. On our last evening there, I stayed up a little later to chat with my parents. The children were already asleep. By 11PM or so I headed down to bed. I felt a little funny walking down the stairs and then, the next thing you know, I couldn’t stand and I felt completely disoriented. Within 20 minutes, I was getting loaded up into the back of an ambulance. I remember seeing the doors close and wondering if I would ever see the outside world again. During the ride to the hospital, all I could think of was whether or not I was going to leave my family in good financial shape. Had I prepared them for this? I wasn’t sure. Of course the whole thing was a false alarm and I’m here to talk about it. However, it illustrates the idea that unexpected things happen to people all the time. Life is full of uncertainties but death is not one of them. The only question is when. Despite that, very few people give much thought to making that transition as easy as possible for their loved ones. Why? Well, it’s scary I guess. Some people are superstitious and worry that estate planning may hasten their demise. Others just have no clue that anything needs to be done. Maybe you fit in the latter category. The good news for you is that there are very clear things you should do now for estate planning regardless of your age and health and they are relatively simple and inexpensive. For people with larger estates, this kind of planning becomes even more important as estate taxes can rob your children of your hard earned wealth. These are the issues that we will discuss on this week’s Wealth Formula Podcast with attorney Joseph Longo. Do not miss this episode! For more than 25 years, Joseph Longo has focused on delivering unparalleled service in the areas of estate planning, asset protection and sports. His clients have ranged from businesses to high net worth families and professional athletes. Mr. Longo has also provided pro bono services on matters for indigent clients.  In addition to practicing law, Mr. Longo has more than two decades of experience in every aspect of agenting. His record in representing 22 first round draft picks, arbitration cases and free agents is second to none. His knowledge of the Collective Bargaining Agreements of Professional Sports and Labor Law issues, coupled with his success as a trial lawyer, equip him with the skills necessary to obtain maximum value for his clients. He has taught law at Los Angeles City College, Mission College and Pasadena City College, and is currently an Adjunct Professor at Loyola Law School. He has also sat as a Judge Pro Temp in the Los Angeles Court System.   Mr. Longo received his B.A. from Brown University in Rhode Island, where he was a starting Defensive Back on the Brown University Football Team in the mid-1980s, and earned his Law Degree from Loyola Law School in Los Angeles, CA. His charitable endeavors include sitting on the Board of Ability First. Shownotes: Estate planning is planning for your exit What is Probate and why should it be avoided? Why do you need a Will AND a Living Trust? Joe talks about a good estate planning technique: Gifting

The end of the year is a good time for giving. Of course we are already in the mood with the holidays. Buying presents has a way of greasing up the credit cards and making it easier to pull the trigger. The end of the year is also a good time to give to charity. Even if you are a kind hearted human being, I’m sure it’s not always easy to part with your hard earned money. However, at the end of the year, you come to the realization that charity is also tax deductible so it starts to make you feel more philanthropic. That being said, I would like to direct you to a cause that I think is really worth your attention. One of our listeners, Dr. Eric Payne is a craniofacial surgeon. He’s the kind of plastic surgeon who can change lives for children with facial deformity such as cleft palate/cleft lip. A few months ago, Eric did a webinar for us on what he does on these international trips. It was pretty pretty inspiring. You can watch that webinar replay HERE. You see, one of the things we take for granted in our lives is how we look. Even if you aren’t a supermodel, chances are that when you walk around town, people don’t look at you like you have a deformity of some kind. We take anonymity for granted and focus on higher level stuff like making money. Now imagine being a kid with a facial deformity that everyone can see in plain site that also interferes with your basic functions like eating, drinking and speaking. That’s what kids born with cleft palates and lips are up against. I want to help these kids by supporting Eric’s work. My goal is to raise $100K for his organization to fund the next mission to India. Then, Eric will take lots of photos and videos to show you your money at work in a follow-up webinar. $100K will result in unparalleled return on investment in terms of the impact it will have on these kids. We have A LOT of people in this community so all we need is for everyone to participate and donate SOMETHING. It could be $10 or it could be $10,000—no pressure! Everything helps. Use the following link to get to the donation page: https://www.leapmissions.org/donate-form/ Make sure that you include Wealth Formula as your referral source. I would like to keep track of how much we donate as a group. In addition, anyone who donates at least $1000 to the cause will be acknowledged on a “Giving Back” page that will be added to WealthFormula.com. If you have been to our events or are part of our online community, you know that the Wealth Formula Community is extraordinary. As a community, I want to see us increasingly make an impact on the world around us. As for this week’s podcast, it’s about how giving can also be designed to make or save you money at a higher level. Merry Christmas. Arlene spent more than 20 years in the trust and investment services industry, and 9 years in non-profit development. When you work with Arlene, you get a compelling, comprehensive perspective on giving derived from her broad experiences with individuals and businesses ranging from Wall Street to Main Street. Get a fresh viewpoint on giving and bring more fulfillment to your practice and your clients’ lives. Shownotes: Arlene’s background Is there a financial benefit to philanthropy? Arlene talks about the Charitable Remainder Trust Are the benefits of charitable giving only for ultra high net worth families? Phone: 503-957-8334 Email: arlene@arlenecogen.com

If you are struggling about finding the right Christmas present for your loved ones this year, I have a suggestion for you. Think EXPERIENCE. Last week I snuck my ten year old daughter out of school and drove her down to Los Angeles to be part of a live studio audience. It was for her favorite Nickelodeon show called All That—sort of like a kids Saturday Night Live. She was on cloud nine the whole five hours of shooting. She saw all of her favorite child stars and even got to give them high fives!  Afterwards, she called it the most exciting day of her life. She thanked me profusely and couldn’t stop taking about the show for the next two days. I am quite sure she will never forget that day. On the other hand, I pretty much guarantee you that I will be getting her a fair amount of stuff for Christmas that she will forget about within a few weeks at best. It’s just the reality of stuff—it doesn’t last. Memories do. The stuff will also cost me a lot more than this experience did. What’s crazy is that being part of the live studio audience was free! If you go to on-camera-audiences.com, you can get a full list of free show tapings that you can attend at no cost. Of course, doing this sort of thing isn’t for everyone. My seven year old daughter would prefer a Vikings game which we are going to do next weekend! That one is not cheap obviously. That said, the general idea of experiences over stuff is a good one and I have been trying to implement it into my gift giving as much as possible. Hopefully it helps you with a gift idea or two this season! Speaking of the gift that keeps on giving, this is the third week in a row of “Ask Buck”. I was a little hesitant about releasing this but the feedback I’m getting has been quite good so it seems it’s not necessarily a bad thing to finish off the recent tranche of questions with one more show. By the way, if you have questions for future shows, just reply to this email or record your question HERE. I prefer the recorded questions but either one is fine. In the meantime, sit back and listen to this week’s show.

Recently I started poking my nose into various physician financial facebook groups. I try to stay away from these things because they tend to put me in a bad mood. But facebook alerts make them constantly pop up on my phone and my brain reacts instinctually for its dopamine hit. When I do poke around in these groups, I’m often left a little bit nauseous. It’s not just because I have a fundamentally different investing paradigm than most people. I am pretty immune to hearing people wax poetic about outdated conventional financial wisdom regurgitated by various mindless pundits. What really bothers me is the attitudes people have in these groups. The over-all flavor of conversation in these forums can be best described by the word scarcity. I’m not talking about the young doctors who are broke and buried in debt. They actually do have limited resources. No…I’m talking about the know-it-all followers of various influencers in the space. There is a certain language that has now become pervasive amongst them that I simply cannot stand. There is a lot of talk about “living like a resident”. For you non-physicians out there, this means living like you make $50,000 per year or less. The idea is that you should live like a hermit so you can get to that magic number, dictated by the “4 percent rule”, sooner rather than later. On top of that, there are often discussions on how little money you actually need to retire. I recall one well known blogger saying you only need about 25 percent of what you make today.  All of this is predicated on some strange machismo related to how sparse one can (and should) live. In fact, I see people making negative comments about physicians who elect to drive nice cars deriding them as financially irresponsible. How dare you drive a Tesla! Now I know I am a personal finance podcaster not a self-help guy necessarily, but I do have to say that attitude goes a long way. I can honestly say that I don’t have a scarcity-type bone in my body. I attribute this attitude of abundance to the financial success that I have had personally. To me, the wealth available to you and to me is limitless. Don’t spend all your time trying to live like a peasant. Instead, focus on expanding your means and letting your lifestyle expand with it.  Life is short. Isn’t it depressing to think that your sole purpose in life is to save enough money not to outlive it? That’s essentially what “live like a resident” means. Now if you are one of the devotes of the aforementioned movement, no need to reply to me with a cynical remark. I get plenty of those in the forums and that’s why I try to keep my hand off the keyboard.  The good news for me is that my listeners tend to be people who truly believe in abundance and it is a pleasure to speak to people who have an open mind. It is no coincidence, I should add, that these are the wealthiest physicians and dentists that I know! People with abundance mentality are fun to talk to and that’s why I do this podcast.  It’s even more fun in a question/answer format like we will do in this week’s Wealth Formula Podcast. Tune in for Part 2 of Ask Buck!