REAL ESTATE Investing for Physicians

SOME GUIDELINES FOR COLLEAGUES

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By Dr. David Edward Marcinko MBA CMP®

SPONSOR: http://www.CertifiedMedicalPlanner.org

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According to Rick Kahler MS CFP® ChFC CCIM [www.KahlerFinancial.com] real estate is one of the largest asset classes in the world. The family home is the largest asset many middle-class Americans own. And, real estate makes up a significant portion of the net worth of many wealth accumulators. Directly owning real estate is not an investment for the faint of heart, the armchair investor, or the uneducated. Most wealth accumulators would do well to leave direct ownership of real estate to the pros and invest in real estate investment trusts (REITs) instead [personal communication].

Still, as we have seen, the lure of investing in a tangible asset like real estate is enticing for high risk tolerant physician-investors who need a sense of control and interaction with their investments. If you are among them, here are a few guidelines that may keep you on a profitable path.

1. Don’t attempt to purchase investment real estate without the help of a commercial real estate specialist who is a fiduciary bound to look out for your best interest. Engage a Certified Commercial Investment Member (CCIM) with years of training and experience in analyzing and acquiring investment real estate. To find a CCIM near you, go to http://www.ccim.com.

2. You will sign a disclosure agreement that will tell you who the Realtor represents. Be sure the Realtor you engage represents you and not the seller, both parties, or neither party.

3. Never trust the income and expense data provided by the seller’s Realtor. While a seller represented by a CCIM will have a greater chance of supplying you with accurate data, most will significantly understate expenses and overstate the capitalization rate. Selling Realtors often understate the average annual cost of repairs and maintenance. I estimate this annual expense at 10%.

4. Another often understated expense is management. Many owners manage their own properties, so the selling broker doesn’t include an estimate for management expenses. They should. Real estate doesn’t manage itself, ever. You will either need to hire professional management or do your own management (always a scary proposition). Even if you do it yourself, you have an opportunity cost of your time, so you must include a management fee in the expenses. Most small residential apartments and single-family homes will pay 10% of their rents to a manager.

5. You must verify all the costs presented to you by the seller’s Realtor. Demand copies of at least the last three and preferably five years of tax returns. Research items like utility bills, property taxes, legal fees, insurance costs and repairs, maintenance costs, replacement reserves, tax preparation and all management fees. As a rule of thumb, expenses will average 40% of rental income on average-aged properties where the tenants pay all utilities except water. Newer properties may have expenses as low as 35%, while older properties can be as high as 50%.

6. By subtracting the vacancy rate and stabilized expenses from the rent, you will find the net operating income. This is the income you will put in your pocket—assuming the property is paid for. By dividing the net operating income by the purchase price, you will find the return you will receive on your investment, called the capitalization or “cap” rate. In Rapid City SD, for example, the cap rate tends to be 4% for single-family homes, 5% to 8% for duplexes to eight-plexes, and 8% to 12% for larger residential and commercial properties.

Citation: https://www.r2library.com/Resource/Title/0826102549

ASSESSMENT: Yes, physician-investors and all of us can build wealth with real estate. You just need to educate yourself, work hard, start conservatively, think long-term, and be prepared for lean years. This is not a quick or easy path to riches.

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What is a Medical OBL?

Office Based Laboratories

By Health Capital Consultants, LLC

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DEFINITION: OBLs, also known as office-based endovascular centers, access centers, or office interventional suites, are physician offices wherein a number of services are offered.

CITE: https://www.r2library.com/Resource/Title/0826102549

Similar to ASCs, OBLs can be single specialty or multi-specialty and can have a number of ownership structures. However, unlike ASCs, OBL procedures (because they are located in a physician office) are reimbursed under the Medicare Physician Fee Schedule.

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OBLs are typically operated and utilized by vascular surgeons, interventional radiologists, cardiologists, or other specialists, and services provided include: cardiovascular, endovascular, venous, and non-vascular services; cardiac procedures, such as diagnostic coronary angiograms, coronary stenting, electro physiology services; device implants, including pacemakers, defibrillators, loop recorders, and biventricular pacers; lower extremity endovascular revascularizations, such as chronic total occlusion and complex limb salvage procedures; renal and mesenteric revascularizations; and, subclavian stenting.23 Of these procedures, peripheral vascular intervention, cardiac services, and interventional radiology made up the majority of the OBL market share in 2019.

While slower to materialize than ASCs, OBLs have increased rapidly over the past few years, for reasons similar to ASCs, e.g., opportunities for physician ownership, the “expedient patient experience” and “favorable outpatient procedural reimbursement.”

In 2020, the global OBL market was valued at $9 billion. Similar to ASCs, an increasing focus on outpatient procedures (due to their cost-saving potential)

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What is “Shelf Registration” for Securities?

What is “Shelf Registration” for Securities?

By Dr. David E. Marcinko MBA CMP™

http://www.CertifiedMedicalPlanner.org

A relatively new method of registration under the Act of ’33 is known as shelf registration.

Under this rule, an issuer may register any amount of securities that, at the time the registration statement becomes effective, is reasonably expected to be offered and sold within two years of the initial effective date of the registration.

Once registered, the securities may be sold continuously or periodically within 2 years without any waiting period for a registration to clear issuers generally like shelf registration because of the flexibility it gives them to take advantage of changing market conditions.

https://www.crcpress.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

In addition, the legal, accounting, and printing costs involved in issuance are reduced, since a single registration statement suffices for multiple offerings within the 2 year period. In effect, what the issuer does is register securities that will meet its financing needs for the next 2 years.

It issues what it needs at the current time, and puts the balance on the “shelf” to be taken off the shelf as needed.

Conclusion:

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Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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PODCAST: How to be a DEBT FREE Direct Primary Care Physician?

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DEFINITION: The DPC model was created to allow for a singular focus upon the Primary Care Physician-2-Patient relationship. To achieve this, DPC removes the hassles and overhead expenses created by insurance and replaces it with a fixed monthly membership fee. This simplified approach frees the physician from meaningless paperwork and allows them to only see 8-10 patients a day. This level of personalized engagement allows them to develop a meaningful and enduring relationship with each patient.

CITE: https://www.r2library.com/Resource/Title/0826102549

By James Hawkes MD

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Dr. James Hawkes grew up in a large family. His father was a U.S. diplomat, which exposed him to different models of healthcare. In addition to exposure, his grandmother encouraged him to become a doctor. He followed her recommendation but to his surprise, the definition of a good doctor wasn’t about improving patients’ quality of life it was about hierarchies, documentation, administrative requirements, and quality measures. 

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Shortly after saying goodbye to the traditional healthcare model, he launched his own direct care practice. Fast forward to today, he is a 100% debt-free direct care physician. He shares his story of how it’s possible to achieve this goal.

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PODCAST: https://healthcareamericana.com/episode/how-to-become-a-debt-free-direct-care-physician/

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