#237 Should You Buy Properties or Invest In Syndications? ft. Peter Kim, MD

I’ve Been Asked Multiple Times

To start the episode, Peter Kim shares how he plans to address a common question in real estate investment: whether to buy personal properties or invest in syndications. He shares that it’s frequently asked and mentions that this episode aims to provide insights for individuals on both options.

Peter also expresses his gratitude for the impact his content has on listeners. As a neighbor expressed appreciation for his podcast. “It’s really cool to know that this is getting out to people and creating an impact,” he says, emphasizing his commitment to delivering valuable content that supports the community’s journey in real estate and entrepreneurship.

Understanding Active Ownership in Real Estate

Peter begins by discussing the concept of active ownership, or directly owning real estate properties. He describes it as an investment path where one has complete control over purchasing, managing, and selling properties. While rewarding, Peter warns that active ownership requires significant time and energy, often involving day-to-day decisions about property management and tenant issues. He shares personal examples from his own investments, like dealing with maintenance requests and tenant negotiations.

Peter shares a recent example, describing a time-consuming decision he had to make for a tenant in one of his properties, involving countertop replacements and rent adjustments. He recalls, “I was in the middle of something, and honestly, it’s not a decision that I particularly want to make right now.” This experience highlights the reality of active ownership as more than just passive income – it involves regular decision-making, financial analysis, and, sometimes, unexpected issues that require attention.

Financial and Logistical Demands of Property Ownership

Peter goes deeper into the financial aspects of owning real estate, noting that active ownership often requires substantial initial capital, especially for large properties. He explains that doctors and other professionals might not always have the liquidity needed for such investments, especially early in their careers. Peter also discusses the risk of having too much capital tied up in one asset and the challenges of managing a property’s cash flow and expenses.

Despite the financial demands, Peter emphasizes the value of control, which allows owners to make strategic decisions to optimize returns, tax benefits, and property appreciation.

Recalling his experience, Peter says, “You’re going to put a significant chunk of your own money into the deal.” He highlights that while full control is appealing, it comes at a price, both financially and in terms of time. Peter acknowledges that some may perceive doctors as wealthy but emphasizes that liquidity isn’t always readily available. He believes that with knowledge and experience, active ownership can be rewarding but advises caution due to the financial commitments required.

The Advantages and Drawbacks of Syndication

Peter transitions to syndications, explaining this form of real estate investment as a partnership where multiple investors pool resources to fund a large property. Unlike active ownership, syndications are passive, allowing investors to benefit from professional management. Investors rely on syndicators or general partners to make major decisions, like when to sell or refinance properties.

Peter highlights the main benefit of syndication as leveraging experienced professionals, enabling investors to diversify their portfolio without hands-on involvement. However, he cautions that syndication lacks the control of active ownership, with capital often locked up for extended periods, making liquidity challenging.

Peter shares, “One of the best parts about syndications is that you can leverage the heck out of the professionals you’re investing in.” He details how he has invested in over 30 deals, an accomplishment made possible by the passive nature of syndications.

While the flexibility of having diversified investments is appealing, he stresses the importance of thoroughly vetting syndicators. “You’re really dependent on the sponsor’s expertise,” he warns, highlighting the need for trust in the syndicator’s ability to execute a profitable business plan.

Combining Strategies and Taking Action

Peter concludes the episode by advocating for a flexible approach, suggesting that investors can benefit from combining active ownership and syndications. He shares his personal journey, explaining how he started with small passive investments, gradually added personal properties, and ultimately shifted focus back to syndications to better suit his lifestyle.

He encourages listeners to consider their unique circumstances, including current financial goals, time, and market conditions, to decide on a balanced investment strategy. Peter believes that flexibility allows investors to adapt their strategies over time to achieve sustainable growth.

Reflecting on his journey, Peter says, “Just because something worked in one season of life doesn’t mean it’ll always be that way.” He emphasizes the importance of aligning investments with one’s current life stage and aspirations. As he advises newcomers, he emphasizes that the first step is crucial, saying, “Set a goal that feels really achievable and aligns with the resources available to you.”

In closing, he reiterates this message: start with a small, manageable goal, seek education and community support, and remain adaptable to changing circumstances.