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Debt Repayment Strategy

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  • Avatar Ghetto 
    Participant
    Status: Physician
    Posts: 126
    Joined: 08/13/2017

    So now I own two commercial real estate properties (21k sq ft total), a rent house and two investment vacant lots on my street, a large percentage of an ambulatory surgery center that I developed, and a medical practice.

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    Could you please give us advices or share your experiences on how did you get in real estate properties?

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    Yes. I started my medical practice in the early 2000s. I rented space for several years.

    I had a leg up because my father had built his own home twice and then some apartments which he later sold. He encouraged me to consider investing in my own office space. So after a few years I purchased some vacant land on the periphery of the medical center in my city. I hired an architect and built a medical office building (16k sq feet) which I ended up occupying and putting the rest up for lease. Fortunately Davita dialysis leased the balance of the building and they’ve been tenants for 10 years and just re-upped for another 5 years (they have an additional two 5 year options as well). It was a ballsy move and maybe too risky but it worked out.

    So I think family advice had a lot to do with the direction of my investments. My father owns a retail strip center and my father in law owns two of them. So kind of the family business if you will.

    #238157 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1203
    Joined: 01/26/2017

    Both of these guys were nearing retirement age. They lost money that neither could afford to lose as they didn’t have a decade to wait to get it back. Some of the stock one owned ended up completely worthless as companies went out of business (or has that eventuality never crossed your mind?).

    I’m not defending their investment strategies. I do think that people don’t intend to hold risky stocks that close to retirement but the constant drumbeat about market investing in the media and culture at large gets the better of some people’s greed and makes them do stupid things.

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    Safe to say that the stocks I own are not likely to go to zero.

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    That’s what all the Bear Stearns stockholders thought. Huge financial company founded in 1923 and survived the Great Depression to become a global financial behemoth. Stock reached $170 in 2007 and was sold for <$10 before it went away. I was reminded of this when reading about Jeffrey Epstein. Even financial wizard types like him lost a lot on that one stock alone.

    For your sake I hope you’re more astute than you are humble.

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    I have a fairly hefty collection of stocks and an even more hefty portfolio of index funds. If any one stock went to zero it would be OK.

    #238158 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3088
    Joined: 09/18/2018

    “Commercial real estate does provide some protection against the ups and downs with long term rental agreements (5-10 years).”

    By suggesting diversification, your response points out a false sense of security due to one building and one tenant. Both strip shopping centers and large mega malls and professional buildings can and do have problems. Some national, some local and some regional.
    Same with individual stocks or bonds.

    Merely suggesting not putting all your eggs in one basket. Your acquaintance would have faired much better if he had diversified. Holding all asset classes and an index like S&P 500 or Total Market would decrease your risk. If you are risk adverse, diversification is your friend. Volatility is is not risk. Please consider building gradually a position in the broad index funds. Consider a plan and stick with it. I am glad you building worked out.

    #238212 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3088
    Joined: 09/18/2018

    “I was reminded of this when reading about Jeffrey Epstein. Even financial wizard types like him lost a lot on that one stock alone.”

    Wizard? Wexner got taken .
    “Little is known about where Epstein’s fortune comes from. Epstein rose to prominence as the money manager of L Brands CEO Les Wexner, Vanity Fair reported in a lengthy profile in 2011. Unlike other well-known financiers, Epstein kept the client list and investments of his US Virgin Islands-based firm — in addition to his own personal net worth — confidential.”

    Relationships of all types were Epstein’s wheelhouse. Enough said.

    #238213 Reply
    Avatar Ghetto 
    Participant
    Status: Physician
    Posts: 126
    Joined: 08/13/2017

    “Commercial real estate does provide some protection against the ups and downs with long term rental agreements (5-10 years).”

    By suggesting diversification, your response points out a false sense of security due to one building and one tenant. Both strip shopping centers and large mega malls and professional buildings can and do have problems. Some national, some local and some regional.
    Same with individual stocks or bonds.

    Merely suggesting not putting all your eggs in one basket. Your acquaintance would have faired much better if he had diversified. Holding all asset classes and an index like S&P 500 or Total Market would decrease your risk. If you are risk adverse, diversification is your friend. Volatility is is not risk. Please consider building gradually a position in the broad index funds. Consider a plan and stick with it. I am glad you building worked out.

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    True, there are no investments without risk. My building is half occupied by one tenant (dialysis center). It is low risk as it is a very nice building and the sole location in my city’s medical center. It is very busy and their buildout and equipment cost over a million dollars. They could walk away from it before their options are up (15 more years) but I doubt it. Or maybe they figure out a way for diabetics and hypertensives to grow new kidneys and dialysis becomes a thing of the past but I think that’s a few more years down the line.

    #238349 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1863
    Joined: 02/11/2019
    Or maybe they figure out a way for diabetics and hypertensives to grow new kidneys and dialysis becomes a thing of the past but I think that’s a few more years down the line.

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    You never Know.

    “Never let your sense of morals prevent you from doing what is right.”

    #238354 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 338
    Joined: 06/10/2019

    Please consider building gradually a position in the broad index funds.

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    With world economic growth slowing and spreading contagion into the US markets, contraction in some sectors (ie. manufacturing), the escalating trade war and business uncertainty, treasury yield inversion and collapse, Brexit, Eurozone weakness, 18 months of essentially no real market returns, weakening oil demand, gold rising, other leading indicators, it’s an interesting time to be recommending the stock market.

    What’s the risk management strategy – just suck up the market losses of a looming recession?

    Insinuating the volatility in real estate is anywhere near that of the stock market is disingenuous, especially right now. Far more confident in my real estate and personal business holdings than the markets. That’s why the physician business owners in our position have parallel strategy. It’s a safer, more solid formula.

    His acquaintance would have fared much better if he opened CD’s 10 years into a bull run, not diversifying risk assets in 2007. We shall see the timing and magnitude of the next recession.

    #238385 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2860
    Joined: 01/03/2017
    What’s the risk management strategy – just suck up the market losses of a looming recession?

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    There’s almost always a “looming recession”.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #238389 Reply
    Liked by Lordosis
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3088
    Joined: 09/18/2018

    The problems aren’t new. WWII, Korean War, Vietnam, high inflation, contractions, recessions, recoveries.
    If you acquaintance was diversified through today, they would be sitting pretty. The BEST part of real estate is it is so time consuming to liquidate. Keeps the knee jerk reactions to a minimum.

    #238391 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 338
    Joined: 06/10/2019
    What’s the risk management strategy – just suck up the market losses of a looming recession? 

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    There’s almost always a “looming recession”.

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    Precisely. So I pay down debt now and buy the markets after the recession, not before. If you know stocks will be much cheaper tomorrow, no reason to buy today – unless one is so undisciplined to think the markets just going to keep expanding indefinitely (circumventing history) at these levels and under these circumstances to where there will never be a better entry point.

    Now you know why my thread is more about debt restructuring.

    #238395 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2860
    Joined: 01/03/2017
    Precisely. So I pay down debt now and buy the markets after the recession, not before. If you know stocks will be much cheaper tomorrow, no reason to buy today – unless one is so undisciplined to think the markets just going to keep expanding indefinitely (circumventing history) at these levels and under these circumstances to where there will never be a better entry point. Now you know why my thread is more about debt restructuring.

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    But there is going to be another recession looming after the next recession. At what point do you feel comfortable getting back into the market if your anxiety level about the market is high at baseline. That’s why if your investing horizon is long then you just keep on keepin’ on. Otherwise, your risk tolerance needs re-evaluation and your asset allocation should reflect that.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #238403 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1203
    Joined: 01/26/2017
    With world economic growth slowing and spreading contagion into the US markets, contraction in some sectors (ie. manufacturing), the escalating trade war and business uncertainty, treasury yield inversion and collapse, Brexit, Eurozone weakness, 18 months of essentially no real market returns, weakening oil demand, gold rising, other leading indicators, it’s an interesting time to be recommending the stock market.

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    Did you just copy and paste this from something you read somewhere. LOL

    #238406 Reply
    Liked by Lordosis
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 338
    Joined: 06/10/2019
    Precisely. So I pay down debt now and buy the markets after the recession, not before. If you know stocks will be much cheaper tomorrow, no reason to buy today – unless one is so undisciplined to think the markets just going to keep expanding indefinitely (circumventing history) at these levels and under these circumstances to where there will never be a better entry point. Now you know why my thread is more about debt restructuring. 

    Click to expand…

    But there is going to be another recession looming after the next recession. At what point do you feel comfortable getting back into the market if your anxiety level about the market is high at baseline. That’s why if your investing horizon is long then you just keep on keepin’ on. Otherwise, your risk tolerance needs re-evaluation and your asset allocation should reflect that.

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    No, there’s going to be a bull market after the recession. I’ll buy then with no anxiety.

    #238413 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 338
    Joined: 06/10/2019
    With world economic growth slowing and spreading contagion into the US markets, contraction in some sectors (ie. manufacturing), the escalating trade war and business uncertainty, treasury yield inversion and collapse, Brexit, Eurozone weakness, 18 months of essentially no real market returns, weakening oil demand, gold rising, other leading indicators, it’s an interesting time to be recommending the stock market. 

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    Did you just copy and paste this from something you read somewhere. LOL

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    No, just the compilation of my own current research that lead to my decision to shift toward debt repayment.

    #238414 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2860
    Joined: 01/03/2017
    No, there’s going to be a bull market after the recession. I’ll buy then with no anxiety.

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    How come the current bull market can’t go on for another 5 years?

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #238418 Reply
    Liked by Lordosis

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