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What competitive advantage does the MD have in real estate

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  • wonka31 wonka31 
    Participant
    Status: Physician
    Posts: 428
    Joined: 03/24/2018

    On the opposite side, I believe the simple fact that folk think this very thing — that MD has SOME advantage whereas it really doesn’t, and folk get into trouble without researching prior to investing.

    The single benefit most MDs afford is the ability to cash flow projects.   This is important in real estate investing where one can build out leveraged growth, take on depreciation and tolerate negative cashflows on projects as they incubate and turn profitable.

    Otherwise, the MD is more often than not a liability.

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    This is super accurate. The actual ‘MD’ portion is useless. The ability to have a stable job and to cashflow during a downturn is invaluable.

    #189800 Reply
     Dont_know_mind 
    Participant
    Status: Physician
    Posts: 720
    Joined: 11/21/2017

    Yes as others have said, the stable income, job security and ability to take on an extra 1-3M in debt during a recession can be worth a lot. But you still need to be a good real estate investor in the first place, because leveraging a loss = bigger loss.

    #189801 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 2469
    Joined: 01/14/2017

    Nothing. Plenty of people making as much as if not more. We have no competitive advantage by the true meaning of the phrase.

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    So, I actually really disagree with you here. I mostly see ‘eye to eye’ with you, on almost any topic that comes to mind but I think you’re missing something. The ability to obtain financing, particularly during a downturn, is a huge advantage. Few professions allow for this is an economic downturn, physicians however sustain this fairly well. As the market goes down and people are scrambling to sell or are unable to obtain financing, we can. We have capital when others don’t. That’s a HUGE advantage.

     

    Our training confers no competitive advantage in regards to real estate, of any kind.

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    This is 120% accurate. Unless you know the game, our training offers no valuable insight or advantage. Nail. Head. Hit.

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    Both of my statements are consistent as they both state that, as physicians, we are conferred no competitive advantage with respect to real estate.  Salary and the notion that we have better access to capital in economic downturns does not confer a competitive advantage.  First, to think that we are unique in that regard is a mistake.  Second, banking on economic downturns as a strategy for success isn’t a good strategy.  Third, your access to capital, or at the very least cheap capital, will decline as your portfolio increases as an individual investor.  And fourth, even if this were true, competitive advantage, as described by its originator Michael Porter, doesn’t mean that you do one thing better.  Comparative advantage means that you do one thing better.  Competitive advantage is more complex and means that you have multiple, inter-dependent activities that, together, work to provide better value, and that these systems are hard to replicate.  Having more money and a stable job hardly meets this test.  Successful competition in real estate is far more complex.

    Contrast that with an actual example of competitive advantage in medicine – a system like Kaiser or Geisinger that have incorporated risk into their model to where they are both the provider and payer.  Their assumption of risk as a payer mandates specific activities that lead to operational efficiencies and allow for them to capture more profit than an otherwise equivalent system relying on third party payers.  They will weather downturns, decreased reimbursements, or single payer moves far better than others, and they will prosper in good times.  Their competitive advantage comes from improved knowledge, improved operations, and a culture that stems from the above – and these aren’t things you can just replicate overnight, or even after years and years of trying.  It took those systems years to get where they are.  So while another system might have a comparative advantage as it pertains to a particular surgery the competitive advantage is all with Kaiser or Geisinger.

    A good book on this subject is Magretta’s Understanding Michael Porter for anyone interested:

    #189816 Reply
    Liked by Hank
    wonka31 wonka31 
    Participant
    Status: Physician
    Posts: 428
    Joined: 03/24/2018

    I think we are arguing different points. Does having an MD make you adept at business or real estate, obviously not. I agree with your point 100%. Does having cash when others don’t and buying ‘on sale’ give you an advantage? Definitely.

    #189821 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 2469
    Joined: 01/14/2017

    I think we are arguing different points. Does having an MD make you adept at business or real estate, obviously not. I agree with your point 100%. Does having cash when others don’t and buying ‘on sale’ give you an advantage? Definitely.

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    I don’t disagree.  But in terms of it meeting the definition of ‘competitive advantage’ it does not.

    #189823 Reply

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