JF1163: How To Invest Your Extra Cash with Buck Joffrey
A physician turned serial entrepreneur. Buck invests his extra cash in many different areas, and helps other high income earners do the same. From real estate to buying internet businesses, he’ll invest in whatever offers good returns. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Buck Joffrey Background:
- Host of the Wealth Formula podcast
- Accomplished physician turned entrepreneur and asset manager
- Best Selling Author of the 7 Secrets of Eternal Wealth
- Based in Chicago, Illinois
- Say hi to him at www.WealthFormula.com
- Best Ever Book: Cash Flow Quadrant
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluff. With us today, Buck Joffrey. How are you doing, Buck?
Buck Joffrey: I’m doing good. How are you, Joe?
Joe Fairless: I am doing really well, and I say your first name is the most fun first name I’ve pronounced in a while.
Buck Joffrey: Oh, good!
Joe Fairless: Buck, in addition to having a very cool first name, is also the host of the Wealth Formula Podcast. He is an accomplished physician turned entrepreneur and asset manager; he built an eight-figure net worth by teaching the principles of wealth and building through his website and his podcast. He is the best-selling author of Seven Secrets Of Eternal Wealth and he’s based in Chicago, Illinois. With that being said, Buck, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Buck Joffrey: Yeah, sure. As you mentioned, I actually am a physician and I finished my training in 2008/2009. I got inspired a little bit by Kiyosaki’s Cashflow Quadrant and then instead of kind of going the direction of all my colleagues, I went into business for myself. When I say business, I mean real business; I pulled myself out of this medical practice after a few years and then started a couple other businesses, and just became a serial entrepreneur.
I started making a fair amount of money doing that, and I had to figure out how I was gonna invest it. My dad’s a scrappy real estate entrepreneur, he has been for 50 years, and then I’m reading Kiyosaki, and before you know it, I become a real estate guy, too.
Joe Fairless: Let’s talk about some specifics. Accomplished physician turned entrepreneur – what exactly have you started?
Buck Joffrey: I’ve started multiple companies; my first company was a cosmetic surgery business, and that’s still in existence, completely hands off. I’m literally moving away… I have another business in the allergy and sinus arena, I have another behavioral therapy business, I have multiple real estate assets and I’m managing some assets… What else? I’ve got internet assets, cashflowing internet sites, and the thing that I spend the most time with is my podcast and my educational platform, which I really don’t make very much money on at all, but it’s what I like doing, and when you make enough money, you can do whatever the hell you want.
Joe Fairless: With your real estate businesses, do you syndicate deals? We talked a little bit before we started recording – you said you syndicate?
Buck Joffrey: Basically, I started out buying multifamily smaller apartment buildings just on my own and had some success, and I had people asking to invest alongside me, so I effectively made a decision that “Well, let’s just do this. If they wanna invest alongside me, let’s just start doing larger assets and getting people involved.” That was the decision to make, and now it’s a little bit of a tough market; I don’t know what your experience has been, but we’re sort of at the top of the cycle, so it’s not like there’s a lot of deals going on.
There’s other things that I’m doing… Obviously, you’ve probably heard of Lee’s opportunity with the real estate guys, so I’m one of the sponsors on that, and also I’ve got a life settlement fund… I’m asset-agnostic; I love real estate, but I’m not gonna go and buy something just because I love real estate. It has to make sense.
Joe Fairless: What’s a life settlement fund?
Buck Joffrey: Whole life insurance policies. This is kind of a crazy; people buy these whole life insurance policies and most of the time they shouldn’t, although there’s exceptions to that, obviously. What happens is they pay for them for 20, 30, 40 years and the next thing you know they’re 80 years old and they can’t afford the premium anymore, because they’re expensive. So in an insurance policy you typically have the cash value in addition to the insurance with the whole life insurance policy. That’s usually not very much compared to the death benefit.
Say somebody’s 82 and they need some money, they don’t know what to do because they can’t pay for their insurance policy anymore, and they’ve got a cash value of, say, $100,000 sitting in that account. So they could turn it in to the insurance company and say “Okay, just give me my $100,000 back, even though I’ve put several hundred thousand dollars over the years”, or they could turn to a broker in life settlements and they could say “Hey, I’ll tell you what–” the broker will say “I’ll pay you five times your face value instead of that 100k, and all you have to do is sign over the insurance policy to us, and we’ll just wait for the rest of your life. You enjoy the money, and when you die, we get the death benefit.”
It sounds morbid on the surface, but I think if you look at it from the perspective of the people we’re buying from, they’re either gonna let these things expire and get nothing, get a fraction of something that’s really not nearly as much as they’ve put in, or they get 4-5 times as much as they ordinarily would.
Joe Fairless: You’ve got a lot of different ventures… Looking at your entire revenue across the board, what are the percentages of each of the revenue buckets?
Buck Joffrey: It’s tricky, because when I say real estate — probably you’re talking about investments, or you’re talking about businesses…?
Joe Fairless: Just in total – money coming into Buck Joffrey’s portfolio.
Buck Joffrey: Well, my businesses tend to be pretty high revenue, so I would say still 80% of yearly income does still tend to be from these businesses – the cosmetic, or sinus, or behavioral therapy businesses, and the internet assets. So in terms of real estate, I’d say probably maybe 15% I would say is from real estate. But the way I view real estate as an investment vehicle, and it’s something I’ve grown up with and I understand it, but the way I make my money on a day-to-day basis is as an entrepreneur. So I think of real estate as where I’m gonna put high-velocity income into, to grow it, and turn paper money into a tangible asset. That’s basically what I see it as.
Joe Fairless: With the multifamily deals that you syndicated, how many purchases have you done with multifamilies?
Buck Joffrey: Well, with multifamily I’m just getting in the game now. I’ve syndicated at least two or three different types of things, but in terms of multifamily, it’s not something that I’ve done a lot of yet. I own about seven or eight apartment buildings right now, a medical building and so on and so forth, so from the standpoint of taking investors along, it’s relatively new to me.
Joe Fairless: It’s funny, seven to eight would probably seem like a lot to most people, myself included, but you said you “only” own seven or eight… Now, only meaning you personally, or you with investors?
Buck Joffrey: I own seven or eight apartment buildings myself. My point was that — I think, Joe, that your thing is you’re the syndicator person, right? That’s what you do. Syndication for me is opportunistic and it’s like, if you thought of a guy who was buying an apartment building as an investment – that’s what I used to do before I started looking at the syndication path, and now what I look at is “Well, if there’s a large asset that we wanna acquire, I can put in the same amount of money and then investors can put in money alongside me and we can make that happen.” So I think it’s just a different way of approaching it.
Joe Fairless: Well, it’s the same way; I put my money into every deal as well, but what I was asking was just the apartment buildings – so you personally own 7-8 yourself, and then you have a medical building, and then how many on top of that have you syndicated?
Buck Joffrey: Well, I’ve syndicated two deals.
Joe Fairless: Okay, so 7-8 apartment buildings… Let’s talk about those. What was the first one that you bought?
Buck Joffrey: The first one unfortunately wasn’t a very good one. That’s where I learned from. I bought a 14-unit apartment unit on the Southern suburbs of Chicago, and basically I did everything wrong. At looked at just the numbers; it was a class D apartment building. I didn’t find good management first, and I basically just kind of looked at the numbers and I didn’t do a lot of the homework that I probably should have. I got into this thing, realized pretty quickly that some of the numbers were cooked a little bit from the previous owner because he owned a number of properties in the area and he was essentially stuffing the rent roll… And then in terms of management, I just couldn’t find a good property manager to be able to handle it, so I basically took a big loss on it. That was my first property, and it’s one of those things I guess — as an entrepreneur I’ve taken some losses, and I always see them as opportunities to learn something. There was a lot of learning there.
Joe Fairless: Absolutely. I’ve certainly learned the most on my first apartment building deal. So that one you don’t have anymore… Let’s talk about the first one that you did that’s still in your portfolio.
Buck Joffrey: I got one in 2011. I remember I finished my training in 2008-2009, so I didn’t have any money until around 2010-2011 to invest. So in 2011 I bought this building, and I got lucky on this — part of this is a theme that keeps coming up in my life, which is sort of a network-based investing. I’m around a lot of people who were in the business and who know I’ve got money to invest and sometimes things fall on my lap, and that’s what happened.
There was somebody who had rolled up a big portfolio loan, and they needed to get out, so I got a pretty sizeable discount. The cap rate to that area already were probably about 7,5% or so, and I ended up getting the sale at 9,5%-10% cap. And that particular property in that area, because it’s in a really hot area in Chicago, the equity probably doubled, because of the fact that the cap rates – and this has nothing to do with me, it’s dumb walk… We’re at top of the market right now, and it’s probably about right around six in that area… So that’s the first one.
Joe Fairless: And with the 22-unit, knowing that the cap rates are at 6% and you bought it around 9,5%, are you doing anything with that to capture that equity, or you just let it ride?
Buck Joffrey: I’ve kind of gone back and forth on that. I have this five-year one, but it’s [unintelligible [00:11:03].00] and then I just had refinanced it I think in ’15, or something like that… But what happened was that I didn’t really know which way the market was gonna go, and sometimes when a property is doing so well – you know how this goes, it’s like… If I sell this thing, we’re gonna find something that is going to do this well. I mean, this thing was an absolute cash cow. So honestly, I’d like to hold on to things. If things are performing well, I like to hold on to them.
I’m not generally the guy who — obviously, when you have [unintelligible [00:11:34].18] five-year disposition etc, I’m not the guy who’s always really excited about the five-year disposition if something’s working really well.
Joe Fairless: Do you own seven or eight apartment buildings? Just so I’m clear.
Buck Joffrey: Well, I own seven apartment buildings and one medical building.
Joe Fairless: Okay. Of the seven, which one has been your favorite?
Buck Joffrey: That first one I’ve just mentioned. It’s in one of these areas in Chicago that’s getting super hot, and again, I had no way of knowing that… It was an area that I think it was sort of a hipster area before, and now it’s becoming very yuppie, so it’s sort of the gift that keeps on giving.
Joe Fairless: And for people who are familiar with Chicago, what area of Chicago is that?
Buck Joffrey: It’s called Pilsen area.
Joe Fairless: Pilsen. And the medical building – clearly, that makes sense. Are you a tenant in your medical building?
Buck Joffrey: Yeah, one of my practices is in that building.
Joe Fairless: Got it. You’ve got a lot of things going on – how do you prioritize your day?
Buck Joffrey: Honestly, for about a half hour before I was talking to you I was playing with my two-year-old. It really comes down to — I treat everything like a business, and I’ve got management, and I’ve got a COO who’s just phenomenal, I’ve got a great marketing team… So literally, I’m moving to Santa Barbara in August. The point that I’m trying to make is that I’m very lucky in that I have a team and I’ve approached this from day one as a business; everything I’ve done is a business and I try as much as possible to be very high-level and direct the action.
Probably the thing that I spend most time on in general for my business is marketing in a high-level direction.
Joe Fairless: What has been a recent shift or big decision that you’ve had on the high-level direction of your business?
Buck Joffrey: I think the idea of starting to get more involved with investors has been a major decision for me. I take that very — as I’m sure you do, I take it very seriously. It was something that I’ve had to think about a lot, because I’ve done well for myself, and I don’t really need people’s money to do this… So the question for me was “Do I really wanna take on that responsibility to start syndicating and raising money for things?” For me, it was just — I think it’s an opportunity too in a way to give back; as you know, I’m a physician and my audience tends to be not necessarily physicians, but certainly highly educated professionals. We’re also the ones who are constantly getting screwed, right? When people see doctors, they know that they make a lot of money, and it’s like a shark tank – everybody goes around them, they want to screw them over. So that was the reason I wanted to get in the game, because I wanted to try to be somebody that people can trust.
Joe Fairless: What is your best real estate investing advice ever?
Buck Joffrey: I think for me the biggest thing – this is just basic, but I think the most important thing is property management. For me, I truly believe that. I know people who have made a career out of syndication just because they found a great property manager, and that they feel comfortable that every time they get a property, the property manager can give them real information in terms of understanding what those real expenses are, what market rents are, and things like that; you can really rely on that.
I think it’s probably in my view the biggest thing that people should look at. In fact, I talk to people in my group, this investor club – it’s not just about putting together deals, but even just advice on “What should I do? I’m looking at this… I wanna go to another market, because I live in New York City.” My advice is always “Okay, well don’t look at properties first, go meet property managers first. Pick the market for a reason, then spend a lot of time interviewing property managers.” For me, that’s do or die, and it’s the same thing for all my businesses; without good management, you’re pretty much screwed.
Joe Fairless: I agree. Without good management, that is one thing that you are definitely gonna be in trouble with. Are you ready for the Best Ever Lightning Round?
Buck Joffrey: Sure.
Joe Fairless: Alright. Well, with some trepidation, we shall continue. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Buck Joffrey: The most influential would be Cashflow Quadrant.
Joe Fairless: Best ever deal you’ve done that you haven’t talked about already?
Buck Joffrey: It was not a real estate deal. I’ve taken internet businesses, bought them for pennies on the dollar and turned them into six-figure businesses.
Joe Fairless: What’s the key to turning a pennies on the dollar internet business to six figures?
Buck Joffrey: Having a great marketing and internet team.
Joe Fairless: What’s a mistake you’ve made on a transaction that you haven’t mentioned already?
Buck Joffrey: Well, a transaction means — could I be on the buy side, too?
Joe Fairless: Yeah. Do whatever, yeah.
Buck Joffrey: I think the biggest mistake I made – and this seems crazy, but I just trusted too much. When I was trying to learn syndication, I joined up with a guy who was supposed to be some kind of syndication guru, and I’ve realized he was just a crook, and the only thing he cared about was fees. I had to get out of that, but I lost money, because I had to invest with him.
Joe Fairless: What is the best ever way you like to give back from a business standpoint or just day to day?
Buck Joffrey: Well, I think with my podcast I’m giving back, since I don’t really make much money doing it. And I would say that that’s my mission right now – education for high-paid professionals. It’s definitely my least profitable business, so I would say that’s pretty much giving back.
Joe Fairless: And how can the Best Ever listeners get in touch with you and listen to the podcast or learn more about you?
Buck Joffrey: WealthFormula.com, you can go there. Lots of resources on there. Actually, you mentioned my book, Seven Secrets of Eternal Wealth. It was on Amazon, it was a number one bestseller, and then I took it off and I just put it on for free on the website as a download (pdf), so you can grab that if you want. It’s a good one to send to especially people who don’t listen to your show, because it basically talks about a lot of the paradigms that you and I already agree on, and your audience already agrees on… But we’ve got to keep people from dying broke.
There’s also a whole bunch of other downloads on that, so WealthFormula.com, and the podcast is Wealth Formula Podcast.
Joe Fairless: Well, thank you, Buck, for being on the show. Best Ever listeners, WealthFormula.com is in the show notes, and since you agree with us on the approach, go find a friend and tell them about the book too, so they can go grab that book.
Buck Joffrey: Buck, thanks for talking about your approach from a macro level, and how you build your wealth, and then touching on and talking about some specific real estate deals. The 14 units that went the opposite direction that you wanted, but it was your first one… And the lessons learned along the way in terms of the management company and just looking at the numbers, and a seller cooking the books a little bit, so the due diligence that I’m sure you do on future properties… As well as the 22-unit that went incredibly well and still is going incredibly well, and the area that you got it in, as well as the connections that you had to find out about the opportunity.
Then overall how you approach your business and the venture that you have, how you prioritize your focus, the high-level direction and the marketing, and then your recent decision to do the syndication route.
Thanks for being on the show. I hope you have a best ever day, Buck, and we’ll talk to you soon!
Buck Joffrey: Thanks, Joe.