Building Your CRE Wealth Formula with Buck Joffrey MD
Buck Joffrey, MD is a surgeon turned serial entrepreneur and the real estate professional with nearly one billion dollars in real estate transactions including $400 million commercial real estate current AUM. He is also the host of Wealth Formula Podcast
He started as a physician and was trained in neurosurgery and then plastics. He got into the edge of entrepreneurship after he read Robert Kiyosaki’s book called Cashflow Quadrant and started really looking at entrepreneurship and started that with his own practices, then branched out into other businesses.
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Brett:
I’m excited about our next guest. He’s in fact, probably one of my favorite podcasts to listen to. That’s to be real honest, he thinks on another level, and it helps make things that are a little bit complex, really simple, and also has a passion for helping others to achieve freedom through building wealth, and some areas that you might not have considered, and or ways to think about building wealth that you haven’t considered before. He’s on a mission to help others to do that every single day. Please welcome to the show with me, Dr. Buck Joffrey. Buck, how are you doing today?
Buck:
Good. How are you, Brett?
Brett:
Hey, better than I deserve. Glad to have you on the show. excited to dive right in. Because a lot of content covering this show today. So let’s just start first off with a little bit about your story, Buck. For those who didn’t know you for the first time and your current focus?
Buck:
Yeah, it’s a long story, right. But my background is, I’m a physician. I trained broadly, started out in neurosurgery had neck surgery, and then plastics. And then, kind of got the edge in entrepreneurship after reading a Robert Kiyosaki book called Cashflow Quadrant and started really looking at entrepreneurship and started that with my own practices branched out into other businesses. My investment interests were in real estate because that’s just sort of the way I grew up with my family’s multifamily investing. Well, my dad’s been doing that for 50 years. So the commercial real estate essentially started from our actual residential real estate started from my own investing in apartment buildings. And then ultimately discovering the power of real estate syndications, with a good operator, a sponsor, and then from there, realizing that, I had the ability to, really contribute on that side of the coin as well. And so I ultimately ended up in the real estate, private equity, and mixed my interest in business with real estate, and then I think that’s been a good place for me. So that’s kind of my background. And now obviously, I have this real estate private equity and the operation. I’ve got probably about 2000 accredited investors in there, a lot of them are physicians, and, a lot of them are dentists, people in healthcare, who kind of resonate with my story. But there are business people and, a number of other, broad groups of people and demographics that all have one thing in common, they tend to make more money than your average Joe.
Brett:
Excellent. Thanks for that brief part of your story. I want to take our listeners back one other step and perhaps before the medical practice days, and before the investment real estate days, I believe we’ve all been given certain gifts, and perhaps these gifts are given to us to be a blessing to others. Some people call them strengths or superpowers, but I want you to go back and I want you to perhaps share with us what you believe those gifts that were given to you, and how do they help how you help people today?
Buck:
Yeah, I think for me, I don’t say this to act like I’m Mr. Modesty, but I don’t consider myself like, naturally the smartest guy in the room all the time. And I would, as a neurosurgery resident, I kind of did the top of the hierarchy. But I feel like the way I understood the reason I was able to achieve always is because my own way of learning things was to be able to break things down into very complex things into simpler pieces. And, that has served me very, very well and even as in surgery, being able to take the more complex procedures, break them down into any Individuals simple movements and sort of very stereotyped movements. And, have things make sense to me, in my own mind, to master them has been really critical. Now, for me, actually, I think what has served my audience well, is the fact that, listen, if, in order for you to explain something to others, you really have to understand it well. And I am kind of a straight shooter in the sense that I understand things in a very straightforward manner, I try to simplify them. I always think about the way I bowl, if I ever go bowling, I don’t put any spin on it, to me, I just hit the aim for the front pan, and I knock it down. So the point is, that, I think that my listeners would tell you, and my investors would tell you that the thing that they find appealing about my style is the ability to sort of conveying fairly complex strategies and paradigms so that they’re pretty easy to understand.
Brett:
Yeah, making the complex simple. And I can absolutely agree with that as a listener for your podcast, Buck. And that is, as a gift, and it may have come naturally to you for years. But man, every day I try I struggle with it, right? Because I’m sure it’s just, slowing your mind down, slowing your emotions down, and then trying to put yourself in the other person’s shoes and saying, “why don’t we just get cut to the chase?”, and I like the analogy of bowling, right? I like to put that first and knock it down. Excellent. So let’s now dive right into how that helps you help others build wealth and or just commercial real estate investing? When you’re finding deals or looking at deals or looking at operators or underwriting property? What’s the best-kept secret to keeping it simple?
Buck:
Well, let me go back to the analogy, again, of what I felt like made me successful as a surgeon, I did a handful of the same procedures over and over and over again, and I perfected them, I got really, really good at them, I could do them and, half the time, a third of the time of the others and get better results. And to me, what became attractive is to try to put those kinds of concepts in place. So when I approach real estate, specifically, my niches is what, generally apartment buildings and larger apartment buildings, 200 units plus, what I like about that space, and the way we approach it is the same way I approach surgery is to say, we’re not out there to reinvent the wheel, I would love to tell you that every little, deal that we do is a work of art, but it’s not. And if it were, I think it would have a higher likelihood of failure. But we try to do is to make, value add real estate, in the residential space. We try to make it like McDonald’s, right? We want everything the same. We want the coffee, the day we acquire something, we’re not going to sit around and think about what color we want to paint the walls, we’re not going to think about which units we’re going to renovate how quickly that’s all been planned ahead of time. And I think what makes us unique in that regard, is that what we’re trying to do is, we’re trying to do things well, but we’re doing it the same, and we’re trying to do it a lot quicker than everybody else. Now, why is that important? Because if you ever look at a pro forma, Brett and every pro forma show you like five years, and you know what you’re gonna do when the value at creation, the one variable that is probably ignored more than any other variable, by the operators and the investors alike, is the variable of time, right? So if you have a five-year pro forma, showing you that you’re going to double your money in five years, which is pretty typical, right? Getting 17 to 20% annualized return. I mean, that’s, that’s kind of your typical pro forma show. But what if you could do that and half the time? Well, then your returns just go way, way up. And that’s really what we’re focused on. We can change. We can create, we can take advantage of what the market will give us to the extent that we know what value add we can bring. We know what the comps are, we know what you know how much money we can increase net operating income realistically over a period of time. But the one thing that we can control better than I think just about anybody I know out there is our ability to do it very, very quickly. And the faster we do something, the more money our investors make. And so I think that’s probably one of the most unique aspects of what we do.
Brett:
Excellent. So taking the surgery of the surgeon approach, and perfecting surgery and applying that to perfecting the value add an implementation of that business plan, have everything pre-planned, prepackaged McDonald’s, like, let’s just go right, let’s go quickly, instead of three to five years, let’s try to do it maybe into three things. Is that a fair summary?
Buck:
Yep, nature is.
Brett:
Excellent. So now let’s apply the concept of time to capital and on your website, I was reading one of your blogs, just the fact that in 2000, the crash, the 2008 crash, there’s over $7 trillion lost in the stock market, right? Or perhaps even other places where people had overpaid for properties. I know, I was in California, Buck. And it was a time where Marcus and Millichap people were buying like crazy before the crash. And everything hit in Sacramento is one of the hardest-hit countries or cities in the country, and a crash and I saw friends, family clients lose half some lose everything, or paid. And they weren’t making time for their friend, they were overpaying, and or they had too much in the stock market. So just talk about the value of being able to diversify and have time beyond your side.
Buck:
Yeah, I mean, I don’t, I would just say with regard to the crash and everything, I mean, real estate is not independent of other asset classes, right? I mean, it’s still linked, we could, I’m not going to pretend that we don’t have some, when, when economies are bad, that we have some kind of, special power to stay away from the effects of that. But what we do have is, we do have some power over, using some basic logic and understanding what, to me, one of the things that I like about our space specifically, is we are in the business of rubes over your head. So if you go back to, the basic fundamental needs that people have, they need to be eating. And, and, you need to have some water and you need a roof over your head. Right. So that’s, that’s a fundamental thing that it’s always struck me is that’s where I want to be, I want to be where people still need to pay for, the, they don’t need to be in office, they don’t need to be in retail, but they do need a roof over their head. Now. The other thing that generally speaking that philosophically has kept us in pretty good shape, even through COVID, pretty much unscathed is the fact that we’re not dealing in the space not really going after that glitzy a class property, we’re typically looking at B and C, class properties that are more for the working class. And I’m definitely not you’re not we’re D class properties, where you’re going to get yourself in trouble with poor credit and people, not having jobs, but people who are, service workers and blue-collar workers, etc, they need a place to live. We have had tremendous luck with that even though COVID. our, we have, we have had very little in the way of, significant problems collecting rents. And part of that is also choosing the right markets, as well. I mean, I don’t I live in California to Brett and I love it. I’d love to live in Montecito. But honestly, there’s no way I would invest here. There’s just no way. Right? Because I think the laws, the business friendliness of California are not there. I also think that there’s a fundamental difference in demographics as well. I think, in Texas, I feel like we hit a population that regardless of where they were at, they felt inclined to have to pay the rent. That was, it’s part of their culture. I don’t know what it is, but we didn’t run into the problems of people not wanting to pay rent, or making it a political statement. So Texas and, and Arizona, we didn’t have a lot of issues there. So one last thing I’ll add is, to the extent that if you look back in 2008, 2009 and the people who got hit the hardest there, in residential real estate it sure the people who were investing in it In large complexes, and they mostly in the major markets like Dallas and Phoenix and things like that they survived just fine, the real people who got hit, they get hit harder speculators, right. That’s not what our business is, we’re not in the business of speculating, we’re not in the business of buy and hope. We’re in the business of buying and actually creating equity. In with commercial real estate, it’s quite simple, it’s Math, and it’s, again, goes back to a way it is that I like it, it’s about driving up net operating income, you increase the number of rents that come in, and hopefully the skill that you have helped to decrease expenses. And that is the value of your property. And so the more you can do that, the quicker you can do that not only are you making your investors money, but you’re actually de-risking that property by by by middle, side by lowering the leverage because you’ve increased value in the property.
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