Exploring the Potential of Commercial Multifamily Investments

By: Dennis Bethel, MD
Thursday, May 1, 2014

In 2013, the American Medical Association (AMA) sponsored a survey on physician financial preparedness. It should come as no surprise that the No. 1 financial concern irrespective of age, gender and specialty was retirement savings. How could it not be?

Between losing a decade of prime earning years to medical education and accumulating massive amounts of education debt, we start out behind the financial eight ball. Combine those realities with decreasing reimbursements, higher taxes, looming inflation and years of unreliable stock returns, and it is no wonder physicians feel anxious about their retirement and see it slipping further and further away.

Is There a Solution?

Ninety percent of the Forbes 400 either made or retain their wealth in real estate. For first-time millionaires, the two most common paths are business and real estate investments. Most physicians, however, are too busy to start a business outside of medicine. As for real estate, investing in single-family homes can be extremely time-intensive. Having done this early on in my investing career, I can tell you that managing these properties can take up a large chunk of your time and only deliver questionable overall returns.

Through a lot of research, I discovered commercial multifamily investments and how they are the most stable asset class in all of commercial real estate. Some key benefits:

  • The best risk-adjusted returns of all real estate asset classes over any 5-, 10-, 15-, 20-, 25- or 30-year period
  • Multiple economic benefits (current income, equity growth, tax-advantages and inflation resistance)
  • 100 percent evergreen investment, as shelter is a basic need
  • Economic-cycle resistance with little to no volatility

With all of these advantages, including top-tier local investment markets, why aren’t more Texas physicians investing in real estate?

The answer to this question is that they believe the two following real estate myths:

Myth 1: Investing in real estate requires one to become a landlord.

Active real estate investing often leads to management headaches. As busy professionals, most physicians have no interest in property management. Fortunately, there are passive investment opportunities with high-quality private real estate investment firms that will manage the properties for you.

Myth 2: Even on a doctor’s salary, I’m limited to small residential properties.

Pooling your investment dollars with like-minded investors, known as direct fractional investing, can allow you to participate in larger properties with economies of scale that allow for better returns with less risk, while still giving you the tax benefits of direct ownership.

Being a doctor is no longer a guarantee of financial security. In these rapidly changing times — where the medical profession is being driven increasingly towards commoditization — you have to invest smarter.

I believe all doctors should at least evaluate how commercial multifamily investments can help them create a rock-solid investment portfolio.

Dennis Bethel MD

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