Automate Revenue Returns with Real Estate Projects

Masaki Oishi, M.D.

Thank you, Cheng. It’s good to be here. Thank you for having me on.

Cheng-Huai Ruan, M.D.

Yeah, so we’ve known each other for a little bit, but I didn’t know you were doing a lot of the real estate stuff. And, so it’s very natural for me to ask you to be on because I think that as physicians, from a financial education standpoint, it’s very lacking. And, it’s not surprisingly so, ’cause we weren’t really taught this in med school, we weren’t taught this in residency, or fellowship, and even becoming attendings. Weren’t really taught this as well. But, the biggest question that… that I get when I see in a lot of the Facebook forums, and stuff like that is as physicians, how can our hard earned money work for us? What do you think?

Masaki Oishi, M.D.

Well, that’s a very loaded question. There are a lot of different reasons why many physicians don’t accumulate the kind of wealth that they probably should. One is because they neglect their student loans, and allow them to sort of snowball, and end up… Sort of being a chained to them for a longer… Or, more than they should. Other reasons include things like, doctors are notorious for being big spenders on certain items like cars and houses, and things like that. So, there’s a bit of financial discipline that probably goes a long way for many doctors. And, then of course, I think the reason why I’m into real estate is because a lot of physicians just don’t know how to make sense of investments, and decide for themselves what looks like something they should have their hard-earned money in, how to evaluate different investments to see if they’re worth their while, or if they’re appropriate for the kind of portfolio that they’re building.

Cheng-Huai Ruan, M.D.

Right. And, ever since residency, I’ve been kind of bombarded with people marketing to me. Me and my wife, we’re both physicians. Ever since that, and we’ve been talked to by so many people about investments here, what should you do as a resident, but there’s so much conflicting information. I feel like it’s also coming from conflicting sources, as well. So, what do you think are the biggest misconceptions around investments that a lot of advisors kinda target doctors when we’re early on in our career when it comes to like investments and retirement?

Masaki Oishi, M.D.

Well, I think when it comes to investments, the most important factor is time. I would say that rather than focus on whether or not I’m making a particularly good investment here or particularly risky investment here, it’s really more important to get started early. The more time your investment has to grow, the more you’ll be able to accumulate. And, really you need to start early, and get in the habit of making regular contributions to your investment portfolio.

Cheng-Huai Ruan, M.D.

I think a lot of docs, and just not myself and my wife are… We’re so hell bent on paying off our student loans, especially when it comes to earlier on, like the concept of investment doesn’t make any sense where we’re in that large amount of debt. So, how do you sort of balance between like debt payoff and investment, investing towards retirement?

Masaki Oishi, M.D.

That’s a great question and I think a lot of professionals, not just physicians, but professionals that have been through graduate school or professional training… Are really at a loss as to what the right balance is. Whether they should pay off their student loan debts now, or use their income to fund investments. And, I don’t think there’s a one size fits all answer. I will say that right now, interest rates are very low, and it may pay to refinance some of your student loans, if you can. I’ve seen the federal rates as high as five and a half, six and a half percent for professional students. 

So, that’s certainly somewhere where you can actually save some money by refinancing or even paying them off. Paying off debt is not a bad strategy. So, it’s a way of paying yourself, having… Negative assets wiped off your books is just as good sometimes as having an investment, because you’re no longer having to pay interest on that. So, it really depends on the situation, but I would say a balanced approach is probably best. I don’t like to see doctors having to live a crimped lifestyle, because they’re hell bent on paying off their student loans either. So, it’s kind of a moderation type of approach.

Cheng-Huai Ruan, M.D.

Absolutely. And, I agree with you on that. Today, just today, I was looking at one of our Facebook forums, and there was a post about a physician couple, both finishing fellowship at the same time, both radiologists, and they both have about $390,000 in debt. But, they’re like, you know what? But, our combined incomes, it’s just a little over a half a million for this first year coming out. And, then she posts on there that they’re looking at this $2.8 million property, not in Manhattan or anything crazy, but actually in Mississippi. And, then you have… We have all these physicians from all sorts of ages, talk about, hey, you don’t want to be house poor at the very beginning. Right? And so, and then have those expenditures, and it’s sort of a overwhelming amounts of doctors are having the sense that going too big earlier on can sort of cripple things. You agree with that?

Masaki Oishi, M.D.

I think that’s probably good advice that… Start with something more bite-size and work your way up. Your comfort level, of course, is very important. When you’re a physician, you don’t want to have to be worrying about an investment that you made, and how you’re going to meet the monthly payments if you decide to finance it.

Cheng-Huai Ruan, M.D.

Yeah, absolutely. Absolutely. But, let’s go into real estate, ’cause that’s what we’re here to really talk about. So, now you’re a part of Market Space Capital, which is wonderful, but let’s talk about the story of how you even got into Market Space Capital, or maybe how you even got into real estate in the first place.

Masaki Oishi, M.D.

Well, it started when I was about 15 years old, my folks came to this country in 1964, not speaking much English, but they realized the value of investing, and they worked hard, and saved money and they bought some property outside of New York city where we were living. And, as the oldest sibling, amongst my brothers and sisters, native speaking English speakers, the job fell on me to make sure that things like property taxes were paid, and the rents got collected, and insurance got paid up on time. So, I had a bit of a… Baptism by fire, if you will. At a young age. So, that’s how I got started. And, it occurred to me over the years, those properties that they bought appreciated quite nicely. I think they made only one down payment on each of those properties, and they never made another out-of-pocket payment again, because the rental income essentially paid all the mortgages off. And, I thought to myself, well, that’s a pretty nice investment. That looks like something that should that be part of everybody’s portfolio.

Cheng-Huai Ruan, M.D.

Right? Yeah. The rest of us don’t really have a view into that sort of world. So, the math doesn’t even make sense at the very beginning. Right.

Masaki Oishi, M.D.

Right. Exactly.

Cheng-Huai Ruan, M.D.

Yeah. And, so how did Market Space Capital come into fruition?

Masaki Oishi, M.D.

Well… I’ve always been investing in properties wherever I go. I mean, I’ve moved several times since I finished my training, but at every place I go, I’m looking at properties, I’m looking for opportunities. I’m not trying to hit the big home run every single time. Sometimes, I’ll invest in properties that look rather shabby, but if I see value in it, if I see potential in it, then I will go ahead and invest in it. And, I’ve had a pretty good track record of being able to complete not just the purchase of a property, but also bringing it to its full potential, and then selling the property. I decided… In 2016 or 17… That I wanted to syndicate this process, bring on a lot more investors, especially physicians that I know. 

Growing a network or database of potential investors was actually kind of fun. I got to call on a lot of people that I hadn’t spoken to in a while. And, so that was kind of a rewarding process in and of itself. So, today I think Market Space Capital has come to the point where we have about $400 million of assets under management, and next year we’ll probably get pretty close to a billion by my forecast. I think we must be doing something right, because we have more and more property owners coming to us asking us to help them with the process. So, that’s kind of, in a nutshell, why I’m doing what I’m doing. I really do want to see professionals, especially doctors, because I’m a doctor myself, have access to the kind of real estate investment opportunities that are out there.

Cheng-Huai Ruan, M.D.

Oh, absolutely. And, part of this Summit is really featuring doctors, helping out other doctors, as well. And. yeah, you must be doing something right. Those are massive numbers and it’s a number I can’t really comprehend in my head. So, let’s talk about some advantages of real estate that doesn’t really exist in some other types of investments. And, there’s probably some tax advantages too. This was alluded to by another segment by Tyler McBroom. He’s a CPA with like a million followers on Instagram. He puts out all this really great content. And, so he actually ended that segment talking about how a lot of income earner… Like physicians, even if they’ve gotten W2’s and they’re employed, there’s some tax advantages for investing in real estate, if there’s sought cost, segregation analysis, and stuff like that. So, can you kinda talk about what that really means?

Masaki Oishi, M.D.

Well, I mean, broadly speaking, there are many ways of making money in real estate. I think the broad categories would be capital gains, rental income, and of course the tax advantages that accrue from owning real estate. And, I think… For a lot of high income or professional individuals, those tax advantages can be quite substantial. Especially if you leverage a property by taking out a mortgage. The interest is all deductible. The depreciation on the property is deductible. So, I think there are a lot of advantages to owning real estate if you have a lot of income. It can offset some of that, and result in a lower tax bill.

Cheng-Huai Ruan, M.D.

Right. And, recently I’ve come across some people where they don’t even have like 401ks, or do these retirement funds, IRAs, and they have everything just kind of invested into real estate. Is that like a common practice?

Masaki Oishi, M.D.

I like to be invested in real estate more so than securities, stocks, and bonds because that’s my comfort zone. For other people, I think you have to admit the convenience of being able to put your money in a mutual fund or a bond fund, and be able to draw it out whenever you want. I mean that’s a very nice feature. The securities industry has done a very good job, and making investing in security so convenient that almost anybody can do it, and it’s almost like putting money into or out of a bank account. So, that’s something that in the real estate industry we want to try to recreate or emulate at the very least. And, that’s probably the next step in the evolution of real estate investment.

Cheng-Huai Ruan, M.D.

Well, that really changed the definition of liquid, ’cause right now a lot of those funds are… Can be liquidated within 24 hours. But, if there’s something that’s real estate backed or a real estate investment in general, that could be a very huge thing.

Masaki Oishi, M.D.

Right. Right now, we have these real estate investment trusts, REITs basically that compete on the same markets that mutual funds do. And, they’re not bad investments, but they only reflect about two or 3% of the commercial real estate that’s out there. So, you’re getting a very thin sliver of selection when you’re investing in REITs. Plus, they function more like mutual funds. Again, there’s nothing wrong with mutual funds, except I find them to be terribly boring, and not transparent. From one week to the next, I don’t know where my money is or what it’s doing. At the end of every quarter, you get mailed a prospectus from the mutual fund company. But, by the time you read that it’s already outdated. The portfolio could have changed many times since then. So, if you like the convenience of owning mutual funds, there’s nothing wrong with that. Just make sure you choose one with a good reputation, and a good track record. And, I think most investors are okay with that.

Cheng-Huai Ruan, M.D.

Right. Right. And, I think most people just really want to diversify their portfolio too. Don’t necessarily go all in on one particular thing. Right. And, so right now, there’s just so many things that are very attractive and sexy that are out there, from cryptocurrency, to real estate, to everything. And, it becomes sort of this muddled mess I feel like whenever we’re looking for investment opportunities, and also this takes a bit of a discipline in planning too. Right? So, we have to know like, what are the things or how much to save so that we can live comfortably, and really redefine what comfortably actually means. 

Because, I do think we kind of overstate it after a while, because a lot of physicians come out of training, and coming out of a residency, and fellowship, and even early on in the career tend to lock a lot of their liquid into liabilities and stuff like that. Nice cars and everything like that. And, I think it’s because they don’t… Really don’t understand the earning potential of their money, right? So, how do you think that we can learn more about like the earning potentials of our money when it comes to like real estate investment?

Masaki Oishi, M.D.

Well, obviously, if we’re going to invest in a property, there has to be a certain level of return, expected return. If all you want is three or 4%, well, you don’t have to necessarily invest in real estate, or stocks, you can probably just buy bonds, and be happy with that. And, that’s fine. But, I think when you look at the long term picture of how do you get to a comfortable retirement where you can have the big house, and you can have the fancy cars, you can have a boat, or whatever it is, feel fancy and still be able to retire comfortably.

Then you’re probably having to look at investments that return a lot better than three or 4% a year, and over a longer period of time as well. So, it really pays to do your homework and look at what kind of returns are expected versus what’s actually accomplished. I think, right now, residential real estate is a very, very good place to be. This is what I tell our investors, more so than industrial real estate, or office space, or retail. I turn them more towards multi-family properties, because that offers the highest return in my estimation.

Cheng-Huai Ruan, M.D.

Right. And, especially right now with the way that everything is going, right? And, so I think that, that multifamily… Speaking of multi-family, let’s talk about some differences. So, there’s single family home investments, there’s multifamily, and there’s commercial. These are the basic three principles that I understand, right? And, so right now you’re saying that like focusing more on the multifamily, because… Maybe because there’s higher demand when it comes to renters in this market right now, is that why?

Masaki Oishi, M.D.

Yeah, there is higher demand. By some estimates, there is probably a 5 million unit shortage, in rental properties in this country. Some of it is because of population growth, but others is because of preference changes among younger individuals. Not everybody wants to go out there and have a house with a backyard, and two dogs, or whatever the situation may be. A lot of millennials and other young people are more into lifestyle and convenience, and that’s fine. That’s great. There’s a market to cater to those individuals, as well. We saw other segments of the real estate market took a bit of a hit during COVID, especially last year. 

The entertainment and hospitality industries definitely did take a hit, but they’re coming back, actually. There is actually some really exciting things happening in that sector, as well. The office space sector is really struggling right now, because a lot of workers still haven’t gone back to work at the office, and they may not go back for a long time. So, there’s a lot of vacancy there. I would be very careful about looking for deals in that sector. Although, if you price the deal correctly, you can still make money. Just have to be careful about what you’re getting yourself into. And, then, of course, there’s retail. 

Retail has been in a long-term decline if you will, because of many things, many factors, but really because of the advent of e-commerce. So, like, if you can buy it online, guess what, you’re gonna be able to buy it online. And, so the need for brick and mortar stores has definitely deteriorated over time. That’s the sector that we really don’t have a lot of investment in right now. The time may come when it’ll hit a bottom and start to rebound, we’re kind of looking for that moment. But, right now we’re very happy with where we are involved. Multifamily investments that’s really, almost all we do right now.

Cheng-Huai Ruan, M.D.

It’s all about moving the money to the right place at the right time, let it grow, and based on the trends, right? I assume?

Masaki Oishi, M.D.

Yes. I think there was this misconception out there that because so many people in the hospitality industry either lost their job or were placed on a hiatus, that a lot of tenants would not be able to pay rent, but as it turns out, because of government assistance in many different forms, rent payments have been very strong, even throughout the pandemic. So… Now, that’s something that we look at and… Say, well, is this something that’s going to last? Is this something that’s going to taper off? Because, of COVID panning out. We don’t know the answers yet, but I think the fundamentals of a multifamily are still very strong.

Cheng-Huai Ruan, M.D.

Excellent. And, let’s talk about some niches for a second, or niches. I dunno how people pronounce it, but one of the ones that comes up that I hear about is sort of like the senior living or 55 and up population and their relatively more stable. Is that sort of a true statement?

Masaki Oishi, M.D.

Well, I think as far as the markets are concerned, yes, that’s a growing demographic. And, certainly catering to that growing segment of the demographic sounds like a very good strategy. We are, at Market Space Capital, we’re in the midst of developing a 250 plus unit property that focuses on that population, and we’re building it right next to a medical center. So, I think those are the sorts of smart location type investments that catch our interest. And, we tend to focus on those kinds of investments.

Cheng-Huai Ruan, M.D.

Great. Yeah. Putting em near a medical center. I mean, that’s very stable. It’s very unique, and it’s good for everyone. So, I’m sure there’s some invested interest, as well. And, so for Market Space Capital, I think that you were saying that there’s a lot of physicians that are part of the investment portfolio, right? And, of course, that’s… Of course, you’re a physician yourself, and you kinda lead the way into it. And, so… But, let’s talk about specifically what really does… What does Market Space Capital really do, specifically? And, when you have a physician on board, what does that journey look like? Where does the money go?

Masaki Oishi, M.D.

Well, when… We’re basically project based in terms of offering investors the opportunity to go in on the property. We don’t have a general fund where you put your money in and you don’t know where it’s going. Like, we definitely want to put the fun back in investing by showing our potential investors the actual property, what it’s going to look like, what we expect from it in terms of financial performance, as well as whatever risks may be involved. But, I think we carefully choose our properties based on 28 different metrics. We’re very data oriented, data driven. And, our approach also is very conducive to bringing the next phase in real estate investment… To our investors, which is to go digital, and start tokenizing some of these assets.

Cheng-Huai Ruan, M.D.

Tokenizing. That’s a great word.

Masaki Oishi, M.D.

Yeah. That, we’re very excited about that. I mean, people hear about blockchain technology. One of the most common questions I get is, so if you blockchain a property, does that mean I’m going to get paid in Bitcoin? And, I’m like, that’s not what it means at all. Crypto is crypto. That’s a whole nother catalyst that I don’t care to touch really, but that’s… That’s the kind of stage we’re at, where a lot of people are still trying to find their understanding of what blockchain does, and what it allows us to do with real estate investments.

Cheng-Huai Ruan, M.D.

Oh, absolutely. And, blockchain is very different than cryptocurrency. In fact, a lot of… There’s speaking of electronic medical records that are gonna be on the blockchain, there’s ways of accessing information, patient data is gonna be on the blockchain, as well. So, as the technology, it’s a very different thing than cryptocurrency, even though I think that people use it kinda interchangeably, at this time, but I agree with that, but that’s not what this Summit’s all about. So, let’s… And, then I actually subscribed to your blog on Market Space Capital, and there’s one right here that really caught my attention. And, it’s called The Most Important Factors Contributing To High Returns. 

And, there’s case studies that are in there. And, I kinda obsessed over this a little bit, and there’s some numbers that are there, and it talks about how, when you have cash returns, we call it the mailbox money, right? It talks about difference in appreciation, and principles down payment in tax benefits. So, if you guys have a chance, go to Market Space… Marketspacecapital.com, and then subscribe to the actual newsletter. I’ll have a link actually in the description of this video, but you give such a fabulous education of these different things, in very simple to understand language. And, I really appreciate that. So, I want to thank you for that.

Masaki Oishi, M.D.

Well, thank you, Cheng. I appreciate that too. I think one of the things I’ve learned over the years is that of all the formulas that are out there about how to calculate return and things like that, the most important one requires no formula at all, which is when you buy a property, buy it right. Okay. Don’t pay too much. If you buy it right and you pay the right price, you’re probably gonna do okay.

Cheng-Huai Ruan, M.D.

Absolutely. Absolutely. So, the last question that I have for you is what do you wish that a lot of doctors, some younger doctors like myself, what do you wish that we know about investing that you think that everyone should really understand? What is the one thing?

Masaki Oishi, M.D.

Yeah. When I was growing up, there were doctors that were friends with my father and I watched them as they started out, and grew their practices. And, they had the opportunity through their practice, through there business, to invest in things like office buildings, and labs, and imaging facilities, and things like that. And, I think a lot of the younger doctors that are coming out of medical school today are opting to become employees at hospitals and things like that, which it has… Those things have their own benefits, but I’m afraid that along with the loss of autonomy, they’re also losing some important investment opportunities, because they’re becoming salaried employees, instead of entrepreneurs. And, I think that’s something that’s very sad to me to watch. I think we all need to find, in ourselves, some level of the entrepreneurial spirit, and carve out something for ourselves, and make some passive income.

Cheng-Huai Ruan, M.D.

Wow, that’s beautifully put. I actually agree with you, as well. So, any book suggestions that you recommend, maybe your top three favorite ones to start reading about?

Masaki Oishi, M.D.

Well, I mean, at the risk of tooting my own horn, I did publish a book myself, called Prescribing Real Estate. You can look for it on Amazon. I think it balances some technical stuff with the more general philosophy of investing.

Cheng-Huai Ruan, M.D.

Excellent.

Masaki Oishi, M.D.

Yeah. There’s also another fine book called Making Money In Small Asset Real Estate. I think that’s the name of the book. I haven’t read it in a long time, but yeah. I think the more you know, the more you get educated about investing, the better. I’ve never said to myself, oh, I wish I hadn’t read that book, because I always come away with something that hadn’t occurred to me before. And, of course, you don’t just blindly follow advise. You put it to the test and see if it works.

Cheng-Huai Ruan, M.D.

Yeah, absolutely. Absolutely. Well, thank you so much for being on. It’s been an absolute pleasure talking with yah. And, guys, go check out Dr. Oishi’s book, and then go to marketspacecapital.com. Well actually, I’m gonna have the link in the description. So, if you’re watching this live, it’s probably in your email, but if you’re watching this on replay, it’s actually with the description, with this Summit. Just go click on the link on that. And, subscribe to their newsletter, because it’s just full of like really fantastic information. And, it takes about three to four minutes to read through some of these newsletters. So, not too much to overwhelm, but just enough to inspire, and just enough to like get the juices rolling in thinking about things in a bit of a different way. And, it’s those small one millimeter shifts that I think can create a massive amount of momentum later on when you’re making decisions for yourself, creating that safety net for you, your family, your friends, your loved ones. So, yeah. Dr. Oishi, thanks for coming on. I really appreciate it.

Masaki Oishi, M.D.

Thank you, Cheng. It’s been a pleasure.