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EP118 - Counseling Physicians on Using Their Medical Property as a Strategic Tax Advantage Financial Tool with Param Balandandapani, MD

Physician-owned real estate can be an incredible tool. If used correctly, you can create exactly the type of freedom you’re searching for: financial, geographical, time, and more. As a living testament to what can happen when you put real estate to work for you, I invited Dr. Param Baladandapani to join me in today’s episode. Dr. Bala is a radiologist, full time mom, real estate investor and mentor to professionals seeking freedom through real estate investing. Listen in as we discuss her personal journey from medical professional to real estate investor, how to utilize the full power of physician-owned real estate, and what to do if your investments are losing the numbers game.

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In this episode, we talk about:

[3:08] Why Dr. Bala pivoted in her medical career to become a real estate investor

Dr. Bala had a “dream job” that came with 12 weeks vacation and a great lifestyle and was almost 10 years out of fellowship training. Then there was a merger at work that changed everything. The new terms left her feeling like she had no control over her life and schedule and made her realize she was lacking autonomy. As she began to struggle through the career transition, she started to take a closer look at her passive income. She had picked up a few simple buy and hold long-term rentals along the way but had never really focused on real estate as a true source of income. She realized that, in terms of passive income, she was making twice as much with her real estate investments than in her stock portfolio. In that moment, she knew she wanted to build her passive income to a level of financial independence that allowed her more control over the terms of her employment.

Never wanting to experience such a high level of anxiety over a career transition again, Dr. Bala began educating herself and acquiring more long-term and short-term rentals, boosting her returns and increasing her portfolio.

[5:30] Dr. Bala’s take on physician burnout and financial freedom

Many of the physician’s I’ve spoken to have brought up the topic of burnout, citing huge student loans and the struggle to generate an income. Dr. Bala feels that physician’s begin their career journey always having their patient’s best interest at heart and knowing what the best practice and standard of care is. As the reality of the job sinks in, they realize they don’t always end up having a voice in standard of care and virtually no control over inefficient systems. When you know there are better systems and processes out there but you feel like you can’t make a difference, it’s easy to burnout.

Lack of control over hours worked or days scheduled can also take a toll. Dr. Bala recounts that she had very little control over her caseload, systems, or even implementing what she believed to be best practice with her patients. The lack of autonomy, the feeling of burnout, that is what made her want to take another look at how she practiced medicine. Many physicians don’t have the option of creating a schedule that works best for them, which is where financial freedom comes in.

[7:24] The who, what, and why involved with Dr. Bala’s consulting practice

Dr. Bala consults with physicians from all across the real estate knowledge spectrum. While some of her clients know little to nothing about real estate investing, others already have portfolios that they want to scale. The goal is to help them build their own active portfolios and to support them in making decisions that will allow them to scale in whatever way works best for their lifestyle.

Dr. Bala helps her clients understand the benefits of owning real estate and supports them in education around strategizing and optimizing taxes, income shifting, hedging against inflation and more.

When physicians look at the real estate equation, they aren’t always factoring in the different levels of returns they receive. When they begin to understand and utilize this knowledge, their investments become more powerful, especially if the real estate is associated with their practice.

[8:35] The power of owning real estate as a physician

When they own real estate, as opposed to leasing it, some physicians may feel that the only difference is making a mortgage payment instead of paying rent. However, when they begin to understand the benefits and how to optimize their taxes, they’ll see that they can actually pay themselves. When the LLC holds the real estate income, it’s taxed very differently, opening their eyes to the tax advantages of owning real estate as a physician.

[14:09] Why outsourcing is a critical piece of owning real estate

A firm believer of outsourcing, Dr. Bala always recommends having a great property management team in place for short or long term properties. When you have a property manager, you are not only freeing up and valuing your time, but you’re also giving yourself geographic freedom. Plus, with the efficiency of outsourcing to a team, you don’t have to worry about being the one to handle difficult tenant situations.

[15:34] What to do when your investment “isn’t working out”

It’s not uncommon to have a property where the numbers “aren’t working.” This is why it’s important to be educated on the submarket prior to purchasing the property, so that you know how to run your numbers accurately from the very beginning. If you haven’t done that, Dr. Bala suggests that you immediately begin to look at how much equity you have in the property in terms of returns. This will help you find the next best place to potentially move that money, after running the numbers.

[16:34] The pros and cons of becoming emotionally attached to tenants

Dr. Bala believes there are pros and cons to being emotionally invested in your tenants. When you have an emotional connection, you’re bringing in people who are helping you with your practice, creating a referral base, and thriving in a symbiotic relationship. However, when there are tough decisions to make, being emotionally invested can make things complicated very quickly. This is why Dr. Bala recommends always outsourcing to a third party who can handle late fees and execution of contracts.

[17:21] A broad overview of Dr. Bala’s real estate systems

Dr. Bala has four general recommendations for any physician investing in real estate. First, you’ll want to have a property management team in place so that tasks such as routine maintenance, contracted services, and accounting are efficient and optimized. Second, Dr. Bala suggests making certain that you are optimizing your tax benefits to boost your returns. Thirdly, it’s important to have systems in place for asset protection. Hire a reputable attorney so you can scale without worry. Lastly, you’ll want to outsource to a team that is going to handle the day to day work. This will ensure you’re receiving optimal rent while decreasing your expenses, which is going to strongly support an appropriate cash flow. 

[19:18] How the “who, not how” approach can reduce overwhelm

“Medicine is one thing and real estate is a whole different ball game.”Dr. Bala believes that even a large percentage of physicians making six or seven-figure incomes were never really taught about money. Trying to manage money and investments with little to no education can be very overwhelming, especially for those who aren’t detail oriented or interested in reading financial education books on their own time.

The good news is that you don’t have to be a financial expert to make great financial and investment decisions, you just need to connect with someone educated in financial matters who can do it for you or guide you through making the best decisions. If it’s not your zone of genius, you don’t need to be focusing on it. So, don’t worry about focusing on the how, and connect with someone who can point you in the right direction. 

[20:30] Dr. Bala’s message to her younger self

If Dr. Bala had a chance to share a message with her younger self, she would educate herself on the importance of being surrounded by a community of people who are aggressive about learning, and would have started investing straight out of med school. She feels she spent a decade doing things wrong before she figured out the correct way to invest, and it would have been a much easier and faster education had she connected with a mentor or a coach. 

[22:16] Dr. Bala’s first job 

Dr. Bala considers her residency her first job.

[22:33] What Dr. Bala would be doing if she wasn’t a physician or entrepreneur

Dr. Bala feels blessed that she had the opportunity to become a physician and is thankful she was guided into a medical career. She can’t imagine not being a physician, but notes that if she would have done anything in addition to being a physician, it would have been starting online education like Generational Wealth MD a little bit sooner.

[23:18] What Dr. Bala is currently reading or listening to for news, information, or inspiration 

As a busy entrepreneur, physician, and mom, Dr. Bala finds that podcasts and courses are the best way for her to consume content. She spends 30 minutes everyday listening to something that her performance coach has suggested, which is content that supports her emotional health and mindset and helps her optimize the way she talks to herself. She believes that these are important areas of life to prioritize.

[24:00] What Dr. Bala does for healthy self care

Dr. Bala practices strengthening her emotional and physical health by listening to a podcast every day and meeting with a trainer five days a week. She also makes a point to prioritize blocking out time to intentionally connect with friends and family on a daily basis. If she doesn’t do this, she feels her energy begin to drain.

[24:49] Whether the desire to heal is born or trained

Dr. Bala believes that the desire to heal is socially conditioned. While she’s unsure if it happens during medical training, she does believe that it happens in your formative years. For her, she feels that what she was exposed to in those formative years shaped her and helped her realize that she wanted to become a physician.

[26:00] Whether leaders are born or trained

Previously a firm believer that leaders are born, Dr. Bala is learning that a lot of the traits we believe are our personalities exist simply because we haven’t acquired different skill sets. As she has continued to train herself, she believes now that leaders can be trained.

I used to think they were born, but I’m beginning to shift that mindset. And I’m learning that a lot of things that we think are our personality are just because we haven’t acquired different skill sets. I’m training myself. So with what I know now and with the path that I’m on, I would say leaders can be trained.

We have an announcement! Our Q2 report has been released. We often talk about the importance of having the latest market data when making investment decisions. Each quarter, DOCPROPERTIES publishes a market report that gives you exactly what you need to identify opportunities for the greatest return and investment. You can download your free copy here.

Thank you for tuning into the Providers, Properties, & Performance podcast!


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