Ep147: Buck Joffrey – This Doctor Lost in His First Real Estate Deal Even Though the Math Looked Good

By Andrew Stotz | 11/13/2019 |

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Guest profile

Buck Joffrey is a physician turned entrepreneur and professional investor. He is also the host of The Wealth Formula® Podcast and author of an international best-selling book, 7 Secrets of Eternal Wealth, which focuses on financial education for high paid professionals.

“At the end of the day, I just came into a realization that I really made a big mistake. I can sit here, chase it, spend money to save it, or I can give it up, cut my losses, sell it to somebody, learn to take the loss and move on. And so I did the latter.”

Buck Joffrey

My Worst Investment Ever Story

Surgeon turned real asset investor

Buck finished surgical training in 2008. Having his own practice and doing a few other things, he started to have a little money to invest.

He got interested in real estate primarily because of his family’s influence but mostly because of Robert Kiyosaki, the author of the best-selling book, Rich Dad, Poor Dad.

“It’s just math, and I’m good with math”

Buck got addicted to the idea of cash flows and multifamily real estate, and he went on and read two of Ken McElroy’s books, The ABC of Real Estate Investing and The Advanced Guide to Real Estate Investing.

Armed with advice from all the books he read, he concluded that it’s all just math, and he knew he’s good at it. With no help from anyone, he started looking for properties.

The deal that spiraled out of control

For his first venture into the real estate world, Buck thought that it was a good idea to go to an online site to look for properties. He eventually found a deal, did the math, and saw a great opportunity–or so he thought it was.

He went down to the place where the property was, ticked all the boxes, and bought the building. Just as quickly as he had made the deal, he started realizing that nothing on his spreadsheet seemed to be working.

All of a sudden, everybody stopped paying their rent, and a bunch of people was creating more problems than he could handle.

Buying something that you think you know and realizing that it was not after

It turned out that Buck’s first deal was a fraud. The previous owner, to be able to convince people to buy his properties, would let people live there for free for a while. This was just to put on a show that the building was performing well and that buyers could expect to receive rent from the fake tenants.

And so, the whole thing was a mess. Buck, with no one to turn to and with little to no experience in property management, had to sell the building after a year later for a loss.

It’s one thing to know what you think you are buying and another thing when you realize that it’s not what you thought. It was a tough way to learn but a good lesson nevertheless.

Lessons learned

Real estate is more than just numbers

The heart of real estate is operations. It’s a combination of finding an asset and good property management to squeeze out those high returns and get the most out of it.

Build a great team and find the right people

If you plan to venture into real estate on your own, don’t. Buck has learned it the hard way. It is very important to create a team with the skills and experiences in real estate.

Don’t underestimate the potential gains from being a “passive” investor

Over time, Buck learned that there are two sides of real estate. Some people are doing it full time, which brings a decent amount of cash. Others, on the other hand, are investing as passive investors who are only limited partners with operators. With zero work, they get to earn a lot more than those who are full time in real estate.

Andrew’s takeaways

Do your research properly

The number one common mistake is the failure to do research properly. Research is beyond numbers. When doing your research, investigate, check, and test those numbers if they’re real.

Your team is your asset

Getting the right people on the bus will shape the strategy of how you invest, where you invest and how you will manage. So, it’s a great reminder to build a great team around you which you can trust.

Realizing when to cut your losses

Don’t wait for a miracle to happen. When it’s losing, learn to give it up. Cut your losses and put your money into something more hopeful. There is so much emotional baggage with cutting losses. It is important to realize when to stop before draining your money, spirit, and time. Get out, move on and do not make the same mistakes again.

Actionable advice

If you’ve got a full-time job and you are focused on it, the last thing you want is to give yourself another job. So, if what you are looking at is a potential investment as a limited partner, find yourself a group of people that knows what they are doing, and you will, in most cases, get a much better outcome with zero additional work for you.

No. 1 goal for next the 12 months

Right now, Buck has about $300 million worth of assets under management for his investor group. His goal is to continue to get people as good returns as he can and maximize investor returns.

Parting words

“Remember, learn from your mistakes. But they don’t really need to be your mistakes because they can be someone else’s. Borrow the takeaways and learn from them.”

Buck Joffrey