Opportunities on the Investment Frontier

Staying ahead of the curve requires strategic investment and innovative thinking. By exploring the opportunities on the investment frontier, dental practices can unlock new revenue streams, enhance patient care, and position themselves for long-term success. But first, it’s important to know the threats and opportunities ahead. A woman in Chicago is facing multiple felony charges for falsely practicing as a dentist. She left behind a string of injured and harmed “patients”—individuals who fell prey to the scheme. Obviously, it is a major crime to practice dentistry without a license, as it should be. What about posing as a real estate sponsor or capital raiser? For the cost of notarizing a few documents, anyone (I repeat—anyone) can file private investment offerings with the Securities and Exchange Commission (known as “Reg D” offerings). Very few questions are asked. Now, I’m not advocating for licensing real estate sponsors… The point is, how do you know who you are working with? Does an expensive office and professional letterhead make someone qualified to raise capital from investors? In protected healthcare professions, trust is everything. It is unthinkable for someone to falsely represent themselves or their professional qualifications in dentistry. But is it reasonable to extend that same level of trust to other professions? The New Get Rich Scheme: Invest Other People’s Money. The 2012 Jobs Act ² loosened Great Depression era regulation on capital raising and opened a Pandora’s box that had been relatively restrained for 80 years. This made it much easier for anyone to raise capital from private investors for real estate investments. These offerings typically take the form of large syndications, including multi-family or commercial projects. In the last decade, there has been a notable increase in the number of new sponsors and promoters marketing real estate investments. Interestingly, I have also seen a proliferation of doctors doing the selling. Often, these are doctors who lack significant experience or a proven track record in real estate and have not managed investments through a complete market cycle. Disclosure: I do not raise capital. I am not a fund manager or financial advisor. I do not sell real estate. But many doctors do. In fact, there are numerous weekend courses promoted to doctors on “how to become a private real estate fund manager.” Why is this the case? Doctors are finding that by becoming general partners in various real estate projects, they can leverage the trust and affinity of their colleagues to attract capital and raise funds—a very lucrative endeavor. This is not surprising. It is one of the key indicators that we are reaching the end of a major “boom” cycle. Greed is rampant. But even when intentions are above board, there is a significant inherent risk when doctors with little to no experience in real estate enter the fray at the top of a market cycle. They are unaware of what they don’t know. When things go badly, it is very rare to achieve any meaningful recovery of funds lost through lawsuits and lawyers. Utilizing Other People’s Money Comes with Significant Responsibility. My first experience in collaborating with another investor was partnering with my dad in the purchase of a single rental house as a D1 dental student back in 1980. My dad put up the capital (investor) and I managed the project (operator). After my time in dental school, we sold the property and split $50,000 in capital gains. I took my share and parlayed that into more rental properties. Since that day, the vast majority of my investing has been with my own funds, slowly accumulated over time. Over the years, many people have urged me to become a “capital raiser” or sponsor. It can be extremely lucrative, but I’ve never chosen to do that. There is a place for that role—as an investor, I need quality operators. But understand that becoming a quality operator is a vocation that requires significant experience, skill, and ongoing effort. It is not something to be learned at a weekend course, and it is not passive. Finding the right operators who are worthy of trust is like looking for a needle in a haystack. And when you find them, the right constructs are still essential for success. Misaligned Incentives = Danger for Investors The significant majority of syndications being offered today disproportionately shift risk to investors, leaving sponsors with little to no skin in the game. Sponsors often make the majority of their profit upfront through acquisition and front-end fees. As a result, sponsors have little incentive to follow through when things get hard. These misaligned incentives are often buried deep in the operating agreements, carefully worded by attorneys. You have to dig deep for the truth. Personal “Self-Check” Evaluation:

• What is my “buy box” criteria? — How defined are my parameters for selecting these investments? Seasoned investors have disciplined principles that they do not violate. Warren Buffett is a prime example of an investor with strong and clearly stated standards. The fear of missing out (FOMO) is the lack of such maxims and the cause of the majority of investment failures by the unsophisticated.
• Am I chasing yield? — Am I being seduced by a desire to hit a home run or achieve a potentially high yield return vs. focusing on principled investment?
• Have I specified desired outcomes? — How will this investment get me closer to specific and clearly defined goals/outcomes? “Have more money” is a lazy answer. How much specifically? For what purpose? What am I willing to risk to achieve?
• Have I adequately understood the risks? — What would my future self want me to ask right now if this deal doesn’t go according to plan?

No Such Thing As “Passive” Investing The idea of “passive” investing is often cheapened to mean “set it and forget it.” There is nothing passive about taking the lead on your own financial endeavors and responsibility for the future outcomes of your investments. Of course, I no longer actively manage assets like I did in the early days. You won’t find me swinging a hammer or taking calls from tenants. That is not how I choose to spend my time. My focus today is on dealmaking, collaboration, keeping my finger on the pulse of the markets, and scanning the horizons for threats and opportunities. You have to keep your head on a swivel on the investment frontier. One Shortcut = Leverage Relationships To Fold Time. If you’re new to the frontier, find seasoned guides who can help you avoid the easy mistakes, find the opportunities, and steer you away from unnecessary losses. The right guide can be the difference between life and death. Controlling Your Destiny – The Thrill Of Freedom The traditional Wall Street model is not designed to create freedom before a distant retirement age. It is designed to limit your options and keep you focused on income production for the majority of your career. Getting out of Wall Street was the pathway that enabled me to reach meaningful financial freedom decades before my peers who were diligently filling 401(k)s. As a practice/business owner, you are no stranger to risk, autonomy, and the benefits of taking responsibility for your own destiny. You have bet on yourself your entire life. Freedom is the ability to take responsibility for your own outcomes and not be handcuffed by factors outside your control (a daily reality on Wall Street). Staying in the perceived safety of the majority will yield average results at best. Success in alternative investments cannot be delegated or abdicated to anyone else. It requires diligence and intention, and it is not without risk (nothing worth doing in life is easy). But the horizons are wider. The air is crisper. The views are more breathtaking. The adventure is more thrilling. Freedom is calling. What path will you choose? Invest in your future. Our dental management solutions can provide the tools and strategies you need to build a thriving dental practice. Book an appointment today. Schedule a meeting today at 561-777-2439 to learn more or find us on Instagram!

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Reference:[https://www.dentistrytoday.com/a-dangerous-era-for-alternative-investments-threats-and-opportunities-on-the-investment-frontier/]