WS1922 Avoiding Rookie Mistakes in Real Estate Investing | Steve Suh

In this episode of The Real Estate Syndication Show, guest host Jim Pfeifer had the pleasure of speaking to Steve Suh, a seasoned ophthalmologist and a savvy passive investor in real estate syndications. Steve is not only a colleague and friend but also a co-founder of Leftfield Investors. He shared invaluable insights from his 14 years of experience in passive investing, which he has also detailed in his new Amazon bestselling book, "Avoiding Rookie Errors as a Left Field Investor."

Steve emphasized the importance of learning from others' mistakes to avoid common pitfalls in real estate investing. He drew parallels between his surgical practice and investing, highlighting how both fields can benefit from understanding and avoiding past errors.

Steve's journey has been marked by both successes and setbacks. He candidly shared his initial forays into oil and gas syndications, which turned out to be a Ponzi scheme, and his subsequent investments that did not yield the expected returns. Despite these challenges, Steve's commitment to real estate remained unshaken, and he learned to diversify his investments across asset classes, sponsors, and geographies.

One of the key takeaways from this conversation was the critical role of the operator in a syndication deal. Steve stressed the need to vet not just the syndicator but also the third-party management team that handles the day-to-day operations of the investment.

Listeners interested in connecting with Steve or learning more about Leftfield Investors can reach out via email at steve@leftfieldinvestors.com or visit the website leftfieldinvestors.com. Steve's book is available on Amazon and through a link on the Leftfield Investors website.

Today’s guest host, Jim Pfeifer, is the Founder & CEO of Left Field Investors – a Community of like-minded individuals interested in creating financial freedom through passively investing in real assets that generate real cash flow. The Community works together to provide education, a network and deal flow for its members. For more information, you can visit www.leftfieldinves or reach out to Jim via email at jim@leftfieldinvestors.com.

VISIT OUR WEBSITE
https://lifebridgecapital.com/

Here are ways you can work with us here at Life Bridge Capital:
⚡️START INVESTING TODAY: If you think that real estate syndication may be right for you, contact us today to learn more about our current investment opportunities: https://lifebridgecapital.com/investwithlbc

⚡️Watch on YouTube: https://www.youtube.com/@TheRealEstateSyndicationShow

📝 JOIN THE DISCUSSION
https://www.facebook.com/groups/realestatesyndication

➡️ FOLLOW US
https://twitter.com/whitney_sewell
https://www.instagram.com/whitneysewell/
https://www.linkedin.com/in/whitney-sewell/

⭐ Be Our Guest!
We are continuously working hard to help our listeners with their journey to real estate syndication. If you think you can add value in any way to our listeners who are in commercial real estate, then we’d love to have you over.
Apply here: https://lifebridgecapital.com/join-our-podcast/

Transcript

Steve Suh: In my opinion, real estate is all about doing shortcuts because you can actually learn a lot of information from people without having to go through it yourself. Just like I said with my cataract surgery experience, I thank all those doctors who showed their mistakes because I, along with many, many other ophthalmologists, have learned that you can not have that mistake because you can do another maneuver that can avoid that mistake.

Jim Pfeifer: Welcome to your daily real estate syndication show. I'm your host, Jim Pfeifer from Leftfield Investors, a community dedicated to educating limited partner investors and providing a network and access to deals. I'm sitting in today for Whitney Sewell, founder of LifeBridge Capital. Our guest today is Steve Suh . He's one of the founders of Leftfield Investors and a full-time ophthalmologist. He has been a passive investor in real estate syndications for over 14 years and has chronicled his experiences in his fantastic new Amazon bestselling book, Avoiding Rookie Errors as a Left Field Investor, 20 Lessons Learned from 14 Years of Passive Investing in Private Syndications. Full disclosure, Steve is a colleague and a friend, and he has helped me immensely in my passive investing journey. In this episode, we talked about the importance of a community to a passive investor, how Steve's mistakes led to his eventual success, and how he learned more from his errors than from his home runs, why diversification is critical, why Steve prefers boring investments, and why the operator is the most critical part of the evaluation of an investment. Steve, welcome to the show. Let's start out with who you are and how did you get to where you are today?

Steve Suh: Yeah, so I am a full-time ophthalmologist in Columbus, Ohio. I have been in practice for over 25 years. And along the way, I got frustrated with the stock market, so I started to invest in real estate after reading Rich Dad Poor Dad. My first investment in real estate was actually our office condo, which we built back in 2005. I got into some small residential real estate as well. However, I didn't feel like I was doing a great job as a landlord, even with property management, and had a lot of frustrations. So I ended up selling those as well, eventually, and then I learned about the world of syndications. So I am currently in over 50 syndications right now, all the way from self-storage facilities to multifamily, resort properties, ATMs, industrial triple net leases, car washes, and even a Broadway show. So there's a lot of things you can do with syndication investing.

Jim Pfeifer: Yeah, that's awesome. And just full disclosure, we started Left Field Investors together. And you were probably the first person that I met that was also in syndications. And I remember the first time we met, and you said, yes, I'm invested with this operator. And I'm actually also in this deal. And I was in the same deal with the same operator. And the sense of relief that I felt was just amazing, because I found somebody else who's doing the same thing. And so can you talk about, I think we should open up with this. Can you talk about the importance of a community in investing passively? Because that's why we put left field investors together. But I just remember kind of leaning on you because you were a little bit ahead of me in the journey and just the sense of relief that, OK, this isn't a scam. Someone else is doing it. This is legit. Can you talk about how community helps you as a passive investor?

Steve Suh: Absolutely. And I recall that conversation at the Starbucks very, very well because you were the first person in the Columbus, Ohio area that I knew who was passive investing. I had been to some other meetings, however, I didn't know anybody in my hometown that was doing passive investing. So, yeah, I think a community is extremely important, especially after having left-field investors is essentially in maybe a different form. It's been around for about four years now. It's been absolutely helpful for me. So my journey started in 2009 with syndication investing. I invested in oil and gas deals. I actually did five in a row with the same sponsor. I was getting some small returns with them. I thought, hey, this is really, really working and I'm not doing anything. So I thought this is the way I want to go because I'm a full-time physician. I don't have time to manage people or manage the manager and that kind of thing. So that's why I got frustrated with active investing. So I thought this was a great way to go. However, the problem with those first five oil and gas deals is It was essentially a Ponzi scheme, and I ended up losing all my money in that other than whatever tax credits I got, and that was very frustrating. So fast forward a few years, I went to some seminars and learned a little bit more about syndication and educated myself. I read some more, you know, read books, and that's kind of when podcasts also came into my life as well and listened to a lot of syndication podcasts. in a real estate investing podcast and I still was not a very good syndication investor in my opinion because I was only with one syndicator at that time and I invested – I think I've invested maybe in five or six deals with this one syndicator back in the 2015, 2016 timeframe. And so that really was not a great deal either, because a syndicator was not a very strong sponsor. And I'm still in some of those deals, and I still have not gotten a lot of money from those deals. So at that time, this was before 2020, before we met, I didn't have anybody to bounce ideas off of. So I think a community is vital for your success in syndication investing. as a passive investor. You and I like to say this is a team sport. I mean, you can flip houses on your own. You have your own crew to start doing that. You can do that on your own without having any people to bounce ideas off of. But with syndication investing, it's absolutely important to have a community where you can bounce ideas off of. Do you like this sponsor? Do you like this deal? Why or why not? So these are just absolutely vital, and it's going to help shorten your learning curve. And more importantly, it's going to save you a ton of money.

Jim Pfeifer: Yeah, and I want to back up a little bit. I do want to talk about the book. But before we get into that, you mentioned your first syndications were the oil and gas Ponzi scheme, right? And then the next ones you did didn't do great. They weren't Ponzi's, thank goodness, but they weren't great. So how did you get into it? Typically, when someone invests in something and it's a Ponzi, they lose their money. They might be like, I'm done with syndications forever. So how did you get the courage to go back in and do it differently? as you went through your journey in passive investing?

Steve Suh: That's an interesting question because I was such a proponent of real estate investing, but I just didn't find my avenue. And so I had some success on the active side. I had a single family home, a duplex and a fourplex. However, the single family home was the section 8 and I just the tenants were not the greatest and they would trash my place and so whatever money I gained from that unfortunately, it would go back to Rehabbing the house before the next tenant. So I would I didn't make very much money on that and the fourplex Unfortunately my landlord. I'm sorry my property manager put a drug dealer in one of the units, and that was not a good situation either. I had landlords who were around there that were complaining that he was having five-minute visitors at his house all day long. And then frankly, they felt unsafe for their, the tenants felt unsafe there. So, and I had a duplex in a college town where my son went to school and that actually did pretty well, but it was still a little bit of a hassle because we had to make sure it was rented out one and a half to two years before they actually moved in. So, and that was during COVID. And the problem with that was the cycle kind of got broken because of COVID. So people weren't sure if they're coming back to school, people weren't sure if they were going to do housing on campus or off campus. That kind of messed that up. But in the end, that actually did pretty well. But one out of three was not, in real estate, not batting too great. So to go back to your question about how did I get the courage to go back into syndication investing, well, I knew that if I wanted to do what I wanted to do in terms of real estate investing, I think I had to be as hands-off as possible. And just by listening to podcasts and going to these seminars and such, I learned that passive investing was probably the best way for me as a full-time W-2 worker to do this. And even though my first foray was absolutely horrible, I lost all my money, my second foray was not great, but it kind of gave me a glimpse into what was possible. And then after we started Left Field Investors, I think I finally got the recipe down. However, there's still some deals I got into that were not great, and certainly we can talk about the lessons I've learned from those.

Jim Pfeifer: Yeah, and you know, that's the thing. Real estate seems like, well, it is, I believe, so much better than the other options, right? Stock market and things like that. But that doesn't mean it's 100% success. And that brings us to your book, Avoiding Rookie Errors as a Left Field Investor, 20 Lessons Learned from 14 Years of Passive Investing in Private Syndications. Why did you decide to write your book?

Steve Suh: Well, I think I learned a lot through investing in syndications and actively being a real estate investor as well. I've always enjoyed blogs, articles that talked about lessons learned because I think you can really learn a lot from your mistakes. And in my book, I'm an ophthalmologist, so I do eye surgery. And I start off with talking about how I learned so much more from one error, mistake that I did during surgery, unfortunately, and for that patient, I guess. But if you're a surgeon, you're going to have complications. Through that one mistake or complication, I've learned so much more than, say, 100 surgeries that went perfectly well. So even at our national meetings when we learn about cataract surgery or new things in cataract surgery, many of the talks were actually about how to avoid complications. And those talks are so helpful because I'll I'll be sitting there thinking, oh, there's something just happened, and I'll remember a lecture that I heard at a national meeting that, oh, that doctor, that surgeon did this maneuver, did this, and it works great. I mean, I didn't have to deal with that complication because of what I learned from other people's mistakes. And so I wanted to write this real estate book so that people can learn from my mistakes, because I lost a lot of money. And if people can not lose money, that's certainly a lot better than trying to learn the hard way through trial and error like I had.

Jim Pfeifer: Yeah, I completely agree with that. And you know, I look at it as, it's kind of a shortcut, right? So someone coming in can learn from your mistakes and not make the same mistakes. But then on the other side, there's people that say, no, you don't want to have shortcuts in life, right? Because you want to learn the lessons yourself. I kind of disagree with that. I think you do too. That's why you wrote the book. So can you talk about why the shortcut is actually a positive thing, right? It's getting you to where you want to go without having to take that loss, right?

Steve Suh: Right. Yeah. You know, people have a finite amount of money. And certainly if you start losing that money, it takes a lot more to get that money back. So, yeah, you don't shortcut shortcuts are, you know, are great. I love hacks. I love all that kind of stuff. But, you know, sometimes it's not the best thing for everything. But when you're talking about your hard earned money, you absolutely want to be as safe as possible with that money. You want to protect that money. But you also want to not have to go through trial and error and say, OK, well, is this going to work or not? And then wait three or four years, and then you're hardly getting any returns. When you could have gone through, say, our forum and looked up that sponsor and said, oh, yeah, they're not doing a great job on these three or four deals, and so that's why I've stopped investing with them. So then you can actually learn from these. from these comments and from forums and virtually networking or in-person networking by community can really help you in that respect and so that you don't have to lose money. But yeah, in my opinion, real estate is all about doing shortcuts because you can actually learn a lot of information from people without having to go through it yourself. Just like I said with my cataract surgery experience, you know, I've thank all those doctors who showed their mistakes live in the lectures because I, along with many, many other ophthalmologists, have learned that you can not have that mistake because you can do another maneuver that can avoid that mistake.

Jim Pfeifer: Yeah. And maybe, um, maybe I should just start calling it hacks instead of shortcuts. I like that phrasing. Maybe that's a, that's more modern anyway. Right. So now I'd like to dig into some of the important lessons you've learned, right? You said 14 years of investing in syndication. So let's, let's dig in. One of them you mentioned in the book is diversification. So why is it important to diversify your investments specifically when we're talking about, uh, real estate syndications with any investment?

Steve Suh: I think diversification is very, very important. Obviously, with mutual funds, if you invest in a fund, you're going to have dozens and dozens of stocks in that mutual fund. You look at the ETFs and such. Those have hundreds of different stocks in them. So no one investment is going to be perfect, especially in the stock market, along in real estate syndications. It could be a great deal. You could have a great sponsor, but something like, you know, if it's a floating rate loan, like we've seen here lately, you know, the rates can rise up quickly. And then now all of a sudden an experienced sponsor may be in trouble because they were depending on this floating rate loan to stay low. And now they have to, um, uh, you know, deal with that issue. So if you had a diversified portfolio. then you can actually hedge your bets on things. So I talk about – I think one of the important things is to make sure you diversify first of all by asset class because multifamily may have a great year or a great number of years like it has. However, lately it's not doing so great in many cases. So if you had a portfolio of self-storage, mobile home parks, some ATM funds, maybe some industrial facilities, You could actually hedge those bets because they all come and go in different cycles. And then you can also diversify by sponsor. That was one of the biggest mistakes I did in my first foray into real estate syndications. I did five deals with that oil and gas sponsor. And I paid for it, unfortunately. And then my second kind of tranche of investments, I invested in five or six deals with this other sponsor. Haven't lost all my money yet, but I mean, I'm not really making any money either. So if I had just taken those say 10 or 11 deals and had 10 or 11 different sponsors, or maybe say four or five sponsors, I'd be in much better shape right now. Of course, you know, we always talk about real estate being location, location, location. I think by geography, you need to diversify as well. So if you're doing a self-storage deal, you maybe want to do a self-storage deal in Dallas and maybe one in Florida and maybe one in Atlanta. So it's nice to also diversify by geography. I also talk about timing. If you come upon a windfall of say a million bucks, you shouldn't invest all that in three months or six months or maybe even a year. I think you need to really slow down. Don't get too excited. Don't get caught up in FOMO because that can really come back and bite you. Because if you invest all your money and then now there's that downturn, let's say for, let's say you had all this money back in 2022 and you invested all your money last year. Well, you might not do very well, especially if you did a lot of the value add multifamily, which depended on the floating rate debt. And just one more thing, you also have to be – look at are you a cash flow investor or are you investing for appreciation? And I think no matter what stage you are in your life, whether you're retired or have a great full-time W-2 job, I think it's probably good to do – at least have some cash flow in there even though you have some cash flow if you're working and maybe have a little bit of appreciation even if you're retired.

Jim Pfeifer: Yeah, that makes complete sense to me. Now this is passive investing, right? So we're, we're supposed to be a little bit less active, but there's still a lot to do in the, you know, vetting area. And you mentioned, you know, you're going to diversify, um, different markets, different asset classes and different sponsors. So how do you do that to find all of these different sponsors? Like, you know, you said you went all in with one oil and gas, then you went all in with another multifamily operator. Well, it's going to take time and effort to find all these different sponsors and all these different asset classes. So how do you go about that and still, you know, make this not a full time job?

Steve Suh: Well, I guess that goes back to the shortcuts or the hacks. And the way to do that is to talk to your community. And if you have a community of, say, a few hundred people, or even if it's just a dozen people who are really active in the passive investing space, then you can at least bounce ideas off of them. hey, say, you know, is X, Y, and Z sponsor a good sponsor or not? And they say, well, no, they're horrible. Well, I don't think you're going to invest with them. So now you just save a lot of time talking to them on the phone for 45 minutes because you know that they did not do a good job with your friends' deals. And then, you know, things like forums, like what we have within our infield in the left field investor site, that's a great resource because, you know, we have literally, I think, I don't know, 10, 12,000 comments in there about different asset classes, if it sponsors, different deals, you know, just people talking every single day about all different things passive. So you can just go to a forum. It doesn't have to be our community, but any community, and to go to the forum, plug in XYZ Sponsor and see what comes up, and then you probably will get some answers on that just without even talking to people. All you do is just essentially like a Google search. That's just one way to really shorten your learning curve and to be confident in who you're investing with.

Jim Pfeifer: Yeah, I completely agree. It's all about the community and the people you put around yourself to help you become a better investor. So you also mentioned in the book that it might be a good idea to invest in boring assets. What are boring assets and why should we be interested in boring?

Steve Suh: Yeah, I really like that chapter in my book because, again, I went, if you go back to my history, what did I do? I invested in oil and gas, which is, frankly, it's a little sexy, I guess. And then I invested in resort properties, one in Puerto Rico, one in Costa Rica, a coffee farm in Panama. That all sounds really cool. Well, ask me how much money I've gotten from those. It's a big zero. So those are really cool asset classes. However, in the end, you want something that's cash flowing because every dollar you get back, whether it's a monthly distribution or whether it's a quarterly distribution, you're de-risking your investment. I think that you have to look at these so-called boring asset classes, these main street assets like multifamily. People need a place to live and apartment buildings are a great asset, not only for the community, but it's great for the investors as well in general. Self-storage. Talk about boring. I mean, it's just a garage door in front of a 10 by 10 room. I mean, that's extremely boring. But in general, it cash flows well. And if the sponsor does it right, you can actually get a lot of forced appreciation just because a lot of times they're in an area where they can actually expand and put in more units. So at the end, you have a lot of forced appreciation. And you can get a really pretty nice equity multiple at the end because of that. Mobile home parks, again, it's one of those asset classes that you don't think about if you're not in the space. But, you know, in general, the cash flow is really well. And again, depending on the operator, they can run a really tight ship and really give you a good run on your money there.

Jim Pfeifer: That's excellent. And so I want to go through one more of the chapters or the topics in the book, and that is the operator. Why is the operator the most important part of a syndication and the most, you know, the main player, so to speak?

Steve Suh: Yeah, there's a lot of terms thrown around if you're not familiar with syndication terminology. You know, there's a sponsor, syndicator, operator, GP, or general partner, and all those can mean pretty much the same thing. However, I personally like to use the term operator because to me, they're in the operation business. They're actually doing what you think the syndicator should be doing, right? But there are many capital raisers out there. There are many sponsors out there who actually may not have much to do with the day-to-day business of the actual asset. So, for example, ATMs. If you invest in an ATM right now, you're not going to go to the ATM company itself and put down your money. You're actually going to go through a capital raiser most likely. And they're really going to have zero say in the ATM operations because, frankly, they have no idea what they're doing in the ATM operation. They're just raising money for this operator. Same goes with multifamily. We always talk about are they vertically aligned or not in terms of the syndication company. If they are not vertically aligned, they're going to have third-party management. And so what does that mean? Well, if there's a syndicator, X, Y, and Z syndicator, They could be raising the money, they could be talking to the bank, doing all the legal paperwork for the PPM, the operating agreement. However, they may not be the boots on the ground on that multifamily deal in Plano, Texas. But in my opinion, you should not only talk to the operator, I'm sorry, the the sponsor, but you should also talk to the third party management group because they are the ones who are running the show on a day to day basis. And, you know, if they're not a good manager, they're going to waste a lot of money. I remember – I actually talk about it in my book where one of the – one of my sponsors that I invested with changed their property management I think about a year after I invested and the occupancy went from 70-some percent up to 90 percent within a few months. That's a huge deal when we're talking about commercial real estate. So I think you really need to vet not only the people putting the paper together, in other words, a syndication team, but you also need to see or vet out who is actually making the key decisions on a day-to-day basis on the ground. And in many cases, that's the management team. So you have to really make a couple of phone calls when you want to invest in a deal.

Jim Pfeifer: Yeah, that's great advice, because often the first person you meet when you're trying to vet an operator or a GP syndicator, it's not really the operator. So that's perfect advice. So I want to get into, you've been doing this for over 14 years, investing passively, and you've learned a lot, obviously, from that fantastic book. So how has your investing philosophy changed over those 14 years from all the lessons you've learned. I know that since I've met you, I've become a much better investor, partly because of my relationship with you and partly because of the community we've built and how much I've learned from everybody in that community. So can you just talk a little bit about how your investing philosophy has changed since you started?

Steve Suh: You know, it's absolutely changed from when I first started. Obviously, I already talked about the fact that, you know, I diversify. by sponsor, especially, and by asset class. So that's one of the biggest things. I think one other thing that I've looked into more lately, especially since I have a family tribe with my brother and my father, is that we look at more cash-flowing deals. So before, I was more about the appreciation play because, frankly, I do make a decent income as a physician, so I don't need the day-to-day or the monthly cash flow. But the appreciation would be nice. But since I've done this family tribe, especially with my dad being in his 80s and my mom, I don't want to be too cavalier about investing and just appreciation plays. So we've really looked at syndications where there's a lot of good cash flow. So we've looked into more debt funds and those kinds of things or deals worth like industrial triple net where they actually give pretty nice cash flow. on a monthly or quarterly basis. So that's changed a lot as well. I was also a really big advocate of single-asset deals. And I think this is – and I'm certainly not opposed to single-asset deals. I still invest in those. However, I'm much more friendly about investing in funds myself. And the reason for that was because I really like to dig into the numbers of the deals, as you know, Jim. However, with funds, you can't really do that, and it's really more based on the sponsor and their track record and, frankly, their trust. So you really have to look at the sponsor and vet them very, very carefully because you don't know what they're going to be buying down the road, so you have to get examples of what they plan to invest in. But again, in terms of diversification, if you invest in a fund, that's going to automatically diversify you at least maybe geographically, maybe not by asset class, but that's going to at least diversify your investment. So that's those are some of the things that I've probably changed over the last several years.

Jim Pfeifer: Well, we appreciate you sharing that with us. And I have to say, I know I'm biased because we work together and we're both founders of left field investors. But, you know, avoiding rookie errors as a left field investor is probably the top book I recommend. Well, it definitely is now the top book I recommend, because it's just such good information for a beginning investor or an expert investor, because you can really hack your way into becoming a better investor and learn from others' mistakes. And I made a lot of those same mistakes. So just reading that book a couple of times really cemented that. So really appreciate you writing the book and sharing it with us. If listeners are interested in learning more about what you do in buying the book or connecting with you, what's the best way to do that?

Steve Suh: Well, my email is probably the best way to get a hold of me. It's steve at leftfieldinvestors.com. Of course, we have our website leftfieldinvestors.com if you want to get a bunch of great free resources. And, of course, we encourage you to join the infield where you can join our private forum where, frankly, that's, I think, where the most infielders would talk about the best benefit there. And you can buy the book either through a link on our website on leftfieldinvestors.com under the book section, or you can just go directly to Amazon and just search my name or search Avoiding Rookie Errors as a leftfield investor.

Jim Pfeifer: Excellent. Well, Steve, thanks for being on the show. We really appreciate you.

Steve Suh: Thanks for having me on, Jim.

Jim Pfeifer: Thank you for listening to The Real Estate Syndication Show. It has been a pleasure to be the guest host today. If you'd like more information about Leftfield Investors and how we educate limited partners, provide a network, and give access to deal flow, please visit leftfieldinvestors.com or reach out to me directly at jim at leftfieldinvestors.com. I hope you learned a lot from the show today. Please don't forget to like and subscribe and share The Real Estate Syndication Show with your friends so they can also build wealth in real estate. You can also go to lifebridgecapital.com and start investing today.