Episode Notes

Dr. Wing Lim hosts guest Gaurav Sobti, Vice President at Create Commerical Mortgage Services, in a discussion about private versus public equity and real estate investing. Gaurav holds designations as CPA, CA, and CFA, and has a wealth of knowledge to draw from in shedding light on equity and what the average investor needs to know. 

Gaurav Sobti is the husband of a physician - he likes to joke that his parents wanted him to be a doctor so he did the next best thing and married one. He understands investments both from the financial point of view, his career, and from a physician standpoint as well. Gaurav defines a lot of terminology for Dr. Lim and offers insight into the markets and asset classes.  

In this episode, Dr. Kevin Wing explores the world of private versus public equities with guest Gaurav Sobti. They talk about the differences between public and private, the pros and cons of each, the differences in leverage and liquidity, and who to buy such funds from. Gaurav shares some important advice on what to investigate and what questions to ask when approaching an EMD (Exempt Market Dealer) or fund manager. This episode is a solid groundwork guide into the world of private and public equity and real estate as an investment from a financial expert.

About Gaurav Sobti, CPA, CA, CFA

Gaurav Sobti has 10+ years of financial services experience across real estate, investments, finance and accounting.

Gaurav’s most recent formal role was with a national real estate finance firm where he was responsible for originating and underwriting commercial mortgage transactions with a specialty on CMHC insured (multi-family) financing. Prior to that, he spent 4+ years at a private investment fund which had a mortgage investment fund. Prior to that, Gaurav worked at Alberta Teacher’s Retirement Fund Board on the private investments team focused on private equity transactions. Gaurav was part of a top performing team that managed a $3Bn institutional grade portfolio. Gaurav started his career at Deloitte, one of largest accounting/advisory firms in Canada and worldwide.

By training, Gaurav is a designated CPA, CA and CFA Charter holder. Gaurav is a licensed mortgage associate.

Resources Discussed in this Episode:

• Gaurav Sobti on LinkedIn
• Create Commercial Mortgage Services

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Physician Empowerment: website | facebook | linkedin

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Transcript

 Dr. Kevin Mailo: [00:00:01] Hi, I'm Dr. Kevin Mailo and you're listening to the Physician Empowerment podcast. At Physician Empowerment we're focused on transforming the lives of Canadian physicians through education in finance, practice transformation, wellness and leadership. After you've listened to today's episode, I encourage you to visit us at PhysEmpowerment.ca - that's P H Y S Empowerment dot ca - to learn more about the many resources we have to help you make that change in your own life, practice and personal finances. Now on to today's episode.

Dr. Wing Lim: [00:00:34] Well, welcome, everyone, on a Monday night, and it's always good to see you guys. And yeah, so Kevin there, me and Gaurav. So I'm Wing Lim, Dr. Wing Lim and this is Dr. Kevin Mailo and there's Gaurav, our guest. So welcome, everyone. There are other people who might pop in later. Yeah, so we're super excited to be hosting this one, this webinar, live webinar and etiquette as we record the show and so that you guys know it's being recorded. So yeah, I'm one of the co-founders of Physician Empowerment and what we do with the live webinar and the podcast is we interview interesting people on interesting topics that might help physicians live better lives. So we're here to do all that. And so tonight I'm super pumped to have Gaurav to be our guest. And Gaurav is interesting for many, many reasons and we'll dive right into it. But Gaurav is a physician's husband, so this is one of the spouses, but he's got a very diverse background. So maybe tell me or tell us a little bit about your immediate family or extended family, how you link into the physician community.

Gaurav Sobti: [00:01:45] Sure. So thanks, Wing So I like to joke that, you know, I come from an East Indian background, lots of medical doctors in that from that background. And so my parents wanted me to be a doctor. So I did the next best thing and married one. And so, yeah, my wife, she's a family physician. She's been a family physician, I think since probably 2015 when she finished her residency. She works as she works out of a clinic. We don't run the clinic. She just works out of a clinic. And yeah, her family has a few, there's a few doctors and her mom's a doctor and so is, I think her, her cousins as well.

Dr. Wing Lim: [00:02:23] Right. And then you got some on your side, right?

Gaurav Sobti: [00:02:26] Do I? I'd have to think actually, I don't, I'm not sure actually if I have too many on my side.

Dr. Wing Lim: [00:02:31] Right, yeah. But it doesn't matter, right? We're all regular people anyways, right? It doesn't matter what profession we are. So now professionally, you have a very interesting background. You're a CA, CPA, CFA, that's quite a designation. You have institutional background and you're not, I guess you don't want to be stuck behind a desk doing people's tax returns. So you do a whole diverse a lot of things and you're into financing as well. So tell us more about what your journey is like.

Gaurav Sobti: [00:03:01] Yeah, so I went to school in Waterloo. I actually studied biotechnology and chartered accountancy. So, you know, I was kind of hedging my bets, thinking maybe I'd go into medicine. Um, but yeah, so I, I worked for Deloitte, which is an international accounting firm there. It was good, I liked it, gave me a good investigative background, but kind of always knew I wanted to do finance. Decided to move out to Edmonton to join a sort of mid-size and growing pension fund, our teacher's retirement fund, and didn't really know much about finance really until I got into there and we were doing private investments. The program was, you know, I would say the book was, you know, it was a $3 billion book where that's what we were building.

Dr. Wing Lim: [00:03:46] Wow, Wow.

Gaurav Sobti: [00:03:47] Half was private equity, half was infrastructure. And I worked primarily on the private equity side. Yeah, we were investing in funds and co-investments. And it was fun. It was, I could have had a very cushy job, but decided that I wanted to kind of do more entrepreneurial things. So I, you know, long story short, I joined a private lender. That's where I kind of got my experience in real estate, I was there for about four years, kind of originating deals, mortgage deals. Right? Again, probably prior to that really didn't think of mortgages as investments. And then decided I wanted to get some CMHC experience, which is related to multifamily. So I joined a national real estate finance firm, learned multifamily financing, CMHC, and then now I've kind of become, you know, independent, you know, I am technically a mortgage broker, right? I like to think of myself as more of a sort of consultant, like I put together my own deals as well, equity deals for real estate as well because I think that's where my passion lies.

Dr. Wing Lim: [00:04:52] Right? So that's a really interesting background. And so of course you're more qualified than anyone, but what you just said just caught my attention. You said you learned about private equity and real estate quite a few years after you became a CA, right? So that tells me that the CAs that we use, if they're the general practice kind of CA, they might not know a lot about this stuff, do they?

Gaurav Sobti: [00:05:16] Yeah, no, you're totally right. Like I, when I was a CA and doing audits, right, you know, I would say my Excel skills were pretty limited as well. Right? Think now, you know, with new CAs that's improved. You know CAs, you know, they know numbers. Some of them, even within CAs, some of them know taxes, some of them don't. There were some CAs who were auditors who didn't even do their own personal tax returns. Right? So I think obviously, just like physicians, CAs come from different kind of backgrounds and experiences. Just as finance advisors do as well, right?

Dr. Wing Lim: [00:05:55] It never ceases to amaze me how my colleagues and I made a lot of decisions, East, West Coast. They always run business ideas by the accountants.

Gaurav Sobti: [00:06:02] Usually they'll tell, you know, then if it's your accountant because they're generally pretty risk-averse, right?

Dr. Wing Lim: [00:06:08] They're very risk averse. They'll shoot down your idea even if it's a good one. Right? So anyways, that's just for what it's worth, right? Do not go to your accountant for business advice. Go there for your tax return advice. Right? So, yeah. Okay, so let's move on. So when we talk about private equity, let's talk about public markets, right? There's public, private and most people just give their money to their advisors. And most people, most physicians I know of have thrown their money into the public markets. And it's a mess out there. So do you want to make some comment about the reason that bank runs stocks, bond reversal, crypto upheaval can just give me, get a broad brush. What's the weather like? What's the temperature like out there in the public markets?

Gaurav Sobti: [00:06:53] Yeah, no, I mean, so obviously there's a lot of volatility, right? You know, after Covid. Well, when Covid hit, you know, the markets took a big dive. And then there was a big run-up related to all the printing of money. Right? Now, they're kind of out of favor again. The markets have taken a hit with just interest rates rising. Right. Tech has definitely taken a huge hit. And, you know, now there's definitely recession fears coming. So, you know, the yield curve is kind of changing, you know, by the month. Right? And especially with these banking failures with ICB and now Credit Suisse like people are worried like is this another 2008?

Dr. Wing Lim: [00:07:34] Very much so.

Gaurav Sobti: [00:07:35] So there's definitely a lot of volatility. You're seeing that in the bond market for sure.

Dr. Wing Lim: [00:07:39] Yes, exactly. So historically, people say, well, 80/20 rule, 60/40 rule 60% stocks 20/40% bonds. Oh, you're set. Well, gee, if both of them tank, what do we do if that's our retirement?

Gaurav Sobti: [00:07:53] Yeah, me personally, like, I think capital should be, you know, flexible. I'm not saying, you know, public markets are bad, but sometimes, you know, there's sometimes a time to invest in them. And so there's sometimes there's better times and sometimes there's worse times. That being said, I think you look at the Canadian pension plan model, right? And Canadian pension plans are really pioneers globally when it comes to investing, right? They tend to put a lot of money into alternatives. And I would say the three big asset classes are private equity, infrastructure, and real estate. So definitely that has a place in someone's portfolio. And you know, there is a trend towards, you know, making this more widely accessible. But yeah, you definitely have to understand sort of what the risks are and, you know, private equity, again, very broad term. Right?

Dr. Wing Lim: [00:08:42] So before you go further, because treat us like grade eight in finance language. Right? So what is private versus public? Why do they call it public versus private? What distinguishes them apart?

Gaurav Sobti: [00:08:57] Yeah, so private, private and public, I mean, the simple difference is that, you know, public is on a, you know, it's openly traded on an exchange. There's generally more regulation there. Right? Like, you know, to go public, like there's a lot of securities documentation that have to be filled out. Whereas private can be, although there is securities regulation associated with private, it's not as regulated, right? And yeah, it's, you know, just it's privately owned.

Dr. Wing Lim: [00:09:27] Right. So why do people consider, why people go into private equity versus public? What's the advantage there?

Gaurav Sobti: [00:09:35] Well, I think there's a few things. So one is control, right? When you invest in a public security. Well, especially if you invest, let's say, through an EFT or a mutual fund manager, well, that manager does not have really any say or control over that over that company. Whereas, you know, if you invest in private securities, whether you're doing your own or you're investing with the manager, they're generally going to have more control, right? That's one reason. The second reason is, you know, there's diversification. There's the universe of public companies, like there's lots of public companies out there, but there's way more private companies out there. So, you know, if all you do is invest in public, then you're missing out on a segment of the market. And then I would say generally private investments they tend to, I mean they have outperformed. Right? That's another reason. There is potential for more alpha because of the fact that there is control and also because you might be investing in different, you know, smaller mid-sized companies or projects and that could eventually go public right through consolidation. Right?

Dr. Wing Lim: [00:10:56] So let's go back a little bit because we are afraid of jargon. So when you say more alpha, do you mean that there's more profit?

Gaurav Sobti: [00:11:02] There is potential for more profit. There is potential.

Dr. Wing Lim: [00:11:04] And then that means that potentially there's more rate of return because people go to private, I know, at least I know people, myself included, go there because all the rate of return is more attractive.

Gaurav Sobti: [00:11:14] There could be, yeah. Now, you know, I will caution that part of that return comes from leverage as well. Like the public markets hate leverage, right? So like if you look at like a public REIT, for example. They're definitely not going to put as much leverage on the asset. Now they'll say it's because of risk and, you know, there's probably some truth to that. But part of it is just if they put too much leverage on it, they're punished by the public markets. You don't have that issue in the private markets.

Dr. Wing Lim: [00:11:45] Let's backtrack. By leverage you mean they actually borrow some money?

Gaurav Sobti: [00:11:48] Yeah, they borrow. Yeah. Typically private investments, there's more leverage in loan. Right. Which, you know, leverage, you know, it can be in, you know, in the right instances, it can be a good thing for returns.

Dr. Wing Lim: [00:11:58] Right. So so what other things should we consider like, say, the downside or the cons of private investment that we need to watch out for?

Gaurav Sobti: [00:12:07] Yeah, I would say a con, one con is that it's not as liquid, right? So, you know, when you invest in a stock, if you need to sell, you can sell immediately. Now that can be a bad thing too, because sometimes you're your worst enemy, right?

Dr. Wing Lim: [00:12:23] Chicken Little.

Gaurav Sobti: [00:12:25] So yeah, like, you know, I would say if you're investing in private, you have to have a longer-term horizon, right? You shouldn't be investing funds that you're going to need anytime soon.

Dr. Wing Lim: [00:12:35] So what kind of horizon, What months, years, decades? What are we talking about?

Gaurav Sobti: [00:12:40] Well, definitely years for sure. Like, you know, obviously it depends on what you're investing in. But, you know, the thing is like public, you can literally buy something today, can sell it tomorrow, I might sell it for a loss, but I can sell it tomorrow. Right? Private securities, you don't necessarily have that liquidity. There are, there's I mean, we can probably for another conversation, there is a whole area called secondaries in the private markets, which does provide liquidity. But that's, again, that's probably too much for this conversation at this point in time. In general, private securities are less liquid. The other thing is transparency. Now, depending on the group you're investing in, right, like, you know, it's less regulated. So there's going to be, there can be less transparency around it. With public you have to file your statements quarterly. You're dealing with the regulator. Private overall is just less regulated and there can be less transparency. Like you could, you could just get into a deal with like, for example, a local developer. There could be, you know, very limited transparency around it.

Dr. Wing Lim: [00:13:46] So in your experience, what's the split that, like most people, do they do like 80% of their money in public, 20% in private? What's your feel, like an average professional.

Gaurav Sobti: [00:14:01] That's a tough question, but I would say it really depends on your own personal circumstances. And your need for liquidity. You know, that being said, I don't think you should be 100% in private, right? I think the public markets do, there is a role for them.

Dr. Wing Lim: [00:14:20] Right.

Gaurav Sobti: [00:14:22] And so it's, I would say, what I can tell you is that like, for example, the pension fund that I worked for, we had 35% in privates, right? So 10% was in private equity. 10% was in public equity, not public equity sorry, infrastructure, and 15% was in real estate. So I think if you look at a lot of the pension funds, you can pull up their reports, right, for Canada. Like I would say, they're anywhere between, you know, 30 to 50% in privates.

Dr. Wing Lim: [00:14:55] Right. I think for most physicians, we don't, like we don't do day trading. We don't have time to do that. We're long-term. We're building up the nest egg for retirement for us and in intergenerational wealth. So for long-termers, you think it's a good idea, right, to... Because these are longer horizon, like you said.

Gaurav Sobti: [00:15:16] Well, I think physicians, like the advantage they have is, you know, especially in Canada they're, generally if you're a physician, you're a physician for a very long time period. Right? You have very predictable earnings. And it's almost like a bond, right, in itself. Like that cash flow stream. So because of that, you can probably rely on that more than, let's say, other professions. Right? You know there definitely is a case to be made to invest more in private securities.

Dr. Wing Lim: [00:15:49] Sure. So let's dive into it. So how can an average Joe get involved in private securities and where do they find them or what kinds are there?

Gaurav Sobti: [00:15:59] So I mean, you know, some of the private wealth managers or investment managers, they may have a private offering. I will caution you that, you know, sometimes these guys are just trying to sell private securities for the sake of almost as - well I'm not sure what the right, I don't want to use the word gimmick - but they're just like, okay, we know private securities is hot. Let's get someone into, let's get these guys into private securities, but they don't necessarily know how to do actually, honestly, the proper due diligence is one. And frankly, they probably overly diversify. So when I was at the pension fund, for example, we actually ran a very concentrated private equity book where we invested inside fund managers. And then we also did direct deals alongside the fund managers. And the reason we were concentrated is because if you have like, let's say, 40 managers that you're investing in, well, they're going to have multiple funds that invest in, you know, 8 to 15 companies each, right? So that's just, like you're just overly diversified. You're probably going to end up, after all the fees are said and done, you're just going to end up getting like an ETF type return.

Dr. Wing Lim: [00:17:21] Well that's exactly - I totally agree with that. And actually, it's not just me. So last time we interviewed Brandon Carlson. He's a portfolio manager and the podcast just got released. And so we asked him, I actually interviewed him in December and say, what's 2023 going, right? Where's the public markets going? And he's just saying exactly that because it's a zoo out there. So he says, if I were to predict where Fortune 500, half of this is going this way, half of that going that way. And if you just do a very broad-based diversification like index fund, you end up with the very mediocre thing, which is, you know, not much different, right? But then if you become more selective and you're not just picking average Joe, you actually need to understand what they do. And become more select, more focused. Then you probably win, right? So I guess that applies to private equities then?

Gaurav Sobti: [00:18:17] No, definitely. Yeah. Like, so that's one thing to consider. You don't want to be overly diversified either because if you're trying to, you know, the whole one of the reasons to invest in private is to get that additional return. And if you just end up overly diversifying there, it kind of defeats the purpose. Right? And honestly, you have to just, depending on who you're investing with, like you might be able to find like a manager that you can invest directly who invests in companies. Right? Or you can invest through what is known as a fund of funds. So the fund, they create a fund like a feeder fund, which invests in a variety of managers. And honestly selecting the right manager to invest in, there is a skill to that. And there is a process. But if that manager is investing in, if your fund a fund is investing in too many managers and then they're laying on too many fees, then again, you're just going to end up with a ETF return, right?

Dr. Wing Lim: [00:19:18] Right, exactly. Now let's pivot and move into that space, into more day-to-day. Who would end up buying these funds from. And there's a, one of the hot, hot, at least in my experience and in my space, but one of the hot, hot things is real estate, right? Real estate funds is part of this private equity. And they're a big chunk of real estate. And so I think you and I are both passionate in this space. And there's a lot of capital raised. There's a lot of good returns. So how would you describe the space right now, this real estate fund space. Is it expanding? Is it hot? Is it worth getting into it?

Gaurav Sobti: [00:19:55] Definitely expanding. The whole alternatives is expanding and real estate is probably, you know, I haven't looked at the statistics, but it's probably one of the largest private asset classes. Right? And there are more private funds kind of showing up. Yeah, so you could find a manager to invest with. You could find a sponsor to invest in. You could go through an EMD as well, right? EMDs have different products on their shelves. But again...

Dr. Wing Lim: [00:20:30] Let's talk about EMDs, that's a good catch phrase. Right? So what does EMD mean and what are they? What do they do?

Gaurav Sobti: [00:20:40] Yeah. So Exempt Market Dealer - I was actually formally registered as an Exempt Market Dealer back in 2015 and I'll be honest, I didn't fully understand it at that point. I was maybe 25, 26. I just had the right credentials and someone got me registered. I got to learn about this space a lot later on, right? And think I have a better appreciation for it. So yeah, so an EMD is an exempt market dealer. From my understanding these are groups that are essentially allowed to raise capital in the exempt market space.

Dr. Wing Lim: [00:21:12] So why, exempt from what?

Gaurav Sobti: [00:21:14] From a prospectus. So when you're raising capital, there's, if you raise capital in the public markets, you have to prepare what is known as prospectus. Which is essentially a legal/marketing document to go public. When you raise money in the in the private markets, there's various exemptions that you can rely on to raise that capital. And, you know, one is, you know, friends and family, another is the accredited investor exemption. Right? And so if you're, I would say EMDS, one) from a from an issuer point of view, from like a sponsor point of view, if they're raising capital on a very frequent basis, then I believe they need to use an EMD right, to stay on with regulation. But EMDs also provide products to potential investors, right? So they have products on their shelves that they essentially sell. So you know, we've done our due diligence. We've approved them. And here you can invest in this product. That being said, I would say, I would caution you coming from a pension background and coming from learning from a mentor who really taught me how to do diligence and having an audit background, I personally would be skeptical of an EMD's, like how much diligence have they truly done? Right? There's probably some out there that are great, but there's some out there that are just pure salespeople who don't really understand the risk, haven't really done significant amount of diligence. Right? And frankly, they're probably not even investing their own capital in the opportunity.

Dr. Wing Lim: [00:22:53] So basically, to recap, EMD in my mind, is more like a brokerage house that they have a product shelf and then the different products and these are all private equity products.

Gaurav Sobti: [00:23:06] Yeah, that's a...

Dr. Wing Lim: [00:23:07] So to speak.

Gaurav Sobti: [00:23:08] That's a good way to sum that up.

Dr. Wing Lim: [00:23:09] Good way to sum that up, right? So versus you go to mutual funds manager or advisor mutual funds. So that's all the public equities. Most average financial planners will sell you public equities, right? And the private equity salespeople are the... DRs. Right? So, and I don't know how everybody's exposure is, there more and more DRs because there are more and more projects. So other than EMDs, would there be some funds that people can buy directly or like, say, from this what you call sponsor, like the developer, the issuer they call them? Or what about a REIT? Can people just directly buy from these people?

Gaurav Sobti: [00:23:48] Well, even if you invest in a private REIT, for example, most likely that private REIT is raising capital on a frequent basis. There will be an EMD involved. Like for example, I was just more curious, I won't name the shop, but, you know, I was just very curious about a certain apartment sort of issuer. Right? Private issuer. So I just, you know, I reached out to them. They immediately, you know, directed me to a third party EMD who I had a chat with about the suitability, first of all, about the opportunity. But whether it's suitable for me. Right. So chances are, if you're dealing with somebody who's raising capital on a very frequent basis, you will get in touch with an EMD. You can invest in projects directly without an EMD, right? But then the issuer has certain responsibilities.

Dr. Wing Lim: [00:24:41] So you talk about accredited investors, right? So think a lot of EMDs, they look for doctors because we are mostly high net worth, right? So can you briefly just tell the audience what's the space about accredited versus non accreditors, the eligible to like, where do they make the cut-off? But do we fit?

Gaurav Sobti: [00:25:01] So accredited investors, I mean... You know I think it's you have to have $1 million in net financial assets that can include your house or you have to make, you know, $200,000 individually or $300,000 with a spouse. And I believe it's like a two-year cut-off. And you have to believe that it's going to persist, right? So that's kind of the definition of accredited. So most doctors, you know, even if they don't meet the financial, the net financial asset test, they'll generally make it on the income test. Right? And then, you know, there's obviously a path forward to get to that net financial asset test as long as they, you know, continue to save money and invest properly.

Dr. Wing Lim: [00:25:41] Right. And then for those of us who are a little bit more exposed, I don't know about the audience, but certainly I'm very familiar with this space. So they promise a lot of returns, double-digit, like 8, 9% prep and then back end. So we end up with 15, 20, 20+ percent. So do you think those are realistic? Are these real? Are they true or are they poo?

Gaurav Sobti: [00:26:05] Yeah, I mean, I think I think they can be realistic, but, you know, definitely there can be a game to it as well, right? Like you can, you know, you can put together a model, right? And, you know, you can make whatever assumptions you want and you can create that 20% potential return. But I think you have to, like I think there's a few things you got to look at. What I look at, for example, is like definitely I want to have alignment of interest with whoever I'm investing with. I want to make sure that they have skin in the game, you know, whether it's through investing cash, hard cash in the deal, plus, you know, potentially putting up their guarantee. Right? They don't always have to have everything, but there's got to be some level of alignment of interest. And then you want to see what kind of, do they only talk about the potential gains, do they even mention any of the risk? What's their track record? Have they done it before? Right? And so those are kind of some of the critical pieces. Do they understand financing? I think that's pretty, especially in real estate that's very important. So I've met with Bob Dylan, for example, from Main Street, right, which is the company. He's very successful.

Dr. Wing Lim: [00:27:22] Big guy

Gaurav Sobti: [00:27:24] Big personality type. And you know, he said like, you know, in this business, you know, you make money on the buy - and again he's more value-add apartments - you make money on the buy, you make money on the financing. You'd be surprised how few sponsors, like how little finance knowledge they actually have and how little knowledge they have related to like even financing. Like I was, people send me opportunities to look at from time to time and, you know, I kind of give my input, right? Like I try to give my unbiased opinion. And someone showed me an opportunity in Winnipeg and it was $100 million project and they were using an interest rate that was like 2% below the current market, right? And so it's like, do you not understand? Like, you know what I mean? Like, you should have this basic understanding. And the other thing I would say is you have to see like, listen, you're going to pay fees, right? Whether you invest in the public markets, if you invest your manager or you invest in private, there are going to be fees. And sometimes the fees in privates are going to be higher. It is more work to put a deal together versus just investing in a stock. But is there an alignment of interest? Like is there a preferred return, for example? Right. I was just looking at another opportunity the other day for somebody and, you know, these guys were taking 40% sweat equity, no preferred return. And they didn't, it didn't seem like they were really putting any cash in the deal. So these are some of the things you should look for, right, when you're kind of evaluating somebody.

Dr. Wing Lim: [00:29:01] Right. So to recap what you say, well, they give you very attractive return while some of those are actually true. But there's a lot of stuff hidden behind that is all by assumption. And we have to do some sort of a due diligence.

Gaurav Sobti: [00:29:16] Or you have to get somebody who knows how to do it. Like, you know, like--

Dr. Wing Lim: [00:29:19] Because they--

Gaurav Sobti: [00:29:19] -- who can do it for you.

Dr. Wing Lim: [00:29:21] Or you have to find somebody who could do the due diligence, short for DD, right, a proper DD. So of course with your background being an accountant, auditor and with your CFA, of course you would know how to crunch numbers. How would average Joe Doctor know whether the salesman across the table knows what they're talking about?

Gaurav Sobti: [00:29:43] I mean, I would say you got to educate yourself, right? So if you want to take the path where you're going to do it on your own, then you definitely have to educate yourself. And it's not that it can't be taught, but you have to invest in that process. You know, despite being relatively educated, right, on the financial side, you know, I think anybody is capable of learning something. But they have to they have to have the time. And they have to commit to it.

Dr. Wing Lim: [00:30:11] Right, exactly. Now, so we have actually gone over time, but I want to switch over and spend a little bit of time about institutional-grade real estate investment. So that's part of our topic. So what would you say is the institutional-grade real estate investment project? Well, you can.

Gaurav Sobti: [00:30:29] Think of institutional grade as generally, I mean typically they are larger assets, but I mean I think you can do it on a small scale too. You just have to have some of the same structures, right? So when, let's say when you're valuing an opportunity, is there a preferred return built in? That's one, that's probably, you know, that's typically a sign of, that's like an institutional concept, right? If they don't have that, then it's definitely not meeting that test, right?

Dr. Wing Lim: [00:31:00] So to me, institutional grade is what institutional funds would buy, right? So that or they would sell, right? And so if somebody builds a project and they would the institution would smell you and say, I want to buy you out, then, you know, you got institutional grade real estate, right? Because you're worth pursuing. But it's different, right? Because we, most doctors have one, two, three, 20 doors of condos or houses. And so these are moms and pops, right? And there's a different level, which is the bigger, more sophisticated real estate.

Gaurav Sobti: [00:31:34] So yeah, generally larger assets for sure are considered more institutional grade for sure. Yeah.

Dr. Wing Lim: [00:31:39] And the returns are different. The effort is different, right. And so that would be a discussion for a different day. Okay, so, one final question. So yeah, you already answered some of that for us, what's the next step if we're interested in this or - our audience is diverse, I know some of the audience already talked to you one on one - some already have a huge portfolio and they're actually walking into institutional-grade already. So what's next for people like that or for the average doctor if they want to expand?

Gaurav Sobti: [00:32:14] Yeah, I mean you can consider investing in, like these GPLB structures, right? Just kind of keep kind of some of the things that I said in mind, right, when you're kind of evaluating these opportunities. And, you know, there are, you could talk to an EMD. But just again, if you're talking to an EMD I would say make sure that they're investing their own capital in those same opportunities. That's probably one of the first questions to ask them. And really understand their due diligence process and who's doing their due diligence.

Dr. Wing Lim: [00:32:46] Yeah. Okay, good. Thank you, Gaurav. It's a lot of questions. It's a lot for people who haven't heard about this quite a bit.

Dr. Kevin Mailo: [00:32:54] Thank you so much for listening to the Physician Empowerment podcast. If you're ready to take those next steps in transforming your practice, finances, or personal well-being, then come and join us at PhysEmpowerment.ca - P H Y S Empowerment dot ca - to learn more about how we can help. If today's episode resonated with you, I'd really appreciate it if you would share our podcast with a colleague or friend and head over to Apple Podcasts to give us a five-star rating and review. If you've got feedback, questions or suggestions for future episode topics, we'd love to hear from you. If you want to join us and be interviewed and share some of your story, we'd absolutely love that as well. Please send me an email at [email protected]. Thank you again for listening. Bye.