June 17, 2018

JF1384: Paying Off All Debts & Living Debt Free - How Did He Do It? #SkillSetSunday with Jeff Anzalone


As a practicing Periodontist, Jeff obviously had student loan debt. He also had a mortgage, both are paid off now. Jeff is here to tell us how he was able to do pay off all of his debts while also investing in real estate. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment called Skillset Sunday where we invite a previous guest to come teach us something that can be helpful for us as we go about our real estate journey.

Today we’ve got Jeff Anzalone. First off, how are you doing, Jeff?

Jeff Anzalone: I’m doing fantastic, Joe. How are you?

Joe Fairless: I’m doing fantastic as well, nice to have you back. Best ever listeners, you might remember Jess – I’m sure you do – episode 1133, titled “Struggling with student loan debt, a periodontist schools himself in real estate investing.” We didn’t quite touch on the debt part of it as much as we did just his overall story. Today we’re gonna be talking about the debt part, and the skillset within this conversation is when we’re in a whole lot of debt, and in particular physicians, but not just physicians – it’s other individuals who have mountains of debt… When we’re in this type of debt, what do we do to get out of it, so what specifically did Jeff do to get out of it? And then now, fast-forward — so when he was right out of residency, he was 300k-400k in debt; now he’s got a seven-figure net worth, and he’s actively investing in multiple deals. He has invested in my deals, so full disclaimer there, that we do have a pre-existing relationship… And we’d love to learn more about how he did it, and then how we can do it if we are in that situation.

With that being said, Jeff, will you just give the Best Ever listeners a little bit of a refresher for your background and what you’re currently focused on?

Jeff Anzalone: Sure. Whenever I was getting ready to get out of my residency back in 2005, the partnership deal that I was gonna be joining – a group practice – fell through about a week or two before graduation day… So I had several hundred thousands of dollars in student loan debt, and other debt, a two-month-old, and didn’t have a clue what to do, basically. It wasn’t a lot of fun.

So after a lot of prayer and networking with people, the man upstairs kind of led me to a situation where I could start reading, learning from somebody that really helped me in the area, helped me network with some of the other local people, built up my practice… It took about six years to finally get out of all the student loan debt, and then last year I finally finished paying off our house and everything. I’m 43 now, completely debt-free, including the house.

All those kinds of struggles and different trials and things that happened to me, I think for me — there’s so many people now that are going through that. It’s even worse now. People are getting out of dental school, medical school, chiropractic school, whatever – anywhere from probably 250k on the low end, to some of the people that I’ve talked with a million dollars in debt to some of these private schools.

It’s tough, so number one, they’re wanting to know “Well, can we get out? Can we start making a living? Where do we start? Should we focus on debt reduction, should we focus on investing, should we do both? Where should we start investing?”, those sorts of things.

That’s kind of the background, a little refresher for your listeners, Joe.

Joe Fairless: Well, 250k in debt would certainly jolt individuals, and up to a million – that’s quite daunting; for 99% of the people that would be quite daunting, right out of school. I wanna talk about that, because that’s the focus of our conversation, but I wanna ask you about your financial approach. You’re debt-free now, you paid off your primary residence… What are your thoughts on the opposite opinion of being debt free, where when someone hears you say you’re debt-free, and they’re like “Yeah, what was your interest rate?” So first off, what was your interest rate on the house payment?

Jeff Anzalone: It was 4.5%.

Joe Fairless: Okay, so a 15-year mortgage, 4.5%. So the contrarian to your perspective is gonna say “4.5%? I can make 8% doing XYZ. The market’s returning whatever. I can make the spread, and then I can pay down from the profits, plus I can then invest the difference, and I’m gonna be much farther ahead.” What are your thoughts on that approach?

Jeff Anzalone: My approach – I don’t push this on anybody; this is just me, this is what I was comfortable with… Just like some people wanna do risky stocks and risky options and risky investing, some people are more conservative. Everything in my life goes back to one source, and that’s the Bible. Proverbs 22:7 says “The rich rule over the poor, and the borrower is slave to the lender.” So what I say is if God didn’t want us to be in debt, that’s enough for me.

Joe Fairless: [laughs]

Jeff Anzalone: There’s nothing else I can say about that. He tells us we have to work. The working people – if you work, you get food, you get to eat; if you don’t work, if you’re lazy, you don’t. Then if you’ve gotta borrow stuff, then you’re gonna be a slave to that lender.
Some of my family members actually had to borrow money. When I first started for my family members, I had to mow yards again; I used to have a lawn service… So it was very humbling, Joe, to be a doctor and have to go to my grandparents to borrow money just to get a practice going, to cut yards again…

Debt to me was just like the worst thing ever. You could probably do what you said, “Hey, we can invest over here”, whatever, but for me it’s like, I’m debt-free. If somebody comes in my practice now, they need work and they can’t quite pay for all of it, or if they can’t pay for any of it, I can do it. I don’t have to worry about paying for something; if I wanna just give back [unintelligible [00:07:19].24] I can do it, and that’s a great feeling.

Joe Fairless: It’s almost becoming like a soapbox thing for me, because I have so many physicians who are investors, and I hear your story, I hear their story… And the perception among most people – myself included – prior to having all these conversations with investors of mine and other physicians is that doctors are loaded, and they’ve always been loaded, as soon as they graduated… But that’s just not the case. That is absolutely not the case. Physicians have to dig themselves out of debt – most of them – before they’re able to really enjoy the lifestyle that quite frankly they very much deserve, because of what they’ve put themselves through to get to the point where they’re at. All that schooling, all the debt paydown… It’s insane how much they go through, so I’m glad you’re telling the story, first off just to educate some people who might not know the type of debt that doctors and physicians have coming out of school.

Now that that’s kind of brought to light – 250k or a couple hundred thousand, or more than that in debt… Now what’s the approach that you took and what would you suggest for people who are in a similar situation?

Jeff Anzalone: I basically took the approach — well, actually I had to take that approach, because I started from nothing, whereas most people I know don’t start from absolutely nothing; they actually have a job, they’ll probably have a salary, and that sort of thing… But I kind of use a Dave Ramsey approach, and that’s who really helped me a lot. I still listen to him to this day… Just use his principles. When you get out, you’re already used to living on nothing, because you’re a resident.

And one of the things that you said, Joe, was you thought doctors are loaded, you thought this and that… Well, think about somebody that’s getting out of their training – in their mind, they’re looking around and go “Hey, look, these doctors are loaded. They’re on the tennis court, they’re on the golf course, they drive a Mercedes… I want that now”, and then they’ll put off things, they’ll put their student loan payments on minimum payments, they’ll buy the big house and all that, and then the next thing you know, they’re a million and a half in debt, including their mortgage, and it’s like “What do I do?”

Joe Fairless: Yeah, that’s exactly what happens.

Jeff Anzalone: I’m doing a little bit of financial and practice coaching on the side, and it’s amazing how many people over 60 that I coach, that have no money. They’ve been practicing their whole life. That was like a wake-up call, like “You know what, I’m never gonna be 60 years old and not have $5,000 in the bank” or whatever.

So there’s a lot of people hurting out there, so I think people can just share their story, because there’s so many people that have helped me get to where I am, and I’m just turning around and just giving back and saying “Hey look, use the Dave Ramsey principles, keep living like a resident, throw everything you can at the student loans initially, completely get out of student loan debt, and then — I didn’t rent, but Dave recommends that you rent until you can afford your 20% down payment of your home.” 99% of the people getting out of training aren’t gonna do that, but if you’ll just do that, just sacrifice a few more years, man, you’ll be so quick to be financially independent, it’s crazy… Because we all have a great income and income potential; that’s the great thing about our profession.

Joe Fairless: And I imagine credit is incredibly accessible right after residency, too… So if you look at the lifestyle that other people are having for themselves, and then you probably have access to a whole lot of credit that you didn’t have before…

Jeff Anzalone: Yeah, and I called my banker, and he didn’t have to meet with me or anything, he said “I’ll give you an interest-only loan for your house, knowing that you’re gonna be going in with this group.” We bought the house, the deal fell through, so it was just like “Yeah, we’ll give you whatever you want”, you know? I was like “Really?” It’s crazy…

Joe Fairless: Now you have the house, but now you have to mow your neighbors’ yards to make the mortgage payment.

Jeff Anzalone: Exactly.

Joe Fairless: Wow, okay. Some takeaways that I’ve got so far – this is what worked for you… You used Dave Ramsey’s principles; you live like a resident, you threw all of your cash that you had from working into paying down student loans, and then the even more extreme approach – or conservative approach, depending on how you think about it – would be to rent instead of buy… And obviously, I love hearing that; I’ve got a lot of apartments for any doctor who wants to rent… We can rent you an apartment, as long as you’re in Dallas-Fort Worth or Houston. [laughs] Anything else?

Jeff Anzalone: I get people that ask me questions like, “I’ve got a lot of debt, but I’m making a good income. What do you think about maybe doing some investing? Should we do stock market, should I buy a house and rent it out? Should we do real estate, or what?” Those are some of the questions that I’m getting, and if you don’t mind, I’d like to maybe share my experience. I know we don’t have a whole lot of time left, but a little bit about my crowdfunding experience, and then doing a couple deals with you, if you don’t mind…

Joe Fairless: Yeah, sure.

Jeff Anzalone: Once I got completely debt-free and had a good chunk of money in investments – stock market mainly, index funds – I wanted to take a portion of the money that I’d saved up, and I kind of earmarked initially 10%, and invest in real estate mentor. So I started researching some of the crowdfunding sites – Realty Shares and Patch of Land were the two I eventually went with… I did that, and then you told the listeners I was on a couple deals with you… And I think just for me, moving forward, I like doing the deals with you based on — the main thing is when you go to some of these other companies, they’re not the ones that have the money in the apartment deal or in the house deal. They’re putting the deals together. So you may invest with them, whatever crowdfunding company; it may take two months, six months… I’m still waiting right now on a deal – it’s been almost 12 months and I haven’t even got my first distribution yet. They’re having problems.

Joe Fairless: Was that planned?

Jeff Anzalone: No, it was not planned.

Joe Fairless: Which platform is that?

Jeff Anzalone: That was Realty Shares. And the problem was with the management, they’ve turned over the management; they’re having a hard time filling the vacancies, a lot of marketing issues… So my money’s just been sitting there for like 11 months now, and I don’t really like that at all (who would…?) Versus the two deals that I’ve done with you – well, you’re the one that’s in charge typically of handling everything, so you have more skin in the game, and I don’t think I’ve waited longer than 45-60 days before I started getting my first distributions from you.

Now, I do know that investing with you is a little bit higher versus some of these platforms, just like $2,000 or $5,000, but still, once you get to the position to where this becomes an option, that’s my experience, and I’m glad I kind of went through both, because I can see both sides now… But I really like going with somebody that’s got skin in the game, they’re on top of it… You do a great job sending us e-mails, knowing about what you’re doing to the property, the vacancy, your improvements, what the goal is… That sort of thing.

That’s kind of my experience with it, and moving forward, I’d like to earmark a little bit more money towards the real estate, versus so much an index fund. Some of my things I went through with that deal – I’m kind of helping people, and they’re asking me technical questions, either online or calling me… So just from my experience from that is kind of how I’m helping them.

Joe Fairless: And I did not know the conversation would go towards that direction; I’m glad to hear the feedback, that’s for darn sure. I’m gonna play devil’s advocate – so a disadvantage in that scenario would be diversification of sponsors, because with the crowdfunding platform they work with hundreds, maybe thousands (I don’t know, it depends on the platform) of different sponsors, so you’ve got a diversification of probably both sponsor and also geography… Whereas with one sponsor – I’ll use myself as this example, since we’re talking about you investing with me – it’s one sponsor group, plus we’re concentrated in one state right now (Texas) and in a couple markets in that state.

Jeff Anzalone: Correct.

Joe Fairless: So when you look at your portfolio, how important is that diversification part?

Jeff Anzalone: Especially now – the stock market is not just going up like crazy like it was, but I think now as I’m getting older, I wanted to have more diversification. I have most of my money in the stock market, but having something to kind of buffer that with the bonds and real estate… And some people will wanna do that right off the bat; they wanna focus more on real estate, not so much in the stock market, but I love the compound interest effect. It takes a while to get to that first million, but after that, it’s amazing how quickly — and I’ve read books about it and I’ve seen it first-hand… After the first one, the second one is a lot quicker, and then the third one and fourth one, and so on and so forth.

So that’s cool, and a lot of these principles I’m able to teach in my kids as they’re growing up. There’s only a few things you can do with money – buy something, save something, or give it away… Again, those are Dave Ramsey principles. So just teaching them that walk as well, and to make sure they’re giving back as well, too.

Joe Fairless: I was reading an article – they were looking at the world’s billionaires, and they were seeing how long did it take them to get to the first million, and then how long did it take them to get to the first billion, and on average, it was 37 years old for the first million, and then it was only 14 years later (on average), 51 years old for the first billion.

Jeff Anzalone: Yeah.

Joe Fairless: Anything else as it relates to this topic that you wanna address as we close this out?

Jeff Anzalone: Yeah, and I’ve mentioned this before the call – I’ve started a new blog, a free blog… I’ve love to give the listeners the address, if you don’t mind.

Joe Fairless: Absolutely.

Jeff Anzalone: I’m basically just kind of going through and started a blog actually maybe about a month or so ago, and it’s called DebtFreeDr.com. It’s basically the principles, kind of my story, what you guys just heard in a little more detail, and it’s just the principles that have taken me from a lot of debt, to getting out of debt, to where I am now… And as I continue posting information on there, I’m going to be going a little bit deeper into investments, investment strategies, real estate etc. so I’d love for you guys to go there and sign up, put your e-mail address in and then you’ll be updated as I update the site.

Joe Fairless: Yeah, it looks great… I’m looking at articles. “Top Ways Docs Can Become Debt-Free In 3 Years”, “Financial Advice For The New Doctor, The Thrifty Doctor…”, all sorts of good stuff.

Well, Jeff, thank you for being on the show again. I enjoyed catching up with you, I enjoyed hearing your perspective from where you were, where you’re at now, and how you got here, and lessons learned along the way… Taking the Dave Ramsey approach, living like a resident, so living below your means, having the money being paid towards student loans that you earn…

You didn’t do this, but perhaps renting, and then once you have the financial ability to start investing, then identifying what is your preferred method. You’ve done crowdfunding, you’ve done investing in private syndications… You mentioned the private syndication route is your cup of tea, that’s what you’re really focused on, and I’m really grateful that you’re investing with my company, and I’m grateful that we had a conversation, because there are a lot of lessons learned for a lot of individuals.

I hope you have a best ever weekend, and we’ll talk to you soon.

Jeff Anzalone: Yes, sir.

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