In the spirit of Black History Month, Lisa Hylton devotes this episode to get into the cross-section of wealth, real estate and the impact it can have on the black community. To talk about this with her, she brings in Dr. Eric Tait, an Investment Fund Manager with Vernonville Asset Management. Eric is a board-certified physician, but his most of his wealth comes from investing in alternative assets. In this conversation, he sends a powerful message about wealth to the black community. Black people need to realize that they have tremendous economic power in their hands. The only problem is that they are mainly using that power as consumers, not producers. Eric believes that for black people to claim their share of the tremendous potential for wealth that capitalism offers, they need to step up more into ownership and full participation in the investing world. Listen in for that fitting wakeup call for this month’s theme. Plus, learn more about private real estate investments and the advantages that it can give to you as an investor.
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Wealth, Real Estate & The Black Community – From Internal Medicine To Financial Freedom With Dr. Eric Tait
The theme for February 2021 is Wealth, Real Estate, and the Black Community. It’s Black History Month. I want to get into the cross-section of wealth, real estate, and the impact it can have on the black community and black people investing and building wealth. Without further ado, I have another amazing guest. His name is Eric Tait. Eric is an Investment Fund Manager with Vernonville Asset Management (VAM), a private investment firm that helps investors attain and maintain financial independence using alternative assets.
Eric is a Physician who is board-certified in Internal Medicine. VAM has grown to over $100 million in assets internationally and domestically. These involve a Hilton Curio Resort in Belize, which I have gone to. It’s absolutely beautiful. A numerous triple net commercial and light industrial assets, multifamily apartment homes, student housing, specialty coffee farms in Boquete, Panama, and dozens of single-family homes, private lending funds, and Angel/venture investments. One thing I want to talk about is Dr. Tait attended Morehouse College in Atlanta, Georgia, and got his Bachelor’s degree in Biology. He lives in Houston with his wife and his two daughters, and practices internal medicine. I’m happy to have you on the show, Eric. Welcome to the show.
Thanks for having me. I appreciate it.
I wanted to dive into your story. I know you have a focus on alternative assets, but to get started, can you talk a little bit about how you got started investing in general, and then specifically in real estate?
As you mentioned, I went to Morehouse College and then came to Houston to do a dual degree MD/MBA at Rice University for business school and Baylor College of Medicine for medical school. It was in business school where I took my first financial classes ever in life. I was a Biology major undergraduate. I had some small businesses here and there when I was growing up, but nothing of any major heft. For me, going to business school was twofold. One, I always had an entrepreneurial interest so I wanted to get a clear understanding of, “What is business? What makes business move in a formal way?” Two, I want to figure out how I was going to invest my own money.
I didn’t have any real desire to leave medicine and do hospital administration or things of that nature. It was focus on what’s the best way to allocate my capital. At the time, I wasn’t thinking about putting together an investment firm or any of that stuff. I just wanted to learn how to do my capital. For me, business school was not about getting a job. It was about learning the things I needed to become a better investor for my portfolio. It was during that time that I got to understand how to do valuations of companies, and then understood that stock prices don’t have a lot to do with actually the profitability of a company. It has somewhat to do with the potential growth aspects of the company, but that’s all guess work by people. To me, it didn’t make a lot of sense.
When I was in school here in Houston, Enron was going through its thing. It was still a going concern company, the hottest thing on Wall Street, its stock price was going up. When we did their financials for the previous three years, they had not made any money from their cooperations. I remember the professor saying, “This company could be labeled a hobby by the IRS.” It was at that point, I sold all of my stocks. I’m like, “This isn’t a game I want to play. This is not where I want my money.” Roughly, a year later, it tumbled lots of people’s 401(k)s down because a lot of people overconcentrated their money into Enron. It’s a big debacle that hung over the city for many years that people are still recovering from. People are starting to put Enron back on their resumes these days from that standpoint.
It was a very innovative company with great people. If you look at the companies that respond off of the alums there, they’re doing well, but the internal culture didn’t make sense. That’s a fear that I have of publicly traded assets. The reason why I went after alternative assets was because it was much easier for me to understand them and to value them from that standpoint. We started in real estate because I knew I was going to practice medicine. I wasn’t going to have a lot of time to run and operating business. There are two ways you get wealthy in this country at a fairly young age. There is a non-service based business or real estate. If you work on Wall Street, that’s the other way, but that’s a different thing and I had no desire to do that. The non-service based operating business wasn’t going to work with me being a physician, so I gravitated towards real estate initially. That is what started my journey from that standpoint.
I wanted to clarify that non-service based operating business. What would those be classified exactly?
Let me do it this way. A service-based business as a doctor, lawyer, accountant where your physical labor is what the business is. Essentially, you own the job. Some law practices, if you’re going to a big firm, yes. If you’re at the top of that firm, you may not have to produce, but physicians, accountants, for the most part, they have to produce for anything to get done. We call it owning your job. Whereas a non-service-based business that is producing some type of either a physical product or something that you don’t have to physically be the one who’s doing it, and you can hire people to do it as the owner, those are the types of businesses that you could walk away from. If you have a good operator in there, the business will do as well or better with you gone. You could sell it at a higher value than with you being in it. If I were to sell my physician practice, it wouldn’t be worth much if I’m not going to stay in it in real life. The delineation is, “Can the business stand alone without the owner, versus is the owner the one who drives the revenue.”
To recap there because that was important. You said these are the two ways that you can build wealth in the United States, which is either having that non-service operating business or real estate.
You can make a lot of money as a service-based business, but you are going to sacrifice your time and your life to doing that, which is perfectly fine. You can build wealth and what have you. It’s just a matter of how you want to build your wealth. For me, my time was more important than money. My ability to do what it is that I want to do when I want to do it was my driving force. Money wasn’t my driving force. I probably given up millions of dollars because I wouldn’t do things that didn’t create a scalable process that didn’t require me to be in it every day. I’ve never been money motivated. I was always time motivated.
Thinking about that and thinking about alternative investments, and the theme for the show, which is wealth, real estate, and the black community. I feel that a lot of people probably don’t know what alternative investments are. Can we start there? I know that you’ve created a white paper covering this topic. Can we dive into the first aspect of it, which is what are alternative investments?
We’re going to make it very easy. The same thing as before, let’s talk about the opposite. Technically, stocks, bonds, mutual funds are considered “mainstream investments.” Anything that is not, that is considered an alternative. Real estate, private debt, you’re lending money to a partner or lending money to people to go do a real estate deal, that’s an alternative investment. You’re putting money into your friend’s business, alternative investment. You’re buying gold, silver, Bitcoin, alternative investments. It’s interesting because Bitcoin now is maybe considered more of a mainstream these days and that’s only because “institutional investors” on Wall Street are now blessing it. It’s almost as if it’s not blessed by and goes through someone on Wall Street, it’s considered an alternative. That’s the easiest way to define it by looking at what it’s not.
Anything that’s essentially private that doesn’t trade on an open market would be considered an alternative. That’s the easiest way to think about alternative investments or I like to call it public market investments versus private market investments. Private market investments are what we do because we do private stocks companies before they go public or before they’ve been bought out. They’re very akin like you can buy a REIT that will be a publicly-traded way to try to get into real estate. We don’t do that. We own the real estate directly with our investor partners. We’re direct owners. There’s no middle person or no what we call derivative process in between the ownership.
Connected to that, you mentioned these alternative investments a lot of them being private. Can you talk about how people find out about these private types of investments?
You have to know people. The SEC determines who can and who cannot invest in these types of investments. In some ways, they can somewhat be walled off. Now with crowdfunding, there’s been some loosening of the rules since 2012 but ultimately, it boils down to who you know, and who you have access to, what your networks look like from that standpoint. From a network standpoint, you have to look for people who are doing it, number one. Number two, if you decide to do something you want to do, you want to do some education on your own to understand what it is you’re looking for. There are lots of people out there who were doing these. They’re around you and you don’t even realize it. A lot of people on the internet are doing it, but that’s not as important as you understanding what it is you want to do and what you’re trying to accomplish. You then look for a strategy based upon the different types of asset classes to accomplish your financial goals. You’re not looking for an investment. You’re looking to fulfill your investment goals and then backfill that with a particular type of asset that they can potentially do that.
As you are a physician investing in these alternative types of investments, what have been some of the benefits, if any, for you, choosing to make these investments as a physician yourself, that you see could be beneficial for other physicians to know about?
I focused heavily on income-producing assets from the outset. I didn’t do 401(k)s and IRAs, those kinds of things. I put my money into things that generated income that could replace my earned income. It allows me to sit here and talk to you. It allowed me to explore a lot more of who I am on the investing side and on the personal side.
You were saying it allowed you to explore more of your investing on your personal side.
It gave me freedom. It allows me to explore more of who I am. It allowed me to expand our investment firm because initially we just did real estate, and then we expanded out from there. It gave me more time with family and the ability to travel and explore hobbies.
Connected to that, thinking about the exploration, I did notice that you have some international investments. Can you talk about your decision to invest internationally?
For us, it’s this diversification. We focus heavily on real estate across multiple asset classes. The way to get diversification is across geographies and asset classes. Another way is currency wise. When you go internationally, you’re not necessarily tied to the US dollar, which can be good and bad depending on what’s going on at the time. For us, it was a pure diversification play because many of the developing worlds are growing at a much faster rate than the United States. We want to have that direct exposure. These are long-term plays. We’re not traders. We don’t go in and out of assets just to do that. We don’t want to get in and out because technically, equity and wealth is built over a long period time. Most individual investors are not going to make money trading in and out of positions. It’s tax-inefficient. It doesn’t work that way. What you want to do is let your asset compound cashflows and equity over time, and that’s how you become wealthy.
How do you mitigate the risk, if any? If someone reading is thinking, they live in the United States and they would like to get involved in some of these international investment opportunities but they’re concerned, how do they mitigate the risk that they’re going to lose their money, or that they’re going to be putting it into an investment that they’re not sure about? What are some of the things that you have experienced that you’ve done to get comfortable?Capitalism is adding value to other people. It only works if you participate. Click To Tweet
That question breaks into multiple parts. The first part is, “Are you doing it yourself, or are you investing with a group that has some experience or has some knowledge there?” You’re using someone else’s knowledge by proxy, or you’re trying to do it yourself. If you’re trying to do it yourself, you’ve got to understand the laws, the way contracts are written in that particular jurisdiction, the legal framework, the market itself in terms of what areas make sense, what areas don’t make sense, and what are the building codes. There are many things you have to know and understand as an individual. It can almost be a full-time job.
If you are looking to join other people and say, “This is a group that does that.” What you’re going to want to do is vet the track record of the person that you’re talking to, or even if they don’t have a track record, what is a team that they have associated themselves with to mitigate all the things I talked about? Who knows the building laws? Who knows the building codes? What’s the plan for this if you’re doing a new build? If it’s not a new build, you’re buying something that’s already existing let’s say, it’s a real estate deal, then what are the sales comps? What are the cashflow? Who’s going to do the management, all of that. They should come to the table with that whole team already in place with a plan.
You’re going to have to pivot a bunch of times, and lots of things are going to happen that are unexpected. What I would argue is you need to have patience when doing that, especially if you’re going into the developing world because just like here in the US, view a development project here in the US, it’s going to go longer, it’s going to cost more. It’s the same thing with a larger magnitude internationally. You have to understand that this is a long-term play if you’re going to be doing it. It’s not going to be something that you’re going to get your money back in two years. You have to prepare from an expectation standpoint.
I want to circle back on the white paper that you guys have created on your site that goes into an alternative. We touched on it at the beginning, which is what alternative investments are. I also wanted to touch on, what are some of the key things that are in that paper that is beneficial for people reading to take away from?
It lays out the major classes of alternative investments, and what are the pros and cons of each of those. It’s a very high-level understanding of what the world calls alternative investments, and the major pros and cons of each. With that, I would argue it begins your process of exploring. It is not all-encompassing because then that would be 50. It’s to give you a clear, concise overview of the different kinds of classes that are out there, and their pros and cons.
Given that this is Black History Month, I wanted to talk about your view on ways in which black people can deliberately make movement. People who are reading, all different races, but given that it’s Black History Month, I also want to have that specific focus to say, these are some tangible things if you’re interested in building wealth be it alternative investments. In your case, you have that alternative investments experience or real estate specifically. What are some advice that you would give them as they think about trying to move away from that 401(k)?
401(k) is technically internal wealth building for yourself. Potentially assuming that the market stays the way it is and what have you. I’m not knocking that. What I would argue is that if you’re trying to build wealth, a lot of people don’t use 401(k)s. That’s the truth. We’ll leave it at that from there. From the larger question of the black community, we must first acknowledge that coming out of slavery here in the United States, and we can make this diasporic if you like, but here in the United States, we were the land. We were the people who did all of the agriculture. We were supposed to be given our 40 acres and a mule, and then we would have moved forward as a nation within a nation. That did not happen.
Even with that not happening, many black Americans had farmlands, had homesteads that were then stripped from them. We want to make sure that we lay the foundation of understanding of why we’re in the position we are financially. We were not able to build generational wealth over time because of laws that were in place for treatment from the Federal government. All of those things. There’s nothing defective about who we are and where we are. We had twelve generations of captivity, enslavement, breeding, and we’ve had two generations of being fully free in this country. My mother drank from segregated water fountains.
If you look at the wealth of the black community in the United States, as a nation, we are pretty wealthy as it relates to spending power. The problem is in my mind and in my eye is that we are consumers and not producers. We do not produce tangible things for our community, let alone the larger community. What we do is we produce a lot of cultures. Our biggest export is culture, but we do not monetize our organs to which culture is monetized. People are starting to change that. People are creating management companies and things of that nature. What I always say is we are rebuilding the institutions that we once owned pre-integration, because once integration came, the percentage of black businesses was decimated. We all went to college and we all wanted to get jobs with other people. Our generation is late Generation X, and then those behind us are rebuilding those parallels intuitions that don’t have the same constraints that our grandparents’ institutions had in segregation. What I would say is we have to have a little bit of grace with one another, but we also have to begin to invest with one another.
We also have to begin to think of how are we owners. I don’t consider a 401(k) ownership. I consider owning a piece of a business, actual physical ownership. We can go back and forth with me all the time, but that’s my thought process around this. You can be an employee, but my argument with you is what else do you own? What other thing do you own that produces something for somebody else? If we can get into the mindset of producing things for our community and for the larger community, because if you think about it, in our communities, no matter where you go, we don’t own the businesses. Other people come here as immigrants, use our dollars. They give us a service so it’s not “use,” but we do not service our community. Every other community in this country services their own community and then other people. We’re always on the consumer side. We have to be on the production side as well.
This is so important. I don’t know if you’re familiar with this book, but there’s a book called The Go-Giver. I think it has 4 or 5 laws. One of them is adding value and then the other one is the Law of Contribution. It’s funny because in your answer here, which is the importance of producing, a part of that is producing not only just for your community, but also for other people. That comes with when you do that, you’re adding value to the lives of other people, because if they’re going to buy your stuff, that’s because that stuff adds value to their lives. That book also talks about how if you want to be successful, add value to more people, contribute to even more people. It’s so interesting, the cross-section of what you’ve said, and what that book that I read also talked about.
I’m a personal development guy. I spent a lot of time with Zig Ziglar. I can quote all those guys because they talk about universal laws. The Go-Giver book is that sane universal law. Law of Compensation is just the same universal laws that are out there. People don’t realize that’s what capitalism is. Capitalism is adding value to other people. That’s it. It’s not telling other people what they should have. It’s providing to other people what they want. If you’re not doing that, you fail. Go back to the drawing board. People lose sight of that. Money comes from other people because they think that what you’re giving them is valuable. Add value to other people, that’s it.
What an amazing episode. Thank you so much, Eric, for coming on. Before we get into my level up questions, I want to give you an opportunity to recap here. Any key messages as you think about Black History Month, black people in America, 2020 has been a crazy year. As we’re here in 2021, people want to move forward. They want to build wealth. They want to create a legacy for their family. Key final words that you’d want to leave to them in that respect.
The thing is you’ve got to own something. Capitalism only works when you participate. If you are only a consumer, capitalism will grind you down and pulverize you, at least the way we practice it here in the United States. You have to be an active participant, which means you have to own something in our society. Even if you don’t make a lot of money, you can get with other people, group economics, pool your resources, and then buy something, invest in something that produces for other people. It only works if you participate. We have to get into an ownership mindset with our resources. That’s the big overarching theme that I would say around Black History Month, and increasing wealth in the black community from that standpoint. Lots of people talk about closing the wealth gap and this, that, and the other, that’s not my thrust.
You can’t hold people back for 100 years and say, “Now go catch up.” Unless the government is going to come in and specifically do specific things, that’s not going to happen. What I asked for is self-sufficiency. Self-sufficiency in that we can employ one another. We can help one another so that we are less dependent on outside groups in our day-to-day living. I don’t worry about the gap closing. What I’m looking for is for us to be able to solve a lot of our own problems at our level, as much as possible, so we’re not always asking somebody else to help us. We can do that internally for ourselves. Going on a Black History Month theme, that’s what I would say.
This might be a little bit of a controversial question, but I’m curious why you’re not worried about the gap closing or why you don’t focus on closing the gap?
In the end, it’s not a doable thing. The wealth one is not a doable thing. Income, yes. There should be parity amongst men and women. There should be parity across all races. Income for the same job, there should be gaps closing. In terms of wealth, compound interest. If I’m sitting on $1 million and you’re sitting on zero and we both earn the same in the future, you’re never going to catch me. Worrying about trying to catch somebody means you’re going to have to run faster. We already have too much stress as it is. We already die earlier as it is. In the end, you can be self-sufficient. You can have all of your needs met in a capital society without catching the group that’s so far ahead of you. You don’t need to catch somebody to be self-sufficient and to be whole and to be fulfilled. That comparison thing is unnecessary. It creates lots of mental anguish. If we can have people who are whole, who have all of their basic needs met, and we can build on top of that, we will be a much healthier community.If we can have people who have all of their basic needs met and we can build on top of that, we will be a much healthier community. Click To Tweet
That’s so powerful. To wrap this up are my level up questions that I ask all my guests. The first one is, what are you grateful for in your life?
Health. Especially in the time of COVID, knock on wood, all of my family has been healthy. Now, everybody’s starting to roll in and get the vaccine. We should hopefully remain healthy, thank goodness. The biggest thing right now is health.
What has attributed to your success and continuous growth?
Parents and family. I have a very supportive family, parents, sisters, wife, cousins, and friends. I have a supportive community that’s always lifted me up and pretty much told me I can do anything. On a growth pattern is the personal development. I’m a constant learner. I am an autodidact. I’m always curious, learning something. I don’t have a big ego about stuff that I don’t know. Show me where I can learn it or show me who knows it, and then I will go and sit at their knee or partner with them.
The last one is, what do you now know that you wish you knew at the beginning of your journey?
Go big early. I spent too much time playing around in a single-family home. I should have been buying apartment complexes in ‘09, ‘10, ‘11, ‘12. I didn’t know. I was scared. I realize it’s the same amount of work. You may as well go big instead of playing it small and safe.
If my guests want to learn more about you, get a copy of your white paper or learn more about your investment opportunities, where do they go to find out more information?
The easiest place is at Vernonville.com. You can contact me through there. You can get on our newsletter list, and then we send information education out probably once a week. When we have specific projects, we send those out. You might get a couple more emails if we’re in the middle of a project. The white paper is at Vernonville.com/alternative-investments. You can download the white paper there to learn more about alternative investments.
Thank you so much, Eric, for coming on the show. I appreciate it. Have an awesome day.
Thanks, Lisa. I appreciate you having me on.
Thank you again, Eric, for coming on the show. It such an amazing episode. My key takeaways from this episode were the following, one, capitalism only works if you are a participant. That one was golden. Given that we are living here in the United States, it is a capitalistic system. This one is super important that if you are only consuming, he noted that it’s just going to grind you down. You need to participate, buy real estate, buy assets, invest in businesses, or create businesses that offer multiple services to different people.
The other key takeaway that I had was private real estate investments. He noted, it gives you ownership. This is an alternative to investing in the stock market. He noted that this gives you ownership in real assets among other things, because his firm specializes in alternative investments, which are other things, not just real estate. He noted that specifically for these private investments, many times you need to know people. Listening to podcast, going out there and doing your research, going to conferences, things like that can help you to get to know people and begin the process of educating yourself and getting comfortable in doing those due diligences to get to know different people.
International investments because he has invested internationally. I talked about what were the benefits that he saw. One was diversification. Diversification of asset class, geography, as well as even currency. Mitigating the risk of choosing to invest overseas. He noted that you can either do all the heavy lifting yourself or you can partner with experienced operators who are already doing this work in those areas, which also takes a research on your part and doing due diligence.
The last two items, the first one was major ways he noted to build wealth in the United States outside of trading your time for money. It was that non-service operating businesses. Those are those businesses that you can set up and they don’t require you to be showing up to them each and every day, and then investing in real estate. In the end, he noted that he wished he went bigger earlier. He played a lot in single-family at the beginning of his real estate journey. He noted that he wished that he had started investing in apartments earlier in the process because it’s fairly similar, but a larger amount of units. That comes with economies of scale and a lot of other great things as well.
Last but not least, the importance of producing and adding value. This was in response to a question I had on ways in which the black community can continue to build wealth for themselves in the United States. He touched on the importance of producing goods, services, products, things for your community, and for other people as well. Through that, you’re adding value because if you’re producing things and people are buying them, listening to them, or consuming them, then that means you’re adding value to the lives of someone else. It is a part of if you want to also be successful, consider how many people you are contributing to their lives. The more people you are contributing to, helping and adding value, that is also a way in which you can continue to grow your success in your wealth ultimately as well, which is a part of that book that I mentioned, The Go-Giver, which is pretty awesome.
That was my key takeaways from this episode. I hope that you thoroughly enjoyed it. As I said before, we are focusing on wealth, real estate, and the black community. Check out my website, LisaHylton.com. Get on there to pick out my Passive Investing Made Easy series to learn more about passively investing in apartment syndications as well as to get on my email list to learn more about my weekly updates, podcasts, blog posts, the whole nine yards. Until next time, keep leveling up. Bye.
- Vernonville Asset Management
- The Go-Giver
- Passive Investing Made Easy – Series episode
About Eric Tait
Eric Tait is an Investment Fund Manager with Vernonville Asset Management (VAM) LLC, a private investment firm that helps investors attain or maintain financial independence using alternative assets. Eric is also a Physician who is board-certified in Internal Medicine. Under Eric, VAM has grown to over 100 million dollars in assets internationally and domestically, these include the Hilton Curio Resort in Belize, numerous Triple Net Commercial and Light Industrial assets, multi-family apartment homes, student housing, specialty coffee farms in Boquete, Panama, and dozens of single-family homes, private lending funds, and Angel/Venture Investments.
Dr. Tait attended Morehouse College in Atlanta, GA, and graduated cum laude with a Bachelor of Science degree in Biology. At Morehouse Eric was very involved in the Health Careers Society and mentoring elementary school children in math and science.
After college, Dr. Tait relocated to Houston to attend Rice University’s Jesse H. Jones School of Management and Baylor College of Medicine where he received his dual-degree M.D./MBA. During Dr. Tait’s tenure at Rice, he worked for Aetna Healthcare as a special assistant to the Senior Network Medical Director for the Eastern Pennsylvania, Southern New Jersey, and Delaware region. Eric graduated from Rice University with an MBA in Healthcare Management and a concentration in entrepreneurship.
Upon graduation from Baylor College of Medicine, Dr. Tait attended the University of Texas Medical Branch at Galveston for his internship and residency in Internal Medicine. Eric is in private practice and is currently on the medical staff of Saint Joseph Medical Center in Downtown Houston.
Dr. Tait is also President of Pinnacle Physician Management Organization an independent practice association that caters to Medicare recipients. Dr. Tait is a member of Key PAC, a nonpartisan political action committee and is also involved with numerous community-based organizations in the Greater Houston region like The Morehouse College Alumni Association. Dr. Tait’s interests include reading, entertaining, and spending time with his wife Claudine and young daughters Kiran and Lena.
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