With the rise of increasing responsibilities and physician burnout, job insecurity has increased. In an effort to safeguard their financial stability, many physicians are seeking passive-income sources as a way to diversify revenue. When physicians consider investing in as a revenue-boosting option, they often look toward traditional routes in the equities and stock markets.
According to gastroenterologist and passiveadvantage.com co-founder Samuel Giordano, MD, physicians should consider another avenue—the real estate market. Dr. Giordano emphasizes the importance of maintaining a flow of passive income and suggests that physicians achieve this goal via investing as a limited partner in a real estate syndication, which provides both a passive flow of revenue and tax benefits for physicians.
Participation in a real estate syndication involves investing cash in that partnership, at which point physicians have partial ownership in the real estate asset. There is no requirement as to the type of property in which physicians should invest. Investing in anything from mobile homes to condominium complexes to storage facilities can provide passive income. Once the real estate investment generates cash flow, investors will see revenue checks either monthly or quarterly. Furthermore, any selling or refinancing of the real estate property will yield a large amount of investor revenue. Whereas physician income is largely limited to clinical duties, which are limited by the number of reasonable weekly working hours, passive income opportunities are comparatively boundless. Physicians may invest in many large, in-depth properties if they choose, as long as they have the financial means to make those investments. The actual time involved after deciding on an investment is miniscule, as the nature of passive income ensures no direct involvement with invested properties.
According to Peter Kim, Los Angeles-based anesthesiologist and founder of passiveincomemd.com, real estate funds are excellent investments for physicians, as they offer a steady revenue stream, tax efficiency, diversification, passivity, and returns. While appreciation of an investment is certainly positive, it is not required for a successful passive income investment, which depends more on generating a monthly or quarterly revenue stream. Increased cash flow from real estate fund investments leads to increased financial flexibility and freedom. Investing in a real estate fund also allows physicians to take advantage of depreciation, a tax-efficient benefit that lowers the amount of taxes to be paid by investors. Kim suggests that a tax-free 6% return may be more favorable than an 8% to 9% return with tax consequences.
Real estate funds provide instant diversification opportunities for physicians. Whereas a syndication investment might be geared toward one building in one location on a single timeline, real estate funds might involve owning assets in multiple locations and making purchases at various points within the market cycle. According to Kim, this diversification aids in managing investment risk. Given the potential long-term nature of investing in real estate funds, Kim urges physicians to engage in a diligent vetting process before proceeding, making sure to gather any information on the track records and goals of the fund’s operators, their desired assets, and their risk management strategy.