WHY DOCTORS SHOULD CREATE PASSIVE INCOME WITH REAL ESTATE
“Ninety percent of all millionaires become so through owning real estate.” – Andrew Carnegie
Harnessing the potential of real estate provides a strong method for establishing passive income and constructing a stable financial base. Doctors can leverage this avenue to develop varied and dependable income sources. Real estate, in this context, becomes a fundamental element in wealth creation, offering doctors a practical means to not only generate passive income but also potentially ensure their financial security in the years to come. Through strategic real estate investments, doctors can proactively set themselves up for long-term financial well-being and stability, thereby achieving their aspirations and ambitions beyond their medical careers.
What Is Active Real Estate Investing?
Active real estate investing involves a hands-on approach where investors are actively involved in the management and operations of their real estate properties. This typically includes tasks such as property acquisition, renovations, tenant management, and overall portfolio oversight. Active investors often play a direct role in the day-to-day decision-making and maintenance of their real estate assets.
Active real estate investing demands significant investor involvement and effort.
Examples:
- Single-family home fix and Flips
- Wholesaling
- Land flipping
- Single-family home rentals
- Multifamily acquisition and management
What Is Passive Real Estate Investing?
Passive real estate investing is “hands-off” investing and is well suited to physicians and other busy professionals. Passive investing allows physicians to put their money to work by supplying capital for real estate ventures, oil and gas drilling, or other cash-flowing, tax-advantaged businesses. Passive investing does NOT require physicians to take on a second job, but instead to leverage the time and expertise of those “active investors” who are committed to the day-to-day operations of these wealth-generating assets.
Examples:
- Real Estate Investment Trusts (REITs)
- Crowdfunding Opportunities
- Real Estate Funds
- Passive investing in multifamily syndications
- Passive investing in oil and gas syndications
- Debt investments in mortgage notes
Why Passive Real Estate Investments are Beneficial
1. Portfolio diversification
Diversifying your investments across various markets, like real estate, lowers the risk of total loss. By spreading your funds across different real estate markets or investment types, you can further minimize risk.
2. Mailbox money
Mailbox money” is the money your money earns. It is produced by putting your money to work in cash-flowing investments!
These passive investments can be used to expand your portfolio, create income, grow your wealth, and give you an option to slow down your W2 employment hours. You can earn passive income through real estate syndications, mortgage notes, or debt-side investments like hard-money lending.
3. Tax Benefits
Most real-estate passive-income investments allow you to take advantage of tax benefits such as deductions for mortgage interest and property depreciation. Also, when available, a 1031 exchange can defer taxes on capital gains, facilitating investment growth and reducing tax obligations until the final property sale.
4. Appreciation in property value
Real estate properties generally increase in value over time, leading to potential profits for investors in the long term. This appreciation can be leveraged through mortgage financing or property sales, providing substantial returns on the initial investment.
5. Protection From Inflation
Real estate acts as a hedge against inflation, as its prices tend to rise alongside inflation rates, preserving the value of your investment and maintaining the purchasing power of your dollar.
6. Generational Investment
A real estate investment can become a long-term asset when passed down to future generations, ensuring financial stability and creating a lasting family business through an LLC ownership structure.
GETTING STARTED WITH YOUR REAL ESTATE INVESTMENT
(Exploring Passive Income Options for Doctors)
For most physicians, passive investing is the best path to creating mailbox money and growing wealth. While we explored multiple asset classes and many different real estate investments, we found that multifamily offers the best combination of tax advantage, wealth growth, and passive income for physicians and other busy professionals who don’t want to take on a second job as an active investor.
Here is a concise overview of the primary methods employed by real estate investors to establish passive income streams.
1. Private real estate investment funds.
Private real estate investment funds, purchasing private rental properties, and investing in real estate investment trusts (REITs) are three common methods through which doctors can generate passive income. Private investment funds enable fractional ownership of multiple properties, similar to investing in mutual funds while maintaining a diversified portfolio
2. Investing in Passive Income with Everest Capital Management
For doctors considering passive income through real estate, Everest Capital Management is a private equity firm created to attain multifamily assets and make them available to busy professionals who want to build wealth and passive income through tax-advantaged real estate.
ECM assists busy professionals in diversifying their investment portfolios by focusing on commercial real estate, particularly multifamily apartments. They are committed in educating new investors and conducting thorough assessments of teams, markets, and deals to minimize risks for our investors. By leveraging an extensive network of general partners, service providers, and industry experts, staying informed about market trends and opportunities, relieving our investors of the need to do so themselves.
3. Obtaining private lease properties
You can create passive income from real estate by buying an investment property and employing a property management company to handle operations. The level of your involvement depends on your trust in the management company.
Keep in mind that purchasing a property often requires significant capital and limits diversification compared to fractional real estate investments. Although this approach blurs the line between passive and active income, it offers control and oversight for investors without directly managing the property.
4. REITs (real estate investment trusts)
REITs, or real estate investment trusts, are large companies that own and operate income-generating real estate. They allow individuals to invest in real estate properties without direct ownership. These trusts often distribute profits to shareholders as dividends.
REITs are publicly traded, making them highly liquid investments similar to stocks. However, they are more closely linked to the stock market, potentially limiting their diversification benefits compared to private real estate ownership.
Note: REITs lack the tax advantages offered by private real estate funds and direct property ownership.
Understanding the Power of Passive Income
Passive income offers an invaluable opportunity to gain financial freedom and utilize time efficiently. By allowing money to work for you, rather than the other way around, you can achieve a balance between professional commitments and personal life.
The Significance of Real Estate for Busy Physicians
Real estate investments not only provide an additional income source but also offer significant tax advantages. Leveraging commercial and multifamily real estate can lead to tax-advantaged passive income, providing the opportunity to reclaim precious time for life’s more meaningful pursuits.
The journey to financial security often begins with the exploration of diverse investment options. For doctors seeking to create passive income, real estate investments offer a compelling and viable path toward a secure financial future.
Are you New to multifamily investing?
Whether you’re a seasoned investor or just starting out, I encourage you to watch the video Introduction to Multifamily Investing where you can learn about:
- Multifamily Basics
- Group Purchasing (Syndication)
- Reasons to Invest in Multifamily
- Lifecycle of a Multifamily Project
- FAQs: Answers to Common Questions
If you want to discuss more on how you can start your real estate investment, schedule a call with us!
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