Starting a side business isn’t on your radar when finding the time (and mental energy) if you’re a doctor. But there are a few reasons medical professionals should give significant consideration to generating passive income through real estate investing.
One of the main reasons you should become engaged in real estate is that it gives you the chance to create a passive income stream separate from your practice, and this income stream can accomplish 4 beautiful things.
1: To increase wealth, reduce debt, and use real estate to generate cash flow.
Most healthcare workers are heavily indebted; even just a few years ago, the typical medical school debt was already close to $200,000. Even if you are generating six figures, devoting a percentage of your salary to paying off that debt would drastically restrict your lifestyle and the money you require to run your practice.
Your financial situation can be improved by reducing your debt load through real estate revenue, enabling you to get more enjoyment out of the money you work so hard to acquire.
Your practice is different from any other business because it depends on cash flow. Cash flow from renting real estate will help you grow your practice and business, whether you want to upgrade the waiting area, lease a better office space, or buy cutting-edge equipment.
Don’t worry if you’re hesitant to take on a mortgage’s added burden. The money you receive from your tenant(s), whether you rent out a single-family house or several units, can pay your mortgage and other associated costs each month.
2: Use real estate to lower your tax liability.
I am not a CPA; therefore, contact your CPA if you need help on taxes. My CPA has told me, however, that real estate can also be used as a tool to lessen your tax liability.
In addition to the additional financial difficulties they bear, physicians who frequently fall into the highest tax brackets may also be hit with punitive taxes (namely, medical school debt). Real estate ownership can be used to lower your taxable income from your portfolio of investments. Along with adding a new source of income, this is also done.
Your taxable income from passive assets can be reduced by deducting real estate business expenditures, including upkeep, maintenance, repairs, property management fees, and even travel charges for checking your properties.
Additionally, there are other insider tips that a certified tax counselor can explain to you. For instance, use bonus depreciation in more significant properties to lower your tax liability.
3: Use real estate to create generational wealth.
Like most professionals, you have a 401K or 403B set up as part of a retirement plan. Because individuals live longer these days, their life after retirement will be considerably longer. Consequently, living a decent life after retirement frequently takes more money than was first anticipated.
Sadly, this means that even a retirement plan with a six-figure balance might not be enough to support you during your retirement. Additionally, you need assets that continue to generate money for three generations if you want to create generational wealth.
You might not have enough money to leave the following generation if you keep going at this pace. A physical asset, such as an apartment building, mobile home park, self-storage business, or smaller rental property, might be passed down to your children (and in many instances, transferring property within your family is subject to severe protection from regular property taxes and fees).
4: Having a second passive income stream can help you enjoy life more.
Being a doctor had probably taught you the virtue of perseverance even before you started your residency. However, wouldn’t it be fantastic to make extra money while you sleep?
I hope you can sleep now.
Real estate, and multifamily apartment buildings, are excellent sources of passive income. Building wealth through a real estate can assist you in achieving any of the following goals: greater savings, a reduction in working hours, an earlier retirement, more frequent luxury trips, a more excellent car, or anything else that calls for more money.
Since the dollar has been losing value over the past few years, wealth-building assets like real estate can act as a buffer against rising inflation.
The accompanying graph shows that, during the same period, while the consumer price index increased by 650 percent due to the recent decrease in the dollar value, housing prices increased by a staggering 1,203 percent.
In other words, even while your income gradually loses purchasing power, your real estate (which may be turned into liquidity) can act as an inflation hedge.
Therefore, if you own rental properties, inflation will cause the rent to rise (which is good news for you). Even better is the fact that, mainly because of its fixed structure, your mortgage on the house will not be affected by inflation.
This implies that while your monthly mortgage payment stays the same, your cash flow will improve as your tenants continue paying the home loan.
Property owners find inflation to be quite tempting for this precise reason.
It’s possible to support your family with passive income in addition to taking caviar and champagne on a private jet to Seychelles. If none of those pleasures appeal to you, but the idea of funding your children’s higher education, assisting them in purchasing their first home, or contributing to deserving charities, real estate’s passive income stream can also help you accomplish those goals.