Physicians can practice medicine and build wealth through passive real estate investing

I am a trained neurosurgeon with decades of experience. However, I also have a passion for real estate.

So far, I have managed to amass a real estate investment portfolio of over $250 million in assets by working with our investors and co-development partners.

As a medical professional, I can relate to your current financial standing. You’ve managed to work your way into your current, high net-worth position(s) and are earning “good money.” Like me, in your earlier years, you probably assumed that all you had to do was work hard each day, climb that proverbial ladder of success to a high-paying career, at which point all your financial problems and “tales of woe” would be over.

As medical practitioners, many of us practicing in this industry see a six-figure income. However, such an income also places you in one of the highest tax brackets in the country. With such a heavy tax burden, and the normal and customary expenses of daily life, accumulating wealth becomes a seemingly far-fetched and uphill struggle.

What’s more, having cash parked in a bank account is not an effective wealth-building strategy; thanks to inflation, cash tends to lose its value over time. More disturbingly, with your current living expenses, not to mention the retirement of your large student debt from medical school, is perhaps why doctors rank as the largest industry group of high-income earning professionals, yet who are not millionaires.

The unfortunate truth is that income is not the same thing as wealth. The famed Dr. Thomas J. Stanley, author of The Millionaire Next Door, perhaps put it best when he said: “If you make a six-figure income each year and spend it all, you are not getting wealthier; you are just living high. Wealth is what you keep.”

Keeping your money and using it to build wealth boils down to purchasing investments that tend to hold their value, exceed the levels of inflation, and appreciate over time. Real estate is one such investment.

To invest in commercial real estate, you do not have to quit your day job to accomplish all these ever-important tasks. Modern real estate investing is very flexible. I love being a neurosurgeon! It is my purpose, not just as a physician, but as a servant to the community-at-large to help my fellow man. There is no way that I will ever leave my practice or profession to become a “real estate guy.” Equally important: There is no reason why you can’t maintain your practice and invest in real estate.

Long-term investing in real estate is better than all other strategic investment options because:

1. Real estate is a renewable source of capital. Owning real estate means you always have a capital source that, except for unusual cases of a down cycle, generally keeps adjusting upwards which can only be a good thing because growing your wealth means you can invest in other projects. Many real estate investors borrow against the value of their existing property to fund more projects.

2. Wealth creation. The overall process of wealth creation is quite simple: If you acquire a rental property by putting up a small amount of money as your down payment, the bank puts up the rest. If conditions are right and the purchase price was appropriate, the rental property should provide net cash flow that pays the mortgage plus all operating expenses. Meanwhile, as the property’s value appreciates and debt is reduced, you end up as the rightful owner of a valuable piece of fully paid-off real estate.

3. Increased cash flow. Passive income is money earned without active involvement in a business venture. This form of income is attractive because it doesn’t keep you from practicing medicine—the money keeps rolling in, even if you’re sleeping. As a medical practitioner who is very busy helping people, it is vital that you choose investment options that don’t demand too much active participation. In my experience, there are very few available passive income opportunities that allow your income to increase over time like real estate.

4. Powerful and consistent growth. Every industry is subject to market cycles, and as a passive investor, you want to own investments that can survive economic downturns without much volatility. Real estate certainly fits that mold. The stock market generally require constant monitoring to keep up with market conditions. If you are not in front of your screen watching the performance of your portfolio, you could lose your investment in a very short period.

5. Tax benefits. As a high-income earner, income tax could be your most significant expense. The good news is that real estate is practically the only investment vehicle that offers tax benefits. If you invest in other opportunities that still require you to pay large taxes, pretty soon you’ll be paying far more tax than you should.

6. Stays up with inflation. A safe investment is only as good as its ability to show returns relative to inflation. That is one of the many reasons why saving your money in the bank is a bad investment strategy for the long haul; your money sits there doing nothing. Inflation eats away at your money at an average rate of 3.24 percent each year, during the past 100 years. Thus, by putting your money in the bank, you will be falling behind each year and actually generating a negative return adjusted for inflation. Compare that with the median rate of return on investment found in commercial real estate, which over the last 25 years, estimates show that this return has averaged 9.4 percent.

7. Competitive advantage. Knowledge is power when it comes to real estate. Much of the time, if both parties agree on a price, a transaction can occur. If you have enough knowledge and contacts, you can benefit from off-market transactions, confidential information or detailed entitlements regarding your neighboring properties.

Remember, you do not have to keep working hard, paying huge taxes, and letting what you have left sitting in the bank doing nothing. It is a lot safer to park your money in a place where it will earn a decent return and allow you to build wealth and retire rich. If you diligently apply this knowledge, you could one day retire with a seven or eight-figure net worth, or perhaps more.

As I have “prescribed‘’ many times in the past, if you have decided to take the passive route to real estate investing, I invite you to join me in this remarkable journey.

Masaki Oishi is a neurosurgeon.

Image credit: Shutterstock.com

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