from dr Peter Kim of Passive Income MD, WCI Network Partner
Based on the results of our previous Facebook group polls of thousands of physicians, when we asked the question “Do you prefer to invest in active or passive real estate?”, we found that approximately 25% of physicians prefer to directly own rental properties. , while the remaining 75% prefer to invest in other people’s businesses (passively).
A Facebook poll may not be the most scientific study, but it confirmed the trend I’ve noticed from talking to doctors—doctors prefer to work as doctors and let others make money for them.
Thing is, many think you have to pick a side and stick with it. The truth is you can do both. I’ve kept a hybrid approach, investing in businesses that depend on how much capital I have and what the opportunities are.
However, when someone has forced me to choose sides, I tend to make passive deals, similar to the majority of doctors who took part in our survey.
Do you want to know why? Here are some reasons why doctors prefer passive investing.
This is the main reason right up front. While there are many ways to generate additional income from a variety of investment vehicles, our most limited resource as a doctor is time. We are busy with our daily jobs and when we go home we want to spend time with our families.
Do we want to use our “free” time to research, review, manage teams and tenants, strategize, etc.? Or do we want to enjoy our time and let someone else do the work?
Passive investing allows you to do what you do best (be a doctor) while simultaneously building income streams to give you the freedom to do what you love (whatever you want).
#2 Leverage the knowledge and expertise of others
It probably took you at least a decade to become an expert in your field. It also required a lot of effort, experience and trial and error. The same applies to real estate investments.
The good thing is, you don’t have to spend another decade learning the ins and outs of real estate to become a successful investor. You can use others who do it for a living and who are knowledgeable in the industry.
Harnessing the knowledge and expertise of other people can be your greatest asset in building wealth, quickly leading you to achieve your financial goals. You tap into the goldmine of industry experience without having to go through the entire process yourself.
#3 It really is hands off
It’s true; Nothing in this world is free. You have to pay to have someone work for you in order to earn income. However, after putting in a little time and effort up front to do the proper due diligence, the rest of your passive investing experience consists of reading updates, checking for deposits, and submitting tax forms to your accountant.
With passive investing, you are able to own a piece of a physical asset without having to go through the effort of acquiring, building, managing and selling it yourself.
I like to say that with 1% of the effort, you can get 80% of the benefits of investing in real estate.
#4 Ability to start small
If you want to purchase a decent rental property yourself, you’ll likely need to invest hundreds of thousands of dollars and take out a large loan. The capital commitment for a property can be significant.
However, it is possible to invest in passive real estate for much smaller amounts. My first investment was a $5,000 investment and to date I make payments of $25,000 and $50,000 for projects I believe in.
These smaller check sizes allow me to diversify my holdings and participate in deals across the country with different sponsors. I can work with industry experts for a fraction of what it took me to buy an out-of-state home on my own.
Many of us would like to invest consistent amounts in real estate early on, even though we may not have six figures to invest. It is possible if you are looking for passive deals.
#5 You don’t have to worry about the backend aspect
Aside from not having to deal with the two most dreaded aspects of real estate investing – toilets and renters – you also don’t have to worry about securing a mortgage, getting insurance, dealing with local authorities and so on make.
I thoroughly enjoy the benefits of investing in real estate, but do not enjoy these other duties and responsibilities. I’d rather not think about these things.
Remember, active real estate investing is like running a business and all that goes with it. When done right, the returns can definitely reflect the time and effort put into the investment’s success.
I suspect most doctors don’t want to be involved in all the paperwork. Name a doctor who enjoys dealing with insurance and charts. The less paperwork I have to deal with when investing in real estate, the better my life is.
As I mentioned earlier, there is no one way to be successful in investing in real estate. I take a hybrid approach and know people who have built financial freedom using both active and passive real estate.
While I’ve spent most of this post talking about why passive real estate is best, there’s undoubtedly more control in owning your own real estate and the potential for higher returns.
Doctors just need to find what fits their goals, time, and interests. Just remember that the key to all of these types of investments is understanding the due diligence required to find good people to invest with.
As you may have heard in medicine, “It depends on who’s holding the knife.”
Don’t forget to sign up for White Coat Investor’s free real estate newsletter, which will bring you attention to opportunities to invest in private real estate syndications and funds, including most of those in which Dr. Jim Dahle invests.
Do you agree with these points? How do you think passive real estate investing is better than active real estate investing? Or do you think active real estate is the way to go? Comment below!