These days, it seems everybody is looking for a way to supplement or replace their working income. In medicine, it’s an omnipresent topic. There are plenty of ways to get the job done.

Personally, I chose real estate 30 years ago and it’s been good to me. It’s given me the freedom to work when, where and how I want, allowing me to be content and relaxed.

With that level of comfort, you can choose the direction of your life. In my case, I elected to travel the world and explore new phases of life that wouldn’t previously have been open to me.

I also chose to stay in medicine and enjoy my life as an orthopedic surgeon, though I didn’t need the money. Because of the lack of financial pressure, medicine is now an elective and enjoyable vocation, rather than a job.

Anybody can do this.

REAL ESTATE FOR DOCTORS

Real estate ownership checks multiple boxes for doctors. Though it’s not the only vehicle to create passive income, the acquisition and ownership of a hard asset like real estate fits our busy lifestyle and is a time-proven way to create choices and wealth. With that wealth, you determine your own destiny.

It doesn’t necessarily require large sums of money or a significant allocation of your time. You can purchase your own property, or you can take advantage of the abilities of an experienced real estate sponsor and let them do the work. Whatever method you choose, there are four forces that will be constantly working for you.

THE FOUR PILLARS

The power of real estate ownership is in the four pillars that support it.

These are: cash flow, appreciation, depreciation, and amortization. As these forces work in tandem, your portfolio will grow, and so will your financial options.

Cash Flow

My favorite part of real estate ownership is the cash flow. Initially, it was a strange feeling to receive money when I hadn’t seen a patient or performed a surgery. However, that sensation soon became addictive and I wanted more!

It’s passive cash flow that will give you the means to eliminate some financial and workplace stress. Little by little you will be able to craft the life you desire. This is true passive income, which is essential if you want control of your time.

As cash flow increases, your choices multiply. When it eclipses your work income, the world opens up. It’s then that you’ll be able to determine how you wish to spend the rest of your life.

Depreciation

When you purchase a property, one of the tax benefits you will receive is from depreciation. Depreciation is a “phantom loss” that you are permitted to deduct from your passive income. This allows you to keep more of the cash flow from your property investments.

The government assumes your buildings and equipment will wear out over time. In order to compensate for this, you’re allowed to deduct a certain amount of “loss” each year due to this deterioration. There is no true loss of income, but it can be used to offset real income. Thus, it’s a phantom loss with real cash savings to you. Because you pay less tax, you keep more money.

Unfortunately, depreciation only offsets passive gain, thus you can’t use it to decrease taxes on your medical income. So, the answer is to create more passive income and pay less tax on it!

Appreciation

Appreciation is the increase in the value of your property. This often due to inflation. Just look back a few decades and see what a house used to cost! One benefit of real estate ownership is that you can sometimes actively increase the value by upgrading your property, giving you some control over the appreciation.

Put the two together and, over time, your property will often be worth more than you paid for it. This will provide more profit if you sell or will increase your current net worth. It can also create tax-deferred income if you refinance, which will be discussed in a later post.

Amortization

Amortization is the paydown on your real estate loan.

For example, most people make monthly payments on their homes. That payment is broken up into principal and interest. The principal is the amount you borrowed, and interest is the cost of that money. Interest is the bank’s monthly profit. The principal is applied to the original loan and decreases the amount you owe each month.

When you own rental property, the same process occurs. Each month, your loan amount decreases. The difference here is that someone else (your tenant) is paying for that loan –– not you. Each month your loan liability lessens, and no money comes out of your pocket.

This is a slow, but pleasantly relentless process. The beauty of amortization is that the amount you owe declines each month and somebody else is paying for it! As that loan amount decreases, the percentage of the value of your property that becomes yours free and clear — your equity — grows. This increases your wealth.

Your Future

These four pillars hold up your real estate portfolio and allow it to relentlessly create wealth for you. As you see patients, take call, or perform surgery, your real estate business will be firmly grounded on these supports, producing income and growing stronger every day.

Sometimes that growth will seem slow, but don’t be discouraged. Money doesn’t sleep and neither does your real estate portfolio. Small, almost imperceptible gains are made each day, and over longer periods of time, the results will compound.

So, if real estate ownership is something you’ve considered, be comfortable in knowing that it’s supported by strong pillars that will allow you to create a massive structure, if you choose. Your future is in your hands.