Medical burnout is a real phenomenon that cannot be denied. You probably don’t have much free time to keep up with the most recent tech IPO or commodities crises if you’re an anesthesiologist, general practitioner, or cardiac surgeon. However, this lack of time need not prevent your investment portfolio from generating a return on investment. Even if you’re occupied with patient care or research, there are a number of methods to use commercial real estate to earn positive, passive returns.

Why should physicians invest in commercial real estate?

Why should doctors invest in commercial real estate when there are so many other financial options?

Passive Income

If you choose the correct commercial real estate investment, you can make money when you’re working with patients, having lunch with friends, or even just relaxing in bed. Your time is extremely valuable to you as a high-earning medical professional; a passively managed commercial real estate investment can save you time while also possibly producing a sizable return on investment.

Diversification of holdings

A good portfolio is one that is diverse. In addition to the more conventional stocks, bonds, and mutual funds, commercial real estate assets can expose investors to lower-risk investment vehicles. A big benefit when the market shrinks is that some commercial real estate assets, such as multifamily residential properties, can even help your portfolio weather an economic crisis.

PASSIVE INVESTING BLUEPRINT FOR BUSY PROFESSIONALS IN 2022

How Do Commercial Real Estate Investments Affect Taxes?

Investments that offer tax reduction, deferral, or elimination are preferred to those without since the majority of physicians fall into the higher end of the federal and state tax brackets. Investors can write off the anticipated depreciation of commercial property on their yearly tax return thanks to property depreciation.

Additionally, income from commercial real estate is taxed as long- or short-term capital gains and is not subject to FICA payroll taxes. Commercial real estate assets can also be used to reduce taxes through 1031 Exchanges, Opportunity Zones, the Low Income Housing Tax Credit, and numerous other state and municipal housing market incentives.

Commercial real estate’s combination of tax benefits, passive income, regular cash flow, and property appreciation make it an excellent sector for physicians trying to maximise their portfolio returns without spending significant amounts of time watching the day-to-day markets.

Tax advantages for commercial real estate include:

• Rates of Capital Gains Tax
• Depreciation deductions, tax deferral/elimination through opportunity zones.
• Tax-free estate transfers via 1031 exchange
• Reduced State and Local Taxes
• Tax credits for low-income housing

The Advantages of Passive Real estate

The three key advantages of passive real estate investments are as follows. They consist of:

Time-Savings

Our time is the most scarce resource we possess. Finding homes, obtaining financing, and managing a portfolio of properties all take a lot of work in active real estate investing. Doctors may focus on what they do best—heal people—while skilled money managers expand their retirement portfolios through passive investments.

Advantages of a Bigger Capital Pool

REITs, real estate funds, and publicly traded real estate firms are common examples of passive investments. The potential to raise and use funds at a level much higher than any one investor can manage is what all three of these vehicles have in common. This creates fresh, lucrative chances that are not accessible to investors with fewer resources.

Depreciation

The ability to deduct property depreciation from their yearly tax bill is one of the factors that attract many high-net-worth individuals to real estate. Contrary to popular belief, many passive real estate investments enable holders to take advantage of these advantages without having to directly own and manage a rental property. The tax benefits of depreciation are a primary reason why many of the richest Americans own real estate.

Professional Leadership

You wouldn’t trust a non-expert with your personal health, as a medical professional. Why stake your retirement funds on that? Finance specialists often handle specific properties and oversee acquisitions for passive investments, so you don’t have to. They can increase returns above and beyond what a part-time investor could achieve by utilising their training and experience in the real estate and rental property industries.

No Interaction with Lenders

Direct real estate investors typically need to get to know commercial lenders very well. Investors frequently collaborate with commercial lenders to raise cash for acquisitions or rehab projects because financing a project may be prohibitively expensive. Since the majority of investments are funded by investor contributions, passive investors don’t have to jump through lender hoops, which they don’t like doing.