Passive real estate investing is the preferred method of investing by doctors. Now, why do doctors prefer passive investing over active investing? It’s because they value time freedom, which is why so many doctors invest in rental properties outside of their full-time job.
Passive Real Estate Investing Promotes More Accurate Self-Evaluation. Active real estate investing requires a lot of time, money, and energy. Passive real estate investing, on the other hand, requires less energy and less time. Those who become active real estate investors usually overestimate their skills and underestimate their costs. This is because it is difficult to fully evaluate one’s own skill level when there are a lot of external factors involved in the success or failure of a business venture. When one invests passively in real estate through a company like BLUEOCEAN CAPITAL, they can more accurately assess how well they are doing over time as there are fewer outside factors involved in their success or failure.
For physicians, investing in real estate that produces a positive cash flow is the ideal investment. It’s a passive income stream that grows with inflation, provides tax advantages, and is a hard asset that can appreciate in value. The complicated part for many doctors is finding the time to investigate properties and manage their investments in between seeing patients every day.
For these reasons, many doctors are opting to invest in real estate through a partnership with a company like BLUEOCEAN CAPITAL. We take care of all the time-consuming aspects of property management while they reap the benefits of real estate investing.
Passive real estate investing offers a way for medical professionals to build net worth without having to deal with active property management. Doctors have embraced it as a way to invest their time and money more efficiently.
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Here are five benefits why doctors prefer passive real estate to active real estate.
1-Passive Real Estate Investing Allows You to Focus on Your Career
You want to continue practicing medicine. While some doctors choose to leave the field and get into active real estate investment full time, most would prefer not to give up their medical income stream or leave their patients behind. Passive real estate investing allows you to continue practicing medicine while receiving income from your investments as well.
You want a more hands-off approach. Passive real estate investing takes some of the weight off of your shoulders by allowing you to invest in properties without having to manage them yourself. This means that you don’t have to worry about finding tenants, collecting rent and making repairs at all hours of the day, giving you more freedom and flexibility in your practice and personal life, too.
2- Passive Investing Has a Shorter Learning Curve
The most important thing to understand about passive investing is that it’s designed to be simple and hands-off. Rather than trying to beat the market with active trading strategies, you simply buy into index funds that mimic various market benchmarks. As long as the market continues its historical trend of rising over time, your investment portfolio should do well.
In general, passive investing has a shorter learning curve than active trading. The basic idea of buying into index funds is very easy to understand. That said, there are other aspects of investing you’ll need to learn if you want to be successful. If nothing else, you’ll need to know how to choose the right index funds for your portfolio and how much money to invest in each one.
3- Passive Real Estate Investments Are Less Risky Than Active Investing
A common misconception is that investing in real estate is risky. Many people believe it takes a lot of money to buy properties or to start flipping homes and that it is risky to make such a large investment. However, the reality is that passive real estate investing (i.e. long-term buy and hold) provides consistent returns with little risk.
In fact, compared to stocks, bonds and mutual funds, real estate investments are less risky than traditional investments since they are backed by tangible assets. Additionally, they can generate higher returns over time if you reinvest your earnings back into the property.
The benefit of passive investing is that it’s less risky than active investing because it allows you to avoid some of the pitfalls that come with being an active investor. Here are just a few:
You Don’t Have to Worry About Finding Tenants
If you’re an active investor, finding tenants can be a challenge. There are laws that dictate how you can market your property and advertise vacancies. You must also deal with background checks and ensuring that prospective tenants meet certain qualifications before you rent to them. Property managers do this for you and handle tenant turnover as well when necessary.
You’re Better Protected From Legal Issues
Let’s say a tenant files a lawsuit against you because they were injured on your property or because they feel you violated their rights by discriminating against them or breaching your lease agreement in some other way. As an active investor, this could land on your desk. As a passive investor, a property management company handles it for you. Their insurance protects your asset and makes sure they have enough coverage
4- Most Doctors Will Feel More Comfortable in a Passive Situation
This is why many doctors feel more comfortable with investing in real estate passively. There are many different platforms available to them now that allow them to invest in these opportunities without having to do anything themselves or without having to do much at all.
As a physician, it’s important to realize that you’ll probably feel most comfortable in a passive situation. Most doctors have been trained to be advisors or consultants, not to manage real estate. In fact, physicians who have experience with real estate typically have dabbled in buying their own home or rental properties and may have had some success. However, when it comes to managing multiple properties, the average doctor is going to be best off trusting a professional team that specializes in finding the right deals and managing them on an ongoing basis.
5- Start-Up Costs Are Less for Passive Real Estate Investing
In comparison to active real estate investing, passive investing has fewer start-up costs. This is not to say that there are zero costs for passive real estate investing. There will always be some minimum cost required to get started in any business venture.
In the case of passive real estate investing, the costs are far less than in active real estate. Some passive investments have no upfront costs at all. Other investments will have a small upfront cost, but nothing like the investment needed to start an active real estate company.
The U.S. tax system encourages real estate investments by providing some great benefits to active and passive owners. One of the best benefits is depreciation. Depreciation is a non-cash deduction that allows you to deduct a portion of your property’s value as an expense each year even though it doesn’t cost you anything.
Final Thought
If you currently have your money in other investments—or you are simply thinking about putting your money into an investment that can provide the possibility of passive income—than the real estate market is one that you should consider. By picking the right kind of real estate investment, doctors are able to enjoy the benefits of interest, equity and even tax benefits.