The Passive Income Thread

[mmc12]

I've been reading a lot of books on finance and financial literary recently (Robert Kiyosaki's books, stock market investing stuff, etc). One of the main themes that has been stressed is the importance of passive income; making money work for you instead of you working for money. As one gets more passive income streams through investments, a dentist can possibly work less and/or pursue other interests. I recently found this web site that focuses on passive income for medical doctors, and I found this particular article to be a very good read on the benefits of owning real estate for rental income. If you guys have other tips/ideas for dentists to make passive income and/or your own passive investments, please feel free to contribute to the thread.

5 Reasons I Prefer Real Estate Over Stocks | Passive Income M.D.

For achieving financial independence, I believe that real estate is the best and most efficient method out there.

passiveincomemd.com

---

Members don't see this ad.

 

[TanMan]

I've been reading a lot of books on finance and financial literary recently (Robert Kiyosaki's books, stock market investing stuff, etc). One of the main themes that has been stressed is the importance of passive income; making money work for you instead of you working for money. As one gets more passive income streams through investments, a dentist can possibly work less and/or pursue other interests. I recently found this web site that focuses on passive income for medical doctors, and I found this particular article to be a very good read on the benefits of owning real estate for rental income. If you guys have other tips/ideas for dentists to make passive income and/or your own passive investments, please feel free to contribute to the thread.

5 Reasons I Prefer Real Estate Over Stocks | Passive Income M.D.

For achieving financial independence, I believe that real estate is the best and most efficient method out there.

passiveincomemd.com

It makes sense if you're only comparing two types of investments, but I will always emphasize in investing in your own practice first (either by startup/purchase and/or expanding your existing practice). Returns are way higher for your primary source of capital - your office. Once you have a lot of excess cash, then you should look into diversifying into passive or active income. As I've alluded to before, it only takes one good idea to take off.

 

[Pablo Sanchez]

I agree that "passive income" can be immensely powerful, and should be pursued by all to ensure financial independence, but the term itself drives me wild. There is no such thing as truly passive income. If you own real estate, who do you think is paying for upkeep, dealing with tenants, scouting out the markets, dealing with contractions in the real estate market, etc? And if you pay a management company to do the maintenance that takes a significant portion of the profits away, and still leaves you responsible for ensuring that they are doing their jobs, dealing with legal issues, etc.

Investing requires work, too. If you think that you are just going to throw your money into a fund and watch it grow without doing any research, tracking performance, balancing portfolios then you won't be making the most of your money either.

I prefer the terms "active income" and "less active income".

 

[Saddleshoes]

Passive income is GREAT.
However, can your passive income overcome your Passive Debt? (Student Lone, Credit Card Debt, Car Loan, Housing Debt, Etc?)
If not, you are in the Great American Rat Race, putting in extreme time and effert but going nowhere.

 

[Rambunctious]

I've been reading a lot of books on finance and financial literary recently (Robert Kiyosaki's books, stock market investing stuff, etc). One of the main themes that has been stressed is the importance of passive income; making money work for you instead of you working for money. As one gets more passive income streams through investments, a dentist can possibly work less and/or pursue other interests. I recently found this web site that focuses on passive income for medical doctors, and I found this particular article to be a very good read on the benefits of owning real estate for rental income. If you guys have other tips/ideas for dentists to make passive income and/or your own passive investments, please feel free to contribute to the thread.

5 Reasons I Prefer Real Estate Over Stocks | Passive Income M.D.

For achieving financial independence, I believe that real estate is the best and most efficient method out there.

passiveincomemd.com

Man we don't have to reinvent the wheel. We are dentists, own a business, hire a couple associates, sit back and let that passive income come in. In a few years buy another practice and do the same thing. IDK why we get tied up in "investing" and trying to play the stock market when honestly we don't have that kind of skill, time or even patience to make it work.

 

[mmc12]

Man we don't have to reinvent the wheel. We are dentists, own a business, hire a couple associates, sit back and let that passive income come in. In a few years buy another practice and do the same thing. IDK why we get tied up in "investing" and trying to play the stock market when honestly we don't have that kind of skill, time or even patience to make it work.

What if you are tired of clinical dentistry at some point? Is it possible to own a dental practice and just hire associates to work for you? (and just deal with the management side of things)

 

[Rambunctious]

What if you are tired of clinical dentistry at some point? Is it possible to own a dental practice and just hire associates to work for you? (and just deal with the management side of things)

I own a practice, work 3 days a week and have an associate work 2 days a week. I hired a management company to do the "management side of things" for me. It's really low stress and eventually hiring another associate to work my 3 days would be even lower stress for me.

 

[Pablo Sanchez]

Man we don't have to reinvent the wheel. We are dentists, own a business, hire a couple associates, sit back and let that passive income come in. In a few years buy another practice and do the same thing. IDK why we get tied up in "investing" and trying to play the stock market when honestly we don't have that kind of skill, time or even patience to make it work.

With all due respect, are you telling me that you don't have money in the stock market?

 

[Molar Whisperer]

Passive income is very tax friendly. Why? The rich lawmakers implemented it to benefit themselves and their cohorts. Observe where the real pros put their money. My CPA friend (mentioned numerous times in the past) has 14 different commercial and residential properties. Since we (dentists) don't have the knowledge, experience, and resources, piggyback off the experts on their strategies and where they hold their money. For stocks, look into the company executive's portfolio and their stock options. Are they exercising them or selling them? I'm not an expert nor will I ever be one, but the clues can be found. I get excited for 52 week lows...that means the stock is on sale (can also mean they are going bankrupt). Investors like Warren Buffett do not pay market price. Since he is buying bulk, he personally negotiates massive discounts. But you can piggyback off of him if you choose since his picks usually won't go bankrupt anytime soon.

 

[Cold Front]

Marry rich! It doesn't get more passive than that! lol

The caveat here - The richer half usually chooses the less rich/poor person. You just can’t look for a rich person to marry - it’s still a very difficult path. Perhaps more difficult than being a successful individual. It’s very competitive to marry a rich person... ask any one who is pursuing that.

 

[TanMan]

Marry rich! It doesn't get more passive than that! lol

It's a lot harder now as wealthy individuals are finding that marriage is rife with problems and it's just easier/cheaper to be a sugar daddy/momma these days. If money is all you care about, don't want to be attached, and want to strike it on your own someday, these types of relationships/arrangements are more in line with financial-based objectives rather than getting married for money, unless you want to entrap that individual for 18 years through a kid or alimony. It's quite unfortunate to bring a child to this world in a loveless(money only) type of relationship.

 

[Cold Front]

It's a lot harder now as wealthy individuals are finding that marriage is rife with problems and it's just easier/cheaper to be a sugar daddy/momma these days. If money is all you care about, don't want to be attached, and want to strike it on your own someday, these types of relationships/arrangements are more in line with financial-based objectives rather than getting married for money, unless you want to entrap that individual for 18 years through a kid or alimony. It's quite unfortunate to bring a child to this world in a loveless(money only) type of relationship.

Trophy spouses are very common and considered a status symbol. I see the sugar momma or daddy’s relationship in post divorce situations. It comes with age gaps, very few things in common, and for all to see impressions from social status point of view. An all ego move. Trophy husband/wife is more subtle and more calculated... and requires some level of bringing an extra game (other than money) into the relationship.

 

[PikminOC]

Trophy spouses are very common and considered a status symbol. I see the sugar momma or daddy’s relationship in post divorce situations. It comes with age gaps, very few things in common, and for all to see impressions from social status point of view. An all ego move. Trophy husband/wife is more subtle and more calculated... and requires some level of bringing an extra game (other than money) into the relationship.

Yes and a large power differential. It's not passive income.

 

[Obnoxious Dad]

Passive income is very tax friendly. Why? The rich lawmakers implemented it to benefit themselves and their cohorts. Observe where the real pros put their money. My CPA friend (mentioned numerous times in the past) has 14 different commercial and residential properties. Since we (dentists) don't have the knowledge, experience, and resources, piggyback off the experts on their strategies and where they hold their money. For stocks, look into the company executive's portfolio and their stock options. Are they exercising them or selling them? I'm not an expert nor will I ever be one, but the clues can be found. I get excited for 52 week lows...that means the stock is on sale (can also mean they are going bankrupt). Investors like Warren Buffett do not pay market price. Since he is buying bulk, he personally negotiates massive discounts. But you can piggyback off of him if you choose since his picks usually won't go bankrupt anytime soon.

I'm a CPA. It's true that while you own rental real estate you get to deduct depreciation expense on properties that in fact often appreciate in value over time. However, when you sell that property the prior depreciation gets recaptured as taxable income. Please also keep in mind that real estate is not an efficient market. Every point in space is unique. As dentists you don't have the time or education to understand the real estate market.

Furthermore, owning residential rental property is a time and money sink. Stuff goes bad. Renters won't pay or they trash the property. Commercial property is becoming hazardous to the owner's financial health. Look at malls. Look at office buildings that are emptying out. Rents are cratering.

 

[Molar Whisperer]

I'm a CPA. It's true that while you own rental real estate you get to deduct depreciation expense on properties that in fact often appreciate in value over time. However, when you sell that property the prior depreciation gets recaptured as taxable income. Please also keep in mind that real estate is not an efficient market. Every point in space is unique. As dentists you don't have the time or education to understand the real estate market.

Furthermore, owning residential rental property is a time and money sink. Stuff goes bad. Renters won't pay or they trash the property. Commercial property is becoming hazardous to the owner's financial health. Look at malls. Look at office buildings that are emptying out. Rents are cratering.

Thank you for your insights. I understand "every point in space is unique." If you have $1M, given your location, market and presidential uncertainty, Covid, etc., where would you allocate it? My CPA friend said the same thing about small time properties but not to your extent.

 

[charlestweed]

What if you are tired of clinical dentistry at some point? Is it possible to own a dental practice and just hire associates to work for you? (and just deal with the management side of things)

Dentistry is a job. And like most jobs, you will eventually get tired of dentistry. You will hate dealing with the PITA patients and patients who have unrealistic expectations. You will hate dealing with your entitled employees. You will hate dealing the neck/back/hand pain every time you sit down. You will hate dealing with the referring GPs (if you are a specialist) etc. This is why it’s important to work hard now (when you are still young and healthy), pay off debts, invest wisely, and save for the future retirement. Hopefully, when you are in your early 50s, you only need to work 1-2 days/wk and not have to worry about things like recession, Covid, oversaturation of dentists etc.

Is it possible to own a practice and hire associates? Yes, if you live in an area, where you have an unlimited supply of patients. But if you practice in highly competitive areas like Socal and NYC, you can’t just hire associate to run the practice for you because they will ruin your practice very quickly. Associate dentists don’t care because it’s not their practice. They don’t care if the patients get upset. They only want to do the minimum and refer all the difficult cases to the specialtists to minimize the chance of getting sued. Patients come to your office because of your good reputation that you’ve worked so hard to earn it….they don’t want to be treated by an unknown new grad associate dentist that you hire. When my friend passed away from heart attack, his wife wanted to bring in an associate to help run an office. But all of the dentist friends and I advised her to sell the office immediately…..when office was in good financial shape….and the buyer would pay a high price for it.

 

[charlestweed]

Man we don't have to reinvent the wheel. We are dentists, own a business, hire a couple associates, sit back and let that passive income come in. In a few years buy another practice and do the same thing. IDK why we get tied up in "investing" and trying to play the stock market when honestly we don't have that kind of skill, time or even patience to make it work.

I don’t have money in the stock market either. That’s because I am totally clueless about it. I don’t have time to read/learn about it because I work 5-6 days/wk. I am a low risk taker. I feel investing in real estates is much safer (it's slower but it's safer), especially in high rental demand area like Southern California. All the money that I’ve earned from practicing dentistry went straight to paying off all my rental properties’ mortgages. Now that I don’t have any mortgage debt, 80% of the rent money go straight to my bank account….and only 20% goes to things like property taxes, insurances, management fee, repairs etc. Although these properties have appreciated nearly 2x as much in value, I don’t plan to sell them….they will serve as my retirement income and will belong to my kids when I am gone.

Edit: After doing all the calculations, the take-home amount is actually only 70% (not 80%)......still a very good amount.

 

[Bereno]

There are some gold nuggets in this thread. That said, my gold will be a little different that someone else's gold. For some, plopping their hard earned cash into the stock market is all they want to do. Truly passive. For some, it is buying another practice and hiring a management company to run it for them, etc.

I am a big fan of that site as well. Gives a lot of great info on trying to intelligently expand income streams and cash flow.

Personally, I put a small amount of money into the stock market as a resident. I didn't put much in (just a few thousand a year), but it has over quadrupled for me and I plan to use this money as a down payment on a house. I plan to buy a house that needs a little TLC and refinance it and use a HELOC to buy more rental properties. Eventually, I will use the rental property's equity to buy my portion into a practice since the interest rates will likely be much lower than a private business loan. I will keep flowing cash into the stock market, real estate, my practice, and probably a few other business ventures. Hopefully by the time I "retire" I will be making just as much as I do now. A building of many pillars is harder to knock down.

 

[wannagiveup]

I own a practice, work 3 days a week and have an associate work 2 days a week. I hired a management company to do the "management side of things" for me. It's really low stress and eventually hiring another associate to work my 3 days would be even lower stress for me.

Careful with the last approach. I believe some state boards have a requirement on clinical hours to renew the license.

 

[Cold Front]

Furthermore, owning residential rental property is a time and money sink. Stuff goes bad. Renters won't pay or they trash the property. Commercial property is becoming hazardous to the owner's financial health. Look at malls and hotels. Look at office buildings that are emptying out. Rents are cratering.

Very true. I think covid changed the game for restaurants, movie theaters, bars, night clubs and event centers - all of which struggled to pay rent or closed for good in 2020.

However, not all rents are cratering. Tech improvised restaurants and with a drive-thru service are booming. Look at pizza joints, they had a great year. Most medical and dental offices are doing ok during the pandemic. But I agree, malls and many other small mom and pop businesses will disappear from the economic real estate fallout of covid. Downtowns of any metropolitan areas may never be the same again. Look at Silicon Valley, many companies are relocating to Texas (Oracle, Elon Musk, etc) - a more tax friendly and less covid strict state.

It won’t be like the 2008 real estate crisis - which was mostly residential. This time, it will be a more targeted tragedy for real estate. You can’t have any large gathering style business anymore - at least for another 6-18 months, depending on where you live. Also, each real estate market will experience different pain; the bigger, more crowded and congested a city was (like nyc), the more exodus of people and businesses will be (to Florida and Texas), and the more those real estate markets will be highly discounted.

 

[Cold Front]

Hopefully by the time I "retire" I will be making just as much as I do now. A building of many pillars is harder to knock down.

Be careful. Inflation will follow you everywhere; a $1 you make today will be worth 0.02-0.03 cents less each year until you retire. That’s why each Dental new grads are feeling the pinch when they start at $500-600/day on their first couple of years. The class behind them is realistically starting at $490-$588/day, and so on. I’ve been on these forums for about 15 years, and every year - someone posts their new job as $500-600/day range. Well, that’s all relative in my example above. We can’t control inflation, but we can plan around it.

 

[Bereno]

Be careful. Inflation will follow you everywhere; a $1 you make today will be worth 0.02-0.03 cents less each year until you retire. That’s why each Dental new grads are feeling the pinch when they start at $500-600/day on their first couple of years. The class behind them is realistically starting at $490-$588/day, and so on. I’ve been on these forums for about 15 years, and every year - someone posts their new job as $500-600/day range. Well, that’s all relative in my example above. We can’t control inflation, but we can plan around it.

Oddly, I am very comfortable with the inflation. It makes long term, stable debt easier to manage. Even then making what I make now at half the value by the time I retire would be a dream still since I will have a solid net worth and have no true bills to pay. By then my only debts will likely be for cashflow investments with low risk associated with them anyway. Fixed rate debts are easier to pay with inflation.

 

[Rambunctious]

Careful with the last approach. I believe some state boards have a requirement on clinical hours to renew the license.

THank you, you are right

 

[Rambunctious]

With all due respect, are you telling me that you don't have money in the stock market?

I only have 401K at the moment and own a dental practice. I'm happy with it.

 

[Strag]

Lots of really good info here! I’m wondering if anyone has any thoughts on paying down a portion of your student debt while in residency for a speciality vs putting in money into retirement accounts such as a Roth IRA/HSA/solo 401k accounts. Should investing in that situation be delayed or is it wise to max out your accounts since you won’t get those compounding years back while you’re in residency?

 

[Pablo Sanchez]

Lots of really good info here! I’m wondering if anyone has any thoughts on paying down a portion of your student debt while in residency for a speciality vs putting in money into retirement accounts such as a Roth IRA/HSA/solo 401k accounts. Should investing in that situation be delayed or is it wise to max out your accounts since you won’t get those compounding years back while you’re in residency?

I personally like the idea of eliminating debt before investing. It is possible that you invest in a retirement account while in residency, and the stock market collapses, leaving you with all of your student debt which will continue to grow, while you lost money in your retirement account. If you pay off your debt first, then you can invest all of that money into a retirement account once you no longer have any liabilities.

I advise you to look up Dave Ramsey's "Baby Steps".

 

[Bereno]

Lots of really good info here! I’m wondering if anyone has any thoughts on paying down a portion of your student debt while in residency for a speciality vs putting in money into retirement accounts such as a Roth IRA/HSA/solo 401k accounts. Should investing in that situation be delayed or is it wise to max out your accounts since you won’t get those compounding years back while you’re in residency?

You will find all sorts of answers to this. The poster above recommended eliminating debt before investing which is a really solid way to go. Many people like the Dave Ramsey style, but I usually recommend a different approach. I like to invest with two things in mind: 1) an emergency fund, and 2) cash flows. If I can live easily for X amounts of months (I use 6) on my cash reserves then I have sufficient emergency fund. After this is met, I then start investing and servicing debt. I know that my debt is a fixed minimum payment each month with a fixed rate as well. If I believe my investments are going above and beyond that same fixed debt rate, I invest in those. This method has served me very well in the past, but who knows how it will work for me in the future.

 

[yappy]

I have gone back and fourth on different investments such as physical real estate, commodities, other businesses, etc. however, when I consider time invested, risk, and rate of return I always come back to equity investment in securities. This is especially true when looking at tax advantaged accounts (thank you white coat investor). I suppose this is the Dave Ramsey style that @Bereno mentioned. The biggest limitation of this strategy is that it is not likely I will retire early, but that was never a goal of mine.

 

[deleted1047421]

I don’t have money in the stock market either. That’s because I am totally clueless about it. I don’t have time to read/learn about it because I work 5-6 days/wk. I am a low risk taker. I feel investing in real estates is much safer (it's slower but it's safer), especially in high rental demand area like Southern California. All the money that I’ve earned from practicing dentistry went straight to paying off all my rental properties’ mortgages. Now that I don’t have any mortgage debt, 80% of the rent money go straight to my bank account….and only 20% goes to things like property taxes, insurances, management fee, repairs etc. Although these properties have appreciated nearly 2x as much in value, I don’t plan to sell them….they will serve as my retirement income and will belong to my kids when I am gone.

Edit: After doing all the calculations, the take-home amount is actually only 70% (not 80%)......still a very good amount.

Redirect Notice

then you better hope Biden doesn’t eliminate the step up in value basis.