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Physicians and advanced practice providers are experts in their field, but what is their real superpower? If you ask a provider like me, it’s working really hard. Massive personal sacrifice to complete schooling, deferring income while amassing incredible debt, enduring arduous testing and training responsibilities — it truly is a testament to willpower just to get in the door. After you land a dream job that has taken years of schooling to attain, it is disappointing to learn about the harsh realities of being an employee. One would think that the coveted role of a provider would come with security and a healthy, steady income, but the medical field certainly isn’t what it used to be.
Medicine has classically been a business led by private, physician-owned practices. Providers have always influenced their own destiny, just as they had learned to do through school and training. I’ve witnessed community medical practices be forced to evolve due to massive pressure from multiple sources, chiefly insurance companies and extremely expensive, government-mandated electronic medical records (read: reimbursement). They’ve slowly but steadily joined larger corporate medical groups. Many providers now find themselves hamstrung by hospital administrators and lacking the control to influence growth or retain equity in their practice.
The prescription for surviving modern medical practice is a combination of real estate and perspective.
Real Estate
Real estate investing allows busy working professionals to gain back a much-needed sense of security. Medicine has always had real estate roots with the origins of practices being founded on purchasing desirable office locations. This allowed practice partners to gain property equity over time, lease space to other providers or vendors and advertise for new patients. The fact is, true wealth-building comes from monthly cash flow and increasing equity.
While times have changed with practice ownership, physicians can emulate this same model with residential or commercial real estate investing. Purchasing properties to rent or lease will not only generate monthly income and equity over time, but also offer tax advantages with the depreciation of each asset, so providers can keep more of their W-2 income.
Physicians can begin real estate investing with a few simple steps:
1. Meet other local real estate investors or real estate agents.
2. Identify a property.
3. Purchase using the advantages of physician mortgages.
4. Hire a property management company to place and manage tenants and collect rents. Rent proceeds are then direct deposited into your account.
5. Consult your CPA about mortgage interest write-offs, accelerated asset depreciation versus traditional depreciation.
Over time, this will create personal financial stability and decreased dependence. You’re more than just an employee required to meet metrics and check boxes; it’s about time you position yourself as such. Of course, we all desire a long and fruitful career in medicine, but remember that this is active income — it requires the exchange of time for money.
Setting up passive income sources doesn’t require the sacrifice of that precious time anymore. That so dearly earned income, when appropriately deployed into stable assets like real estate, will grow without any more of your time. As this passive income and equity grow over the length of your medical career, you will find yourself in a position to have something to pass down to your family. Unlike ticking numbers on the stock exchange, these are physical, tangible, insurable assets. Gone are the days that children can join the family business and take over the medical practice as the fresh face. Today’s efforts in establishing a medical career can’t really be passed down. But real estate can.
The portfolio you build can not only bring cash in now, but also serve as a way to pay for future educational expenses, future annuities to your loved ones or a stepping stone for them to continue building on. Depending on the market you live or invest in (talk to a local CPA with real estate experience), it is a reasonable expectation for each single-family residential rental to bring in about $3,500-$5,000 in net-net cash flow annually and possibly offset $80,000-$100,000 in W-2 income with depreciation strategies. The sooner you start investing, the sooner your tenants pay off your mortgage on the unit they are renting.
Sitting on this kind of advantage certainly makes that meeting with a hospital or practice administrator slightly more tolerable. Financial stability makes working feel more like a choice. It feels less like the only means to an end and more like part of a bigger picture. It makes for more gratitude.
Perspective
We are lucky to have incredibly rewarding intellectual jobs curing disease and treating ailments. We have a significant impact not only on our communities but in some cases also across the world with research trial data. Hospital administrators have a helpful role to play as this business isn’t easy. The face of medicine has already changed, and there’s nothing you can do about it. Insurance reimbursements, contract negotiations, administrators, coding pressure, satisfaction surveys, HR/employee management, pharmaceutical companies, etc. are here to stay. Don’t rely on the corporate structure of medicine for your long-term financial security and family stability. They are trying to make the industry sustainable, period.
These mounting pressures, physician deprecation and administrative politics will continue to reface the medical industry. The full ramifications of this likely won’t be realized for another generation as we continue to closely watch the reform. It is much easier to enjoy the blessings of this career when you are able to stand on another source for financial independence, stability and your future. It is possible to have both.
Your perspective influences your happiness, and it is so much easier to have perspective when you have security. You still have more control than you think, but you also have less time than you think. When it comes to long-term growth and real estate assets, time is of the essence. Stop the cycle of only exchanging time for money — it is your most valuable asset after all, and you’ve already sacrificed too much of it.