Passive Income MD

The average debt for recent dental school graudates surpasses $200,000.

Dentists are great at a lot of things, but according to 

, one of those things is getting into debt. Taking the time to look into passive income strategies is worthwhile for paying off that debt and then some. If you’re unsure of how to increase your net worth while managing your own practice and patient load, Passive Income MD has a few suggestions that could help.

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This one may seem simple, but that’s only because it is. If you were to move your savings from a traditional, brick-and-mortar bank with a low interest rate and into a high-yield savings account online, over time you can make a surprising amount of extra cash. Online banks are FDIC-insured just like the traditional brick-and-mortar institutions, so your money is just as safe.

You can find online banks that give you a return up to 

 higher than many traditional banks. When you look at it like that, it’s almost a no-brainer.

These are like a savings account that you have to keep in place for a certain amount of time, for a guaranteed return. Again, simple, but a great place to park some cash that you may need in a specific amount of time and don’t need immediate access to.

Build an investment portfolio that pays out dividends (Stocks / Bonds / Mutual Funds). Dividends are payouts that companies give to their investors as a portion of their earnings. They’re often paid out quarterly. If you’ve already got an investment portfolio, it’s time to take a good look at which stocks, bonds, or mutual funds you own. You’ll see consistent returns from the ones that pay dividends. This is a fantastic way to earn passive income. Invest once and watch the returns pile up.

4. Invest in REITs (Real Estate Investment Trusts)

This is like a mutual fund that holds various real estate projects. Perfect for someone who wants exposure to the real estate market, but wants the investment to be totally passive. They typically pay higher dividends than stocks, however transparency and liquidity is often lacking.

This one is fairly straightforward on the surface - just buy a property, find a tenant, and get some cash flow as your income exceeds your expenses. The initial capital needed can be steep, and might require a larger time commitment than other things on the list, however the payoff can be huge and last for many years.

Crowdfunding is a newer way to invest, having emerged onto the scene just within the last few years. Most people have heard of sites like Kickstarter and GoFundMe, and a very similar concept exists for real estate. Developers are always looking to raise capital to fund their projects. Through the various online platforms, investors have access to these projects and can choose to invest in both residential and commercial properties.

This option utilizes web-based platforms, such as Lending Club and Prosper (two of the best), that connect people who are looking for loans with people who are willing to lend. Lenders, in this case, are essentially acting as the bank.

Basically, people looking to borrow money will make a listing on the site. Those borrowers are then placed into a category and given a “rating” based on their credit history and rate. You, as an investor, will contribute money to these loans and then be paid back at the predetermined rate of interest. Invest and see those monthly interest payments deposited into your account.

If you’ve ever thought to yourself, “I wish there was a product that did this,” then invent it! Create a product, medical or otherwise, and sell it as a company or get royalties for it. It’s not impossible to figure out, I have many friends who have taken a concept to market. Don’t overlook invention as a fantastic means of attaining a passive income.

Have you seen a problem that might have an app-based solution, medical or otherwise? These days, there are great resources to help take your idea out of your head to reality. If your app takes off, you can expect the checks to start rolling in.

This might sound a little crazy, but again, I personally know physicians who have used this incredible platform to create some passive income for themselves. There are physicians acting as educators, entertainers, and musicians on YouTube, and collecting income through the ads that pop up on the videos.

If you’re looking for a way to begin gradually replacing your income, these are just some of the best ways you can do it as a physician. Remember the idea of gradual retirement? Passive income streams like the ones mentioned here are perfect ways to allow you to spend more time with family, enjoy your day job more, and, of course, make a little money while you’re at it.

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Personal finance can be a challenge for many dentists. Passive Income MD knows a thing or two about accumulating wealth, and his tips for physicians can help you, too. Continue below for some passive income inspiration. 


Top 10 Passive Income Ideas for Dentists

Direct ownership is the most beneficial way to invest in real estate.

I don't mean to sound like a broken record, but I'll repeat myself anyway: 

is one of the best ways to achieve wealth and financial freedom, especially for dentists. My other posts will tell you that there are several ways to invest in real estate, including 

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But the best way to invest in real estate is through 

. As with anything, this method has its pros and cons, but for this post, I want to focus on the four major ways to earn money via real estate.

First up is simply appreciation in value, or a home’s value increasing over time. Most of us who witnessed the 2008 financial crisis know home values can fluctuate significantly. Still, in the long run, the overall value of homes seems to increase at a rate at least in line with inflation (around 3 to 5 percent). That’s passive appreciation as a result of time.

appreciation, which is when an owner increases the value of a property by improving it. For example, you might renovate the kitchen and bathrooms in a home, enabling you to sell it at a higher value.

If it’s an apartment building, you might be able to raise rents and lower expenses, thereby increasing the overall net operating income. This, in turn, increases the building’s value.

What’s left over from the rental income when the expenses are paid off each month amounts to cash flow. If there’s a surplus, that’s positive cash flow. If there’s a deficit, you have negative cash flow.

For example, if you collect $5,000 in rent each month and your expenses are $4,000, then your cash flow is $1,000 each month. Cash flow puts money in the bank and is essentially additional monthly income.

These first two categories are the only ones most people think about when it comes to real estate investing. But as you’re about to see, there are two more.

Owning a property is somewhat analogous to being a small business owner, and because of that, you can deduct quite a few expenses.

Some of the more common deductible expenses are any funds put toward fixing up the property, paying property management expenses and tax preparation.

, whereby the IRS allows you to determine the value of the actual building, divide that value by 27.5 (the useful life of a property as determined by the IRS) and deduct that precise amount each year.

For example, if your rental property (the building itself) is valued at $500,000, you would divide that by 27.5 years (which equals about $18,000) and deduct $18,000 as a depreciation expense each year for 27.5 years. This deduction allows you to report a smaller profit to the IRS, reducing the amount you ultimately owe in taxes.

, using a 1031 exchange may allow you to defer taxes from any sale indefinitely.

Most properties are purchased using amortized loans, wherein a portion of the monthly loan payment goes toward interest and reducing the principal. That means that every month, a little bit of that principal is being whittled down, and your equity in the property is increasing.

In essence, by having your rental income pay off your mortgage, they’re buying you the property little by little.

Alright, we’ve learned a lot. Let's look at a hypothetical scenario. 

You purchase an apartment building for $800,000 and put down $250,000 (

). Let’s say this property produces $30,000 per year in cash flow and appreciates in value at 4 percent per year. After 10 years, this property could be worth $1.18 million, and you would have earned $300,000 in cash flow.

Assuming a normal amortized pay-down schedule, in 10 years you’re left owing $430,000 to the bank, so your equity in this property is now $750,000 (=$1,180,000-$430,000), which is triple your initial investment of $250k. Adding up the cash flow, you’ve also received $300,000 in cash flow during this time.

Of course, this $300,000 over time is subject to taxes, but because of the benefits afforded real estate investors (like depreciation), you would definitely walk away with more than if it was simply all capital gains.

Did you follow that? It’s important because putting these four things together is how many real estate investors achieve very nice returns over time. This is not a get-rich-quick scheme by any means, but over time, these methods can pay huge dividends and create great wealth.

If you’ve considered real estate investments in the past, utilize these four methods to get the best return possible.

Questions, comments, or want to know more? Reach out to me at 

Owning property is a tried-and-true way to gain passive income. But do you really know how and why real estate contributes to your wealth? Passive Income MD has boiled it down to the four main channels of ownership benefits. Continue below to learn more.


The 4 Perks of Direct Ownership Investment

Earned income, according to Passive Income MD, is most people's primary source of income.

 is the best way to build wealth, and I’m not alone. In fact, millionaires, on average, have not just one, but 

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		Is seven the magic number of income streams that turns an average earner into a millionaire, or is it that the millionaire knows how important multiple streams of income are, and so begins to collect them?

 of streams, or could those seven streams be in the same category, like, for example, real estate?

		Do high earners really need this many streams of income, or should they just keep working hard in their given profession?

While I couldn't find too much additional information online, my own research unveiled a few ideas that certainly make the most sense. Let’s return to my original questions:

Do the income streams make the millionaire, or vice versa?

The number seven may not be magical, but it does seem these concepts are two sides of the same coin. Yes, the streams may eventually make the millionaire, but it’s also true that the millionaire understands the importance of multiple income streams — without them, after all, he or she may never have broken the million-dollar mark. So, he or she continues to increase their streams of income.

Are these seven individual categories of streams, or are they all from the same category?

As with investments, I believe that it makes the most sense to diversify your streams of income — up to a point. If you’re finding a category that works for you, then go for it. Still, don’t put all your eggs in one basket.

Yes, diversification is key. I’m talking about the whole picture here — not only the way you gain income and net worth, but also what you do with it. The best way to build wealth is to turn your active income into multiple passive income machines.

Should you focus on building more streams of income, or is your profession the top priority?

 consider multiple streams of income. In fact, more than anyone, we are in the 

 to accelerate our growth toward financial freedom. We’re able to earn the necessary capital and immediately throw that money into creating additional streams very quickly. We just have to be strategic about it. Keep your expenses in check, and be disciplined about moving your earned income from your day jobs and straight into the money-making machines. There is a balance to be had here. You just have to figure out exactly where it is for you.

If you’ve made it this far, hopefully we’re on the same page. If so, you may be wondering about what these seven streams might consist of. While there’s no perfect blueprint for what these income streams should be, here are some of the most common types of streams:

 - This is your day job, and most people’s primary source of income. this one’s easy to understand and most people’s primary source of income. You trade your time for money.

- You own a business. You either make and sell something, or you provide a service.

This is income you make from lending your money out. This might mean a CD, P2P lending, real estate crowdfunding, funding fix-and-flip debt deals, or simply money in a savings account.

- This is money that’s distributed as a result of owning shares of a company.

 You own something and you rent it out. Probably the most common is owning a rental property, such as a multifamily apartment building (renting apartments in exchange for monthly payments).

 - This is money earned when you sell an investment, like stocks.

 - You create a product, idea, or process, and you let someone use it. They pay you a small fee every time they do.

If you’re curious about my own streams of income, I encourage you to check out my 

 for an in-depth look. For now, though, I will tell you that I’m currently at 12 streams, beginning with my day job as an anesthesiologist, and ranging from an apartment building to this very blog. Ultimately, having these multiple streams of income has proven invaluable to me — not only because of monetary value, but because they allow me to live the life I want, and I feel I have a hedge against whatever the future might throw at me.

For the average millionaire, seven sources of income may be the sweet spot. But given my own experience, I believe that seven may not be enough.

Passive Income MD is an anesthesiologist and family man who is obsessed with the idea of achieving financial freedom through multiple streams of passive income. In this article, the passive income expert explores income streams, specifically how and why they create wealth. Seven, according to some millionaires, is the magic number of streams necessary to create and maintain wealth. But is seven actually enough? Continue below to find out. 