A 46 year old dentist recently posted on Dentaltown asking for investing advice regarding his working towards an early “exit from teeth” over the next few years.
He essentially is shooting for fatFIRE.
He partnered with a larger corporate group which is going to be paying him to acquire 60% of his practice but would continue working 2-3 years afterwards.
In the future, he plans on selling another 20% enabling him to acquire another lump sum and wanted to know what to do with the initial cash as he would need it to live on.
He also owns a couple of duplexes and plans on accessing tax deferred retirement account money by age 65.
What would you do if you were in his shoes?
In this dentist’s situation, his top priority is focusing on developing multiple passive income streams. Unfortunately for most of us doctors, we don’t think about this until much later in our careers.
Some of us don’t think about it all.
These types of investments should be one of the first ones you invest in from Day one.
I remember my cousin (retired at 46 as an attorney) tell me the first week I started practicing to “start with the end in mind.”
Too bad I didn’t take his advice seriously until a handful of years ago.
Luckily I found a few people to mentor me, especially with multifamily syndication experience and began to quickly replace my income bit by bit each year.
4 Reasons To Create Passive Income With Multifamily Syndication Investments
1) Treating patients is hard work, income is not guaranteed
It’s funny how people laugh when I tell them how physically demanding dentistry is on the body.
I personally know several dentists that had to stop working due to back, neck and wrist pain.
More physicians are opting out and having to retire earlier due to longer hours and having to see more patients to keep up with insurance cuts.
When we get out of training, we never give much thought that our earned income isn’t guaranteed.
Let that last sentence sink in…
We think we’re invincible because we’re young and full of energy but the reality is that most people won’t be able to work as long as they expect to.
So much for job security.
My hand surgeon friend called me last year while skiing and told me he fell and broke his wrist (how ironic). For dentists or surgeons that depend on their hands for income, getting in an accident can change their practice horizon in a blink of an eye.
If you don’t plan carefully, you could lose everything. But on the flip side, if you had $15,000 – $20,000 of passive income coming in each month, things would be MUCH different.
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2) Tax benefits
Whenever I discuss real estate investing with other doctors, one of the reasons they shy away from it and invest only in the stock market has to do with liquidity. They rest easy at night knowing they can access their money whenever they see fit.
Most think that investing in real estate will tie up their money for years and won’t be able to get their hands on it if need be.
If this sounds familiar, I encourage you to consider what I’ve done, invest in both. Everyone is going to be different with goals that work best for them personally.
One of the main reasons I began investing in multifamily syndication deals was to capitalize on the tax benefits they provide such as depreciation and expense write-offs.
3) Avoid capital depletion
This morning during one of our cases, my dental assistant asked me what I would do if I won 10 million dollars. Specifically, she wanted to know about all the different things I’d buy (as she loves to spend money) because in her mind, nobody could EVER spend that kind money.
I told her that I’d give away 2 million dollars leaving me with 8 million. Then I’d take that 8 million and invest for passive income. Most of the multifamily syndication deals I’m currently in are paying an 8% preferred return monthly.
So I told her that if I did that, we could figure out the passive income based on this calculation:
8,000,000 x .08 = $640,000
So in order to avoid depleting the capital, I’d have an investment that’s spinning off $53,000/month virtually tax free.
I don’t think this satisfied her answer as she mainly wanted to know what type of vehicle or house I’d purchase. I told her that I’d be able to buy anything I wanted to with that money that was coming in each month without having to worry about it running out.
For most of us, we have to try to figure out how much to save up enough in stocks or mutual funds in order to never run out. During retirement, you can go through several millions of dollars quickly especially when you add in housing costs and healthcare.
If you’ve not created passive income streams, you’ll more than likely be watching the market each month worrying as your nest egg continues to dwindle.
But with passive investments such as multifamily syndication deals, you can live off the monthly (or quarterly) distributions while your capital is preserved.Join the Passive Investors Circle
4) To leave a legacy
Proverbs 13:22 states that “A good person leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous.”
The wealthiest and most content people I know are givers. They think about others more so than themselves.
If you’re concerned about your heirs blowing through a big pile of money you leave them, then consider leaving them passive income investments instead.
Also, it’s never too early to start teaching kids about how to handle money so they can continue the family legacy.
What do you think? Are you ready to start creating multiple streams of income?