There is no better time than the present to develop a couple of additional income streams to help you on your journey to financial independence and early retirement.
Many physicians turn to real estate as a side gig, since there are a variety of ways to enter real estate depending on your time, skill level, interest in being involved, and available capital.
Which real estate gig is right for you? Where might you go as you journey deeper into real estate
Passive Income MD explores the options.
I believe that investing in real estate is one of the best ways to generate passive income and, ultimately, reach financial independence.
There are many, many ways to invest in real estate, and the decision of how exactly to invest is based on many factors. Some people, for example, make real estate a full-time job and dedicate many hours a day. Others work a handful of hours every quarter and still bring in a decent chunk of monthly income.
If you’ve been interested in real estate investing but haven’t known where to start, one great way to test the waters is by using real estate as a side hustle to supplement the income of your “day job.”
And if you haven’t yet considered a side hustle in the first place, don’t worry; we’ll discuss that as well.
So, is real estate investing the perfect side hustle for physicians? Let’s take a look at why it may or may not work for you.
Why Have a Side Hustle?
Before we delve into all the options for establishing a real estate side hustle, let’s look at why you might consider a side hustle in the first place.
The modern medical field is in a state of constant fluctuation. Debt is rising, regulations seem to change almost weekly, and it’s an understatement to say that job security isn’t what it used to be.
As a result, many physicians are turning to additional ways to not only supplement their income but to achieve a level of financial security that their day job simply doesn’t offer.
Even if you’re in a stable position, a side hustle can be a great way to keep your mind engaged outside of work, and to produce extra income doing something you’re passionate about.
Lastly, if complete financial independence is your goal, a side hustle can fast-track your journey by providing streams of passive income. One day, you may wake up to see what was once considered a hobby can cover all your monthly expenses, making your day job completely optional.
If any of these reasons resonate with you, then let’s examine the different ways that people use real estate as additional sources of income.
Way back in the day (2014), I made my first real estate investment using a crowdfunding platform. Despite experiencing the fear that every first-time investor likely goes through, I took the leap with just $5,000 and never looked back.
In case you aren’t familiar, here’s a quick summary of what crowdfunding is: many investors come together and invest in a property (single-family, multi-family, commercial, etc) by combining their capital. This is all facilitated by a third-party, online platform. Essentially, you are the bank offering a loan; you agree to certain terms and receive a monthly distribution.
Crowdfunding is great for someone looking to start small and see what all the buzz is about because it usually has a low barrier of entry ($5,000, for example), carries somewhat less risk, and produces great average returns.
Of course, there is still risk, and as with any investment, it’s important to perform thorough due diligence. Fortunately, many platforms make this slightly easier by painstakingly vetting their deals and offering comprehensive risk assessments.
The only other potential downside is that some of these platforms do require that you be accredited.
If real estate investing exists on a spectrum (and it does), with managing your own property at one end (very active), Real Estate Investment Trusts (REITs) are at the far opposite end (completely passive).
REITs are essentially a fund that includes many diverse real estate assets. The barrier of entry is extremely low at around 12 basis points, the investment is very liquid, and the returns can be better than investing in the stock market.
However, most REITs do have some correlation with the stock market, so returns can fluctuate quite a bit. Still, they’re a great option for someone who wants to add a certain level of diversity to their investments while remaining 100% passive.
If you’ve ever turned on HGTV, you’re familiar with the concept of flipping homes. It has a certain allure, after all–finding a fixer-upper, improving it by expending some time and creative energy, and then selling it for a tidy profit.
It’s great, in theory, and it works well for many people. The downside is that this method is extremely hands-on, and though the returns can be sizeable, it can be very risky.
Running a successful fix-and-flip operation takes knowledge and skills that can take years to master. It also requires a large amount of capital to purchase the home and cover all the necessary renovations.
Though this option comes dangerously close to falling outside the “side hustle” category, there are people who manage to do it (and why it’s on this list).
If you think you might have a passion for it, this could be a great way to rid yourself of some elbow grease. Still, it is important to make sure you know what you’re getting into.
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Owning a Rental Property (or Ten)
Direct ownership is one of my favorite ways to invest in real estate. Don’t get me wrong, there are still plenty of risks and potential headaches when you own your own properties. But I’ve found that the returns make it well worth it, and many people are surprised to find out that if you play your cards right, the cash flow can be very passive.
This method does require quite a bit of upfront work. Due diligence can truly make or break this type of investment. Unlike with other types of real estate investing, the vetting and research are 100% up to you. But as long as you have a system that works for you, this isn’t nearly as bad as it sounds.
One common objection to owning a rental property has to do with ongoing maintenance. No one wants to get the “my toilet is broken” call at 3 AM–and with good reason.
Fortunately, despite owning several properties myself, I’ve never received a call like that. Good property management handles all the day-to-day stuff, and all I need to do is approve the occasional decision via email and cash the monthly checks.
The world of syndication is complex, but basically, syndication is the pooling of capital to invest in a real estate opportunity (similar to crowdfunding). They are usually only open to accredited investors.
A syndication is facilitated by a “sponsor,” who vets a real estate deal, acquires funds from investors and then purchases, manages, and operates the property. As an investor, you simply collect the payouts.
Note: If you’d like to learn more about syndications, be sure to check out this post.
This changes things just a bit because you’re investing in the sponsor as much as you are a property. Due diligence, then, should be performed on both.
This method of investing also offers many different types of deals, from single-family to industrial. This allows for some excellent diversification.
Once you find a trustworthy sponsor and a solid deal, a syndication can provide fantastic cash flow and is completely passive.
The great thing about real estate investing as a side hustle is that there are so many options to choose from. No matter your availability of time or capital, there is an option for you.
The downside is that all these options make it somewhat difficult to choose one. Personally, I recommend beginning with something small, like crowdfunding. This will allow you to find out if it’s right for you, and how much it truly interests you.
The key is to get started as soon as you can. Once you’ve started down the real estate investing path, you’ll probably wonder why you didn’t do it sooner.
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5 thoughts on “Which Real Estate Side Hustle is Right for You?”
As inflation will continue to rise, I believe it makes sense to invest in real estate today as it will always appreciate in value and you will definitely benefit from it even if you are new to investing. But there are some things that you should always keep in mind before making such purchases, such as due diligence, which requires attention to detail and quality reporting. For this, I usually use construction management software, and I would recommend it to anyone who has a sleeper with something similar. The main reasons are that it’s a workflow automation solution, as you can create checklists for each stage of the project, and easy reporting to a centralized cloud, which will help make everything more efficient. Of course, I think that physicians are very attentive because their work requires extreme concentration, but at the beginning of building an investment portfolio, I would highly recommend doing something like this.
This is a good summary of RE options.
I was a nonprofit CEO, and built a nice rental portfolio. We own 5 duplexes worth about $2.2 million, free and clear. They produce about $130;000 net pretax profit.
I manage them myself. I’d estimate it takes about 60 hours annually. I’ve been doing this for 20 years I’ve never had the proverbial midnight broken toilet call either.
I’m now semi retired and that income is a big reason why!
Great article for someone with no background in real estate! Because I have no experience in real estate, I hope someone can help me with my question. Is now a good time to invest in commercial real estate?
I have a 2 year window to elect to purchase a portion of the real estate where my practice is located. Would it be best to proceed now? Or wait until next year in hopes that the market or interest rates are expected to improve? Obviously no one can predict the future, and that is not what I am asking, but does the commercial real estate market closely mirror the residential market? I feel like the residential market became overpriced during covid, then interest rates went up, yet prices still have not come back down much, so the cost of getting in to the residential market is much higher now than 2 years ago. Did commercial real estate prices do the same trend? Or is commercial real estate more steady? Thanks for any insight.
Commercial real estate is often valued based on the income. So if the rent your practice is paying is going to stay the same or increase over the next 2 years – this is the better time to buy. You also have 2 extra yrs to collect a portion of equity pay down. And that may also mean you have less equity to buy now vs later – this should offset any small interest rate changes. Worst case if rates plummet- you refinance.
I like the saying “buy real estate and wait, don’t wait to buy real estate” because of appreciation. As interest rate goes up prices usually go do. Buying a property now at a high interest rate can be beneficial as you can always refinance to a lower interest rate when the rates go down.