Multifamily Syndication: What Do Doctors Invest in to Build Wealth for Retirement?

As a doctor, you’ve spent years building your career and helping others. But have you thought about your own financial future?

Most physicians earn a very respectable salary. By saving prudently and living within their means, it is easy to retire comfortably. However, if your goal is to build wealth before retirement, that is a whole other category.

In order to retire “wealthy”, you will have to make smart investments. In order to make smart investments, you need to identify your financial needs and work towards your financial goals. One important lesson for doctors to learn when it comes to investing is being able to say “This is too expensive. I cannot afford this”. Physicians should save 25% to 50% of their after-tax income. [1]

Doctors often trade time for money instead of building passive income streams that can scale. To build wealth for retirement, you need to have your money working for you. Here we are going to talk about investments for doctors. In this article, we’ll explore what multifamily syndication is, and why it’s a popular investment for doctors.

What Do Savvy Doctors Invest in to Build Wealth That Will Last Through Retirement?

Being a physician does not automatically make one smart at investing. However, physicians do possess certain qualities that may contribute to their potential success as they get into the world of investing.

For example, doctors have strong analytical abilities due to their training. They can apply this skill to evaluate investments, assess risks, and make informed decisions.

Additionally, the discipline required to study medicine translates well into investing. Doctors are accustomed to patience and perseverance, crucial traits in the world of investing where long-term strategies often yield better results. Doctors are committed to lifelong learning, which is a mindset that can carry into their investment strategies. They are willing to learn and adapt to changing market conditions.

The fact that medical professionals generally have a stable income also means that they have a reliable base for investment activities. This helps mitigate some financial risks.

Keep in mind that success in investing isn’t guaranteed for anyone, including doctors. Market fluctuations, unforeseen circumstances, and lack of diversification can pose challenges. Additionally, while doctors might have strong analytical skills, they might not necessarily have specialized financial knowledge or experience in investing, which could impact their investment decisions.

With that out of the way, let us discuss some investment options that doctors usually go for, starting with the stock market.

Many doctors invest in stocks, mutual funds, and ETFs due to their liquidity and potential for long-term growth. They might diversify across different sectors or focus on healthcare and biotech industries due to their expertise.

The term “stock market” refers to several exchanges in which the shares of publicly held companies are bought and sold. These are conducted through formal exchanges that operate under certain regulations. [2]

It is a platform where individuals and entities can buy and sell stock from publicly-traded companies, essentially buying a small piece of ownership in that company. Stock prices fluctuate based on various factors like company performance, economic conditions, and market sentiment.

Alternatively, doctors may invest in private companies or venture capital funds, leveraging their networks and knowledge in the healthcare industry to identify promising startups or growth-stage companies.

Private equity (PE) refers to investments made in private companies that are not publicly traded on stock exchanges. It involves buying ownership stakes in private businesses with the goal of improving their performance and ultimately selling them for a profit. PE firms raise funds from various investors, such as institutional investors, high-net-worth individuals (HNWIs), and sometimes even professionals like doctors.

Doctors, like other investors, might consider investing in private equity due to the potential for higher returns.

Private equity is commonly grouped with hedge funds and venture capital as an alternative investment. However, because this asset class requires investors to commit significant capital for years, this may not be ideal for all physicians. [3]

Some doctors may instead aim for 401(k) and retirement accounts. Maxing out contributions to retirement accounts like 401(k)s, IRAs, or a self-employed retirement plan (like a Solo 401(k) or SEP IRA) is a common strategy, taking advantage of tax-deferred growth.

Many employers in the US offer a 401(k) plan, which is a retirement savings plan that has tax advantages for the saver. It allows employees to contribute a portion of their pre-tax income to a tax-deferred investment account. The contributions made to a traditional 401(k) are not taxed until withdrawn during retirement, potentially lowering an individual’s taxable income in the present. [4]

Do Doctors Invest in Real Estate?

Many physicians do invest in real estate. They see real estate as a way to diversify their investment portfolio and generate passive income outside of their medical practice. Real estate can offer stable returns, potential tax advantages, and a hedge against market volatility.

Some doctors invest in real estate by purchasing rental properties, either residential or commercial, to generate rental income. Others may invest through real estate investment trusts (REITs), which allow investors to own a portion of income-producing real estate without directly owning property.

Rental properties can provide a steady income stream for doctors, which can be particularly advantageous for those who might have irregular or fluctuating incomes due to shifts or private practices.

Over time, real estate properties also tend to appreciate in value. Investing in the right location can lead to significant appreciation, which helps build wealth.

However, real estate is not always the right choice for some doctors. Doctors often have demanding schedules that might not allow for active management of properties. Real estate investing often requires time for property management, finding tenants, maintenance, etc. Most physicians do not have the time or energy to play the role of landlord.

The choice to invest in real estate often depends on individual preferences, risk tolerance, financial goals, and the amount of time a doctor can dedicate to managing their investments alongside their medical career.

How Doctors Can Make Passive Income in Real Estate: Multifamily Syndication

Multifamily syndication is the perfect real estate investment for doctors because it solves the problems mentioned above. Because syndication deals involve multiple investors pooling their resources together and having the property managed by a different entity, it does not require you to become a landlord.

This allows doctors to participate in real estate without the huge time commitment. In a syndication deal, multiple investors collectively purchase a single real estate property. This can be done with any type of real estate, but multifamily syndication is the most popular. [5]

Because multifamily properties like apartment communities have several units that produce income, multifamily syndication returns are strong, reliable, and consistent.

This strategy allows investors who may not have sufficient resources to invest in such properties individually to participate in larger real estate deals.

In a syndication deal, there are two main parties involved: general partners (GPs) and limited partners (LPs).

The syndicator or sponsor identifies a potential multifamily property that could be a profitable investment. They conduct market analysis, due diligence, and financial projections to assess its viability. They take a more active role throughout the investment process. [5]

The syndicator creates a legal entity (like a limited liability company or LLC) that will hold ownership of the property. They then offer investment opportunities to potential investors, detailing the terms, potential returns, and the amount required to participate.

As limited partners (LPs), investors take a more passive role in the multifamily syndication. They simply invest their money into the syndication deal in exchange for a share of the property’s monthly rental income. Depending on the deal structure, they may also gain a share of the equity upon resale. However, every deal is different.

The exact details of the profit split will be given to potential investors before they decide to participate. Each investor’s ownership stake is proportional to their investment amount. The syndicator may also invest their own capital for the syndication deal. This is a good way to own real estate without actually having to put in all of the work.

Since LPs do not actively participate in the investment process, they are not legally or financially liable for anything involved with the syndication. In fact they only face the loss of their initial investment should anything go wrong. [5]

Once the required capital is raised, the syndication entity purchases the multifamily property. They also handle property management, making this a true passive investment that may appeal to doctors.

The syndication typically has a predetermined exit strategy, such as selling the property after a certain period (often 5-10 years) to realize potential appreciation. Upon the sale, the proceeds are distributed among the investors, again according to the terms of the agreement.

As with any investment, multifamily syndication carries risks. Economic downturns may affect property values, for example. There could also be unexpected expenses or changes in the real estate market.

Successful syndications can provide investors with passive income, tax benefits, potential appreciation, and diversification in their investment portfolios.

It’s crucial for investors to conduct thorough due diligence on the syndicator, the property, and the terms of the investment before participating in a multifamily syndication to mitigate risks and ensure alignment with their investment goals.

For doctors with busy schedules, multifamily syndication offers a way to invest in real estate without the hands-on responsibilities of property maintenance.

Additionally, the potential for economies of scale in multifamily properties can lead to better returns compared to single-family investments. Syndication also provides access to larger, more lucrative deals that might not be feasible for an individual investor.

It’s still crucial for doctors or any investor to conduct thorough due diligence before investing in syndication deals. Understanding the market, the syndicator’s track record, the property itself, and the terms of the investment are critical steps to mitigate risks and ensure alignment with their retirement wealth-building goals.

Why is Multifamily Syndication a Popular Investment for Doctors?

Multifamily syndication is a popular investment for doctors for several reasons. The first one is passive income.

As a busy doctor, you may not have the time or energy to manage a rental property on your own. Multifamily syndication is the solution. These deals allow you to invest in real estate without the hassle of being a landlord. You don’t have to worry about tenants, rent collection, renovations, and emergencies. The syndicator takes care of all the day-to-day operations, and investors receive a share of the profits.

Investing in multifamily syndication also allows you to diversify your investment portfolio. Instead of putting all your money into stocks or bonds, you can also invest in real estate. This approach can provide a steady stream of income and potentially higher returns.

Real estate investments even offer several tax benefits like deductions for mortgage interest, property taxes, and depreciation. These tax benefits can help reduce your overall tax burden and increase your return on investment.

Multifamily syndication is therefore one of the best choices if your goal is long-term wealth building as a physician. Multifamily syndication is a long-term investment strategy that can help you build wealth for retirement. As the property appreciates in value and generates income, your investment grows over time.

See Why Accredited Investors are Choosing BAM Capital

Multifamily syndication is one of the most lucrative investments in real estate, and savvy doctors who want to invest in real estate choose this investment strategy.

Keep in mind that most syndication deals, including multifamily syndication deals, are exclusive to accredited investors. These are investors with financial sophistication that allows them to assess these deals properly. Accredited investors also have the annual income and net worth to protect them in case a deal doesn’t work out.

If you are an accredited investor looking for a trustworthy syndicator to work with, choose BAM Capital.

This Indianapolis-based syndicator is an industry expert trusted by investors because of their track record for excellence. BAM Capital’s award-winning investment strategy helps mitigate investor risk while still creating forced appreciation. [6]

BAM Capital has a strong Midwest focus, prioritizing Class A, A-, and B++ properties with proven upside potential and in-place cash flow. This syndicator is also vertically-integrated, meaning they can handle every step of the syndication process. They can handle everything from locating high quality multifamily properties to managing and renovating the property. In fact, BAM Capital now has over $700 million AUM and 5,000+ units. [6]

No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions.

For accredited investors who want to enjoy the passive income and all the other benefits of being in a multifamily syndication, schedule a call with BAM Capital and invest today. Check out the Cap Rate Calculator from BAM Capital.

Sources:

[1]: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1325290/

[2]: https://www.investopedia.com/terms/s/stockmarket.asp

[3]: https://www.investopedia.com/terms/p/privateequity.asp

[4]: https://www.investopedia.com/terms/1/401kplan.asp

[5]: https://multifamilyrefinance.com/apartment-investing-blog/multifamily-syndication#important

[6]: https://capital.thebamcompanies.com/