8 Physician-Friendly Passive Income Ideas, Ranked

Discussion in 'Doctors Cafe' started by D. Sayed Morsy, Aug 31, 2020.

  1. D. Sayed Morsy

    D. Sayed Morsy Famous Member

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    Spend as much time reading about physician personal finance as we do and you’ll notice that most writers have something to say about passive income. There are even authorities on the subject, such as Passive Income MD. But much of what the less-than-authoritative writers suggest isn’t passive at all.

    We’ve seen some physician personal finance sites suggesting that you should podcast, blog, or pick up telemedicine for passive income These suggestions are far from passive. They require recurring time and effort. With that in mind, we created this compilation of physician-friendly passive income ideas. We’ve placed them on a spectrum of easy (truly passive with little start-up effort), moderate (truly passive with some start-up effort), and difficult (a lot of start-up effort but eventually passive).

    Easy passive income

    These options are truly passive. Other than some initial time spent researching your options and setting them up, there isn’t much work to be done. Unfortunately, these options also have some of the lowest ROI.

    High-yield savings accounts

    As their name would suggest, high-yield savings accounts are like savings accounts but with interest rates that Investopedia says are typically about 20-25x the average. In exchange for the higher rate, banks may have higher deposit requirements, a higher required minimum balance, and possibly some fees. Once you open an account, you can schedule automatic transfers and forget about it, making this a truly passive income option.

    CDs

    CDs (certificates of deposit, not compact discs) also give you a higher interest rate (typically 3-5x the national rate, according to Investopedia) in exchange for a tradeoff with the bank. With CDs, the tradeoff is time. When you open a CD, you trade a higher interest rate for time. The bank or financial institution issuing the CD will require you to lock away your money for a fixed term. You can access your money early in the case of an emergency by paying a fee. The guaranteed rate of return in CDs make them a good vehicle for emergency funds.

    Peer-to-Peer Lending

    Think of peer-to-peer (P2P) lending as a more sophisticated version of loaning a friend some money with an interest rate attached. Usually, P2P lending websites connect borrowers directly to investors. The site sets the rates and terms and enables the transactions. P2P lending connects lenders with individual borrowers on websites. Here are some examples of P2P lending sites and their interest rates. Borrowers apply for funds to the website, and the website assigns a risk value to their venture, which determines the interest rate. Unlike a CD or a high-yield savings account, with P2P loans, you have to worry about the borrower defaulting. In other words, you might make nothing, or lose it all.

    Moderate passive income

    Dividends

    Dividends themselves are true sources of passive income, but receiving them requires some setup. In order to receive them, first you need to purchase stock in a company that distributes them — enough stock that you meet its criteria for dividends. Then, that company needs to have a profitable fiscal year or quarter. Finally, the company rewards you by paying you a share of the profit in the form of a dividend. These steps are all passive after you purchase the dividend stock.

    Real Estate Investment Trusts

    Real Estate Investment Trusts (REITs) are a more passive way for you to reap the benefits of the real estate market. Structured like mutual funds, REITs own and oversee income properties, which they purchase and maintain with shareholder money. In return, REITs often pay investors dividends. The tradeoff is that while you get some of the benefits of having income property, you won’t cash in on any appreciating value of the property. Examples of REIT-owned properties include apartment buildings, data centers, or offices, to name a few. REITs are passive-ish because while you won’t have to maintain any property or pay a mortgage, you have to include them in your investment portfolio.

    Difficult passive income


    These passive-income ideas have a higher ROI, but they’re barely passive. They require an intense amount of work in the beginning, but the work either diminishes or disappears over time. Or, you could pay somebody else to do it.

    Income property

    With an income property, you are the REIT. Whether it’s an apartment you own and rent, a vacation getaway that you lease, or an office building, you can make a tidy sum. But, anytime there’s a clogged drain, an ant infestation, or a tenant who likes to practice their thai kicks on your sheetrock, you’ll be getting the call. Furthermore, as the landlord, you’re on the hook for tenant loss due to economic volatility or depreciation of real estate values. Being a landlord is a serious time and resource commitment — one that physicians shouldn’t take lightly. Owning income property could eventually become passive if you hire a property management firm.

    Build something

    Ever have what you think is a great idea for an app, service, or technological product? Maybe it could top app-store charts or be the next breakthrough in your speciality. Both have the potential to be a recurring stream of revenue, but both also come with massive initial start-up costs in time and money. We’re not saying don’t do it. You just might want to be sure that your idea is a slam dunk before you get started.

    Write something

    We love learning how physicians see the world. Admittedly, we’re a bit biased, but the pandemic has brought to light the need for more physician perspectives in mainstream society. Maybe you have views, either clinical or social, that people would benefit from hearing. E-books and self-publishing have made it much easier to turn your idea into a book. If your idea is good enough, people might download and read it for years to come, making for a nice passive income stream. But writing a book takes time and sometimes money. Think carefully before you start working on your masterpiece.

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    Last edited: Aug 31, 2020

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