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Real Assets: Tangible Properties You Can Invest On


June 14, 2021

Harsha Moole, M.D., MBBS


Assets are vital to not just businesses but also individuals. The quality as well as several wealth-generating assets you have as a doctor is what helps you to achieve true financial freedom. These assets serve as a medium of generating, transferring, and storing up wealth for now and in the future. The accumulation of these assets is what shows your net worth as a doctor and not the figures on your paycheck.

Assets are broadly categorized into two – Real assets and Financial assets. While real assets are tangible properties that an individual owns such as buildings, lands, and others, financial assets are assets that you can convert to cash in a very short time. Examples of financial assets are securities, stock, and bonds.

What are Real Assets?

Real assets are quite different from financial securities. They are tangible assets that an investor buys with the expectation that the value of such assets will increase with time. Real assets include real estate, precious metals, lands, and even artworks.

For many doctors who want to build their investment portfolio, real assets are a great way of diversifying asset classes. Why doctors can build sustainable wealth using real assets is because, unlike the stock and bond, it is not affected by the movements in the market. Because real estate, which is a major category of real asset, increases fast in value, it is not affected by inflation. 

Real estates as physical assets have their worth tied to their properties. The low level of correlation with other financial assets makes it ideal as an asset class.

How do you differentiate an Asset from a Liability

The measure of wealth is when your assets outweigh your liabilities. Assets are those purchases and acquisitions that you make which helps to improve your financial position. Liabilities on the other hand are those expenditures that take cash away from you.

When you buy a car you may believe that you have acquired an asset. But is that the case? Cars generally appreciate as the year goes by. The simplest way to differentiate between liabilities and assets is to see assets as acquisitions that can increase in value over time. Examples of assets include lands, buildings, securities such as stock and bonds, cryptocurrencies. Examples of liabilities include loans, and credit card debts.

Different Types of Real Assets

There are different types of real assets that physician investors can invest in. Some of them include Real Estate Investment Trusts, rental properties, commercial real estate, and precious stones. While some real assets may be suitable for some people, real estate has gained popularity as a stable store of value.

Real Assets

Benefits of Real Assets

Real assets have specific characteristics that differentiate them from every other asset class. The characteristics inherent in each type of real asset may differ. Yet, there are similar characteristics that are shared by these asset classes. Some of these characteristics include:

  • Diversification advantages: Over the years, real assets have shown a low level of correlation to other asset classes. Physician investors can maximize this correlation in building sustainable wealth. By diversifying into other asset classes such as real estate with low correlation, investors can accumulate more profit.
  • Ability to rise above inflation: These characteristics make real estate investing a reliable store of wealth. Unlike other securities whose values can diminish in times of inflation, the value of real assets is quite stable. Real estate has been discovered to give higher returns in inflationary periods.
  • Steady income flow: real assets are a reliable source of income. When you invest in real estate as a doctor you can be sure of constant revenue or dividends from such investments. This is mostly because real estate is fee-for-use assets. Fee-for-use assets require users to pay a certain amount of money to use those assets. So, when you buy a property and rent it out to a family, you are paid yearly rent which builds your cash flow.
  • Tax benefits: Higher-income most times also means higher remittances to “uncle Sam” (the tax office) and nobody wants that. Through real estate, doctors can enjoy tax advantages on their income. This is because so many things are deducted including the cost of repairs and maintenance, insurance, legal fees as well as depreciation.

How to acquire Real Assets as a Physician Investor

#1. Purchase real estate investment trusts (REITs)

REITs make it possible for you to enter the real estate world without going through the hassles of buying a physical property. REITs operate more or less like mutual funds where people entrust their money to the company to invest on their behalf with the expectation of dividends. Some examples of properties that can be owned by REITs include office apartments, hotels, and retail spaces.

Investing in REITs can help you to maintain a steady cash flow because the dividends paid to investors are pretty high. This makes REITs one of the best investment options for you as a doctor trying to build long-term wealth. As a doctor, you may decide to reinvest the dividends back into the business to bring in more yields while relying on your paycheck to take care of your other expenses.

If you are trying out REITs for the first time, you should go for publicly-traded REITs. This is because publicly-traded REITs are easier to be traded and valued. Publicly traded REITs can be purchased through a brokerage firm. All you need to do is to register with one.

#2. Online real estate platforms

There are many online real estate investing companies that help to connect investors with developers. An investor may then choose to fund real estate development projects using equity or debt financing. In exchange for the funds provided, investors will be paid dividends periodically by the developers.

Unlike REITs, investing platforms require the investor to have a considerable amount of money. Only accredited investors are accepted on many of these platforms. To be accredited in adherence to the requirements of the Security and Exchange Commission, only investors who have had a minimum annual income of $200,000 in the last two years ($300,000 if you are running a joint investment with a spouse) can be accredited. If your net worth is up to $100,000,000, you also qualify for accreditation.

#3. Rental properties

Investing in rental property is another good way of enjoying the juicy investment benefits that real estate offers. This investment strategy is very straightforward. It involves you buying a property and renting it out to families and individuals who pay rent for the use of such property. In its basic form, you can decide to rent out some parts of your living space to people. If you are living in a multi-unit building, you may rent out some of the units and collect rent.

Before deciding to jump into this type of investing you may need to carefully weigh your options. This is because buying rental properties requires that you get more involved. You may consider hiring a property manager to manage the properties for you.

#4. Flipping investment properties

You can get very good deals from this type of real estate investing. Some properties that are not in very good condition can be underpriced. All you have to do is look out for such properties, buy them at a good price, renovate and resell or rent out for a profit.

Flipping is however a bit complicated. You may need to estimate the total cost to know if buying the property is a profitable move. As a physician investor, you may not have enough time to do all these estimations yourself. You can either enlist the services of a contractor or partner with one who will make the estimation and manage the entire project.

#5. Real Estate Syndication

Real Estate Syndication is another way doctors can buy into real estate investing. In syndication, a group of investors combine their resources and skills to acquire and manage properties that they wouldn’t have been able to individually. The profit made from the properties is then shared amongst the investors based on the agreed percentage.

Conclusion

While it is good to be desirous to be free financially, such freedom comes with good planning and wise investing. Over the years, real assets such as land and buildings have proven to be the fastest means of achieving financial freedom. To learn more about real assets you can maximize as a physician, click here.

 

Here at PhysicianEstate, we welcome all physician entrepreneurs to learn about commercial real estate investments, rental property investments, and wealth generation. We encourage all physicians to eventually become real estate physician investors. We know a great deal about Who – What – Why – How. 

Stay in touch with us by signing up for our newsletter. The newsletter will keep you up to speed on the current real estate investments we are looking at, provide physicians with investment opportunities, and much more.  

Legal Disclaimer: This is not investment advice. I am not a legal and/or investment advisor. This is my personal blog, and all information found here, including any ideas, opinions, views, predictions, forecasts, commentaries, suggestions, or stock picks, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as personal investment advice. These are my views, it is not a production of my employer, nor is it affiliated with any broker/dealer or registered investment advisor. While the information provided is believed to be accurate, it may include errors or inaccuracies. To the maximum extent permitted by law, PhysicianEstate disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses. You should consult with an attorney or other professional to determine what may be best for your individual needs. Your use of the information on the website or materials linked from the Web is at your own risk. 

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Authored by Harsha Moole, M.D., MBBS

Hey there! I hope you enjoyed reading this blog. PhysicianEstate is my brain child and passion project. I run this platform to empower entrepreneurially motivated physicians to make financially educated investment decisions and discuss asset protection strategies. Lots of important but free content here and here! If you have any questions or if you are interested in partnering with me, let’s connect! hmoole@physicianestate.com

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