The 8 Best Passive Income Ideas for Doctors

Creating passive income is a must if you want to create financial security.  As a physician, it can seem odd to advocate for passive income strategies when our financial superpower is our high incomes.  Diversifying your cash flow does more than offer security alone.  Having revenue streams other than your profession can also alleviate financial anxiety, expedite financial independence, and offer relief for those burnt out in their careers.  I previously wrote a post discussing the 10 Best Physician Side Gigs.  You will find that there is overlap between the best physician side gigs and the 8 best passive income ideas for doctors.  That is because many of the best side gigs happen to generate passive income!  Here are the 8 best passive income ideas for doctors and physicians. 

‘Passive’ doesn’t always mean passive

I want to make a brief disclaimer before we dive into all the great ways doctors can generate passive income.  Passive income is not always…passive.  If you follow the My Physician Side Hustle series, you will know that I have selected blogging as my physician side gig.  Though blogging offers a great outlet for my financial thoughts and ideas, there is very much an upfront cost. 

Earn money while you sleep

The goal behind passive income is generating a revenue stream that creates income ‘while you sleep.’  As enticing as that idea sounds, it is rarely that easy.  Almost every passive income strategy on this list requires some form of initial investment.  That investment can come in the form of capital.  That investment can come in the form of time.  Sometimes that investment is both time and money.  No matter the passive income strategy that you choose, you can be assured there will be an early cost before you have the ability to generate meaningful income. 

I have worked hard to highlight why each individual passive income idea in this list is strategic and has the potential to generate passive revenue.  I will also do my best to emphasize where the upfront investment is regarding each income strategy.  Ok, with that out of the way… on to the 8 best passive income ideas for doctors and physicians!

1. Invest in dividend stocks and bonds

The first passive income idea for doctors on our list is investing in dividend yielding stocks and bonds.  A dividend (or coupon for bonds) is a sum of money paid out in a regular cadence to shareholders.  Depending on the stock or bond, these are paid out monthly, quarterly, or (most commonly) annually.  Historically, dividend yielding stocks averaged an annual payout of 2%, but there have been stocks with dividend payouts as high as 5%!

Not all stocks and bonds pay dividends.  It is important when reviewing the potential investment that you determine if it is in fact a dividend yielding stock.  If you are uncertain, make sure to contact the brokerage firm to get further details.  Dividend stock and bond investing is arguably the easiest and simplest way to generate passive income. 

An example of dividend investing

The idea is simple…If Dr. Works-Hard receives a bonus of $10,000 and she is interested in generating passive income, she may choose to invest it in a dividend yielding stock.  If she happens to invest that money in a stock that yields 4% annually, then after one years’ time she would receive a dividend payout of $400 (in addition to investment interest).  Now this may seem negligible, but this was just an example for easy math.  Now let’s say that Dr. Works-Hard has $1,000,000 she wishes to invest in that same dividend stock.  After one year, now her dividend yield is $40,000 (in addition to interest accrued…still)!  You can see how a larger nest egg has the potential to drastically drive greater passive income. 

The caveat here is this: to generate impactful passive income, you commonly have to have a large initial investment.  The larger the investment (as well as the yield), the greater the passive income.  Another caveat is that these examples do not factor in inflation.  It is important to understand the real context of your dividend return after factoring inflation.  However, for those with the capital on-hand, dividend stock and bond investing are one of the best passive income ideas for doctors. 

2. Real estate investing

The next three passive income ideas for doctors will all be real estate related.  Real estate offers many avenues for investment and involvement.  From owning and operating your own rental property to REITS and crowdfunding, there are many ways to generate passive income with real estate. 

The first one on our list is arguably the least passive, but still a great way to generate passive income nonetheless.  Owning and operating a rental property has historically been a great investment.  There are many physicians and doctors who have doubled their annual income through real estate investing alone.  Owning a rental property is one of those avenues.

For those with the monetary capability as well as the time, owning a rental property affords you a tangible asset that can generate cash flow for decades.  Further, if you wish to pursue a more hands off approach, you can employ a landlord or property management company to handle your real estate (for a fee).  This may lower your overall net profit margin, but it affords you a more passive approach to income.  As you will come to see, real estate investing is one of the best passive income ideas for doctors and physicians. 

3. Real estate investment trusts (REITs)

Next on our passive income real estate journey are real estate investment trusts (REITs).  This is still considered real estate investing; however, it is more hands-off than owning rental properties.  In short, REITs are companies that own and/or finance large commercial real estate.  These large companies specialize in certain types of real estate (i.e., office space, multifamily dwellings, healthcare buildings, etc.). 

REITs can offer tax advantages

It is also important to mention that REITs often benefit from tax advantages if they pay out a large percentage of their earnings as dividends.  This is why they make great passive income ideas for doctors!  REITs are a more passive strategy for real estate investing because they are very liquid, require less initial monetary investment, and tend to have lower fees (comparatively). 

There are some drawbacks to REITs to be aware of.  The most notable is that, as an investor in an REIT, you have very little say in how they manage your investment.  You are simply entrusting your money to the company managing/financing the commercial real estate.  Your share price can also be influenced by real estate market trends that have nothing to do with the overall health and value of the particular real estate you are investing in.   However, with the right mindset and some patience, REITs are a great avenue for passive income creation through real estate. 

4. Real estate crowdfunding

The final real estate pathway for generating passive income is through crowdfunding.  Unlike owning rental properties or investing in REITs (essentially a fund), crowdfunding is where a group of investors pool their money together and invest into a commercial real estate property.  Passive income is generated through regular payouts (dividends) and from a gain on the sale at the end of a predetermined holding period. 

The reason crowdfunding has exploded in recent years is for a couple of reasons.  First and foremost, it has become more readily available with platforms like Fundrise and Crowdstreet.  Secondly, individuals who invest through crowdfunding are given more freedom to choose the properties they wish to invest in.  These investors also gain partial ownership of the asset. 

As with the prior real estate investments mentioned above, there are caveats to consider.  One is that crowdfunding often has higher fees than REITs.  Crowdfunding often has longer holding periods as well.  Holding periods are commonly 5 to 10 years with crowdfunding.  From owning and operating a rental property to REITs and Crowdfunding, there are many paths to passive income through real estate.  Each has their own risks and benefits.  All offer a means of passive income generation as long as you understand the initial investment. 

5. Peer-to-peer lending

Peer to peer lending is relatively straight forward.  If you are a doctor or physician who has available funds, you can lend these funds to another physician in need.  Now, I am overly simplifying the process somewhat, but that is the gist. 

Peer to peer lending utilizes platforms that allow multiple investors to contribute smaller amounts of money to total the needs of the borrower.  If Dr. Works-Hard needs $10,000, then a peer-to-peer lending platform may borrow $2,000 from 5 individual physicians willing to lend that money.  These 5 lending physicians are able to generate passive income through this lending process by generating interest on their share of the principal investment each month. 

Peer-to-peer lending is technically a riskier investment as oftentimes these loans are unsecured.  This means that if Dr. Works-Hard decides she doesn’t want to make her monthly payments (defaults on her loan), there may be no reprimand.  Though this may be a slightly riskier investment, peer-to-peer lending offers another great avenue for doctors and physicians to lend to peers and generate passive income. 

6. Become a blogger

Blogging is near and dear to my heart, and therefore I have included it as one of the 8 best passive income ideas for doctors.  Blogging, or the creation of a niche website, offers avenues to create digital content that provides value to the reader.  If you are able to offer something valuable, like great personal finance content (wink wink) then oftentimes your viewership will return to your website time and again.  The greater the content you create, the more likely you are to generate a following. 

If you build it, they will come (probably)

With the generation of high-volume traffic, you have a platform that is enticing for others wishing to access your audience.  These avenues include targeted ads, paid advertisements, sponsorships, sponsored posts, affiliate marketing, and more!  You can see why blogging can be such a lucrative way to create passive income.  If you have a well-established blog or niche website, there are multiple ways to monetize it.  What’s more is you can employ all of these avenues of monetization simultaneously.  If you want to know more about this, check out our post How to Make Money Blogging as a Doctor.  We also have a very comprehensive post on How to Start a Blog!

There are a few things you need to understand about blogging before you close this article and start one for yourself.  For one…they are hardly ‘passive.’  Speaking from experience, it takes a lot of time to write the valuable content needed to cultivate a following large enough to create impactful revenue.  It is also important to understand that income generation from blogging takes years on average.  This method of passive income generation for doctors is not for the faint of heart.  It requires perseverance.  However, for those with an enjoyment of writing and a niche that is monetizable, blogging can be quite lucrative.

7. Create a digital product

Digital products are great for passive income generation for one reason…they are easily scalable.  Much like content creation for a blog (mentioned above), creating a digital product that sells can actually make you money while you sleep.  Ideas for digital products include the creation of an online course or ‘masterclass.’  Another idea would be writing and selling an e-book, how-to guide, or tutorial.  Maybe you create an online application or app?  Any and all of these examples are great ways to generate passive income as a physician. 

E-books, podcasts, courses, and apps

For starters, any of the above-mentioned digital products requires a monetary and time investment.  If you are writing an e-book…it takes time to write.  If you are creating an application, you likely need to find a coder, then test the application over and over before it is ready for primetime.  However, if you are willing to put in the work and investment early…and it is valuable, then it will likely generate income.  Sometimes these revenue streams can generate passive income for decades.  Digital products are great because you can sell them online, and once they are created, they are infinitely scalable.  This is another example of true passive income.  Digital products, depending on your price point, can be another avenue for those seeking to generate multiple streams of revenue through passive income. 

8. Become an influencer

The last pathway to generating passive income for doctors is becoming a social media influencer.  As I previously mentioned in my article on the 10 Best Physician Side Gigs, being an influencer is hard work.  It is rarely pulled off by physicians, but when it does occur, you essentially make yourself into a brand. 

Becoming an influencer, in reality, translates into growing and maintaining a social media presence.  Individuals with the personality to cultivate a large following on platforms like YouTube, TikTok, Instagram, Twitter, etc. can monetize their audience.  Potential advertisers are thus enticed to pay you to access your social media following.  Forms of influencer monetization include endorsements or paid advertisements. 

A few caveats on influencing.  First, rarely can busy physicians pull this off successfully.  It requires the combination of your medical expertise with other talents like fitness, comedy, or aesthetics, etc.  Another challenge with this form of passive income generation is the traffic needed to generate significant revenue.  Commonly, influencers need a massive following…think hundreds of thousands to millions of followers.  Influencers with substantial traffic are positioned to build serious passive income.

Take home points

Passive income generation drives large swaths of search traffic as it combines income generation with little effort.  Who wouldn’t want that?!  However, it is important to understand that rarely are these methods ‘passive.’ There is often a monetary or time commitment that must be made before an individual is able to reap the rewards of their investment.  For the best passive income ideas for doctors mentioned above, most of these will ultimately bring in revenue if you are patient (or have an available opportunity fund). 

I do advocate, however, for everyone to diversify their income streams.  As such, generation of income through passive methods, or the pursuit of side gigs, are great ways to get started.  If you want to know more about methods to generate supplemental income, make sure to also check out our article on the 10 Best Physician Side Gigs.  As always…

Stay motivated!

The Motivated M.D.

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