Financial Freedom Through Passive Income for One Doctor: Year 3 Update

Passive income is a big part of our financial plan and journey to financial freedom. It also happens to be a very hot topic currently for many physicians, professionals, and people in general. Here is a Year 3 update on my passive income sources.

The allure of passive income

It’s pretty easy to see the advantages of passive income.

But before getting too far, I’ll remind you that I don’t really believe that there is such a thing as true passive income. What we refer to here and elsewhere as “passive income” is really “leveraged income.”

All this means is that passive income is really money we make in which our work to income ratio is (much less) than 1. By comparison, in our day job as doctors, our work to money ratio is 1.

Regardless of these technicalities, passive income (as it will be referred to here on out) is awesome.

You make it while you sleep. You make it with minimal overall effort (even though initial effort may be considerable).

Nuff’ said.

Different types of passive income

There are tons of options.

In fact, I have a whole post dedicated to all of the ways that you can make passive money through side gigs. Check it out here.

The most common and popular side gig for passive money currently is real estate investing.

For me and Selenid, the biggest sources are real estate investing, this blog, and speaking gigs. Again, are these totally passive? Certainly not! But they are quite leveraged.

Our goals for passive cash flow

Goal setting is extremely important. I won’t go into all of the behavioral and psychological benefits of goal setting or the science of setting good, S.M.A.R.T. goals. But I highly encourage all of you to become good goal setters.

Anyway, tangent aside…Selenid and I firmly believe in this and set goals for just about everything. If you check out our recent written financial plan, you will see that we set a very ambitious goal of achieving $250,000 in cash flow from real estate by 2025.

So that is goal #1.

We have also set out a goal of achieving an annualized 6 figures in profit from The Prudent Plastic Surgeon.

Let’s see how we are doing!

Real estate investing

I’ll start here because REI is certainly the biggest part of our passive income pie. And, as I mentioned above, we set a very high goal of reaching $250,000 in cash flow in 5 years at the start of our investing journey.

Well, it’s now been about a year (a little less actually) since we started learning about and investing in real estate.

In that year, we have bought 3 investment properties for a total of 8 doors.

Current cash flow

Property #1 has an annualized cash flow of $9,824.
Property #2 has an annualized cash flow of $15,000.
Property #3 has an annualized cash flow of $26,096.
Property #4 has an annualized cash flow of $14,917.
Property #5 has an annualized cash flow of $12,331.
Property #6 has an annualized cash flow of $14,125.
Property #7 has an annualized cash flow of $10,299.
Property #8 has an annualized cash flow of $10,616.

This comes to a grand total of $99,083 in annualized cash flow. These are projected estimates based on our cash-on-cash calculations.

Regardless, we have already reached 40% of our 5-year passive income goal. Honestly, the past year has slowed things down due to the market conditions. As a result, we only bought 1 property in 2023. But we continue to look for deals!

Like I’ve said, it does take work. It takes effort. But, then you automate processes, get more experience, and it becomes really quite passive…ahem…I mean, leveraged. And it.is.so.worth.it!

The Prudent Plastic Surgeon

To be 100% transparent, I did not start this blog to make money. But it does now make money.

My goal and mission (as written one our first day of business on my Microsoft Word document business plan) is to spread the principles of personal and financial well-being to other physicians, trainees, and people of all walks of life by sharing his journey on this pathway of fulfillment, purpose, and happiness.

As I progressed, I recognized that I could spread my story and reach more people by investing into the blog. Initially, this just came from my pocket. However, income has allowed me to achieve even greater reach and provide a better product, which is my ultimate goal!

After coming to this realization, with some help from others in the space like Jimmy Turner from The Physician Philosopher, I developed the financial side of my business plan.

I set a goal for annualized cash flow of $10,000 in Year 1. Selenid has pushed me to set better and more ambitious goals. The goal for Year 2 was an annualized cash flow of 6 figures.

And right now, it’s been about 2 years since starting the blog.

Current cash flow

Over my first year, the cash flow from The Prudent Plastic Surgeon was $15,386
In my second year of the blog, the cash flow is $102,000
My third year of the blog saw cash flow of $110,000

This has come from 4 main sources:

Sponsors for the blog
Affiliate advertising for courses and conferences
Coaching/Advising
My course, Graduating to Success

Speaking gigs

I have done a lot of speaking gigs within the medical field but these have all been pro bono except for 2 that resulted in $3,000.

Other sources

Sure, there are some other leveraged side gigs and passive income that we have made over the past year. Things like stock dividends, etc.

But these course have been very minor in comparison.

My biggest have been from:

Medical surveys/consulting: $4000

Total cash flow in Year 3

Adding up these main 3 sources gives us a total annualized cash flow of $216,083!

This number is slightly higher than it was in Year 2 and significantly higher than it was in Year 1.

What did we do with all of this cash flow?

It’s really easy for me to answer this question. We re-invested all of this money! Well, almost all of it. We did use some of it to buy this rocking swing set for our kids, Rich Dad, Poor Dad style!

We invested it into buying more real estate properties or improving the ones that we already had to force appreciation. In fact, we bought our last 5 investment properties largely with our cash flow from the other properties.

We also invested much of this money back into The Prudent Plastic Surgeon.

But what could we do with all of this passive income?

Well, we could live off of it.

In fact, this is a big part of our ultimate goal. Eventually, once our passive income outpaces our expenses, we will be financially independent and free.

Our current budget estimates annual expenses at about $250,000. This is probably an overestimate. But, even by this overestimate, our current passive income replaces about 70% of our current expenses. Again, we know these expenses from our budget and they help us decide how much we need to save for retirement as shown here.

Now mind you, if we decided to retire, we would do away with things like life and disability insurance, etc. So it would actually cover a greater portion of our income.

But we would still need to pay our mortgage and student loans. Once those are paid off, that passive cash flow goes even further!

This mean we actually have reached some level of partial financial freedom!

But keep in mind, we do not have all of our eggs in the passive income basket for retirement

I am a big fan of a hybrid investing approach. So we both still maximize our 403(b) contributions and have a Roth IRA (which, to be fair, we only started fully funding on 2023 as I’ve written about).

This way, we get to fund our retirement using the best of both ~~worlds~~ strategies…passive income and equity investment withdrawals.

Looking forward to Year 3 and will keep you all updated!

Want to learn more about creating passive income in your life?

What do you think? Is passive income worthwhile for doctors? Why or why not? Let me know below!

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5 thoughts on “Financial Freedom Through Passive Income for One Doctor: Year 3 Update”

Pingback: Help! I'm a High Income Earner But Scared to Invest » The Prudent Plasti¢ Surgeon
Wayne C
December 14, 2021 at 12:24 pm
Thank you for the blog. I find the information provided very informative and thank you for being transparent in your journey toward financial freedom. For the three properties that were purchased, did you purchase them outright or there is loan on each property? Thanks.
- The Prudent Plastic Surgeon
  December 14, 2021 at 12:30 pm
  That’s for your kind words Wayne! Happy to share my journey. For each property, we bought with a mortgage using 25% down
hematologydoc
January 26, 2022 at 6:09 am
I would like to start active real estate investing but I am hesitant on how to start. My main fear is how to find a good real estate agent and maintenance of the property which I do not like doing at all
Any tips to help with this process?
- The Prudent Plastic Surgeon
  January 26, 2022 at 10:05 am
  Getting started is always the hardest (and scariest) part! The key in beginning is education and team building. My wife and I recommend 2 books: The Doctor’s Guide to Real Estate Investing by Cory Fawcett and The Millionaire Real Estate Investor by Gary Keller. Definitely read those!
  In terms of team building, your investor agent is your #1 person. Interview a bunch of them. Ask if they invest in real estate. Ask how many investment properties they sell each year. Ask how they identify good cash flowing properties. Then work with them to set the criteria for properties you want to invest in.
  For property management, even self management can become quite passive as it has for us. Or you can just use a property management company nd be totally hands off. Its your decision on which end of the spectrum you would like to be!