[Editor's Note: The Physician Wellness and Financial Literacy Conference (WCICON22) will be held February 9-12, 2022 at the JW Marriott in Phoenix, AZ. You won't want to miss this hybrid conference containing both in-person and virtual packages. Click here for more details and save the date today!]
I’ve been practicing as a physician in the USA since 2008 using H1B and H4 visas with an Employee Authorization Document (EAD). I was unable to practice for a few months in 2015 when my H1B expired and my H4-EAD was yet to be approved. I made zero dollars during those few months. Thankfully, my spouse who is also a visa physician did not have any visa lapse and supported our family through this time.
Once again, beginning in February of 2021, I found myself in the same boat—my EAD has lapsed due to a delay in processing by USCIS on account of COVID. My lawyer tells me I am unable to work for anyone (including myself) anywhere on the planet while I am on US soil without a US work permit.
The following is an account of how I’ve managed to contribute financially to our family during this time. Let us start with a few things to know about me and my financial situation.
- I have equipped myself with financial knowledge from a few physician finance courses available online and through the network of physicians in online communities, including the WCI Facebook Group.
- I have accumulated a fair amount of savings in my nest egg over the past few years.
- I have access to my husband’s savings which he has allowed me to invest since he (like many physicians) does not want to devote any time to learning physician finances.
Here are the steps I’ve taken since the summer of 2020 to earn “projected” 10%+ returns on our cash invested and legally save taxes. I also will include the experience of another female physician in the same situation as I am in. These methods do not require a work permit as they are considered passive income. As always, please consult your own immigration attorney, financial and investment advisers for your own specific situation.
How I've Started to Earn Passive Income
#1 Investing in Real Estate Syndications and Funds
I am investing in passive real estate syndications and funds through a few sponsors introduced to me by the WCI Real Estate Newsletter and other physician Facebook groups (after I did my own due diligence on them). The assets are Class B, value add multifamily apartments. I started with a $10,000 investment which has yielded me a cash-on-cash return of 10% and I received my first distribution of $185 in May 2021 but paper losses of over $3000. That’s a win-win because I get to use the non-deductible passive losses to offset any passive gains from real estate, even in the future.
#2 Roth Conversions
During the end of 2020, I converted a small amount of my previous employer’s 401(k) to a Roth 401(k) since we were in a lower tax bracket in 2020 (I resigned from my job in October 2020). That means I won’t have to pay taxes on this chunk of money until I draw the distribution post-retirement, assuming we’ll be in a (hopefully) higher tax bracket then.
#3 Hard Money Lending
Peer Street introduced by WCI is a hard money lending platform. I dipped my toes in this field by investing $5000 with them in two different bridge loans with interests of 7 to 9% and terms of up to 24 months. This has yielded me $172 till now which has emboldened me to invest a much bigger amount with the DLP Lending fund.
The DLP Lending fund is not a tax-efficient vehicle for my cash but it promises returns of 11%+ with quarterly liquidity. I thought it was a better place to park my savings temporarily than in a traditional bank with less than 1% interest. Once I figure out my mindset on why I want that liquidity and I figure out a better tax-efficient investment, I suspect I’ll move my funds out.
The Physician Finance courses that taught me how to do the above things were paid for through my CME from my last W2 job.
#4 Direct Real Estate Investing
Another female physician whose H4-EAD is similarly delayed and cannot “work”, was gracious enough to share her experiences with me.
She invests in direct real estate which she learned about a year ago. During her EAD lapse, she acquired 6 doors in 4 investment properties. Direct real estate done passively (as is the case when one does not have a work-permit/EAD or has an H1B tied to a certain job), does not generate lucrative tax savings that can offset W2 income (active losses) but is still widely profitable and somewhat tax efficient. The passive tax savings and passive income is outlined below.
My colleague was able to sell her Rental property A and “1031 exchange” it to buy two rental properties that generate her a cash on cash of 8% and 14%. The 1031 exchange helped their family defer the capital gains tax indefinitely.
She also bought a short-term rental that will be managed by her Property Manager and used as her family’s vacation home. The cash on cash for this short-term rental is 10-15%.
#5 Investing in Notes
She acts as the bank when she lends out her cash for compound interest of 8-12% through her LLC (LLC created when she had her EAD but some options are available to do notes without an LLC too).
When I started out as an attending physician in 2014, I did not know what to do with my salary other than place it in a retirement account, a taxable brokerage account, and in my savings account after taking care of my expenses. Having come from India with a middle-class background where my parents worked as physicians for the Indian Government, the tenet of saving money was instilled hard in me. Discovering and experimenting with my new financial knowledge has been a refreshing breather of a game, allowing me passive income and broadening my intellectual horizons beyond clinical medicine. I am educating myself on stocks and bonds and in venture capital—more on that next time…
What do you think? What other methods of earning passive income are available to folks in a similar situation? Share your experiences below!