Commercial Real Estate Investing for Physicians

Key Takeaways

• Doximity reports 2025 average pay ranging from about $325,000 in family medicine to about $697,000 in orthopaedic surgery, so the same strategy means different things across specialties.
• Physicians start attending pay in their thirties, often after years of training salaries and education debt, which shortens the window for capital to compound.
• Passive losses from rental real estate generally cannot offset W-2 clinical wages or active practice income, although they can shelter the rental income itself.
• A spouse who works mainly in real estate may meet the real estate professional tests on their own, a mechanism worth discussing with a CPA before relying on it.
• A limited partner gives up control over every decision after funding, so sponsor selection carries more weight than the choice of any single property.

The physician income picture, by specialty and by career stage

Physicians are among the highest earners in the United States, but the average hides a spread of more than two to one between specialties and a late start that no other profession matches. According to the Doximity 2026 Physician Compensation Report, which covers 2025 pay, average compensation grew about 2% from 2024 to 2025, and surgical specialists out-earned primary care by roughly 90%.

Average annual physician compensation by specialty, 2025 (Doximity 2026 Physician Compensation Report)

Specialty	Average 2025 compensation
Orthopaedic surgery	$696,852
Radiology	$609,684
Cardiology	$604,635
Anesthesiology	$557,131
Dermatology	$497,509
Emergency medicine	$423,723
OB/GYN	$420,859
Psychiatry	$350,786
Internal medicine	$339,274
Family medicine	$325,040

Certified registered nurse anesthetists share many of the same constraints: shift-based work, mostly W-2 pay and income that stops when the shifts stop. The BLS counted 54,500 nurse anesthetist jobs with a May 2025 median of $236,590, which places many CRNAs in the same tax and time position this guide describes.

The workforce is large and aging. The AAMC counted 1,032,365 active physicians in 2024, and about 23.9% of them were 65 or older. That second figure matters here because it describes a large group of physicians approaching the point where clinical income winds down and investment income has to carry more of the household.

The career arc is what separates medicine from other high-income work. Four years of medical school, then three to seven years of residency and fellowship on a training salary, means full attending pay typically begins in the early to mid thirties. The first attending years are a ramp rather than a plateau: a new hire may be paid a fixed salary floor while building a panel, partnership tracks can run several years before full distributions, and education debt competes with every other use of cash.

How the income is paid matters as much as how much it is. Many physicians are employed by hospitals, health systems or large groups and paid on a W-2, often with a productivity component tied to work RVUs. Others own a share of a practice and are paid through a partnership K-1 or S corporation distributions, and locums and moonlighting income typically arrives on a 1099. Each route has different tax consequences for real estate, covered below.

What passive income has to solve for a physician

For a physician, passive income is less about adding money than about removing a single point of failure. Almost all household income depends on one person being clinically able, credentialed, insured and on the schedule. Income that arrives without another shift addresses that dependence, while doing nothing about investment risk itself.

Three pressures are specific to medicine. The first is time: a call schedule, whether q4 home call or a run of night shifts, consumes exactly the weekday hours when lenders, contractors and tenants expect answers. The second is concentration: a physician's human capital, retirement accounts and often a practice stake all depend on the same healthcare economy, including reimbursement rates set by payers the physician does not control. The third is career length. A procedural career depends on hands, eyes and stamina, and disability insurance replaces part of the income but not the compounding that would have happened with it.

Freedom Commercial Real Estate's founder grew up in a family of doctors and surgeons who invested in real estate, and the pattern was consistent: the capital worked best when it asked nothing of the calendar.

How a passive net lease position works

In a passive position, a physician contributes capital to an entity, usually a limited partnership or LLC, that a sponsor organizes to buy and operate property. In single-tenant net lease real estate, the tenant generally pays property taxes, insurance and most maintenance, so the income resembles a long lease payment more than an operating business.

The value of that income is set by a handful of measures. Net operating income is the rent left after property expenses, and the cap rate is that income divided by the price. Whether the rent keeps arriving depends on the lease guarantee, the remaining lease term and the store's rent coverage ratio. Once a loan is added, positive leverage decides whether debt raises or lowers the equity yield, and investors compare outcomes with cash-on-cash return, IRR and equity multiple. The wider mechanics are in the guide to triple net lease investing.

Why a directly owned rental collides with clinical practice

Owning a rental directly is a second job with its own liability, and medicine already supplies both a full schedule and a litigation profile. The collision is less about total hours than about which hours and which risks: a burst pipe does not wait for a post-call day, and a tenant injury claim names the owner.

Physicians carry malpractice coverage because clinical work generates claims, and many think about asset protection for the same reason. At a general level, a directly owned rental adds a new category of exposure (premises liability, contractor disputes, fair housing complaints) that has to be managed with entities, insurance and umbrella coverage. A limited partner in a professionally managed vehicle generally risks the capital invested rather than taking on the property's operating liabilities, subject to the governing documents and state law. How any of this interacts with a particular state's exemption rules and a physician's existing coverage is a question for an asset protection attorney, not a general guide.

A property manager reduces the phone calls but not the decisions. The owner still signs the loan, approves leases and capital repairs, and carries the vacancy. That is delegated management. A passive interest is a different arrangement in which the decision rights, and the ability to intervene, sit with the sponsor.

Risks and liquidity

Passive real estate removes the operating work and leaves every investment risk in place. A private interest is illiquid, dependent on a sponsor, exposed to a single tenant's credit when the property has one tenant, and more volatile to equity when it carries debt. Each of these deserves the same attention a physician would give a treatment's side effects.

• Illiquidity. Interests generally cannot be sold on demand, transfers often need sponsor consent, and capital may be committed for five to ten years or more. Money that might be needed for a practice buy-in, a home or a career change is poorly matched to it.
• Sponsor risk. After funding, the sponsor makes every decision. Fees, conflicts, reporting quality and judgment in a bad year all flow from that choice.
• Tenant risk. A single-tenant building earns nothing when the tenant leaves. Retail bankruptcies and chain-wide closures have repeatedly shown that a familiar name is not the same as durable credit.
• Leverage. Debt is paid before equity. A loan maturing into higher interest rates can cut distributions even when the tenant pays in full.
• Concentration. One property, one tenant or one sponsor can dominate a small allocation. Spreading across vehicles reduces that, at the cost of more paperwork.

Tax mechanics: W-2, practice owners, and the spouse question

Real estate is taxed differently from clinical income, but not in the way physicians are often told. Depreciation can make a property report a tax loss while paying cash, and IRS Publication 925 generally treats that loss as passive, usable against passive income but not against W-2 wages or active practice income. The details turn on how the physician is paid.

Employed physicians on a W-2 generally cannot use passive rental losses against salary. The $25,000 special allowance is reduced by 50% of modified adjusted gross income above $100,000 and is gone by $150,000, so it rarely applies at attending income. Unused losses are suspended and carried forward until there is passive income to absorb them or the interest is sold.

Practice owners and 1099 physicians are in a similar position. Income from a practice in which the physician materially participates is nonpassive, whether it arrives on a partnership K-1, as S corporation distributions or on a 1099. Owning a share of the practice's building and renting it to the practice raises separate self-rental rules that a CPA should review.

The spouse question. A practicing physician cannot meet the real estate professional tests, because more than half of their personal services are in medicine. Publication 925 applies those tests to one spouse at a time on a joint return, so a spouse who works mainly in real property trades or businesses and spends more than 750 hours in them may qualify independently, and material participation in each rental activity is a further requirement. This is a mechanism with strict record-keeping demands and audit history, not a default outcome.

Every conclusion here depends on filing status, state, existing passive income and how each spouse spends their time. Freedom Commercial Real Estate does not provide tax advice. Consult your own CPA or tax advisor before relying on any of these rules.

Accredited investor status across the physician career

Most private real estate offerings are open only to accredited investors. Under SEC Rule 501(a), an individual generally qualifies with income above $200,000 in each of the two most recent years, or $300,000 jointly with a spouse or spousal equivalent, and a reasonable expectation of the same this year, or with net worth above $1 million excluding the primary residence.

The training years usually fail both tests: resident salaries sit well below the income threshold and education debt often makes net worth negative. The first attending year is the turning point for income, but the test looks back two years, so a physician finishing fellowship may not qualify on income until the second full year of attending pay unless joint income with a spouse already clears $300,000. A physician moving into a lower-paid academic role or reducing to part time should also consider whether the reasonable expectation for the current year still holds.

Questions a physician can ask any sponsor

Because the decisions leave with the capital, the questions have to be asked before funding. These are written for a reader with limited time who wants answers in writing.

1. Who signs the lease guarantee on each property, the parent company, a subsidiary or a franchisee?
2. What is the remaining lease term, and what happens to the plan if the tenant does not renew?
3. What are all the fees, what base is each one calculated on, and which are paid even when investors are not?
4. How much debt is on the property, when does it mature, and is the rate fixed?
5. How long is capital expected to stay committed, and what options exist to exit early?
6. When have distributions been reduced or suspended in the sponsor's history, and how was that communicated?
7. When do Schedule K-1s typically arrive, and in how many states will investors need to file?
8. How much of the sponsor's own capital is invested on the same terms as investors?

Frequently Asked Questions

Q: Can real estate depreciation reduce a physician's taxes on clinical income?

A: Generally not for a practicing physician. IRS Publication 925 treats rental losses as passive, and passive losses ordinarily offset only passive income. Depreciation can still shelter the rental income itself, and suspended losses are released when the interest is sold. Consult your own tax advisor.

Q: Does it matter whether a physician is employed or owns a practice?

A: For the passive loss rules, usually not: W-2 salary and active practice income are both nonpassive. Ownership matters in other ways, including capital needed for buy-ins, self-rental rules if the practice leases a building the physician owns, and more volatile year-to-year income.

Q: Can a physician's spouse qualify as a real estate professional?

A: Possibly. On a joint return the tests are applied to one spouse at a time, so a spouse who works mainly in real property businesses and spends more than 750 hours in them may qualify. Material participation and records are also required. This belongs with a CPA.

Q: When does a physician usually become an accredited investor?

A: Often after two full years of attending income above $200,000, or $300,000 jointly with a spouse, under SEC Rule 501. Net worth above $1 million excluding the primary residence is the alternative test, which education debt can delay.

Q: How liquid is a passive commercial real estate investment?

A: Not very. Private interests generally cannot be sold on demand, transfers often require sponsor consent, and capital can stay committed for five to ten years or longer. Money likely to be needed for a practice buy-in or a home purchase is usually a poor fit.

Q: Is a single-tenant net lease property lower risk because the tenant pays expenses?

A: It shifts operating costs, not risk. If the single tenant leaves or fails, the property earns no rent until it is released or sold, and debt payments continue. Tenant credit, lease term and store performance decide how exposed the investment is.

Sources

1. Doximity, 2026 Physician Compensation Report (2025 data)
2. AAMC, 2025 Key Findings: U.S. physician workforce (2024 data)
3. IRS, Publication 925: Passive Activity and At-Risk Rules
4. 17 CFR 230.501, Regulation D definitions (accredited investor)
5. U.S. Bureau of Labor Statistics, Occupational Outlook Handbook: Nurse Anesthetists (May 2025 pay)

This page is for informational purposes only and is not an offer to sell or a solicitation of an offer to buy any security, nor investment, tax, or legal advice. Examples are hypothetical unless a source is cited. Consult your own advisors about your situation.