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We dive into the critical yet often overlooked topic of wealth-building for physicians. Guest Amir Baluch, an anesthesiologist and financial expert, shares actionable strategies for diversifying investments, creating passive income streams, and leveraging high-earning potential to secure long-term financial stability.
Amir Baluch is an anesthesiologist.
He discusses the KevinMD article, “Leveraging your medical career for long-term wealth building.”
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Transcript
Kevin Pho: Hi and welcome to the show. Subscribe at KevinMD.com/podcast. Today, we welcome Amir Baluch. He’s an anesthesiologist. Today’s KevinMD article is “Leveraging Your Medical Career for Long-Term Wealth Building.” Amir, welcome to the show.
Amir Baluch: Hey, thanks for having me on. So I’ll start by briefly sharing my story and journey.
Kevin Pho: Go right ahead.
Amir Baluch: Well, it was kind of not the smoothest journey to get to where I am. So right now, I’m a semi-retired anesthesiologist and mainly focus on wealth strategies and alternative investments. But unlike most people listening to the show, I actually did not get into medical school the first time I applied. That was kind of painful.
And so I decided to put my life savings in my first business, electronic payments. After about a year, that didn’t work either. So then I’m like, OK, what am I going to do? I guess I’ll move back in with my parents in Midland, Texas. My dad was an internal medicine doctor, so I figure, hey, they’ve got a spare bedroom for me. But two months later, he declared bankruptcy—clinic wasn’t doing well, some failed investments—and we actually ended up moving to a one-bedroom apartment, the whole family, and kind of started from scratch.
So I was just sitting there thinking to myself: How do I prevent this, or where is the lack of financial education? I definitely didn’t get it in college or in high school. So, you know, I started learning a lot just from books and audio books as well. There weren’t really that many masterminds or anything like that. So Rich Dad Poor Dad was a book that was pretty popular around that time, like a quarter of a century ago, actually. And eventually I figured out that most people make their first million in real estate.
So I started getting into real estate at the age of 21 while I reapplied. Eventually, I did get into medical school, thankfully, on the second attempt, but I kept going with those alternative investments in real estate. And eventually, when I was 25, I got into my first multifamily deal as an LP with a private REIT.
In 2008, when I was a resident in Miami doing anesthesia, we did a short sale flip in Dallas. I eventually moved to Dallas in 2010–2011. I got my securities license because I love to learn. I joined a boutique investment bank. It had a broker-dealer arm and also a mergers and acquisitions arm. So I learned from them for about half a decade before I went off on my own to create Baluch Capital and help educate other physicians, so they wouldn’t end up like my family did, you know, 25 years ago, and also present some opportunities for growth and passive income.
Kevin Pho: All right. So you’re an anesthesiologist, and of course, you have your focus on wealth building as well. What’s your life like between those two careers?
Amir Baluch: Well, a few years ago, I went down to about doing 8 days a month of anesthesia. I took a year off to kind of formalize our company, make my brother systematize on the real estate development side, and brought in some underwriters from BlackRock, JP Morgan. Then I went back into anesthesia about 4 to 5 days a month. So, you know, every other Friday and maybe every other Tuesday, I’ll be in the OR, just picking up shifts or, you know, helping out friends if they’re on vacation—I’ll cover them.
That way, I still have one foot in the game and get some free food every now and then, and don’t let my Figs scrubs go to waste that I spent so much money on, right?
But most days, I’m waking up at 4 a.m. and I’m online with my team. We’re doing Zoom calls, we’re preparing for the day, and usually by 9 a.m. I’ve pretty much got a whole day’s worth of work done. The rest is pretty much the bonus round. We just work a lot on acquisition of real estate development, so we’re constantly working with underwriters and brokers and wholesalers.
On the private equity side, we’re constantly in meetings with companies that we’ve already invested in. And a lot of times, I’m a strategic partner with them. So we’ve got to sit in on these quarterly meetings and help, you know, either if they need to pivot or need to scale up or wherever they are in their process. Then we also do acquisitions, buying out e-commerce stores and creating fixed income products for passive cash flow for people. So all that structuring, organization, and team building is usually the space that I live in.
Kevin Pho: All right. So let’s talk about your KevinMD article, “Leveraging Your Medical Career for Long-Term Wealth Building.” Tell us what this article is about for those who didn’t get a chance to read it.
Amir Baluch: Well, you know, physicians are in such a unique space because they study for about 12 years, and they go into debt, which is kind of a disadvantage, but then they cash flow pretty significantly, and they usually have pretty good credit. So they have the cash flow, but they don’t have the time. So now, how can you use this to your own benefit?
Well, you know what, whenever we become doctors, we kind of have a systematic approach for diagnosis and treatment, right? But a lot of times, we don’t apply that to investing. People kind of just shoot from the hip, but I think if doctors started applying that to their investments, they could actually diversify and create a systematic plan. “Hey, let me have a certain amount of private equity, a certain amount of private credit, a certain amount in real estate, a certain amount in the public stock markets,” and build a portfolio just as if they were trying to build a medical plan with somebody with multiple comorbidities. “Hey, we’ve got to treat your diabetes; we’ve got to treat your blood pressure; use this; use this.” You bring in specialists when you need them, right? You consult with other people when you get stuck. You don’t try to make a diagnosis or decide what the plan is on your own.
So I think a lot of that mindset is actually embedded in the back of a doctor’s head, but sometimes they don’t use it because they’re so pressured with time, which is really their greatest asset. That’s the one that they really have to protect.
So what I feel that a lot of physicians should do is, you know, if they have the strong cash flow and they can live a little bit below their means and start generating passive income, if you start focusing more on assets that create passive income instead of just focusing on net worth, you could buy your time back. For example, we’ve helped a lot of doctors just take one day off a week. Let’s say you can just take a Wednesday off, or maybe two afternoons—maybe Tuesday, Thursday afternoon. You can just work on your practice or work on something outside of medicine, like if you are going to go into real estate or you have another type of side hustle, just to kind of clear your mind. But it does help to get that extra maybe 5,000 to 10,000 dollars a month first, so you can back off a little bit and get a big perspective on what’s going on. Don’t miss out on the big picture, because when you’re working as a doctor—I don’t know how it was for you—but you’re just like, man, it’s work, work, work. It seems to never end.
So I think that’s a good strategy that doctors can use to get their time back, which will help them make better investment decisions, maybe help grow their practice if they’re private practice. If you’re W-2, that’s a little bit different, but they could start building a second stream of revenue and kind of have some more control in life and also diversify from some of the pitfalls of medicine, which a lot of people don’t like to talk about, like decreasing reimbursement rates and a lot more corporate control and feeling the squeeze from these mergers.
Kevin Pho: So you talk about alternative sources of income, passive sources of income. Normally, that tells me that this is real estate-based—that’s part of your background as well. So let’s say we’re a physician, or a physician is listening to you here, interested in hearing more. Tell us how they can get started. What are some examples of some of these passive income streams that you’re talking about?
Amir Baluch: Well, I think that an easy one to get into is anything involving real estate, just because we’re a little bit more familiar with it. So I tried to get in with just doing a single-family rental. It’s kind of easy to get your mind wrapped around it, and it’s a business, but it’s very simple. The cash flow comes in from rent; your expenses are mainly the mortgage and maybe a little bit of upkeep. And that’s a pretty small business model but very easy to understand. And for a physician, it comes with a little bit of cash flow and some decent tax benefits. So you’re working on both offense and defense there. That’s a good place to go.
The next probably would be private equity, which just means private business. So there’s public equity, like public stocks, and there’s private. It just happens that private equity has made more money than public equity every year for the last 35 years. So at some point, somebody should have some exposure to it. And physicians can team up and buy into these businesses. Even some mom-and-pop businesses, you could buy at maybe three to four times the net income of a business, which means your return is, you know, the inverse of that, which is 25 percent cash-on-cash return from day one. So imagine if you could buy into something that’s maybe medically related—maybe it’s an existing medical spa, which, you know, is a little bit medical, but maybe you might not have aesthetics involved in it. Or maybe it’s a joint venture with a pharmacy or something like that, that’s a little bit medically related but not what you’re trained to do.
There’s actually good cash flow from there. And then, as they get older, it’s usually better. You know, then you’re trying to just protect what nest egg you’ve created, and you’re just looking for even more cash flow to bring your time back, and maybe something less risky. So usually private credit offers that, where it’s fixed debt against lending on a hard asset like real estate. Also, there are things like municipal bonds and corporate bonds. There are some public stocks that put off dividends, but it’s not that great. And then also just traditional fixed income products as well that you could get from either a financial advisor or even online. You could find those things where you could be a debt partner into a different type of entity.
Kevin Pho: Now let’s talk about the first thing you mentioned—single-family homes. How does one get started in that? You say that it’s a simple business, but let’s say a physician, like you said, is at a time deficit, may not know a lot about real estate. How does one learn enough to have the confidence to purchase a single-family home for passive income purposes?
Amir Baluch: Well, there are a couple of ways. One, if somebody wanted to partner on the money side and the lending side and have somebody else kind of manage it from a distance, you could do that. And usually there are realtors out there that specialize in it. So how I got started—I got my real estate license in 2011. I don’t think anybody needs to do that. But even then, I worked with another realtor that specialized in single-family rentals. And so you can find these people online, and there are also these real estate meetups that you’re going to find in almost any city. So networking with people that are in that space is probably the first place to go.
And whenever you find somebody there, as soon as you are collaborating with them, they’re going to open up their Rolodex. They’ve got people that lend on it, they’ve got people that find the properties, they’ve got people that manage the properties, because eventually you need some type of a team.
If you’re wondering who those team players are, probably the best book you could get—now, I’ve actually just bought and given away copies of this; I wish it was my book—but it’s called The Millionaire Real Estate Investor by Gary Keller. It’s like a blue and white book on Amazon, probably 10 bucks or something like that. But they show you step by step on what team members you need to make this pretty smooth. And so, you know, once you start putting your team together and pull the trigger on your first one, and you get through a year or two of that first one, you kind of know, hey, what to look for, how to hire a proper property manager. And, you know, you rarely get any phone calls. So I think that’s the first thing to do: put together your team of a realtor that knows what they’re doing, get your lender—then the lender might have some contacts for you to help get you some deals too—and then a property manager.
Kevin Pho: Now, contrast that option with, say, real estate syndications, because I hear a lot of physicians who may not want to make that effort in constructing their own team and directly purchasing a property, then go into real estate syndications. So contrast those two options.
Amir Baluch: That’s a good topic. So the most important thing that a lot of people don’t talk about—the most important difference—is the valuation method. Most businesses, including a multifamily syndication or any commercial real estate syndication, the whole enterprise is valued at a certain multiple of the net income.
Now, in commercial real estate, though, it just happens that instead of using a multiple of the net income or the multiple of EBITDA, you basically get the inverse of that, which is cap rate. And so cap rate is your, you know, if you bought a property all cash, what is your cash-on-cash return for a year? It’s usually like 4, 5, 6 percent, something like that. So that’s how those things are valued. So if you don’t increase the net income, if you don’t increase the rents, the value of that property is not going to go up. And you get a little bit of cash flow, but that value is really not going up that much. And sometimes it can go down, even if you increase rents, which is what’s happened in the last couple of years in multifamily.
Now, if you contrast that with single-family, why does the value of the house go up? Well, it’s actually not the value, but the price of the house goes up because the value of the dollar goes down, and houses are always a good hedge against inflation. So houses will adjust for inflation, and the valuation is based off comps. So if your neighbor next door sold for a million bucks, and you’re right next to them, and you have about the same square footage, you’re probably going to sell for a million bucks. And it happens that, you know, all the components to make a house—wood, steel, labor, wages—that all goes up. So, you know, the replacement cost goes up, which makes these houses more valuable over time as well.
So the valuation method is a little bit different, and you have to just go in there knowing what the plan is. So on a single-family, if you just buy and hold, and the cash flow is more than your monthly payment to the bank, you’re pretty much going to be OK no matter what, as long as you don’t get huge expenses coming in or too much vacancy. In commercial real estate, the difference is you’re going to be a lot more passive, so you can sit back and not do much work, but you’ve got to be careful about the valuations going in. You need to know a little bit more about how they’re going to increase those rents. In any commercial thing, it’s all about increasing the rents and decreasing expenses. You kind of have to have a better grasp of that and not just blindly invest in that, because if it’s not managed correctly, the overall property can go down in value—or maybe just not go up in value as much—compared to a single-family rental, which is pretty much always going to go up in value because it’s just hedging against inflation, sometimes a little bit better or oftentimes, in my opinion, better than commercial real estate.
Kevin Pho: Now let’s talk about the second option you mentioned, which is private equity. How do physicians dip their toes into that potential option?
Amir Baluch: So this is a little bit trickier. You know, sometimes they’ve done it and didn’t even know that they’re in it. For example, a lot of my surgery buddies are partners in a surgery center—that’s technically private equity. Or maybe if somebody opened up or partnered on a coffee shop down the street or anything that’s a private business, they might be in it but not thinking that it’s private equity, but it is, just on a very small scale.
A lot of times when people think private equity, they think of businesses that are, you know, 10 million, 50 million, maybe even a few billion dollars. That one, at least for me, is just a lot of networking. Luckily, because of my securities license, I was networked with a bunch of broker-dealers, and we just get deals all the time. Most of these things involve issuing securities in the private market. And so through them, I’ve gotten a lot of deal flow in at least life sciences and biotech.
But if somebody wants to get into private equity, you really have to go out there and basically take action and look for it. So you could go find some business brokers. For example, let’s say I really wanted to get into a pharmacy, because as an anesthesiologist, I just liked the pharmacology, right? And maybe I just wanted a pharmacy. You could find business brokers that are selling it and get on those email lists and say, “Hey, I’m looking for this. I can get an SBA loan for about a million, so I have this much down payment. If you find somebody that’s willing to owner-finance, I could do that.” And you actually go out there and have to hunt. It’s way easier to do public equity, right? You just push a button online and buy stocks.
But the downside of that is those are very efficient markets, and in an efficient market, it’s hard to get good risk-adjusted returns. In the private market, there’s a lot more inefficiencies. You have to deal with brokers, and the deals take a long time to close. It’s not like if somebody puts a Twitter post online that the valuation changes in milliseconds or anything like that. So it’s a little bit more work but a lot more stable. Over time, the data has shown it’s more profitable and higher risk-adjusted returns.
Kevin Pho: Now, is there a certain type of physician personality trait who would be more amenable to these alternative investments versus just sticking with low-cost index funds? Because from what I’m hearing, not all physicians may be cut out for these alternative investments that you’re talking about.
Amir Baluch: Right. I think, you know, at the end of the day, you can make it through either path. I’d say if you are going to do a set-it-and-forget-it with index funds, you’re going to have to save a lot more and have a longer timeline. Right now, I mean, these people—nobody has a crystal ball—but JP Morgan and Goldman Sachs are predicting that the next 10 years, the S&P and indices should be averaging around 3 percent, 2 to 3 percent a year returns after adjusting for inflation because of the bull run we’ve had and P/E ratios, you know, two standard deviations above where they usually are, and things like that.
So if you just have a longer timeline, you could set it and forget it if you don’t want to spend the time to learn about alternatives or if you don’t have the network to find some mentors that could help guide you. Now, if somebody has more time on hand and wants to diversify—which I think diversification is really key because you can never put all your eggs in one basket, right? So if somebody wants to diversify, it is a little bit more active. Even if you end up being a limited partner in some type of alternative syndication, there’s still some active role in there. You need to do some minimal due diligence. And if anybody has questions about that, they could email me on an asset class. I’ll at least show, you know, 20 or 30 things you should look at in every asset class before you pull the trigger. But you do have to take a little bit more active role or maybe put together a small investment group where everybody is putting in their two cents and dividing up the work and pooling their money together to invest as a group. That’s another way to do it if people are constrained for time.
But for sure, people that have more time, which in my experience has been anesthesiologists and emergency doctors—it’s more like shift-work-oriented—or even hospitalists that are one week on, one week off, are now really getting into alternatives and having the time to do the due diligence on these deals and increase their deal flow. Because it just depends on your time, the time involvement you want to take, and your timeline. If you can look further out and save more money, you could go with the indices route—just a little bit more risk.
Kevin Pho: We’re talking to Amir Baluch. He’s an anesthesiologist. Today’s KevinMD article is “Leveraging Your Medical Career for Long-Term Wealth Building.” Amir, let’s end with some take-home messages that you want to leave with the KevinMD audience.
Amir Baluch: You know, in anything you want to accomplish in life, if you work hard enough and you’re around the right people, you’re going to get it. So if being financially savvy or getting enough passive income so you can maybe just take one or two days off—not really retire early, because I think if you like your job, you should keep doing it—but, you know, you want to just find some mentors out there, read as much as you can, and hang around people who have been there, done that, that pretty much already are where you want to be.
And if anybody wants any other resources, we’ll have a link for anybody watching where they can get a free copy of my book, Prosperity Prescription. It has a little bit of a blueprint on how to get that started. Or if somebody wants to book a quick 10-minute call with me—just like a clarity call, I call it—where in 10 minutes, we kind of find out what the next step would be for them. Those two options will be available somewhere on a link, either on my website or somewhere after this podcast.
Kevin Pho: Amir, thank you so much for sharing your perspective and insight. Thanks again for coming on the show.
Amir Baluch: Thanks for having me. It was a pleasure.
