Short answer: dentists can invest in real estate two broad ways — actively, by owning property directly, or passively, through syndications, DSTs, and REITs. Both can build wealth and defer tax, but the right mix depends on how much time you have, how much you already own, and how concentrated your net worth is in your practice. Real estate should diversify your wealth, not just add another illiquid bet on top of the practice and its building.
Why do dentists invest in real estate?
Real estate offers income, long-term appreciation, and unusually favorable tax treatment — depreciation can shelter income, and 1031 exchanges can defer capital-gains tax when you sell and reinvest. For a high earner looking to diversify beyond the practice, it can be an attractive complement to a stock-and-bond portfolio.
Active vs. passive: which fits a busy dentist?
| Approach | What it looks like | Trade-off |
|---|---|---|
| Direct ownership | Your practice building, a rental you manage | Most control; most work |
| Syndication / private fund | Passive stake in a larger deal (LP) | Hands-off; illiquid, accredited-only |
| DST | Fractional institutional property, 1031-eligible | Passive; no control, fees |
| REIT | Publicly traded real estate shares | Liquid, diversified; correlated to markets |
What are the tax advantages?
- Depreciation — a non-cash deduction that can shelter rental income.
- 1031 exchange — defer capital-gains tax by reinvesting sale proceeds into like-kind property.
- DST 1031 — a passive way to complete a 1031 into institutional property.
- 721 / UPREIT — roll property into a REIT operating partnership on a tax-deferred basis.
- Step-up in basis at death — heirs may inherit property with gains effectively erased.
How does real estate fit a dentist’s overall plan?
As one diversifier among several — not the whole plan. Before committing capital, most dentists should fund tax-advantaged accounts, keep adequate reserves, and honestly assess concentration. When real estate does fit, coordinating the structure and tax treatment with your CPA and a real-estate attorney is what turns a good property into a good investment.
Frequently asked questions
It can be — real estate offers income, appreciation, and strong tax features like depreciation and 1031 exchanges. The main cautions are concentration (many dentists already own the practice and its building) and liquidity (private deals are hard to exit). It works best as one diversifier within a broader plan.
It depends on time and temperament. Direct ownership offers the most control but real work; passive vehicles like syndications, DSTs, and REITs are hands-off but come with fees, illiquidity, and (for private deals) accredited-investor requirements. Many busy dentists favor passive approaches.
Sources
Founder & Financial Planner · Investment Adviser Representative · Series 63 & 65
Ian McGinnis is the founder of Dental Wealth Partners and a fee-only financial planner dedicated to dentists. As an investment adviser representative (Series 63 and 65), he built the firm to give dentists coordinated, fiduciary advice across their practice, taxes, investments, retirement plans, and long-term goals — the whole picture in one strategy. A graduate of Belhaven University, Ian previously worked at Davis Private Wealth, MML Investors Services, and Northwestern Mutual, and is based in the Jackson, Mississippi area. He is the author of The Wealthy Dentist and hosts the Smiles & Cents podcast.
Keep reading
- What is a 1031 exchange, and how can a dentist use one?A 1031 exchange lets a dentist defer capital-gains tax by reinvesting real-estate sale proceeds into like-kind property. The rules, deadlines, and pitfalls.
- Real estate syndications for dentists: GP vs. LP explainedIn a real estate syndication, the GP runs the deal and the LP invests passively. What dentists should know about roles, private 1031s, risk, and access.
- Why your dental practice shouldn’t be your whole retirement planConcentration risk is the quiet danger for successful dentists. Here’s how to think about building wealth beyond the practice.