{"id":7070454,"date":"2026-09-30T22:00:06","date_gmt":"2026-09-30T22:00:06","guid":{"rendered":"https:\/\/fivemor.com\/?p=7070454"},"modified":"2026-09-30T22:00:06","modified_gmt":"2026-09-30T22:00:06","slug":"borrowing-money-to-invest-what-physicians-should-know-first","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=7070454","title":{"rendered":"Borrowing Money to Invest: What Physicians Should Know First"},"content":{"rendered":"


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A friend called me recently. A few of his investments had slowed down, one had stopped paying entirely<\/a>, and we spent twenty minutes working through what the losses might look like and whether he could write any of it off.<\/p>\n

Then he mentioned, almost in passing, that the money he’d put in wasn’t his. He’d borrowed it.<\/p>\n

That changed the conversation completely. We weren’t talking about investments that might underperform anymore. We were talking about payments that were due either way.<\/p>\n

If you’re a physician, you’ve probably had this option in front of you. Banks like our income and they like the credential, so the offers tend to arrive before you go looking. A home equity line on a house that’s appreciated. A line of credit against your brokerage account. Margin. A practice loan.<\/p>\n

And when a deal shows up and the cash isn’t sitting there, borrowing looks like the obvious answer.<\/p>\n

Sometimes it is. But the thing that usually determines how it turns out isn’t the investment. It’s the loan.<\/p>\n

Disclaimer<\/strong><\/mark>: This article is for informational and educational purposes only and does not constitute financial, legal, or investment advice. Any investment involves risk, and you should consult your financial advisor, attorney, or CPA before making any investment decisions. Past performance is not indicative of future results. The author and associated entities disclaim any liability for loss incurred as a result of the use of this material or its content.<\/h6>\n
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Is it a good idea to borrow money to invest?<\/strong><\/h2>\n

The short version: it depends almost entirely on whether the debt is attached to the asset or attached to you.<\/p>\n

A mortgage inside a real estate deal is normal. It’s non-recourse, it’s secured by the building, and if the deal fails the lender takes the property and that’s the end of it.<\/p>\n

A loan you signed personally to fund your piece of a deal is a different thing entirely. It has your name on it. The investment can go to zero<\/a> and the loan doesn’t go anywhere.<\/p>\n

Those get talked about as if they’re the same tool. They’re not.<\/p>\n

You’re signing two agreements, not one<\/strong><\/h2>\n

When you borrow personally to invest, you take on two obligations that have nothing to do with each other.<\/p>\n

The first is the investment. Up, down, or zero. That’s the risk you evaluated.<\/p>\n

The second is the loan. It has no idea what the investment is doing. It’s due on the first.<\/p>\n

So you’ve made one side of this optional and the other side mandatory.<\/p>\n

Here’s the version most people run. You borrow at 7% and put it into a deal projecting a 10% or 12% preferred return. Three to five points of spread, and the investment covers the payment.<\/p>\n

But a preferred return isn’t a guaranteed return. It tells you where you sit in line. It doesn’t obligate anyone to pay you.<\/p>\n

A sponsor can pause distributions<\/a> to hold cash, build a reserve, or cover a rate cap that got expensive. Sometimes that’s exactly what a good operator should do.<\/p>\n

Your lender doesn’t pause anything in response.<\/p>\n

The cash flow that was supposed to cover your debt turns out to be the most interruptible piece of the whole arrangement.<\/p>\n

Which dollars actually make the payment?<\/strong><\/h2>\n

Before you borrow for any investment, answer this specifically. There are only two honest answers.<\/p>\n

The investment pays it.<\/strong> True for stabilized rental property and some private credit. Even then, stress it. What happens if distributions stop for a year?<\/p>\n

Your clinical income pays it.<\/strong> True for stocks, crypto, pre-IPO shares, most value-add real estate during the improvement period, and anything else that doesn’t distribute.<\/p>\n

If it’s the second one, you’re not doing arbitrage. You’re making a directional bet financed by your W-2, with interest accruing whether you’re right or not.<\/p>\n

That can still be a reasonable thing to do. It’s just not what most people think they’re doing.<\/p>\n

What kind of debt are you actually using?<\/strong><\/h2>\n

The interest rate matters less than who controls the loan.<\/p>\n

Margin loans.<\/strong> Callable daily. Your broker revalues the collateral continuously and can liquidate without asking. FINRA sets the maintenance floor at 25%, but most brokers hold you to more, and they can raise their own requirement whenever they want.<\/p>\n

Securities-backed lines of credit.<\/strong> Similar mechanics, slightly more flexible terms, still secured by assets the lender can reach.<\/p>\n

HELOCs.<\/strong> Secured by your home. Usually variable. And banks retain the right to reduce or freeze the line, which they did at scale in 2008, to borrowers who were current on their payments.<\/p>\n

Personal and practice loans.<\/strong> Fixed payment, full recourse, nothing to seize but nothing protecting you either.<\/p>\n

Debt inside a deal.<\/strong> Non-recourse, secured by the property, ends with the property.<\/p>\n

The first four all reach you. The fifth doesn’t. That’s the line that matters.<\/p>\n

What happens if the investment goes against you?<\/strong><\/h2>\n

It breaks in one of two ways.<\/p>\n

You get sold<\/h3>\n

If your debt is callable, the lender picks your exit.<\/p>\n

Account drops below maintenance, you get the demand, and if you don’t post capital the position gets liquidated. You don’t negotiate the timing.<\/p>\n

And the timing is the whole problem. Margin calls happen at bottoms. That’s what a bottom is.<\/p>\n

The SpaceX IPO is a clean recent example. It priced at $135 on June 11, 2026, opened at $150, and ran as high as $225 over the following weeks. Then it reversed, closed below its IPO price in mid-July after a Starship delay, and bottomed at a close of $108.27.<\/p>\n

It’s trading around $148 now.<\/p>\n

Buy at $200 with cash and you had a rough summer. You’re down some, you didn’t enjoy it, and you still own the shares.<\/p>\n

Buy at $200 on margin and you were liquidated in the low $110s. The loss is permanent and you watched the recovery from outside.<\/p>\n

That investor may have been completely right about the company. It didn’t matter, because being right later wasn’t available to them.<\/p>\n

With your own money, being early and being wrong<\/a> are different outcomes. With borrowed money, they’re the same one.<\/p>\n

You get stuck<\/h3>\n

The private version has no margin call, which makes it feel safer.<\/p>\n

You draw on a HELOC<\/a> and invest in a syndication or fund. No daily price, no maintenance threshold, nobody forcing a sale.<\/p>\n

Then distributions pause. The payment continues. And you can’t exit, because there’s no real secondary market for private LP interests. Where one exists, you’re taking a serious discount and you usually need sponsor consent.<\/p>\n

The lender can’t come after the investment. It isn’t pledged to them and they couldn’t sell it anyway.<\/p>\n

They come after you. The house securing the line, the brokerage account, whatever the guarantee reaches.<\/p>\n

Now you’re holding two problems that don’t offset. The investment may recover. The debt is indifferent either way.<\/p>\n

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Can you write off the losses and the interest?<\/strong><\/h2>\n

This is usually where the conversation starts, and the answer is less generous than people expect. Worth running past your CPA, since it turns on your full picture.<\/p>\n

Interest on money borrowed to invest is generally treated as investment interest expense. It’s deductible, but only against net investment income, and only if you itemize. Net investment income is a narrower category than most people assume, and it typically excludes qualified dividends and long-term capital gains unless you make a specific election that costs you the preferential rate.<\/p>\n

So a physician with a large margin balance and a portfolio producing little current income often can’t deduct the interest this year at all. It carries forward, which helps eventually, but eventually doesn’t pay this month’s bill.<\/p>\n

HELOC interest has its own wrinkle. Interest on home equity debt isn’t deductible as mortgage interest unless the proceeds went into the home. Used for investing, it may be treated as investment interest instead, with all the same limits.<\/p>\n

And capital losses offset capital gains, with $3,000 a year against ordinary income beyond that. Against a physician’s income, that’s close to noise.<\/p>\n

The tax code does not make you whole on a leveraged position that went badly. It softens the edge, slowly.<\/p>\n

The real cost of leverage<\/strong><\/h2>\n

The usual framing is that leverage magnifies returns in both directions. That’s true and it’s incomplete.<\/p>\n

The better framing is that leverage takes away your ability to wait.<\/p>\n

For most physicians, patience is the actual edge<\/a>. High stable income, no outside investors, nobody forcing redemptions. You can hold something through a bad eighteen months when an institution can’t.<\/p>\n

That’s worth more than three points of spread. And a personal loan is the fastest way to give it up, because it puts a deadline on a decision that never needed one.<\/p>\n

Debt inside a deal is ordinary. Debt that funded your entry is a different instrument with a different risk profile.<\/p>\n

Knowing which one you’re holding is most of the work.<\/p>\n

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Were these helpful in any way? Make sure to sign up for the newsletter<\/strong><\/a> and join the Passive Income Docs Facebook Group<\/a><\/strong> for more physician-tailored content.<\/em><\/p>\n

Peter Kim, MD is the founder of <\/em>Passive Income MD<\/em><\/a>, the creator of <\/em>Passive Real Estate Academy<\/em><\/a>, and offers weekly education through his Monday podcast, the Passive Income MD Podcast. Join our community at the <\/em>Passive Income Doc Facebook Group<\/em><\/a>.<\/em><\/p>\n

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Disclaimer:<\/mark><\/strong> I am not a CPA, attorney, or financial advisor. The information in this post is for educational purposes only and should not be construed as tax, legal, or financial advice. Please consult a qualified professional about your specific situation before making any decisions.<\/em><\/h6>\n

Further Reading<\/strong><\/h2>\n<\/p><\/div>\n