Should You Buy or Rent A House During Residency? #458 Part 1

And number two , this idea that owning a home is the American dream , that you haven't made it until you own a home , and I think it's even more prevalent among physician spouses than it is among the physicians . I have been putting up with living on student loans for the last four years and I want a freaking house .

You don't need me to introduce you , Jim , Everybody knows you . So let's jump right into this , right , Because this episode is about it's very kind of you . I don't know if it's true , but it's very kind of you . This episode , guys , we always talk about from experience .

So about several years ago , we got a property in Pennsylvania and then since then we've gotten several other properties with that and we've seen some successes and we've seen some you know , not so successes . I wouldn't go as far as saying failures right , Because we haven't failed .

Interest rates are close to 7 percent , student loans are through the roof , and so forth , in terms of , you know , interest rates .

a year , because that's what emergency docs were making back then . That was the plan and that plan was working fine and would have worked fine even if White Coat Investor had never made a cent . But you know , I got all excited in 2011 about passive income , about a side gig , you know . And yes , I felt very passionate about the white coat investor mission .

I'd already been doing that for four or five , six years online on various online forums , but I decided to want to start a business doing it and and my goal was very modest it was I wanted to be making a thousand dollars a month within a couple of years .

And if I didn't make that goal , the backup plan was actually to just go start a direct real estate investing empire . So you know , we never got beyond one property and it was an accidental rental . All my other real estate investments and about 20% of our portfolio is real estate . All of my other real estate investments are passive investments . You know .

They are syndications , they are private real estate funds . They are , you know , vnq , the Vanguard real estate ETF . So I've opted to put my active time into White Coat Investor rather than a direct real estate investing empire .

But I certainly thought about it , and I even think about it still from time to time , and then I got to remind myself I'm trying to simplify my financial life .

$50,000 , $100,000 is a lot of money . So if you want to be in the private real estate investing world which I think is perfectly fine , it has lots of advantages over public real estate .

I think funds are better for the vast majority of people . I think funds are better for the vast majority of people .

You've really got to want to be able to do the due diligence on that single property before buying it , to be interested in a syndication rather than a fund that's going to get you 10 or 15 different properties for your 50 or a hundred thousand dollars .

In essence , it's kind of made it less I want to say , made podcasting less relevant , but it really gives a direct voice to you know folks who are willing to go out there and kind of student doctor network .

You know what's going on out there , if you know what I mean , anybody who knows the reference , you know you can really get out there and kind of have a voice out there . And I'm just very interested in , like , the bad stories about syndications and I just remember you know there was a lot of investments .

You know we got approached by several companies in the past and so forth . But I'm just really interested in the public sentiment about syndications right now . And I think you know one of the things , particularly for the young doctors who are out there right now , because obviously we are just recording right after match day , right .

So you got a whole host of young doctors who are transitioning to becoming residents . They're going to be used to getting a certain amount of money that they've never had before .

There's going to be a , you know , maybe a little bit of some lifestyle creep from being a med student to now having some cash and so forth , but basically they're going to be targets , right , whether it's some type of financial product or some type of real estate product .

What's advice that you're giving to these students , or actually to these medical residents who are maybe in a high cost of living area , are considering , hey , should I just get like a ?

You know , should I rent ? You know I'm living in New York , or maybe I'm living in Cali or I'm living in Atlanta , should I rent ? Or , you know , should I just get like a duplex ? But with these interest rates , I mean it's hella high .

I mean , the truth is , the right answer if you're not going to be in a place for very long , historically is to rent and not buy , right , If you look at the historical data , you got to be someplace three to five plus years for it to appreciate enough to overcome the transaction costs of buying and selling and residency tends to be three to five years long .

So it's always been a gamble to buy as a resident . Now there are times when it pays off right In the last five years it's mostly paid off . If you bought a house when I started residency in 2003 in Arizona and you sold it when I left residency in 2006 , you did just fine . You might've doubled your money .

Now , if you I can't talk most medical students out of buying a house as a resident , it doesn't matter what I tell you , you're still going to buy the house . I can't talk you out of it . And that's fine , because sometimes it works out .

It probably works out about a third of the time for a three-year residency and about half the time for a five-year residency . And the truth is your income is going to go up so much anyway that you can bail yourself out of your bad decision . You know , and uh , so yeah , you lost money , but it doesn't matter because now you make $350,000 a year .

You know that's the truth . Most doctors is they do okay because their income bailed them out .

Because I know there's always that , well , you're paying somebody else's mortgage and you know what do you notice for residents to jump on that I mean there's two industries working against you here , right , there's the realtor industry , there's the mortgage industry .

That's throwing money away just as much . That's number one . And number two this idea that owning a home is the American dream , right , that you haven't made it until you own a home . And I think it's even more prevalent among physician spouses than it is among the physicians , if you like .

I have been putting up with living on student loans for the last four years and and a few years before that , in undergrad . I want a freaking house .

But I've been working with her for several years and during the time she's a nontraditional premed , during the time that she was kind of trying to get herself together to get into medical school , we had a conversation one day and she goes I think I want to buy a house as a pre-med . As a pre-med I said are you crazy ?

Now she was what , 27 at the time All of her friends were getting married , having children , buying houses . And I said your trajectory is not their trajectory and you can't . You know this is apples to oranges .

So the other day , when she got into medical school , we just had a conversation on Friday and we absolutely laughed about that previous conversation , about her getting a house . But I think you're right . You know it's this idea of the American dream and I'm going to be missing out if I don't do it .

So certainly when I become a resident and now I'm making some income I deserve this house . So it's just very interesting .

and , uh , people just don't think it through . They're like , oh , oh well , the mortgage payment is less than rent , so I must be coming out ahead . They forget all those other expenses of homeownership and until you've owned a home or two , you don't realize that sometimes you got to spend $14,000 replacing the roof .

So I've really done lots of roofs . They are more expensive now than when I paid 14,000 for sure Solar panels . You got to make sure it pencils out and most of the time it doesn't pencil out without the big tax break from the government . If you're not getting a big tax break , it's probably not going to pencil out .

It's very easy to overpay for solar panels to be sold a way too expensive solar panel system and come out behind on it . If it's going to take you decades to recoup your cost , it probably doesn't pencil out . You might want to behind on it . If it's going to take you decades to recoup your cost , it probably doesn't pencil out .

You might want to still do it . Maybe you just care that much about being solar and saving the planet or whatever that it still makes sense . But you've got to make sure it actually pencils out . There's actually quite a bit of shopping around you need to do to make sure you're buying a system designed to be bought , not sold , and paying a fair price for it .

Where you live matters . What direction your roof faces matters . Your weather matters . How much you're paying matters . What you're doing with the electricity matters .

You really got to run the numbers on this one and it sounds like whole life for uh for yeah , exactly , if you're gonna come out ahead in six years , fine , and you're gonna be there for 20 , fine , buy the solar panels , right .

But if it looks like , you're like , oh , this is gonna take 22 years to pencil out and , uh , I might only be here for six more years and maybe the person buying it's really going to value these solar panels . Well , maybe they won't . You know , and don't expect that you're going to get the money out of the solar panels you're putting in .

You really need to get the money out yourself while you own the home , not count on being paid more from the next buyer .

. This is Dr Nii Yo . This is the end of this segment . I appreciate you for listening , but this ain't the end . If you want more , go ahead and click the next button on your favorite podcast app Listen . That's next for more banter between me and Dr Rene . That's next for more topics . That's next for more segments Listen . Did you hit next yet ?