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Ep 005 – Buying a House During Residency

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  1. Trevor’s Story: Finding A House During Residency [0:03:41]

  2. Buy Or Rent? Which Is Which? [0:06:36]

  3. Breaking Even On A House? [0:13:05]

  4. Buying A House Is Mostly An Expense [0:15:38]

  5. Trevor’s House During Residency [0:20:43]

  6. Unexpected Problems Relating To Houses [0:30:30]

  7. Can I Buy A House When I’m Already An Attending? [0:32:59]

  8. Motivation To Buy Or Rent A House [0:36:40]

  9. Roadmap: Values Based Financial Planning Approach [0:40:04]

Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board certified ophthalmologist with a full time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.

Jon: Hello everyone and welcome to the fifth episode of the Financial MD Show. On today’s show, we dive into the concept of buying a house during residency. We start off by hearing a little bit of Trevor’s story and his experience during residency and med school and what he learned about buying versus renting and what he would do differently. I’ll give you a little clue: He’s got some regrets to share with us today. We then pivot to talking about when it is the right time to buy a house and how to buy that house. We talk a little bit about physician mortgages. Trevor goes into how his perspective has shifted which actually turns to go a little bit against conventional wisdom. We wrap up by talking through, is renting really worse than buying and what are the pros and cons of it and when in your career is the right time to buy a house, how to buy it right, and how to identify when it is a seller’s market versus a buyer’s market and how not to pay too much frankly. And so with that introduction, I hope you enjoy today’s episode of the Financial MD Show.

Jon: All right, welcome everyone. We are back again with the Financial MD Show with yours truly, Jon Solitro, and Dr. Trevor Smith. How’s it going, Trevor?

Trevor: Great! Having a good start to the week here.

Jon: Yes, it is Monday here in Financial MD land and somehow I feel slightly more dynamic with these big headphones on my head or it could go completely the other way where I’m like an NPR announcer. Anyway, we’ve got a great topic for you. I love talking about this particular topic because we do get a lot of questions on it and it’s more of a philosophical or more of how do you predict the near future is going to go, when we get asked the question of should we rent or buy during residency – we’ll talk about that first – and then we’ll talk a little bit about buying or renting when you get your first job because that’s a different concept as well. There are a lot of factors to consider when you’re buying versus renting. You’re getting out of medical school, you’ve been matched, you know where you’re going to be, and you start looking ahead maybe a few months before of where you’re going to live. Trevor, you came from U of M Med School, right?

Trevor’s Story: Finding A House During Residency [0:03:41]

Trevor: Yeah, that’s right. I grew up in West Michigan, went to undergrad there at Hope College, and then went to University of Michigan Medical School.

Jon: You then had to find a place in Royal Oak area because residency was at Beaumont?

Trevor: That’s right. Beaumont, now called Beaumont Health.

Jon: Okay, I call it Club Beaumont.

Trevor: Some people do call it Club Beau, definitely not internally, but yeah. It’s not very clubbish for sure. It’s definitely a residency. Then I had to find a spot in Royal Oak. My first thought is just like I don’t know where I was going for residency so to think about getting a house in medical school was like definitely not on my agenda. Nor did I need one; didn’t have a family, didn’t have kids. Everybody has got a different circumstance. I don’t even have a motivating factor to even lean in that direction, plus I was 23 starting medical school which sounds young now.

Jon: You mean out of medical school at 23?

Trevor: No, starting medical school. In terms of looking at a house potentially, there’s people in my class that bought a house.

Jon: That’s interesting.

Trevor: They had worked for a few years. Not even that much older, late 20’s. They had a kid or a kid on the way.

Jon: Working spouse?

Trevor: They had either a working spouse or some of them a non-working spouse who just wanted a home.

Jon: Their student loan payments went to mortgage payments?

Trevor: Yeah, I would think that would be it. I’m honestly not sure, now that I say that. Maybe they were working and it was just enough to pay that portion – I’m not sure. When I went to residency, I kind of thought about it. I googled around a little bit and White Coat Investor steered me clear of buying anything big and then I knew I was going to try to pay off my loans directly so my finances were tight-tight because the first few months before I refied, I was paying full payments on one of my loans – the government one – so I knew getting a house was not in the cards for me. I didn’t have the cash flow. I didn’t have a down payment. More to that story later, I did end up getting a house for a year.

Jon: Oh, you did? Okay, excellent.

Trevor: Yes. We haven’t talked about that at any point. Yeah, but I’ll get back to you.

Buy Or Rent? Which Is Which? [0:06:36]

Jon: Okay. Here’s the situation: You’re getting out of medical school, you’re going into residency, you’re searching around for where to live, and most people come into it with the mentality of, in general, it is better to buy than rent – not throwing away your money – and so I get this question. I got this question when I was speaking to – I remember one specifically, I was talking and this was a year, maybe two ago – talking to MSU’s Radiology Residency Program, and I tried to hang around and answer some questions at the end but a first year PGY-1 comes up to me and says, “You know, I’m thinking I should probably buy a house, what do you think?” And I said, “No, don’t do that.” And they kind of look at me a little shocked like why? It’s always better to buy versus rent, right? You’re owning something and building equity, and normally, sure, although there’s other schools of thought on that as well. It just depends what’s important to you. Is it important to you to be more mobile? Is it important to you to not have to take care of a house? All that kind of stuff. Throwing away money could be valuable – that kind of thing – but when it comes to residency, the general school of thought that I approach it in is a: A longer residency makes a little more sense versus you know in a pretty high likelihood you’re not going to stick around that town. Probably 80 percent chance. Most people are traveling a distance from their home so maybe they’re one of the few that really liked it and they get offered a job as an attending to the hospital that they actually graduated from – but not likely. Specifically, in today’s market, if you buy a house, I would say prices are higher than they should be on houses in Michigan as we’re talking today. So this may be different in your part of the country, but in Michigan, prices have been going up and up and up since about 2012, have surpassed beyond where they were at the time of what we call the housing bubble or the mortgage crisis or whatever you want to call it when prices kind of crash back down again. I was lucky enough to pick up a foreclosure at the time and just sold it this summer so we made out pretty well. In general, buying a house right now or in the last couple of years or probably in the next year or two means you’re going to be paying a high price for this especially when you look around and see that people are getting into bidding wars for a house. That’s like a sure sign that you’re overpaying for this house, I would think, and maybe you don’t care but when it comes to something that I’m going to buy this and then 80 to 90 percent chance I’m going to sell it in the next three to five years, should you be buying an asset that’s overpriced is all I’m saying. Personally, I say don’t buy a house during residency; rent, and it’s simply for that reason, and we saw this back in before my time when some of the partners that I grew up with and was trained with when they were doing these lectures and working with residents and helping them transition into practice in 2006, 2007, 2008, what they saw was residents buying houses because at the time, real estate is the “best investment in the world.”

Trevor: Right. It always goes up.

Jon: You’re right.

Trevor: That’ what they were saying and that’s why it’s a safe bet.

Jon: Is that true over time? Sure, you would say that about the S&P500 too. But we’re not talking about long term. I had an ER resident that got out of residency in 2009, had bought a house, and she couldn’t sell it because she owed more than it was worth. She was what they call underwater and she moved out of the state to get a job in Kentucky still having this house. So for two, three, four years, she carried two houses and you can say, “Well, that’s great. You can just rent it.” Yeah, sure that’s an option. Do you want to? And it’s not like a sure thing.

Trevor: That’s a stress.

Jon: Oh, it is.

Trevor: When you’re having life changes even if you take a new job that you’re really excited about and you have to move and start fresh, it’s stressful. It’s very stressful. I think especially in medicine with so many uncertainties and there’s a pressure on you. You put pressure on yourself. You know people are watching you. We just hired this guy. We just paid a bunch of money to come over here. Is he going to do a good job? You want the staff to like you. You want to not be busy throughout the day, making phone calls and arranging stuff. It’s just adding complexity to your life or adding complexity to your future life. It couldn’t be avoided for the first five to ten years after graduating medical school. It’s priceless because things are always – there already chaos and you only have control about so many factors that are going to stress you out. But making major purchases, you have control over that and unless you have a lot of good reasons, you’re going to be glad especially if you really look into the prices and how much you “save” by buying a house and not “again” wasting your money on rent. When you compare the two over a lot of time periods and in a lot of scenarios, you come out ahead on the rent. People argue about this forever, but it’s true. It adds complexity.

Breaking Even On A House? [0:13:05]

Jon: I mean how long does this even take before you’re really going to get back to breaking even on a house? How much of those first few years are just interest, and let alone, closing costs? Even if you sold the house for exactly what you bought it, you wouldn’t be able to get back out of it what you put in for four or five years, I would think. So these residents buying houses in their first year, their house has to go up in value just to get their money back out and break even when they get out of residency because of closing costs and interest and all kind of stuff especially if they’re doing the zero money down physician loan which in residency is pretty much most people, that’s all you can do. It kind of allows residents to get a house when maybe they shouldn’t. There’s a lot of factors to that. It’s the timing of when you’re buying and selling, it’s the interest, it’s the closing cost, and just all that stuff. I think a lot of you growing up, again, like Trevor saying have this message that you need to buy and not rent. But renting is like paying insurance. There’s a cost to what you are paying for. Well, you’re paying for the freedom to be able to live your life the way you want and not worry about bad things happening and at least wiping you out financially. That’s insurance. Same thing with rent. You’re paying for the insurance that if I got to go somewhere quick, I can and I don’t have to worry about selling a house or being a landlord or if I need to be flexible and with you guys as residents, you know you’re going have to be flexible.

Trevor: I’m probably extreme on the rental side of things. I read Ramit Sethi’s book I Will Teach You To Be Rich. He’s got a whole blog system and stuff – he’s great. That just put the nail in the coffin for me in wanting a house in the next three to five years. I don’t want one. I had such a long list of reasons why I love renting. Before, I was like, “Oh, renting kind of stings like buying a house there’s so many barriers, it’s really hard.” Like I said I had one for a year – maybe I’ll tell that story in a minute – but I kind of know it is challenging and there’s so many hidden costs and they’re not small that it meant a lot of responsibility. I’m a millennial and I do like the freedom.

Jon: Not a vagabond?

Buying A House Is Mostly An Expense [0:15:38]

Trevor: Yeah, and I’m not. I’m like so not a vagabond. I’ve been in Michigan my entire life. It’s nice to not feel stuck to things that are big and expensive when I’ve already got student loans. The renting is just so good. I don’t understand how – there must be just so much money being made by the housing industry to convince everybody that owning a home is a no-brainer and then also the housing market, I think you’re almost had to get into the bigger economic picture of the United States inflation and all the stuff. The numbers have just gone up so it just seems like a safe thing. It’s a false sense of safety. It’s a false sense of an investment when to me buying a house is actually mostly an expense. If you look at it a little bit more objectively for how much you’re going to pay like you said closing costs, the interest is actually kind of insane unless you’re doing a 15-year. When we’re talking to residents here, residents aren’t doing a 15-year.

Jon: No.

Trevor: They’re trying to get their monthly payment as low as possible. They’re trying to say, “I can get more for the same price as renting.” Usually, I think, is what it comes down to. It’s not, “I’m going to invest my money and I’m going to have a little nest egg in three to five years.” It’s like, “Oh, well, I was going to pay 1100 dollars for a rental place and it’s not that nice and I want to have my own place. I’m going to find a place at Zillow for 900.” It’s going to end up costing you 1200 with all the closing costs with the insurance you’re going to have to buy and you’re going to want and then what if something breaks? It really adds up fast. You started out, and the way they get you to buy something – just in general, car purchasing process is the same way – they make it seem really easy. It’s going to happen really fast. It’s going to be smooth. It’s just as good or better than the option – renting – that you thought you’re going to do. They just kind of sleepwalk you into buying a house. They make it seem easy. They do the mortgage calculator for you on Zillow. I can find a good deal. You talk yourself into thinking you found a deal.

Jon: Interest rates are low and there’s no better time.

Trevor: Yeah. I mean how many people have you heard go, “Oh, best thing ever. I just bought a house. I paid too much.” Everyone thinks they got a deal, do you know what I mean?

Jon: Well, and that’s what I don’t understand. When I talk about the whole bidding wars thing, you put an offer on a house and then the realtor comes back and says they got another offer, what’s your highest and best. That’s the bidding war. How can you feel good about that? How do you not have some buyer’s remorse? You must be so emotionally attached to that house that you’re like, “I don’t care. Just write them a check, honey, whatever they want.”

Trevor: That’s right.

Jon: So you get the house and then you go through this process and you’re sitting in this house, wouldn’t you said the first time being like, “Yeah, I paid too much for this thing.

Trevor: I don’t think people do have that.

Jon: No, they don’t. They can’t. They wouldn’t be able to live with themselves.

Trevor: They’re so happy. You know what people don’t do is after the fact, sit down, and go, “How much did I spend to make this happen?”

Jon: No, they don’t because they don’t want to know.

Trevor: And, “Am I glad?” They do not want to do that. I wouldn’t do that either. Nobody in their right mind would sit down and go, “Okay, there was some unexpected costs. Let me put that in a spreadsheet and just make myself depressed.” No one’s going to do that. But that is what’s going to happen.

Jon: Yeah. We can convince ourselves of anything and when they go through that process, they’re just slowly everyday convincing themselves, “Yeah, no, this is a good deal. Yup, I’m glad I did this. This is great. This makes sense.” And I totally agree on people say their house is an investment but it’s not. Unless you’re going to turn that somehow into cash and recognize that gain, it’s not an investment. It’s an asset, I guess.

Trevor: It’s an asset with a decent amount of risk like buying a stock.

Jon: Yeah, and people talk about if they have enough savings for retirement and they’re like, “Oh then I’ve got my house too. I’ve got equity in that.” That equity doesn’t mean squat unless you’re actually going to sell it. It’s just paper gains, right?

Trevor: That’s right.

Jon: So you’re going to sell that house to help fund your retirement. If yes, then okay. We can include this in the picture and in the plan. But if not, then they can sit over here on the side while we look and see what other investments you don’t have because you decided to pay down all student loans first.

Trevor: Yeah. So let me tell you about how I got this house.

Jon: Yes, please.

Trevor’s House During Residency [0:20:43]

Trevor: So I’m in the residency and – I’m reflecting on the silly parts of the story – so, I was second or third year resident living in a teeny tiny little apartment. I want to say it started out like 630 per month and it was walkable to the hospital and I had a very strict but responsible landlord and it was great. It’s one of those kitchens where the kitchen counter was this wide next to the sink. You didn’t even have a place to dry your dishes pretty much and there’s no dishwasher. But I knew what I was getting and I was motivated to pay off my loans and I wanted to live responsibly. At that time too, I was planning on doing long-term international medical work. I got to keep it tight so I can get out there and get going as soon as possible.

Jon: That was kind of one of the stipulations on your loan forgiveness sort of, right?

Trevor: Yeah, that’s right. Anyways, I had the small apartment and I liked it. I definitely am somebody who can go with the flow. We don’t need to have everything right away. I can bide my time, delayed gratification. Anyways, it was fine for a couple of years, and then I started dating this girl with a dog and then I couldn’t have a dog in my apartment.

Jon: Period. Not even visiting?

Trevor: Not even visiting because like I said, my landlord was really strict, even though it’s not a nice place, you’d think he’d be fine with it. He had a dog. It just kind of put this bug in my ear like, maybe I’ll look at a house and I was looking at a fellowship and staying in the area so I kind of started doing like justify this part of my feelings and it be kind of convenient for this and I kind of want to do want to have a house and trying to get out debt so why don’t I pick up an asset that’s going to be worth more in a couple of years. Basically, I just started looking at houses and then I would find one, I was like, “Oh, I really like this house.” Completely emotional interest and then I would look at it and it wasn’t what I want and I was like, “Okay, thank God, I didn’t like that house because I don’t have the money.” Eventually, I got a house. My parents helped me with the down payment because they don’t want do a physician loan and it was understood that I would basically borrow that, pay it back. Anybody listening who doesn’t have that type of situation is like, “Gosh, this guy, I feel so bad for his loans with his parents helping with this house.” But I’m just being real. This is how I ended up getting a house. It was 215 I think I paid and it was just a small ranch home. I liked it. It was great. It got a good inspection, and less than 30 days in, the hot water here went out. I replaced it myself with the handyman, went to the store, carried this 200-pound full of the hard water buildup stuff inside. It was one of the heaviest things I’ve ever lifted. I was sure I was going to hurt myself.

Jon: Heavy and awkward.

Trevor: Yeah. So we carried it up the stairs and he disposed of it, and bottom dollar, paid him hourly for the afternoon and bought the thing at Home Depot and used his truck and drove it over. Bottom dollar, it cost me 900 dollars to replace it within 30 days, and I didn’t do the one-year insurance thing which is to me I’ll always do that in the future. So I had that repair then a month later, I had a backup in the basement. It did like snow melted and somebody came in, snaked it. They took some roots out and they were like, “Hey, there’s cracks.” They used a clay pipe because it’s an old area of Detroit and Berkley. It was cracked. He’s like, “You’re going to have to replace that from the house to the street.”

Jon: You know what? They get a ton of those down there.

Trevor: Oh, yeah, tons because these are old. Twelve thousand dollars is what they were saying is going to cost. Guess how much money I had in the bank? Twelve hundred dollars probably, 1500 dollars? Pretty much living month to month now that I bought a house and a refinancing loan so I’m not even paying my loans down anymore. Goals out the window. Eventually, then I’m applying for fellowship and I didn’t match in Detroit. So now I have to sell my house. I was pretty much sure I was going to match in Detroit. Everything works out fine – love my mentors and everything. It’s fine, but it was unexpected and I was, “Okay. That’s great. I’m still going to go somewhere good but I’m going to have to sell this house.” So I sold the house 10 months actually after I bought it.

Jon: Oh my gosh.

Trevor: I did for sale by owner. I got out of it by the skin of my teeth. I actually made a small profit because selling by owner is pretty doable. I got lucky, super, super lucky, and I was stressed probably for six of those 10 months. I was stressed about when I sell this, they’re going to do an inspection. They’re going to see that that pipe needs to be replaced and I’m going to have to pay it. This was going to be at least 12,000 dollars depending on how fast they can do it and permits and so forth because they have to shut down the street. That’s just one of the million things that can expensive wrong with your home that you have to replace. So I wasn’t prepared to be in a house. I still enjoyed it. There’s lots of great memories.

Jon: Did the dog get into the house?

Trevor: The dog got to hang out in the house. He was very happy in the house. Those were great. It’s fun. It was nice to have a home. It’s a different sort of satisfaction to own a home, I get it, it’s nice. But the stress in residency is significant. The stress of owning a home and the lack of predictability is substantial and there’s way worse stories than that one but the reason I was able to not lose a bunch of money was because I fully disclosed that whole thing when I was selling it by owner and because I did, he had a separate plumber – different company – come out and give a second opinion, and they said, “This is normal. Cracks in the pipe is fine, and this will last 20 more years as long as you just snake it once a year. That’ll cost you 50 bucks once a year.” I got so lucky. Otherwise, I would have just added another ten grand to my already large mountain of debt. And that was a house I had inspected thoroughly. My brother is a real estate agent. He’s like everything is checking out, everything looks good. My real estate agent is like, “My son just bought a house in the same neighborhood a couple of months ago. This is good price. You’re getting a deal.” Again, see, I thought I was getting a deal.

Jon: Says the guy who was going to get a commission.

Trevor: I know that’s exactly a long story.

Jon: No, that’s exactly a prime scenario.

Trevor: It happens. Maybe I had to go through that but I love renting now. I’m obsessed with renting.

Jon: Understandable.

Trevor: I don’t have a fancy apartment or anything right now and it’s just great. It’s peace of mind. It’s a controlled fixed amount of money per month so I can manage my budget better while I’m aggressively paying down my loans. You don’t always get a great landlord but I have. I’ve repeatedly had a really nice landlord that fixes things quickly. My hot water when I take a shower is terrible. It’ll go hot and then cold, but it’s like, nah. You’re not going to have everything even in the house that you own and the peace of mind and the control of being able to leave or move, it’s amazing. It’s so nice. Renter’s insurance is way cheaper. Everything is less expensive. I love it.

Jon: Yeah. Those are some fantastic points and a lot of them in favor of renting from lowest cost and insurance and no chance of you having to deal with like water issues in the house are the worst because they’re so expensive to fix if they can be fixed and that’s the one thing I’ve learned from different houses is always look at the basement. Look for any signs of water because they may say whatever they may say and at the end of the day they’re not liable. There’s no return policy on house so you’re in it and then the next month you got water in your basement.

Trevor: And you’re dealing with it again.

Jon: I’ve dealt with that and it’s so stressful and then what happens is every time it rains after that, you’re lying awake in bed just like, “I’m going to go check the basement.”

Unexpected Problems Relating To Houses [0:30:30]

Trevor: Yeah. I have a list of things that I want in my next house and one of them no basement. They have them. My parents actually don’t have a basement because the last house they owned flooded every single year and they got sick of replacing the carpet and the drywall and they did all of the things all of the people recommended and they had a sump pump and they had a backup battery and it just always flooded. They rehabbed a house and it was close to some dune area where nobody in the neighborhood had basements and they were just, “We are not putting in a basement. This is great. We love this. How could it flood?” I mean, the roof could leak or a pipe could break, but other than that, it’s not going to flood like clockwork annually. I hated worrying about when it would rain.

Jon: Yeah. I’ve put a deposit down to get a B-Dry System – a basement waterproofing. It was 8,000 dollars they wanted for that. The first time we got water in there, so I’m like, “Fine. Do it. Here’s the deposit. I want this.” And then I had to move around some dirt and stuff around the outside of the house and fix some gutters and stuff and that pretty much took care of it. So then I was, “I guess I don’t need the B-Dry System.” So I went to get my money back and they’re like, “Yeah, we don’t really give the deposit back after 45 days.” It was a 25% deposit too. Two grand. And I was like, “I don’t think so.” They gave me half of it back eventually after I threw enough of a fit and wrote a letter. Yes, lots of great stories about buying a house. Similar concept when it comes to, “Okay, I’m out of residency. Now, I’m an attending. Now I can buy a house, right?” Trevor – maybe you know this – what are the chances that your first job is going to be your last job?

Can I Buy A House When I’m Already An Attending? [0:32:59]

Trevor: The last job is probably less than 10 percent, I would guess, for last job. I think people say more than half of people leave their first job within two years. At least half.

Jon: That’s what I’ve heard too. I’ve heard 80 percent within three years.

Trevor: Yeah, that sounds right. I mean I’ve got text messages going with lots of different ophthalmologists just in my subspecialty. That’s just subspecialty where you do want to find something and stick because you build patient base that really, really benefits and then when you’re a partner and you’re profit sharing, it’s particularly beneficial in ophthalmology and particularly detrimental really to move around for the same reasons. I’m talking to multiple people. We’re all early and I have moved and they’re all either moving or looking and asking like, “Hey, what did you look for in this next position? I don’t have this. I don’t have that. I’m looking for something new.” They’re all renting fortunately. I mean off the top of my head, I think they’re all renting. So it’s great. I mean it’s just one major factor that’s not going just kind of push you and hold you down when you know you don’t like what you’re in.

Jon: Yeah. It’s a lot of the same concepts again if that first month or two when you’re in that new job and you buy a house and you’ve got a physician loan with zero down, again, you’re almost going backwards a little bit just until you got to bring money to the table to get out of the house because you’ve got no equity and there’s closing costs and all that stuff. I don’t think we need to go too deeply onto that concept. Pretty much the same thing until you really feel you’re settled until you feel you’re getting a good value. I don’t know about good deal but good value for what you’re getting and what you’re paying and just all those other factors. Not saying never ever buy a house. I own a house right now that’s basically makes sense for us. Part of it is I’ve got four kids. It’s hard to find a place to rent that can fit this many people.

Trevor: It’s nice for kids to have stability. I think that is nice.

Jon: Definitely. A house and a yard and the neighborhood and all of that stuff, for sure. That’s what we are paying for.

Trevor: And just not to move every other year. If you’re renting, they can like a family probably but they could sell the house if the market’s hot in the next one to two years and you’re moving every couple of years. It does happen to people. I know people who have done that as a family but just have to pick up a move. They’re selling the house.

Jon: Yeah. We had really good timing with like I said, we bought our house in 2012 as a foreclosure, four-bedroom, good-sized house, and then we just sold it this year and basically doubled our money. But that was probably – cross my fingers – a once-in-a-lifetime opportunity and I knew back then I was, “Okay, there’s a bunch of foreclosures around. I’m going to find a sweet deal on a house,” and then we always knew as a family that this could be our forever house or we could sell when it makes sense. One day, we just looked at each other and we’re like, “What do you think about selling this house? Okay, look into it.” And here we are.

Motivation To Buy Or Rent A House [0:36:40]

Trevor: I have like getting close to a closing thought too which is just I’m trying to think what my friends have been saying me as I’ve been talking about how much I like renting. Definitely, the number one is, “Well, don’t you feel you’re wasting money?” We’ve kind of been over that and it’s never a waste. It’s a roof over my head and all these great things that I get out of it just like a house. It’s definitely not a waste of money. I’m paying good money for something and not too much but it’s always about a lot of these questions are so objective-focused. It’s like, “I want a house. I don’t know why I want a house but I have a desire to have a house.” I think when we want something, people will oftentimes say they’re just trying to figure out how to get the house because they want the house even if they don’t know why. But they’re not thinking bigger picture like how do I build wealth, what do I want in life, how do I want to be successful. And you don’t need a house to build wealth especially early in our careers as a physician, you’re so far in the hole that buying a house often inhibits your ability to build wealth. This is like, “Do I buy new car, do I lease a car?” I think I read a lot about the specific issues which is just helpful in residency. I was, I want to get a better car, we want a reliable car. It’s all these narratives that companies and whatever we tell basically us. We tell ourselves these things because we want new things. We want nice things. But the question really is how do I want to build wealth? How do I make a plan? It’s so easy to get distracted with these individual decisions but it’s really you got to come back to the big picture. What am I trying to accomplish? What am I trying to do? What am I trying to build? Who do I want to be? These are way more important questions that become your motivation. It becomes your foundation for making a smart decision about buying a house. And we almost got to this backwards a little bit but it is what’s motivated me to rent say like there’s all these good ideas – but really the reason I’ve done it and I’ve stuck with it is because I want freedom. I want financial freedom. I don’t want to be in debt. I love to own a house someday but I don’t want to do it in a way where I feel trapped or where it’s limiting me, funding. If I want my kids to go to a private high school or something, I’d like to be able to do that. I don’t think I want to do that. I went to public school. This is a good example of – I think we focused on the specific issues and it’s helpful and there’s a lot to be learned, nuances, pros and cons, all these opinions but really if you don’t know what you want or what you’re striving for, you’re just going to forget and just read little tiny articles about this and that.

Jon: Sure. It kind of hit that.

Trevor: That was the closest thing.

Jon: Go after whatever you read all shiny object and kind of go after that.

Trevor: Yeah, and you forget – it’s so easy to forget. Anyway, thank you for giving me a minute to pull my thought there.

Roadmap: Values Based Financial Planning Approach [0:40:04]

Jon: I think it’s a great closing thought how does this all tie back into financial planning and your overall financial picture. Does the house play into that? Maybe. I’m not saying it doesn’t but it’s definitely something that every decision – you know we do this roadmap with our new clients where we walk them through first before even talking about money and dollars and goals and time horizons and all that stuff – we talk about their values and we say it’s called the values based financial planning approach where we say, “Okay.” But this concept of money, what’s important to you about money, and we start to get at the motivations of people and, “It does bring security and it brings comfort and I take care of my family,” and do all of these kind of things that are deep-rooted philosophical values that they were raised with or cultural things and then we get to the next step of okay and how does your financial plan help you feel these things or accomplish these things and basically make you feel like how does money give you the life that you want now and 50 years from now and leave the legacy you want for your family and all those things and maybe a house plays into that but maybe we have to have the conversation that, “Okay, for you to do this, I think the most optimal way is for you to rent right now and that’s okay and may go against the conventional thinking.” But running everything and why when we have our reviews with our clients we pull out the roadmap every time so we can say just to check back to that standard and that benchmark of is every decision that we’re making and everything that we recommending and the plan for putting together, is it still in line with what you said is important to you. And a house buying decision, where you live, buying or renting is no different. How does it all play into that? That’s I think a fantastic point that we need to remember. Overarching, what are we saying here at Financial MD, does this decision get you closer to or further from your best life I guess.

Trevor: How often do you go over that with your clients? Is that an annual check-in?

Jon: At least every six months.

Trevor: That sounds about right. I tend to get off track little bits maybe quarterly, but for the most part, a six-month check-in would probably be spot on.

Jon: I can fix most things within six months with people. And six months, it’s funny I have been working with enough attending physicians now that there’s six months between they can build up enough cash that depending who they are, I’ll meet him every six months and be like, “I’ve got another 50 grand sitting in my checking account.” “Okay, let’s do something with that. Let’s invest that. Let’s do it and just not just let it sit in your checking account.” “I’ve got 100 grand,” or whatever the case. That works for now and I don’t always remember to bring out the roadmap but it’s definitely some I try to make a regular habit.

Trevor: That’s great, nice. Thanks.

Jon: All right, so I think that’s enough to say on that topic. Trevor as always, thanks for sharing insights.

Trevor: Hopefully, people can learn from my mistakes and it’s definitely humbling to just tell that story and people can listen to it in perpetuity but it’s true. Everybody has complex situations. In whatever way you feel like your situation sucks, somebody in that exact same way has probably had it worse than you. There’s always a way out. There’s always a plan, and honestly, once you sit down and look it square in the face, it’s typically not as bad as you thought it would be and more doable than you expect. There’s lot of good people out there and great financial advisors like Jon. If you don’t have one, he’s a good one. I don’t give you enough big thumbs up on here but it’s true. You’re a good dude and you’re principled and a family man and all that stuff so keep up the good work. People are lucky to have you.

Jon: Thank you, Trevor. I just need more like me I guess. Awesome. Well, it’s good. It’s good to be reminded of what we do and why we do it.

Trevor: Absolutely.

Jon: Hopefully, this helps somebody – I’m sure it will – and hopefully it helps lots of people because like you said, this is going to go in perpetuity. This is going to posted to the world wide web and it’s going to change people’s lives.

Trevor: That’s we go.

Jon: Yeah. I’m Jon. This is Trevor. This is the Financial MD Show. Thanks for listening. Be sure to share it and I guess this would be the time in our show career where we say please leave a rating and review. This helps it to reach more people, more residents making smart decisions early on. So leave a review. That would be so fantastic. Check out the YouTube channel where we got the two-minute didactic minute videos. You’ll meet Piper, the labradoodle, in the most recent video, and get some good financial tips along the way. Join the Financial MD Facebook community, a group of like-minded physicians sharing ideas, getting ideas, giving ideas. We’re trying to throw as many resources at you as we can to protect yourself from yourself here at Financial MD. Other than that, you know how to contact us – Schedule your free consultation. We’ll see you next time.

Thanks for joining us for another Financial MD Show. Be sure to head over to to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.

The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.

Resources and Links:

  1. White Coat Investor website –

  2. I Will Teach You To Be Rich by Ramit Sethi –

  3. Zillow: Real Estate, Apartments, Mortgages & Home Values –

  4. Roadmap ?

  5. Financial MD Facebook community –

  6. Financial MD website –

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