I was so wrong.
I was 26 years old, recently graduated from a General Practice Residency, and had found a decent first job as an associate in an office. “I’m a dentist,” I would exclaim to myself, “now I can finally make lots of money.” I didn’t run out to buy a fancy car or other expensive toys; I was going to be frugal. I was going to make sound investments and spend my money conservatively. First order of business? A new house.
Dorm rooms, shared living spaces with house mates, tiny apartments… I was so over that. Besides, a house is a great investment, right? I could buy an inexpensive starter home and live there for a few years. I’d settle down and get married, probably start my family there. Then when my family outgrew the house I could sell it for a HUGE PROFIT and move into a bigger home. Not a bad plan, right?
Where I thought I would live as soon as I graduated dental school.
Wrong, wrong, wrong. I was making a couple of mistakes, which were:
(1) I assumed a house is an asset. That statement blew my mind when I first heard it. I was listening to the audiobook of Rich Dad, Poor Dad. Author Robert Kiyosaki revisits this theme in several of his books, which helped shape my philosophy on money. Basically, a home should be considered a liability, not as asset. It requires significant start up and maintenance costs and, in the end, there is no guarantee that you will be able to sell it for more money than you invested. Sure, you get nice tax breaks and it offsets the costs of renting, but that does not mean it is a sound financial decision.
(2) I assumed I was going to be able to afford it. The 1970’s and 1980’s were a glorious time to be a dentist, but those golden days are over. A dentist can still make a nice living and provide well for his/her family, but it requires entrepreneurial spirit and fortitude. It takes business savvy and thoughtfulness. I eventually made decent money as an associate, but not in that first job.
By the way, I was thinking about buying a house in 2007 and early 2008. Um, yeah… good think I didn’t go through with it. I would be stuck with a house that I overpaid for in a difficult economy. But let’s ignore the housing crisis for a minute. Right now is an AMAZING time to buy a house. Low interest rates, a large volume of homes on the market (including foreclosures), and undervalued prices have made this a buyers market the likes of which will probably never be seen again in our lifetime. So maybe you’re thinking about buying now…
It is a great time to buy a home, but that doesn’t mean you should. Of course you should speak with your accountant and friends and family about your financial situation. We have to look at student loans and tax filings, etc. But you should also think about where you are on your career path.
Three years ago I started my own practice, Broadhollow Dentistry, from scratch with my business partner, Erin. We got 100% financing from Bank of America so we didn’t have to dip into our savings. But we didn’t draw a salary for ourselves like most start-up businesses. I needed to live off other part-time jobs and savings while the practice got off the ground. I would not have been able to do that if I had financial obligations to pay for a mortgage and other housing costs. I may have been stuck working as an associate when I was actually ready to move on.
As I write this I have a lovely apartment in downtown Huntington Village, a great town on Long Island. I’m still single, so I don’t need any additional living space. My apartment gives me the flexibility while my professional career evolves. Buying a home may be the right decision for you depending on your personal and financial situation, but don’t forget to consider your professional goals.