LOCATION, LOCATION, LOCATION…that’s it, right?? Turns out ~ not quite!!

This month’s edition of MMFD takes a hard look into the ins and outs of one of the largest purchases a person or family ever have to make…buying a home. It is not as easy as you may think and a measure of research goes a very long way. Back to help us navigate the shifting tides of the real estate market and the shoals of home purchasing is Ms. Katherine Vessenes.

About Ms. Vessenes:

Ms. Vessenes works with over 300 physicians and dentists from Hawaii to Cape Cod. Her firm uses a team of experts to provide comprehensive financial planning to help doctors build their wealth and protect their wealth while reducing taxes now and in the future. Katherine is a longtime advocate for ethics in the financial services industry; and has written three books on the subject of investment strategies. She has received many honors and awards including: numerous tributes from Medical Economics as a top advisor for doctors, multiple 5-Star Advisor Awards, honored as a Top Woman in Finance, in addition to being selected to be on the CFP® Board of Ethics. Katherine can be reached at: Katherine@mdfinancialadvisors.com or 952-388-6317. Her website: www.mdfinancialadvisors.com.

QUICK SUMMARY:

Real Estate:

1. If you have never lived in the area before recommend you rent for the first year because it allows to learn the area and your desired neighborhood preferences

2. Renting also allows you a chance to recover your finances and build savings

3. If needed to change that first job can do so easily and not tied to fixed real estate asset

In general do NOT buy a house during residency or fellowship.  Typically at year 15 of a mortgage start to be at 50/50 point where interest and mortgage are equal and start to build true equity.   Thankfully most training programs are not that long.   

In a bad real estate market town house or condo are more difficult to sell vs single home

“Throwing away” money on rental payments is old thinking and need to accept that it costs money to live and rent/mortgage is a necessity

Historically the price of real estate increases c/w inflation.  There are certainly pockets where returns exceed expectations but this is not the norm

Major problem w doctors is buying too much house too soon

How much house can I afford?  2-3 x your annual income assuming no (educational) debt. i.e. if your income was $200,000 you could afford home of $400 – 600,000.  You must run a budget prior to purchasing to know what kind of payment you could handle

Owning a home has many associated costs and fees, below are just a few:

• Association feeds ($300-500 and much higher depending on location)

• Maintenance and repairs

• Furniture and decorating

• Home owner’s insurance

• Household help – cleaning, lawn care, snow removal

• Utilities – electricity, gas, garbage removal

• Property taxes (tax rates are public and published for each township)

Most people will need to purchase a starter home and don’t think you should get “the house of your dreams” as your very first home

If you live in a state w no income tax then often real estate taxes are higher

If you have or are planning to have a family be sure to consider schools and educational goals of your children.  Most doctors cannot afford private education and thus public education should be a factor in your decision.