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Pharmacy Residency Podcast

May 23, 2018

As new graduates go out and the dust settles, they find themselves wondering if they should put money to student loans, credit card debt, investments, savings or towards a home. A pharmacist loan or doctor loan is a special type of loan with zero down no PMI. There are restrictions, but it may be a way to retain savings and have a little rental income (we had a roommate as residents) while enjoying home ownership. Have a listen. 

Full Transcript:

welcome to the pharmacy leaders podcast
with your host Tony Guerra the pharmacy
leaders podcast is a member of the
pharmacy podcast network with interviews
and advice on building your professional
network brand and a purposeful second
income from students residents and
innovative professionals hey welcome to
the pharmacy leaders podcast and I
wanted to do a quick episode on home
loans or the doctor loan I know many of
you are struggling I listen to income
outcomes show that did a great episode
on that their name is waypoint financial
and Waypoint is when you kind of go off
track and then try to come back on track
or at least that's how they explained it
and you know after graduation you know
the dust really settles and you kind of
look at your money and where you're at
and it's just like oh you know that
sinking feeling in your stomach like
what have I done what have I done and
then you know you you've sacrificed up
to a decade if you do it the way that
schools tell you to you know for years
bachelors for years pharmacy two years
pgy one pgy to and now you are probably
about two hundred thousand in debt that
would be the average putting undergrad
with grad and then the residency
penalties so each year you're in
residency some of your loans gain
interest as well so you're about two
hundred thousand down and there's
something called a doctor loaner for a
physician mortgage loan but there's also
the same thing for pharmacists and they
consider other professions within that
doctor loan so I wanted to talk to you
about it I'm not gonna tell you the
there there are many places that do it
and I can you know put you in touch with
a lender and just first of all I'm not
giving you funny
vice I'm just kind of looking at the
pros and cons I had seven years of
experience as a full-time real estate
agent - it's a guy that I worked with
during that time in the Baltimore area
and he was really helpful in terms of
explaining what it is to me explaining
what it is to the clients that I had and
and I think that we had about 300
clients over that time period so I've
gone through many sales and many
purchases and if you look at the
mortgage loan zero down with no PMI it
seems like a win-win so I'm actually
going to take the the opposite approach
which is to say these are the five
reasons you shouldn't do it and then
kind of go from there and talk about how
you can make it work so the first is the
the taxes I'm not an accountant and the
first thing you think of with a home is
that you're doing it because of tax
deductible interest but depending on
your income and I don't know you'll need
to meet with an accountant to figure
this out but if you are taking a
standard deduction the new standard
deduction your home mortgage may not be
on there and that's my understanding
from the accountant that I've talked to
at certain income so you're gonna have
to figure out from your income what is
your interest rate and you know if if or
what is you know where does it make
sense to take the standard deduction and
does it not so again I'm not an
accountant but understanding that
there's a possibility that it doesn't
make sense for you to take that itemized
deduction and that's a conversation to
have and you say well I don't have an
accountant I'm not rich like that it's
you can talk to financial planners who
can put you in touch with one I know the
yfp team I'm sure could do it the income
outcome guys guy could certainly do it
guys could do it so anyone who's a
financial planner that you trust I would
definitely ask them for a good referral
okay so second you don't have PMI and
first of all what is PMI what
is insured is not the actual mortgage
but the 20% or the the difference
between the 20% so a bank likes to have
20% down because traditionally the the
price of the home just won't dip that
much and if that's the case then they
just need to insure whatever is missing
from yours so let's say you put 5% down
then we need to insure that 15% to get
us to a nice comfortable 20% what the
banks want and so in some way you know
you you're going to have maybe a little
bit higher interest rate if you take one
of these pharmacist loans I believe but
you won't have this PMI and the issue
with PMI is that it doesn't really
there's different types of products and
in many ways it doesn't go away so you
can say oh well my house appreciated to
where now I have you know 80% you know
and 20% you know loan-to-value and
that's not how PMI goes away I think you
actually have to literally pay it down
and then I think it actually goes to 22
percent not 20 percent so some things to
talk to with the banker about that or
the loan officer about that but no PMI
is is generally a it's a good thing that
you're not going to have it but it's
going to maybe cost you on the interest
rate side okay so the first thing to
talk to us and we're gonna kind of need
to talk to a lot of people is an
accountant to talk to about tax
deductible interest and then to talk to
the lender really explaining p.m. eyes
and and and who I'd worked with for so
long really did a great job of
explaining things talking about student
loans so if if you want to kind of look
at your mortgage and look at your
student loans you say okay well I'm
gonna instead of paying you know or
saving up for a down payment I'll just
pay some of my student loans and I don't
know if that necessarily is the way that
I would have done it so if I was in the
most of you guys are so we're talking
about 200,000 in debt or somewhere close
to it and you're just starting out I
would look at it as saying all right
well what I really want to make myself
feel comfortable is to have a safety net
so I care more about how much I have in
the bank to come up with unexpected you
know surprises maybe something happens
with the house where you know the air
conditioner goes out or we need to
replace you know it's something roof or
something like that it's much more
important to have money in the bank then
that in that little bit less that you
own the student loans and if you're
talking about so let's let's give a
hypothetical let's say you have 20,000
that maybe you saved up and you could
put it down as a down payment or part of
the down payment you could you know put
it towards your student loans or you
could advance your mortgage and you know
which do you do and that's something you
want to talk with a financial planner
about but I would actually take the
fourth option which is I would put it in
the bank so that I could have the
knowledge that I have money just in case
something happens and in listening to
the yfp team three to six months tends
to be where people are at I personally
prefer to have two years worth of salary
in the bank as and then there are
reasons for that I I'm I have you know
another house that I have to make sure
that I have enough money to cover the
the rent if something happens or
something happens to my house for that
house and then I also went through as a
real estate agent I was going through
the beginnings of the collapse so I know
what it's like to have variable income
and it just makes me all warm and fuzzy
so what I bought with that money is
peace of mind and for me peace of mind
comes from two years salary in the bank
I know that many investment
professionals would say that that's
crazy that's a waste but it also and
future episode I'll talk about investing
a little bit how I invested I've had
nine homes in my life in my time from
pharmacy school till now the 20 years
and I own two yet right now but you know
I'll talk about that as we kind of go
along but that's really having that war
chest and then having an opportunity
that you have money for those
opportunities if you're you know really
check to check it's really really an
uncomfortable place to be the zero down
payment makes the math really hard this
kind of a fourth thing if you have a
zero down payment it's hard to do the
math because you're doing math with zero
so let's say let me give you the example
of what I did with my last home so in my
last home I put 20% down on two hundred
and five thousand dollar house so it was
a little more than forty thousand
whatever made twenty percent and we'll
just call it forty thousand for the math
and you know after the appraisal was
done after I got it after the the it
wasn't the appraisal but it was actually
the tax assessor that came and said you
know this house isn't worth two hundred
thousand is for two hundred thirty five
thousand so I made about thirty thousand
dollars on that forty thousand dollars
that I put in for a seventy five percent
return and later episodes I'll talk
about this too
I don't do anything that doesn't I'm I
don't to call myself a sophisticated
investor but I'm only willing to make
investments that are going to net me
fifty one hundred two hundred percent
returns I'm not interested in six
percent returns and these when they lose
I lose everything but when they win they
win huge and right now the winds are
certainly outpacing the losses and I'm
pretty smart about it I mean an
investment in something like putting
together a book would be you know ten
thousand dollars and I'm hoping to net
at least twenty and then you know
investing in myself with coaching with
you know the real estate business I
invested five thousand dollars in my
first year as a real estate agent in the
Feeny coaching there at a Carlsbad and I
said bottom line
I put in five grand I want ten grand
back and I got it actually I got 20
grand back I think so you know 4x what I
put in well but then you lose it so it's
really 3x but anyway that that's kind of
how I think of things instead of hoping
that 2% 3% 6% is gonna get me there I'm
doing what my countin told me to do and
my accountant said you need kills you
need huge sums of money and we says huge
he means like 5,000 10,000 20,000 at a
time to start paying these off in any
reasonable amount so I know that a lot
of you guys are willing to work extra
hours extra shifts but sometimes those
aren't available and it also takes away
from your family things like this you
can do real estate investing in your own
time rather than having to work another
you know you're already exhausted
you know another two to ten or another
eight to four whatever it is up at the
zero down payment kind of getting back
to it
you have infinite gain and infinite loss
if the market is going up and you're
trying to save it may actually outpace
you so for example if a home is two
hundred thousand dollars when you start
and this happened and you know when we
came in to ours so if the home is two
hundred thousand dollars when you first
go into the market say I'm gonna save
that forty thousand dollars for the down
payment by the time you get the down
payment that house may be three hundred
thousand so now you're forty thousand
isn't twenty percent you still need to
save another twenty thousand and you
might be chasing the lights as a word
you know potassium and sodium is you
know as we kind of mess with the the
electrolytes they tend to kind of slip
away from us
so in a rising market it sometimes
becomes impossible to do in a falling
market however you actually get there
sooner so if you're kind of coming in
and you're saying okay I want to get
forty thousand two hundred thousand
dollar house and it goes down to 160
then you know when you get to 32
thousand you're there and you've got
your 20% down but the issue with saving
that money is that now you need to save
that money plus the savings that you
need three to six months so if you're in
an area like I don't know the California
where you need to buy an eight hundred
a thousand dollar house to be in a
decent neighborhood you're talking about
saving 160 or 200 thousand dollars plus
three month's income six months income
so you're talking huge numbers quarter
of a million dollars to do what you need
to do where this will allow you to get
in there now the other thing that we did
and as residents we had roommates and
and I'm you know at the time I was what
in my early 30s and I've got somebody
living in our basement my wife and I are
married we've got someone living in our
basement to help us make ends meet
because we knew that we took a hit and
we were still trying to be responsible
with our money
and same thing in Baltimore so you're
never too good for a roommate but a
roommate just that extra income each
month makes it really easy and and so
often the roommate is just never there
so the fear of course is that they're
gonna get in your way but I find that it
actually is the opposite where they're
just not there a lot especially somebody
young who's out all the time or whatever
and then I understand the idea that if
you slowly save for something that
you'll have a better appreciation for
the the value of that you know you've
saved up for something and then you
bought it and I know the yfp team
recommends the 20% down for something
like that and to save up for it and my
thought on that is I have enough
experience having sold and bought 300
houses that I would feel comfortable
taking a zero down loan but that wasn't
my goal with the second house the second
house is just meant to I'm just trying
to pay it off so that it can pay for the
costs associated with my first house
because houses are expensive and outside
of just the mortgage in terms of the
roof and the pain in getting you know
the deck stained and and everything that
kind of goes along with it but those are
kind of the five things that I would
really look at if you're looking at one
of these no no money down loans look to
see if where you are financially if it
would be tax-deductible
no talk about the PMI and how that
affects the interest rate is a little
bit higher interest rate again they're
giving you these loans because
historically the default rate is so low
I think it's a fraction of 1% it's like
a point one or point two percent and
that's why they're doing this so after
those you know 8 to 10 years of school
and work you know they actually give you
watching how it fits into student loans
and credit card debt and things like
that because if you know there's a
market appreciation in the market and
you miss out then that could have paid
your loans but there's market
depreciation and you've actually put
yourself in a hole so really trying to
better understand where it fits into
your life and then I think the the last
one I was talking about was just that
you know it's really easy to get the
loan but it's hard to get out of the
house just like it's easy to hire
someone but not necessarily easy to fire
them so thinking and taking time to do
it but I just wanted to talk a little
bit about it if you do want to you know
Facebook message me or email me I'll be
happy to tell you you know who the
lender is that I worked with all those
years he was a great guy and and really
did a great job of talking to him I
think he can only work in the Maryland
area but anyway hopefully this is
helpful and gives you some hope as many
of you are graduating and you've got
maybe families coming and you want to
have a house and my recommendation has
always been to not get that first house
in a neighborhood that you wouldn't want
to rent in because as you maybe rent it
out that's gonna be something that
people are looking at so I will talk to
you soon support for this episode comes
from the audio book memorizing
pharmacology a relaxed approach with
over 9,000 sales in the United States
United Kingdom and Australia it's the
go-to resource to ease the pharmacology
challenge available on audible iTunes in print ebook and audiobook
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