Based on comments made and questions asked by young doctors, especially after Match Day, there are plenty of people who don't really understand how home ownership works. And you really should know what you're doing if you're going to buy a house during residency. Let's talk about it below in April's financial tip of the month.

ANNOUNCEMENTS

	Financially Empowered Women Virtual Event – Pay what taxes you owe and not a dollar more. Join this women-only virtual event led by Johanna Fox Turner, CPA, CFP to learn how to simplify the process and maximize tax savings. Presentation April 25th at 6 PM MT. See Event Details and Learn About the FEW Community
	Financial Educator of the Year Nominations Open – Know someone who is passionate about improving financial literacy? Nominate them for the Financial Educator of the Year Award by April 26th! The winner will receive $1,000, and the nominator who writes the best submission gets a free WCI online course of their choice! Please educate your peers on personal finance, we even have some presentation slides to help you do it. Submit a Nomination
	Free DIY Financial Planning Tool – We've teamed up with NewRetirement to bring you the ultimate financial planning software. The FREE version goes far beyond a retirement calculator, giving DIY investors the ability to take control of the variables that impact wealth, retirement timing, and long-term financial security. Upgrade to PlannerPlus to unleash the full potential of this powerful tool and receive an exclusive 20% discount on the annual subscription. This offer is valid only until April 30th for White Coat Investors. Try NewRetirement Financial Planning Tool

MARKET UPDATE

Data sources: Morningstar and SPGlobal

Here's hoping you've got money in equities. After another strong month in March, the S&P 500 had its best first-quarter performance since 2019. Artificial Intelligence is all the rage, and even oil and home sales are on the rise again. This kind of bull market won't last forever, but enjoy it while you can.
Are you tired of hearing about Bitcoin? Well, that's too bad, because it reached 70,000 for the first time, and all those HODL people must be loving it. Volatility of an asset isn't always a positive, but when it's riding high (and Bitcoin is zooming to the moon at the moment), it's hard to argue with those who are swimming around in digital currency.
Even the more alternative investments are performing well. Got commodities? Good for you. Got silver? You're doing well. Got gold? You're doing awesome.
In February, every bond that we follow was in the red for that month. Even though short-term bonds and Treasuries had minimal gains in March, that's better than a kick in the teeth.
Though they're still negative YTD, US REITs and International REITs made a little bit of a comeback.

REAL ESTATE OPPORTUNITIES

Origin Investments – Founded in 2007, Origin builds, buys, and finances multifamily real estate projects in fast-growing markets. Offering private real estate funds which focus on increasing tax efficiency, enhancing portfolio yield, maximizing growth, and minimizing portfolio volatility. It's possible to get started with an investment of only $50,000.

MLG Capital – Founded in 1987, MLG Capital invests via a series of funds that target both geographic and asset-class diversification. MLG Capital has consistently delivered attractive, tax-efficient returns throughout its 35-year track record of success. Offerings include Private Funds (both Private Funds and Dividend Funds) and their newest investment vehicle, the MLG Legacy Fund.

37th Parallel – A private multifamily acquisitions and asset management firm that provides a vertically integrated investment platform (funds and single-asset investments) for investors seeking tax-advantaged income and equity growth. Discounts are available for White Coat Investors.

Please consider these introductions and be sure to do your due diligence prior to investing in any real estate investment opportunity.

STAFF ADVENTURE

A Journey to Middle Earth – Carpe Diem with Community Liaison Michelle Baker

What would you do if you had the chance to travel somewhere you've always wanted to go but had only limited time to do it? We recently had to make that choice when my spouse had an unexpected sabbatical. The timing wasn't ideal. We'd have to take our teenagers out of school since there was nobody to stay with them while we flew to the other side of the planet. That meant that a long-desired trip to New Zealand could only last for eight days, with a full day of travel on either end. We debated whether it was worth it, but we decided to go because "who knows if we will ever get this chance again while we're young and fit enough to do it?"

Seizing the day, we were soon on our way to the Southern Hemisphere. We spent a day in Auckland on a dolphin-watching tour, surrounded by dozens of tourists and hundreds of curious and athletic common dolphins. Then, we hopped to the South Island and drove south from Christchurch into the Southern Alps. We hiked nearby peaks, swam in brilliant blue lakes, navigated to Lord of the Rings film sites, and sampled local favorites: meat pies, gelato, and venison pizza.

Our main focus was exploring the flowing water canyons. We spent two days canyoneering, where we rappeled, jumped, ziplined, and slid down waterfalls through impossibly green and pristine rainforest. The water was so cold but so clean, and we drank it directly from the stream untreated. Truly spectacular.

Another grand adventure was a via ferrata route, aptly named Lord of the Rungs—which ascends along, across, and behind a dramatic waterfall for 1,500 feet. Several hours of climbing and crossing cable suspension bridges later, we stood at the top of the falls and of the mountain, awaiting a helicopter ride back to the valley. Our final day was occupied by a helicopter ride to explore Mt. Earnslaw Glacier, followed by riverboarding (a cross between boogie boarding and whitewater kayaking) down the Kawarau River through Class 2 and 3 rapids.

Of all those we met, nobody could believe we had come so far for only a week. It was difficult to leave such a beautiful place so soon, but we had filled our days and our hearts with as much as we could and taken full advantage of our opportunity. Was it worth the journey? It certainly was. No regrets!

BEST OF THE MONTH

Best of WCI

Why More and More Dentists Are Going 'Out of Network' – And Why That's Actually Good News – Writing about private equity–for doctors or dentists–and whether it's positive or negative tends to produce controversy among WCI readers.
Merging Financial Responsibility and Environmental Sustainability – You know what else causes controversy? Writing about how to save the earth and why you should take action.
What to Know About Islamic, Muslim, Halal, Sharia-Compliant Investing – We have received questions for years about Halal investing for devout Muslims. Here are lots of answers.
Want to Shorten Your Student Loan Repayment? The PSLF Buyback Can Help – Here's something that could potentially save you a LOT of money in the long run.
4 Methods of Reducing Sequence of Returns Risk – If you ever plan to retire, the sequence of returns risk is imperative to understand.
The 1 (Weird) Tax Trick the IRS Hates – Does this trick actually exist, or is it made up by people who really, really want to find it?
How Our Plan to Start a Family Affects Our Quest for Financial Independence – WCI Columnist Francis Bayes is looking to his future–about starting a family and how that will affect his financial life.
Why Buying Individual Municipal Bonds Doesn't Boost Your Return Over a Bond Fund – Some investors believe that investing in individual muni bonds gets a higher return than a muni bond fund. It's probably not a good idea.
WCI Travel Club: Magical Trips to Peru, Portugal, and Disney World – Let's have some fun and live vicariously through WCI readers and writers while they journey across the world.
2024 WCI Annual Survey Results: Here's Your Net Worth, How Much You Make, and Your WCI Criticisms – Our readers have told us some fascinating details about their lives and about what they want.

New Podcast Episodes

Be sure to check out The White Coat Investor Podcast if you haven't yet. 30,000 to 40,000 are listening to every episode. If you'd like to leave a question to be answered on the podcast, record it here.

#356 – The Struggle to Financially Support Your Parents (Sponsored by Locumstory)
#355 – Burnout in Women with Dr. Darria Long (Sponsored by Resolve)
#354 – Mega Backdoor Roth Contributions with Minimal 1099 Income (Sponsored by WCI Courses)
#353 – Lesser Known Tax Strategies (Sponsored by White Coat Investor)
#352 – How to Reduce Capital Gains on Property Sales (Sponsored by WCI Mortgage Recommended List)

The Milestones to Millionaire Podcast has short episodes celebrating your accomplishments.

#158 – Hospitalist Pays Off Student Loans in Just Over 2 Years and Finance 101: Emergency Funds (Sponsored by WCI Courses)
#157 – Dual Income Couple Pays Off Mortgage Among Other Financial Milestones and Finance 101: Dividend Investing (Sponsored by StudentLoanAdvice.com)
#156 – Family Doc Pays for a Dream Wedding with Cash and Finance 101: How to Wire Money (Sponsored by WCI Social Media Channels and Forum)
#155 – Pediatric Dentist Gets Back to Broke and More and Finance 101: Ways to Earn More Money as a Doc (Sponsored by WCI Monthly Newsletter)

Best of the Web

Every month we recommend (about) 10 articles from across the web. Thank you to those who send us suggested articles.

An Ex-Googler Retired at 40 on Friday but Regretted It Monday – Don't get enticed by the siren song of FIRE. It's not right for everyone.
Paramedic Gets 5 Years in Prison – This one is shocking. It may not be long before malpractice is not your biggest legal risk.
Can You Build a Family Empire? – Jordan Grumet interviewed Katie and Jim about WCI and what they fight about.
7 Years Retired from Surgery – Cory Fawcett switched from operating to blogging, writing, and traveling 7 years ago. Here are his thoughts now. He does seem happier than the Googler above. We loved this line: "If your retirement goes anything like mine, it will be better than you anticipate."
When Bonds Beat Stocks – Emerging Markets have provided a pretty unusual situation the last couple of decades that provides a cautionary tale. John Rekenthaler expounds.
47% of Parents Still Support Adult Children – This one is tough to figure out.
The Government Wants Your Input on Private Equity in Health Care – Go here and click on the "comment" bubble to leave your anonymous comment. Jim already did.
Physicians Grow Louder on Non-Competes – These are ridiculous for hospital-based specialties like the PICU doc in the article.
Why Financial Literacy Education in the US Sucks – We all think that getting more financial literacy education would fix a bunch of problems. Maybe not. This video demonstrates the problem with even the small amount we're doing now.
Can You Give Investment Advice Without Registering as an Advisor? – Probably, but run through the ABCs to find out for sure.
How Much Cash Should You Have in Your Portfolio? – Mike Piper shows that while cash isn't trash, it also isn't necessarily king.
More People Buy, Number Go Up – The crypto diehards have been on a victory lap this month as Bitcoin returned to its previous high in dramatic fashion. Nick Maggiulli argues that it has now been clearly revealed to be nothing more than a momentum trade.
Homeownership in Retirement: Asset or Burden – There's a reason we tell you to pay off your mortgage before retiring. The pro-debt people keep arguing, but our experience is that folks become wealthy because they didn't choose between paying off debt and investing, they just found a way to do both.
40 Life Lessons I Know at 40 – You'll love #6 and #11. Warning: This article (by the author of The Subtle Art of Not Giving a ****) has the potential to offend.

TIP OF THE MONTH

By Dr. Jim Dahle,
WCI Founder

The WCI subreddit was absolutely inundated last month with graduating medical students who want to buy a house. This pretty much happens every year after Match Day. Even those who know my recommendation that renting during residency should be the default choice wonder if they could possibly be an exception to this rule of thumb.

Honestly, I gave up on talking graduating doctors (and their partners) out of buying homes a long time ago. It just didn't work. They still did whatever they wanted the vast majority of the time. I don't think it's a logical thing; it's an emotional thing. Besides, sometimes they did come out ahead owning instead of renting.

On average, they come out ahead perhaps 1/3 of the time after a three-year residency and half the time after a five-year residency. This has been particularly true the last few years with home appreciation going bananas. No graduating resident or even young attending has any peers anywhere near their age who have lost money on a home even when they only owned it for a year or two. It's been like that for a while. But those of us with a few gray hairs who bought homes in 2006 and then sold them in 2015 (because they could not be sold at all in 2010) at a loss know that home appreciation can be a two-way street.

However, even when things DON'T work out, most doctors are still OK in the end. Yes, they might have to be long-distance landlords because they are underwater on their house and can't sell it for what they owe. Yes, they might have to sell at a loss at the end of their residency. But that event also usually coincides with a very happy event, a 3X-5X raise. They can afford a screw-up. It sucks; they took a big risk and got burned, but it's not the end of the world. You just can't buy a house big enough as an intern to get into trouble that your attending income can't get you out of. But the bad decision can still hold back your financial progression.

Boiling things down to the basics, the decision about whether to buy or rent a house in residency is really all about appreciation. And appreciation is really only about two things: 1) luck and 2) time in the house. There's nothing you can do about the first one. Well, maybe if you have a crystal ball that functions better than mine. If you know your home will appreciate at least 15% (enough to cover the transaction costs) in the three years you will be in it, then you should feel pretty comfortable buying it instead of renting something comparable. If you're not sure, well, join the club. That's why there are rules of thumb.

There probably isn't anything you can do about the second one either. Your residency length is what it is. Three years, four years, five years. That's it. If you're absolutely 100% sure (or at least think it's very likely) that you won't move after finishing residency and that you will be happy in that house for at least another 2-3 years after residency, then congratulations! You may be an exception to the general rule. Go get yourself a doctor mortgage and buy a house.

In fact, I really don't care what you spend your money on. You want a Birkin bag? Fine. You want a Tesla? Go get it. You want to go on an around-the-world cruise on your credit cards in the six weeks between graduation and the start of residency? Great. I really don't care. I just want you to understand in advance how it all works so you can make an informed decision. Based on comments made and questions asked, there are an awful lot of you who don't understand how home ownership works. So, let me point out five ignorant arguments that first-time homebuyers use to justify bad decisions.

#1 Joe Did It and He Made Money

The argument goes like this: "I know a doc who is just finishing residency. He said the best financial decision he has ever made was to buy a house in residency. He made $100,000 on the house while he owned it. So, I'm going to do the same thing." The problem with this argument? You won't own your house during the same three years Joe owned his house. You may not get the same rate of appreciation he enjoyed. Truly, your mileage may vary.

#2 My Mortgage Payment Is Less Than Rent

This one just exudes ignorance. If there is one thing to know about mortgage payments and rent payments it is that the mortgage is the minimum amount you will pay for your housing and the rent is the maximum. Experienced homeowners know there are a lot of other expenses associated with homeownership besides the mortgage. Property taxes. Insurance. Maintenance. Repairs. Equipment. Snow removal and lawn care. HOA fees. And that doesn't even count the two biggest ones. First, most people aren't happy just to buy a home. They also feel a need to renovate it and make it theirs. That's not free. Second, the transaction costs. Who cares if the mortgage is $500 less a month than rent if you have to spend $50,000 to sell the thing when you're done? Even if you'd saved up all those $500 payments (which you didn't), $50,000 is still more.

#3 I Don't Want to Live in an Apartment

Believe it or not, some people are not aware that you can rent homes. Actual single-family houses with four walls and no adjoining neighbors and with a driveway, a yard, and a fence. Yup. Renting does not mean you have to live in an apartment.

#4 Renting Is Throwing Money Away

Renting is not throwing money away. It is exchanging money for housing. It's buying a roof over your head. Just like buying groceries is not throwing money away. It is exchanging money for food. Both are necessities of life, and you should be willing to spend on them. "But I'm not building any equity." That's true. But step back for a moment and consider how much equity you are building if you buy a home. Barring appreciation, if you make the payments on a 30-year, 7% mortgage for three years, you will have equity equivalent to just 3.3% of the loan. On a $300,000 house, that's about $10,000. Then, you'll spend $30,000 to sell it. If paying rent is throwing money away, you know what else is throwing money away? Realtor fees. Property taxes. Mortgage interest. Insurance. Roof repairs. New sod. Paint. The list goes on. The only thing that isn't throwing money away is principal payments. And as we just saw, the principal payments don't add up to much those first few years of a mortgage, i.e., the years you'll actually own the home during residency.

#5 Owning Gives Better Tax Benefits

You know something really cool about our progressive tax code? The standard deduction. In 2024, the standard deduction for a couple filing as Married Filing Jointly is $29,200. That means that unless you have itemized deductions of more than $29,200, you'll be better off just taking the standard deduction. That also means that, in reality, only the amount of your itemized deductions above and beyond $29,200 are truly deductible. Two of those itemized deductions are property taxes and mortgage interest. That's mostly what people are referring to when they talk about the tax benefits of owning your home. (There is another important one: the fact that you don't have to pay capital gains on the first $250,000-$500,000 in capital gains on the home.) However, when we're talking about houses like those that residents can afford, the property taxes and mortgage interest often don't total to much more than $29,200. The interest paid on the first year of a $300,000, 7% mortgage is (surprise surprise) $21,000. Add in $5,000 in property taxes, a $200 charitable contribution, and $2,000 in state income taxes, and you still don't get to $29,200. You got zero tax benefit for owning that home.

New residents are going to keep buying homes no matter what I tell them. I just want them to know that there is a very good chance that this will not turn out to be a smart financial decision, especially for a three-year residency. Don't believe these dumb arguments being put forth by the realtor industry, the mortgage industry, and your classmates. If you want to run the numbers yourself, try the New York Times' Buy vs. Rent calculator. I suspect you'll come to the same conclusion I have, that it's a gamble to buy a house for a five-year residency and a bad bet to buy one for a three-year residency. Do Future You a favor and at least consider renting for a few minutes before you commit to writing a five-figure check to a realtor.

The White Coat Investor

Past Newsletters

March Newsletter – Who Is Your Biggest Financial Enemy?
February Newsletter – This Popular Netflix Show Reminds Us of the Best Way to Invest
January Newsletter – 4 Lessons Learned After Years of Being Financially Independent
December Newsletter – A Roth IRA Is NOT a Bad Investment
November Newsletter – The Role of Your Investment Oversight Committee

Click here for all past newsletters.