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MtoM #251: Dermatologist Hits $750,000 Net Worth Before Finishing Residency and Finance 101: The Basics of Real Estate Investing
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- [00:00]
A
This is the White Coat Investor Podcast Milestones to Millionaire Celebrating stories of success along the journey to financial freedom. This is Milestones to Millionaire podcast. Number 251 dermatologist hits $750,000 net worth before finishing residency Resolve is the number one rated physician contract team, reviewing 1,000 plus physician contracts every year. They empower physicians with location specific compensation data which leads to unparalleled leverage during the physician contract negotiation process. A physician contract lawyer is included and can negotiate on your behalf, alleviating the stress that can go along with reviewing complex legal terms. Flat rate pricing and flexible schedules are designed For a physician's schedule use code WHITECOAT10 for 10% off at whitecoatinvestor.com resolve by the way, we have a partner called called Bolden. This is software. It's like financial retirement software. I've reviewed it on the website. If you go to whitecoatinvestor.com bolden you can check it out, but it's a really great companion for DIY investors, especially if you use it alongside something like our Fire your financial advisor, your course. You can empower yourself as a DIYer. Take control of all the variables that impact your wealth, retirement, timing and long term financial security. There's all kinds of new enhancement they have on it. They've got a custom withdrawal order, they've got a redesigned overview page and enhanced Roth conversion modeling, that's a popular feature. They can do some customization of the rates a little bit better for setting those rates for inflation and appreciation returns. And they've got some updated long term care assumptions built in there now as well. So if you've never checked out Bold in, go check it out. Whitecodeinvestor.com Boldin if you checked it out before, check out the changes. It's neat, new and different and improved. And like most of these, it's got not only a paid version with some additional features, but it's got a free version so you can try it before you buy it and check it out. Go to whitecodeinvestor.com Bolden all right, we've got a great interview today. It's an unusual person to be celebrating this milestone with, but it's a milestone we've done many times, just not usually with a resident. So let's take a listen to it, stick around. Afterward. We're going to talk for a few minutes about some basics in real estate investing and kind of my take on real estate investing. Our guest today on the Milestones to Millionaire podcast is Garrett. Garrett, welcome to the podcast Great to.
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B
See you in person. It's fun to chat like this after listening to all the podcasts.
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A
Yeah, it's interesting, I ask most guests before they come on, have you listened to some of these before? Do you know what you're in for? And the vast majority of them say, yeah, I pretty much listened to all of them. So that's actually not unusual for our guests at all. It is not a requirement, though. Those of you thinking about applying, you're not required to listen to the other 250of these before applying to come on yourself. Garrett, tell us where you are in the country, where you are in your career, and what you do for a living.
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B
Yeah, so I'm a PGY4 in dermatology. I'm out on the west coast in a very high cost of living city, just finishing up my fourth year of residency, which is now in a research track. So it's about 80% research time, 20% clinic. So seeing patients half a day a week and going to grand rounds, that kind of thing.
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A
Very cool. Okay, now we're celebrating a milestone that we celebrate all the time, but not with residents. That's the impressive thing about this. So tell us what we're celebrating today.
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B
Yeah, no, I'm just about closing in on $750,000 net worth at this point.
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A
Three quarters of a million dollars in residency. This is sort of unusual, you know.
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B
Yeah, no, it's kind of funny to think about. I've really started to track it more and following this, it's kind of fun to see.
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A
Yeah, most people in residency have a negative net worth. Right. They're still working on the back to broke milestone, not the millionaire milestone like you're maybe currently working on. So part of this deals with your method of paying for school. So tell us how you paid for school.
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B
Yeah. So ultimately went to MD, PhD out back east at Johns Hopkins. That really was kind of the impetus to start this all. And had a small stipend. I mean, when I started, it was under $30,000 a year. By the time I finished, it was about 35. But not having to pay for medical school was a big part of this.
- [04:23]
A
Yeah, so you never had the big negative net worth.
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B
Yeah. And the other big advantage I had too was I was able to get through the program pretty quickly. I finished my MD PhD in six years, which I think really set me up well to kind of catapult through these as opposed these milestones, as opposed to spending more time in graduate school.
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A
Yeah, that's a ridiculously short period of time for an MD and a PhD. How did you get out in six years?
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B
I think it was a lot of things. I think a lot of it was just advocating for myself. I had a good project where I had a good publication, and it also was Covid time. So it was really hard to get into the lab, but I could get back into the clinic and just advocating for myself. You come to a lot of this point, I help a lot of MD PhDs that are younger than me navigate these transitions. And I think a lot of it's. You could graduate this year or the next year. And I think advocating for yourself makes a big difference because when you add it up, the lost income, the time value of money and everything else that goes into it, and the flexibility it gives you later in your career when you want to have kids and a family and everything else is huge in a research career.
- [05:19]
A
Okay, so that's part of it. I mean, you didn't go negative like most medical students do, and you only really lost two years in a contract program kind of situation. But that doesn't explain $750,000 as a resident. So I think for that explanation, we got to start talking about your paper route.
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B
Yeah, I started a paper route on my 12th birthday. Birthday. It was delivering papers and actually made pretty good money. I made $200 a month, and my parents had me put over 50% of that into a bank account. And then I was really lucky to have a grandfather who was really good at introducing me to time value of money and compound interest and all that kind of stuff, and actually convinced me to take that money along with money I made working at a burger joint and a grocery store and a few other places, and actually opened an IRA when I was in high school, which, if you think about the years that I was invested, did pretty well. Even just putting it into QQQ as the only thing I invested in.
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A
That worked out well, didn't it?
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B
Yeah. So that helped a lot. That's probably 20% of where I'm at today.
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A
Okay, so before you went away to college, how much money you think you put into a Roth IRA?
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B
I probably had about $15,000 in by the end of high school.
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A
Okay. And that's been essentially in tech stocks.
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B
Yeah. Q. Q. Q. In Berkshire Hathaway was all it was in back then.
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A
I didn't know a lot, so that did just fine. And so that's a significant chunk of the $750,000, but it's certainly not all. So let's talk about some things you've done to earn money along the way and how much of it you've invested. And tell us about your financial literacy journey, not what your grandparent knew, but what you learned and how you learned that.
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B
Yeah, I mean, I had really great parents as well. That taught me a lot. They let me. I remember when I was about 9 or 10 years old, they let me budget the entire family vacation. And they still yell at me because I apparently in a Dairy Queen, told them we couldn't afford ice cream because it wasn't in the budget. So they still give me grief about that to this day. But I think that was a lot of it, of living like a resident, but also during medical school. I mean, I wasn't making a ton of money, between 30 and 35,000. My wife was making between 40 and 50,000. But we were able to live in a very low cost of living city. We were in Baltimore. We were able to take advantage of some programs with Johns Hopkins where you could buy a house in the neighborhood and they'd help you with down payments. So we got $35,000. If you were to live in a house for five years, they would forgive that loan. So that helped out a lot. And I worked a ton. I was on the neighborhood board and did a ton of work making my neighborhood better. So by the time we sold our house, we made a pretty good amount of money on that too. So I think really picking an affordable city and being able to buy a house as opposed to renting all those years and making that reasonable was a big chunk of things as well.
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A
Yeah, there was another side hustle in there too, right? Something about admissions consulting or something.
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B
Yeah, I did some medical school admissions consulting, which I think is a great option for medical students and residents. The main qualification to be able to do it is just telling them where you got into medical school and where you go to medical school, that's really all the parents want to hear. But a lot of editing, essays, a lot of mock interviews, things like that. And I think it actually was good for me as well. It really honed my writing, made me better for residency applications as well as the interview process. Helped out a lot as well.
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A
You're kind of a scrapper, right? You just scrap this all together. A little bit here, a little bit there, a little bit here. One eye, one here, one here, one here. And all of a sudden, you know, you add it all up, it's a huge win. Yeah, right. You've done pretty awesome. What's your wife's career?
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B
So she works in like university, higher administration, like fundraising, event planning, that kind of thing.
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A
But a five figure job, it sounds like.
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B
Yeah, she's just gotten to six figures now, being on the west coast where salaries are dramatically higher. I mean, the same job here makes double what she made in Baltimore.
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A
Yeah. So certainly a contribution though. It sounds like you've been together through this whole process.
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B
Yep.
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A
So that's part of it, but still pretty awesome. Pretty awesome. Okay, so what advice do you have for other people that listen to that and they're like, holy smokes, I'm the same place as him and I'm minus 400,000. You know, what advice do you have for those people that want to get to where you are?
- [09:22]
B
Yeah, I mean, I think the things that I wrote into being interested in coming on this podcast was one all the conversations I had with other MD PhDs of when do you graduate? But this also applies to people that are going through medical school of should I pursue an mph? Should I pursue a research year? And I think really weighing it out is the time value of losing a year of attending hood versus the benefit of residency and everything else. Is that worth it? So I think making those decisions in a way that takes the finances into account, I think is important. It's not to say don't do it, but important to weigh that as well. I think also just when you're thinking about medical school decisions, thinking about where might make sense financially. I mean, we made probably $250,000 difference of going to Johns Hopkins versus other options I had on the west coast or like Upper Northeast or similar situated programs to Hopkins, but would have made a dramatic difference in our overall financial picture without being able to buy a house. And I mean, our mortgage was $1,000 a month. You can't get that in very many places in the United States.
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A
You're relatively young. You didn't waste any time here for all you've accomplished, right. An MD, a PhD. I don't know how many, how many years you spend in college.
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B
Just four years.
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A
Yeah, I took four years in college. I mean, Durham is still a four year residency, right? Yep. And you're here in your early 30s and pretty much just about done and already building wealth. So your case for not wasting time, you've demonstrated pretty well. Right. There's no lost years there. There's no multiple gap year kind of situation. You put every year to work and made it earn its pay.
- [10:55]
B
Yeah. And I think it really gives me a lot of freedom. I think you hear a lot about fire on this Podcast. But especially if you're pursuing a research career, you have to make a huge sacrifice. Doing research in dermatology is nowhere near as lucrative as doing just straight clinics. So having that flexibility with like having built up an amount of net worth really allows me to continue to pursue the research I want to pursue and go to a higher cost of living city and do a lot of these things that I think would be a lot more challenging when you want to have kids and do all the other things that life throws at you.
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A
Yeah, for sure. That flexibility is aided by, you know, not only what you've acquired, but by your level of financial literacy and discipline. Right. Because that's number one, how you acquired this. But number two, what will allow you to pivot and make changes in your life that allow you to do what you want to do with your life so that money becomes a tool rather than an end, much less a stress in your life. So that's pretty awesome. All right, there are people out there considering MD PhDs. What advice do you have for them as they make that decision?
- [12:01]
B
Yeah, I mean, I think really thinking about how long the program really is, I think this is a point of advice I give to a lot of people is you have to think not just for the 22 year old self that's applying to MD PhD, but I'm about as fast of a track as you can possibly be. And I'm still probably three or four years away from really having a big NIH funded lab. So at the very quickest, it's the next 15 years of your life. So what do you want to do? Do you want to own a house? Do you want to have kids? Do you want to have a partner? All those things I think really play into it. And I think people too often think of like, what do I want when I'm 22, rather than what am I potentially going to want when I'm 35 and doing the same thing.
- [12:37]
A
Yeah, it's pretty awesome amount of planning that you've done, not only with your finances, but with your life and just figuring out your career. Super helpful. I don't know that most of us have quite as much vision of our future as you do and that that clearly enables you to put yourself on a path to get to that vision. Once you know exactly what it is that you want, what's next for you? What's the next goal you're working on?
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B
Yep. So really right now, just trying to start up my own research lab. I'm working both at two big institutions here on the west coast starting a research lab working on the microbiome. So it's applying for NIH grants. It's now actually starting as an Attending, which will be nice for my income as well. I won't be working full time as an Attending, but really trying to take that research lab to the next level and ultimately run an NIH funded lab is the goal, assuming the NIH funding still exists in a few years.
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A
Well, there is some stress about that right now, for sure. I have a partner who just finished a fellowship with the CDC and he paints a pretty dire situation there, for sure. And I'm sure that's carrying forward through other government agencies as well. But thanks for what you're doing. It's important work. It's remarkable work. You've done a fantastic job setting yourself up so you can do that work without financial distractions that so many docs have. So congratulations to you and thank you so much for coming on the podcast to share your success with others.
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B
Yeah, thank you so much for the podcast. It's been a great step along the way. I've listened to it many miles while running.
- [14:04]
A
All right, hope you enjoyed that interview. Obviously, Garrett's killing it, right? Most people at his stage of career do not have the wealth he's already built up, which gives him options. Options already as he's coming out of training, he. He can design his career the way he wants. This is going to lead to less burnout, and it's just pretty awesome to see what he's put together. Now, I promised you at the beginning we're going to talk a little bit about real estate, and I've written lots of stuff on real estate in the past. But we also have a number of real estate partners, advertisers, sponsors, whatever you want to call them, people who we help raise money for their real estate investments. And as a result of that, there's lots of marketing that goes out on their behalf, whether you're attached to our real estate opportunities list or not. That's where most of the marketing is. But you hear about it on the podcast and you see it on the blog and forums, et cetera, et cetera. But I think it's important that you hear directly from me kind of my take on real estate. So with no marketing here, let's talk just for a minute about real estate. Okay. Real estate investing is totally optional. That's the first point I want to get across to you. You do not have to have a rental property to be financially successful. You do not have to invest With a specific real estate investment trust, mutual fund, or ETF to be successful. You do not need private passive real estate investments like some of the syndications and funds that invest with us to be successful. It is possible to be successful with nothing more than a single fund of fund mutual funds. Right. Mike Piper is one of my great. Who his portfolio. This is a very sophisticated, financially sophisticated guy. His entire portfolio is one mutual fund. It's the Vanguard moderate life strategy fund. That's it. That's what all his money is. He just, he's a real fan of simplicity. And you can keep it that simple and be fine. You do not have to invest in real estate. I invest in stocks and bonds and real estate. I see those as kind of the three big investment asset classes, and that's what I invest in. I think there's some real benefits to real estate, Things like some unique tax credits advantages. But mostly it's a case of another asset class that has relatively low correlation with stocks, but has similar returns to stocks. This is a good thing when you're building a portfolio to have high returning assets that have low correlation with each other. This is a principle of portfolio construction that makes sense. But when you go to invest in real estate, all the investment principles that matter with stocks and bonds still matter with real estate. Right. You got to diversify, you got to watch your fees, you got to watch your tax efficiency, you know, take advantage of retirement accounts to put investments in as they're available. There's a lot more, you know, to it than just going out and buying the house down the street or just going out and buying some, you know, syndication that somebody's trying to push on you. Right? There's more to it than just buying some right now. Sometimes people need to get over the hurdle and just get involved. And it does help you to learn more as you get involved. But keep in mind, it's got to make sense as part of your portfolio as well. Okay? So it's totally optional, but it is a viable pathway to wealth. In fact, I'm still convinced the fastest way out of medicine, if you're like, wow, I'm in this, I'm 35 years old, I'm two years out of residency, and I hate this. I want out as fast as possible. I think the fastest way out is to live like a resident. So you have some capital and then take that capital and invest it into a small portfolio of short term rentals. Talking about buying 5 to 10 short term rental doors, whether in your city or another city or whatever. Probably Managing themselves, managing them yourself for a while. But eventually you should be able to hire management. I think if you do that with a reasonable amount of leverage, that's probably the fastest way out of medicine. I think five years is totally reasonable that you can get out of medicine, be financially independent and do whatever it is you actually want to do with your life. Now most of us went into medicine because we want to be in medicine and we don't have to hit financial independence within five years to do this. But be aware that sort of a pathway is available, is available, and it's a viable pathway to wealth. And you don't have to do short term rentals, you can do longer term rentals. You can add it to a portfolio of stocks and bonds like I have. There's a lot of different ways to invest in real estate. Now if you want to invest directly, that's totally reasonable. It has some aspects of a second job for sure. You got to pick the property and sometimes you do the upgrades and the management yourself and those sorts of things. But you get to control everything and you get to add value. Sometimes if you spend Saturday over there knocking out a wall, well, you just added value to your portfolio. And this is something you're not going to be able to do with your index funds. You're not going to go knock a wall out at Apple and increase the value of Apple. But you can do that with direct real estate investing. So some people really like that level of control. Others of us, we prefer to invest our time actively and our money passively. And so we're looking on the passive spectrum. So if you want to invest passively, you've got another decision to make. One, you can invest on the public side. That usually means buying real estate investment trusts on the stock market. You don't have to buy them individually. Just like you buy an index fund for all the stocks, you can buy an index fund for all the REITs. Vanguard has one that we've been using for years. The ticker for the ETF version is vnq. It's very low cost, it's very widely diversified and, and that can be the way you invest in real estate passively. If you want to step from the publicly traded side to the private side, there are some advantages to doing that as well. There's potential to earn a liquidity premium. There is a likelihood of being able to invest in smaller properties than you're going to get in those big publicly traded REITs. They're just too big to be dealing with relatively small apartment complexes. Or other sorts of investments like that. And so it gives you the opportunity to invest in kind of different assets than you would be able to via the publicly traded REITs. They generally are formed as partnerships. They're often not liquid. Sometimes your money's tied up for several years. They're often formed as partnerships which pass through depreciation to you. And that's really valuable for some people. Sometimes you can use that to offset massive amounts of other real estate income. And so that equity real estate income is coming to you essentially tax free. Done well now, not quite as good as if you own all the properties yourself and you never sell one of them. You just depreciate them and depreciate them, depreciate them and exchange them and depreciate them and depreciate them and exchange them and depreciate them and eventually die. And your kids get the step up in basis of death. But it's still pretty good to get depreciation to offset all of those, all that real estate income that you have. But if you're going to invest in these passive private real estate investments, you've got a little bit of a barrier. And the barrier is typically the minimum investment amount. Okay. Because these are not insignificant, especially if you're going with somebody who's been around for a while. It's not unusual to see those be a hundred thousand dollars, for instance. And that's just hard to come up with early in your career and still have a diversified portfolio. So for the most part, these sorts of investments are for people who are already wealthy. Right. You're already a millionaire or a multimillionaire and then you've got enough that you can diversify a real estate portfolio that's composed of these private passive investments like syndications or funds. If you're not yet wealthy, it's a lot harder to diversify that. So you either end up with a non diversified portfolio for a few years or you just wait a few years or stick with some publicly traded investments or you know, direct real estate properties that you buy yourself. But down the road, the passive private option becomes a little bit more of an option. You just need to diversify between different investments and properties and managers and so forth. So that's the message I wanted to get through to people about real estate. Right. And I worry sometimes that that gets lost in, you know, the marketing and advertisements that you get via White Coat Investor from some of our sponsors. So I try to repeat it frequently and pound, I absolutely pound on it in our real estate Course, for those who've taken our no hype real estate investing course, I pound on this point. And of course we work hard to try to limit our advertisers to people who are experienced fund operators rather than some fly by night syndicator doing their first syndication. That's dramatically over leveraged. Right. We're finding the best people we can who are interested in advertising to you, who are raising capital from you. But that's not a perfect process. Right. That cannot replace your due diligence, your vetting. You still gotta do that, you're still responsible for it. People have lost money in investments that they first heard about at White Coat Investor. These people are paying us to introduce you to them. There's not some sort of guarantee that comes because you heard about them at White Coat Investor that you're guaranteed to make money on them or you're guaranteed super high returns or anything like that. That doesn't work. Even some of them that we've advertised here that I've invested in have lost money. It does happen. There's risk that comes when you try to have high returns and sometimes that risk shows up. I think a lot of people in real estate investing really felt that risk show up in 2022 when interest rates went up 4% in a year. Right. That's a very bad thing. Especially if you have variable interest rate debt on a highly leveraged real estate property. And so you hear about people getting capital calls or having to come up with other solutions to deal with their real estate investment that's in trouble. Well, that's why, because it was over leveraged and too much of the debt was variable rate, people took on a lot of risk and the risk showed up. So there are less risky ways to invest though, right? You don't have to go with a fund that's highly leveraged. You can go with a fund that's more focused on income. You can go with a fund that's not even on the equity side, it's on the debt side. Right. Those are the people who get paid first when things go bad. There are lots of investments where the equity investors have been totally wiped out and the debt investors not only got all their principal back, but all of their expected interest back. So there are different places to invest in the capital stack when it comes to real estate investing. So when you go to make your first real estate investing, don't pick the riskiest way to invest. Why don't you invest your first few investments into some of the less risky ways to invest in real estate, less leverage, a better place in the capital stack, and so on and so forth. I hope that's helpful to you as you think about how you want to add real estate to your portfolio. If you want to add real estate to your portfolio all right, Our sponsor for this episode was Resolve, the number one rated physician contract team that reviews thousand plus physician contracts every year. They're good at empowering physicians with location specific compensation data that leads to unparalleled leverage during the physician contract negotiation process. A physician contract lawyer is included and can negotiate on your behalf, alleviating the stress that go along with reviewing complex legal terms, flat rate pricing, flexible schedules. It's all designed for your schedule. Use code WHITECOAT10 and get 10% off. Go to whitecoatinvestor.com resolve for more information. Thanks for participating in the podcast. Without you, it's not much of a podcast. If you want to participate, apply@whitecoatinvestor.com Milestones. If you don't want to participate, that's fine too. We need listeners, even if if you're all listening at 1.5 and 2.0 speed. I'm just going to start talking faster until finally nobody can listen to me at 2.0. But until then, keep your head up, shoulders back. We'll see you next time on the Milestones to Millionaire podcast. The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.