Realtors and Physician Mortgage Loans with Peter Kim of Curbside Real Estate – Podcast #97

Intro: This is the White Coat Investor Podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011. Here's your host, Dr. Jim Dahle.

WCI: Welcome to White Coat Investor Podcast episode number 97, Realtors and Physician Mortgage Loans with Peter Kim. This episode is sponsored by Curbside Real Estate, a free real estate concierge service for physicians. The home buying process can be extremely confusing and difficult, especially for younger physicians. It can be tough to decide whether to rent or buy, know what your loan options are and ultimately figure out what lenders and real estate agents you should choose.

WCI: After struggling through his first home purchase, Dr. Peter Kim founded Curbside Real Estate to address these physician-specific issues encountered during the home-buying process. Curbside Real Estate is your physician-led Curbside consult for physician home loans, expert real estate agents, relocation services and everything in between. Whether you're securing your first home loan, just beginning your search, or just not sure where to start, Curbside Real Estate can help you navigate the home buying process confidently and efficiently, saving you valuable time and money.

WCI: There's an exclusive bonus for White Coat Investor readers. You get a $100 bonus at closing if you go through the links in the podcast notes today. Contact Curbside Real Estate at [email protected] or call 650-397-1728 for a no-commitment consultation. Thanks so much for what you do. I know your daily work is not easy. It took a long time to learn how to do what you do. And it's really high liability work. So thank you for taking the time and the effort and going in every day and taking care of patients that really do need your help.

WCI: A couple of announcements to make early on the podcast, the White Coat Investor book, the second one, the White Coat Investor's financial Bootcamp is out. So be sure to take a look on Amazon for that. You can get that now. There should be … probably about the time you hear this, it'll be available as an e-book as well as an audiobook. So look for that. We're very proud of that. We've been working on it for a long time. And it's dramatically more detailed than the financial boot camp emails, if you receive those when you signed up for the White Coat Investor Newsletter.

WCI: Also, it's a good time to save the date for WCI Con 20. That's the Physician Wellness and Financial Literacy Conference. It's going to be in Las Vegas, March 12th through 14th, 2020. With the travel day on the 11th, we'll have a reception that night, if you can get there in time for that, and a travel day on Sunday, the 15th. But that's gonna be pretty awesome. It's gonna be at Paris and Ballys in the Paris Conference rooms. You can't register until July. I wouldn't bother booking a hotel room before then. There's going to be plenty of hotel rooms, but it's a good time to save the dates if you need to clear your clinical schedule for that.
WCI: We're very excited. We're taking speakers for that now. If you want to speak at that, you can submit an application. You can find that on the website, and we'll put a link to that in the podcast notes as well. If you just want to give input on who you want to hear from, there's also a separate little survey you can do that you can give suggestions for who you'd like to hear from at the conference.

WCI: Our quote of the day today comes from Morgan Housel. He said, “Singer Rihanna nearly went broke after overspending and sued financial advisor. The advisor responded, ‘Was it really necessary to tell her that if you spend money on things, you will end up with the things and not the money?'” It's kind of a good question. You know, there's a lot of people out there who are very famous and have made a lot of money, but really don't have much of it left. It's really unfortunate, but it turns out that making money is not the same skill as keeping money.

WCI: All right. We have a special guest today on the podcast. It should be well known to people who've listened to all the other podcast. We have Peter Kim here again with us. Peter is an anesthesiologist and a serial entrepreneur. He's the man behind Passive Income MD, a member of the White Coat Investor Network, and the owner of Curbside Real Estate, the sponsor of this episode, and he's a good friend. He's actually coming out to Utah three days with this family. We were just making arrangements to meet for lunch before he heads up to Park City to do some skiing. And so I'm looking forward to seeing him then. Of course, by the time you hear this, that lunch date will have been well in the past. But welcome to the show, Peter.

Dr. Kim: Hey, thanks for having me. I'm really excited to be here.

WCI: Now, you've been on the show several times before, but I'm not sure all the readers ever really connected those two businesses unless they're really good at recognizing your voice. I guess that was because you were blogging anonymously at the time. How's it feel to be out of the anonymous blogger closet?

Dr. Kim: You know when I made that decision, or actually leading up to the decision, there was a lot of fear there. I mean, putting yourself out there especially online, privacy issues, things with your work, I mean, there were a lot of concerns. So it did take me a couple of months to make that decision. But then once I made that decision and I … I'll be honest with you, my finger was kind of hovering over that whole submit when I wanted to just publish the post, but not much happened. You know, people at work didn't start telling me things or having issues with my blog. In fact, kind of the opposite. Some people started … Some people did read it. They reached out to me. They started sharing their issues, started sharing their concerns. And we talked about how we could kind of help each other.

Dr. Kim: And it's similarly, on the blog, on our Facebook group, I mean, it gave me the opportunity to really get out there and do what I love, which is interact with people. And yeah, to really build a community as a result. And so really, it's only been positive things.

WCI: So tell us a little bit about what's new with Passive Income MD. Anything that listeners can look forward to there?

Dr. Kim: Well I'm kind of following your lead a bit. Always try to grow the brand and kind of really improve what resources we have for physicians who are looking for multiple streams of income, and in particular when it comes to real estate. So one of the newest developments is … I think I can tell people this now, is we have a couple of upcoming courses, a couple of things that are really dedicated to helping people … like a whole package, from start to figuring out, okay is real estate something that makes sense for me? And then ultimately, how do I ultimately get to the point where I can invest in real estate, understand the whole process?

Dr. Kim: In particular, the first course that's going to be coming out here is about investing in passive real estate investment. It's like syndications and funds. So it's going to … it takes a few months for these things to really kind of come to completion, but I think you'll see it come down the pipeline pretty soon.

WCI: Yeah. I think people will be really excited about that. That is a common question I get is, “How do I tell these apart? How do I decide what funds or what syndications or what crowd funder to go with? I don't know the first thing in evaluating these.” It's just not as easy as going and buying a total stock market index fund where you just buy it all and forget about it. You know, it's much more complex than that, unfortunately.

WCI: All right. Let's turn to Curbside a little bit. Can you explain to readers what Curbside can do for them?

Dr. Kim: Sure. I think you mentioned it a little bit in your intro, but I mean this home-buying process is, it's confusing. I mean, it's difficult, especially your first one. But every time you do it, I mean, it's never quite simple or kind of smooth or these kind of things, especially for young physicians. I mean, you come out of residency, you come out of fellowship, and one of the first kind of like rites of passage or things that you feel like you want to do as you get settled is to buy a home.

Dr. Kim: The problem is nobody kind of teaches you how to do it. And you know, navigating the whole loan process, finding what loans might work, even just trying to figure out whether it's actually a good time to buy or not … you know, the whole rent versus buy scenario … I mean, that's a difficult decision. And it's a huge decision that can really kind of set you off in a different direction in terms financially. I mean, there are people that make this decision wisely and their financial futures end up well as a result, and there's other people that do the other way. I mean, they might make a pretty poor decision when it comes to buying a home, and then they kind of find themselves in a little bit of trouble that they have to make up over the next couple of years.

Dr. Kim: So we help them throughout that entire process. I mean, as you mentioned, I had a really, really rough go at it when I came out of fellowship. My wife is also a physician. So we were both in that same boat. We came out. We wanted to find a home. And it was just a painful process, especially figuring out what loans to kind of work with, and then what realtor to work with. So it took me a lot of time, energy and effort while I was still trying to find my way at work to figure all this stuff out. And luckily once I did figure it out, I started just telling people about it, mostly my colleagues, actually my former resident … my resident-mates, and I started setting, “Look, I'm just gonna make it easy for you, I just went through it and you know, if you have any questions about it, just reach out to me.”

Dr. Kim: And so they started doing that. And the next thing you know, they're saying, “Hey, you mind if I tell … my friend calls you because they also have some questions and I can't really explain as well as you do?” So it just started growing organically, and that's when I kinda figured out, “All right, there's really no help out there for physicians in this kind of arena,” and that's when, essentially, Curbside was created.

WCI: So let's break that down a little bit. You went through a lot of different things that people have to go through when they're getting a home. Let's talk just about buying a home for a minute, you know, not so much about the realtor, not so much about the loan. What are the big mistakes that people make when they're buying a home?

Dr. Kim: I think one of the biggest ones is buying a home possibly too early. I think most people think about buying a home immediately when they graduate. That's the first thing they think of. The reason I know this is that I'll tell you for example, someone I know who is in fellowship just reached out to me. They're graduating pretty soon in a few months here, and they started asking me about whether any of these physician loans will cover a two and a half million dollar home. I said, “Whoa. Whoa. Whoa. Slow down. Let's get on the phone here.”

Dr. Kim: And I started going over a few things. I said, “I know that you feel like you've been holding back, and there's been some delayed gratification and you want to buy a home and you want to start your life, but this may not be the best time depending on what else you have going on.” So we kind of talked through his financial issues.

Dr. Kim: So, yeah, I think people don't think about the other financials that you talk about, I mean, really getting a hold of debt, understanding where you are financially. This is a kind of a time to transition, let's be honest here. First couple years out, I don't know what the percentages are, but I mean, I tend to find that a lot of people don't necessarily stay in that first job. So I think buying too soon without going over that whole financial situation is probably the biggest mistake that people make.

WCI: Do you think that that's a separate mistake from buying too much house, or do you think they're tied in together somehow?

Dr. Kim: I mean, they usually go hand in hand. People want to buy soon and they want to buy big. And knowing their financial situation, knowing that they're in a point of transition, knowing that possibly their family may be growing at that moment and their needs may change in a short amount of time, I mean, I think they all go hand-in-hand. Once you get a good hold of that, then I think those decisions, other decisions about when to buy, what size house or price house to buy all kind of fall in line.

WCI: Now, what is it about us? So why do we think that buying a house right away, and buying a big house is going to make us happy? Where does that come from?

Dr. Kim: I mean, it's called the American dream, I guess, for a reason, or maybe that's how it's marketed. I mean, I still think … I mean, I'll be honest with you, I did … we got into our home pretty early, and we still live in that same house today. I think it's about seven years now.

WCI: So worked out for you.

Dr. Kim: It worked out really well. And it did. And when I look back at it, we were in the middle of a … I'm gonna say 2012. So, basically coming out of that big recession. And so the price point that we bought at, to be honest with you, I don't think we could afford today. So it did work out for us, but I think that it went through … we went through a lot of the whole thought process about whether it made sense for us, and we didn't just dive into it headfirst, and luckily it all worked out. We kind of lined things up so that probability-wise, the chance of success would be a lot better. But, yeah, I don't know. Physicians, I mean, it's the same thing with the car phenomenon. I mean, you want to buy a big car … I mean, a nice car when you come out. And I think unfortunately, the cars have a lot smaller price point than a home is. But, yeah, I mean, people just are sold that this will be kind of one of the keys to happiness. And I don't think that necessarily is the case.

WCI: So lots of graduating medical students, incoming residents, and especially their partners seem to have this burning desire to buy a home. Why do you think that is? And do you think it's a good move to buy during residency?

Dr. Kim: Well, it's the whole point of feeling like you're putting down roots. Now, depending on your residency and the length of term of the residency, and the location that you're buying, the cost of living there, doing like a rent versus buy analysis, it might make sense. I've seen it work out for some people, I mean, especially in some of these longer residencies, I have friends who are doing some of these five and seven-year type residencies and they can kind of ride through whatever the economy happens to do at that time. And I know many situations where it's actually worked out really well for them. I mean, some of them even kept that place afterwards and then renting it out just because it happens to be in a very, very nice area for renting, especially if it's near a medical center and that sort of thing.

Dr. Kim: So it can be. I think people just … they're in school so long. I mean, you're in college. You're in medical school. Maybe they took off a few years, did some research, did a few other things. I think just that feeling of kind of being settled and moving on with your life. And as you see your other friends who didn't go into medicine, reaching that stage where they're starting families, buying homes, and these kind of things. And so you feel like why not? Why not me?

WCI: Yeah. Every time I look at the numbers, I look at it and it seems like at a five-year-period, a five-year residency, you're general surgery or something, it's about a 50-50 proposition of whether you're going to come out ahead renting or not, just from a financial perspective, not talking about the hassles of home ownership or anything like that. And you get shorter residencies, you know, a peds or an emergency medicine three-year residency and, boy, I don't know, it does work out maybe a third of a time, but that seems like a pretty big gamble to take, especially given the other hassles of buying and selling at such a busy time in life.

WCI: So my general recommendation has usually been that the default ought to be renting during residency. But there's no doubt that it does work out for some people. It's almost like it's cyclical though, right? You get a few years where housing values really go up really quickly, and so people go, “Well, of course I gotta buy in residency,” and they buy just in time for housing values to go down. And then the next group comes along three or four years later, and they go, “Well, housing values don't always go up. I'm not buying.” And they miss out on a boom when they do go up. It's almost like you can't win here sometimes, I think.
Dr. Kim: Right. What did you end up doing?

WCI: I ended up buying during med school, which was a mistake, and renting during residency, which was a mistake. So I lost out on both ends, you know? The one we bought in med school, we bought for 80,000, we sold it for 83,000, right? And the problem is people are like, “Oh, you made money.” No, we didn't make money. It's not that simple. Just selling it for more than you bought it for doesn't mean you made money. You got to subtract out the transaction costs and all the other costs of home ownership. We lost thousands.

WCI: Then in residency, I was in Arizona from 2003 to 2006, right? I mean, things doubled over that three-year time period. Obviously, you couldn't have planned for that. If you had a working crystal ball, it would've worked out well. So obviously that period of time, we would've been better off buying. So then we come out of residency, we go to Virginia, and we decide, “Oh, we'll buy, you know.” You know how everything ended up. Anybody that bought in 2006, there it was in 2015 selling it for a loss, you know.

WCI: So it's almost like you kind of get this cyclical nature to it that works poorly against you, which is unfortunate. And what you really need to do is just be in the house long enough that you're in there that whole cycle. You know, if you're in there 7, 8, 10 years, you're gonna go through a downturn, you'll go through an upturn, and you're probably come out ahead because you can spread those transaction costs out over all that time period. So appreciation can be greater than the transaction costs, but in a two or three or four-year time period, it's really a gamble whether you're going to get the appreciation you need to overcome the transaction costs.

WCI: The other thing that really, I think, people fall into is this whole idea that if your mortgage payment is less than your rent, you should buy. And that's as deep as they go. It's just that superficial, you know? They don't stop to think, “Well, is there more to it than just the payment?” Because really, you can make that mortgage payment about anything you want by spreading the mortgage out as long as you can. So I think people make that mistake a lot too.
Dr. Kim: Yeah, I think taxes comes up a lot too. I mean, when people start talking about it, they think of the tax benefits. I mean there are definitely some tax benefits there, but people also forget just the other costs of home ownership. I mean, I find that any time anything breaks, that normally you will call a landlord for, next thing you know, it's over a thousand dollars that you're paying out. And yes, that goes into some things you can write off ultimately there, but there's an additional cost there that people don't necessarily consider.

WCI: Yeah, for sure. It's pretty interesting too. A lot of people don't realize, they may not get those tax benefits. Most attendings do, because they're itemizing and they're paying enough, and property tax or charitable contributions, and their income taxes and the mortgage interest that it works out, but a lot of residents, especially with the new higher standard deduction, they're not actually getting a tax benefit for buying, you know, unless you actually run the numbers and know what your tax situation is. That's I think heavily oversold by the industry as well.

Dr. Kim: Right.

WCI: Let's talk for a minute about high cost of living areas. I mean, you live in California, right? Are there special considerations there for docs as they buy homes?

Dr. Kim: Well, the lower down payment, these physician loans where you're able to pay a lower down payment without the private mortgage insurance or PMI as it's otherwise called, definitely come into play a lot more here. I mean, we're looking at homes where homes start at a million dollars for a two-bedroom, two-bath home. So that may sound normal for some of these people up in the Bay Area, they might think that's cheap, but for I think a lot of the people that are listening to this, I'm guessing that probably feels a little bit expensive.

Dr. Kim: So physician loans definitely come into play here a lot greater and knowing what those loan limits are really important, and there are a few lenders that, depending on what that price point is, they really are … they're specialized in this, in kind of dealing with how to manage your whole debt to income ratio, and kind of ultimately help you qualify for the loan that you're looking for. So I think that you can't just blanket or go to anybody out there. There are special ones and especially in certain states which you have to go to that kind of understand how this process works.

WCI: Now, I mean, the other thing that it seems like in those high cost of living areas is that your house is just a much bigger piece of your financial life, you know what I'm saying?

Dr. Kim: In terms of your net worth, you mean?

WCI: In terms of your net worth, in terms of what you have to be thinking about, you know? I mean, in my case, my house is almost negligible, right? I mean, maybe it's 5 or 10% of my net worth, but it's not a big piece my financial life. It's like a quote I'd put in the financial boot camp book, that basically if you have to ask how much a house costs, you're buying too much, you know? But in California, that's not an option, in Seattle, in DC, in New York City, you know? I mean, it's gonna be this huge figure that you look at and you go gulp, whereas if you're buying in Indianapolis, you probably took out a bigger loan to pay for medical school than you did to buy your house.

Dr. Kim: I mean, that to me sounds pretty crazy. You're right. I mean, that is the, by far, especially where I live, Bay Area, that dictates everything. And it's kind of funny to see we're at a time right now where I see a lot of physicians coming out. They can't even afford anything around some of the hospitals here. They have to drive and find places that are hour, hour and a half away, especially here in LA.

WCI: That sounds incredibly dangerous as a resident.

Dr. Kim: Yeah. It's a far drive. And unfortunately, that's what the cost of living here is like. I mean, it seems unsustainable. And in terms of your net worth, it's a huge part of your net worth. And when you go start looking at net worth, towards retirement and these kind of things, you should definitely … I mean, I tell people definitely exclude the price of your home, or the actual value of your home right now as it sits, but it's a huge part. But the thing is, we do experience, especially in some of these areas, a good amount of appreciation. Now, I know that doesn't mean much, but it could mean something if you decide to ultimately move somewhere else. I mean, that's what you have to make the decision, or downsize a bit.

Dr. Kim: Our home here, again, we were really lucky to buy when we did. I mean, there are again, certain situations, and I can't say we totally knew that that would be the case, but I mean our home price is over doubled, and that's added seven figures plus to our, “net worth”, but again, it doesn't mean much unless we do something with it.

WCI: Yeah. It's interesting. I was looking at statistics for California housing the other day, and if you look at the bottom of the mark, and I think it was 2008 in California, I can't remember exactly when it was, the Bay Area has more than recovered from that. It was well above the 2008 level. But California on average was not. It still has not recovered 10, 11 years later from the trough that it fell to in 2008. And a lot of people just don't realize that in these can't lose real estate areas, that you really can lose for quite a long period of time. I think they say in real estate that time heals all wounds, but it might be a lot more time than you think to get back to the value you bought something out if you end up buying at a peak.

Dr. Kim: Yeah. I mean, that's unfortunately the case, but again, there are other kind of … there are for certain people in certain situations that tax benefits are there as well too. So I think this whole … and then, of course, the emotional aspects of being in a home, being settled with your family, being at a certain school district and that sort of thing. So there are other factors, it's just kind of you have to kind of look at the whole picture and not just look at the numbers.

WCI: Okay. So we talked about residents. We talked about high cost of living areas. Let's talk for a minute about attendings, okay? Someone's coming out of residency. How long should they wait to buy their home, or should they wait?

Dr. Kim: Again, it really depends on their situation. I think that's definitely a point of transition. Their first job … You know, I don't know. Do you know numbers that are attached to this kind of thing? Or how many people or what percentage of attendings actually stay at their first job?

WCI: I think the statistics I've seen are that 50% change jobs in the first two or three years, I think is what I've seen.

Dr. Kim: That's not surprising to me at all. So for me, that's a tough time to buy a home, to be honest with you, just because you may move locations. You may move states. I mean, that happens quite a bit, and the next thing you know, you're scrambling to get rid of that home. You know, we have that discussion with people all the time. What I always ask people is, “Are you willing to just wait until you know that you're a little bit more settled, that you like the job, that you want to stay there, that your family isn't growing, and these kind of things?” It's a crazy point of transition that people have no idea until they get there.

Dr. Kim: So I suggest that people, you know, if you can hold it off for a couple of years, you're probably better off. I mean, especially if you're a 1099, like a lot of ER, people like yourself or a lot of anesthesiologist, you're actually gonna really have a hard time getting a loan anyways, without at least one or two years of tax records, tax reports, of you working at that similar job anyways. So it's a tough time. So a lot of times, I suggest people wait a little bit.

WCI: You know, I've kind of always told people, 6 to 12 months. And I think my theory behind that is that you want to make sure that you're … both your personal life, if you're about to get married or something, that's probably not the time to be buying, or if you're about to have a bunch of kids or something, that might not be the time to be buying just because you're gonna end up buying some place too small for what you really need in the long run, but also your professional life is stable. I think you need some time to find out whether you like the job and whether the job likes you, and I think that takes six months.

WCI: It's hard to get a rental contract for six months though. Usually, you have to sign for a year, and so that's why I go 6 to 12 months, but at that point, I think most people have a pretty good idea whether that job's gonna work out. I mean, there'll always be surprises, but you gotta weigh that against waiting to buy, because as you know, the longer you're in someplace, the better deal it is to buy. And if you wait too long on the front-end, that just shortens the period of time you're in the home.

WCI: So I think it's a little bit of a balancing act, but this idea that you should buy four months before your residency ends, I think is where you often run into these people that just feel like they're in these golden handcuffs, right? The hospital administrator that employs them has got them exactly where they want them. They got this big, fat mortgage. If they sell and move to another job, they're gonna lose 100,000 or $200,000 because of that house. So I think you got to be careful not to get locked into that kind of a position.

Dr. Kim: Yeah. I mean, it's kind of funny. Even though this business … and this business was created to help people get into homes, often times I end up … I mean, I'll be honest with you, sometimes I end up talking people out of it. I mean, it's … the whole point is that I want to help people get into the home at the right time that makes sense for them and not put them in a bad situation. And I think waiting, like you mentioned, at least a little bit till they know what's going on makes a lot of sense.

WCI: Yeah, right time, right home, exactly.

Dr. Kim: Yeah.

WCI: Okay. So any financial tasks that you think someone needs to do before buying a home? Is there something that they shouldn't buy a home if they haven't done this? Or do you think there are some things that need to be taken care of first, or not really?

Dr. Kim: Well, I think dealing … for most people, dealing with their student loan debt, and whatever debts might be out there is probably … takes a little bit of priority over getting a home. To kind of go back to the person I mentioned before. He had a significant amount of student loan debt. I mean, he's talking 3, $400,000 and talking about purchasing a home that's in the well into the $2 million. So I think we kind of said, “Hey,

WCI: I'm just curious what income that doc had.

Dr. Kim: Well, I think there was a possibility for some family help for the down payment and that sort of thing.

WCI: But it's just a typical doctor income, 2 or 3 or $400,000?

Dr. Kim: Yeah, yeah, pretty much typical income here in Los Angeles. But I said, “Look, if you had the opportunity and some family's willing to help you with the down payment, and you've got these high interest loans at significant amount, you may be better off financially getting rid of those student loans first before you kind of throw that into a home, because once that debt is taken care of, you're gonna find that you can save up pretty quickly actually for that home if that's what you're … all those debts are taken care of.”

WCI: Now, when you say taken care of, you mean paid off. Are you suggesting people should pay off their student loans before buying a house?

Dr. Kim: Well, no, not necessarily, but he had this … Well, his interest rate was quite high. His interest rate was quite high, so I said, “Why don't you figure out if you can refi these loans, figure out what percentage you can get there, but just the whole point is to address those debt, that loans for …”

WCI: To have a plan for it.

Dr. Kim: To have a plan for it. Doesn't mean you …

WCI: Now, what about those who say, “Well, I don't want to refinance before getting a mortgage because that's going to ding my credit score, and then I'm going to get a lousy interest rate on the mortgage.”

Dr. Kim: Yeah, I think that's overrated. I think the credit score, people are very, very afraid to have their credit even checked once or twice before they actually need something because they think their credit score takes a hit.

Dr. Kim: Now, I actually took a credit score course sometime last year, because I really wanted to learn a little bit more about this whole credit score thing. And they kind of broke things down into like what has the most impact on your credit score. And obviously, defaults and these type of things, 30, 60, 90-day late, I mean, those are the biggest … or defaults, foreclosures. And these things obviously have the biggest impact on it. But one of the other biggest things is really your credit utilization.

Dr. Kim: And so if people can be smart and smart about what gets reported on a monthly basis to these credit agencies, for example, by either paying off their credit cards a little bit early so it doesn't get reported there, these kinds of things have far more impact on your credit score than a couple checks on it is what I found. And those things recover quite quickly. And by refinancing your loans, number one, it really won't impact your credit score significantly by a couple of those credit score pulls, but what it will help you do is in the debt to income ratio, especially if your payments … again, depending on what kind of … what they refi into and what those payments end up being, often times, that can kinda help you actually get the mortgage that you need.

WCI: Any trends you've noticed with Curbside in the last year? Anything that seems to be happening in this physician housing market that you've noticed?

Dr. Kim: Yeah. We've actually noticed that it's gotten easier for our physician clients to purchase homes. I mean, I think that in the past five or six years, with this crazy run-up that we've had with prices … well, especially in these areas near me, but in many parts of the country, these homes were going so fast. And the more competitive you can make your offer, the more likely you were to get into a home especially with multiple offers.

Dr. Kim: So when they were looking at a lot of our physician clients coming in with 0%, 5%, 10% down payment loans, they just didn't look as competitive as somebody who was putting in 20, 30, 40% or all cash. Now, as the market softened quite a bit and as supply has increased, I mean, you're seeing things sitting on the market for a little longer. Now, these physician-clients that are coming in and trying to actually buy the house with lower down payments, they're a lot more attractive and they're a lot more competitive.

Dr. Kim: So I've noticed that a lot of the physician clients that we are working with even two years ago, three years ago, I mean, it would take them a very, very long time for some of their offers to get accepted on multiple homes, this sort of thing. But the thing I've noticed in the last 3 to 6 months, oh, I mean people are really going after these physician clients, and they're getting their offer accepted.

WCI: How many doctors has Curbside been able to serve in the last year?

Dr. Kim: In the last year? It's definitely been a few hundred, a few hundred physicians. And it's just continuing to grow, I would say pretty much at an exponential rate as people are just telling their friends about it. So it's really been great. I think that feels good, and kind of hopefully makes us feel like we're doing a good job.

WCI: Let's talk about realtors for a minute. A big part of your businesses is basically connecting doctors with realtors. What do you think about realtors? What value do you see them adding? Do you think they're worth using for buying, selling, both? And what do you think about that classic 6% commission structure?

Dr. Kim: That's a lot of questions there, but I'll try to tackle it one by one. I have a lot of … obviously, I have a lot of good relationships with a lot of realtors. I guess, and in actuality, I have my real estate broker's license too as well. So I understand that market. I don't go out and buy homes for people or sell homes, but I got it myself just so I can learn a little bit more about the industry, what they do and what value they bring.

Dr. Kim: And having been behind that, I actually think they can bring a significant amount of value. I mean, when I went through the process, again, it's not necessarily a hard process to get your license, a little bit harder process to get your broker's license, which is what I have, but a lot of it deals with regulations and making sure disclosures and disclaimers, and making sure all these things within this contract are done correctly. And these are things that I think if I were just to go out there and try to purchase my own home, I would have no idea about any of these things.

Dr. Kim: And just kind of making sure that you navigate a few of these things correctly, oh, that can change a whole transaction. It may not even get you into the … you may not even end up purchasing that home, or you may end up purchasing that home for a lot less if you'll be able to negotiate based on some of these types of things.

Dr. Kim: I mean there are some things I didn't even know I can negotiate. I think that really has to do with the realtor and kind of the knowledge, especially that I've learned behind the scenes. But when I went to go buy some investment properties, which I've done, I still use realtors. I think they have a better understanding of the market. They know what things can be negotiated. And sometimes it's easier for me to negotiate through a third-party. And also, again, I feel like I'm not … you're not really paying for them as the buyer. I mean, I guess it's really technically coming from the seller. And so having somebody to kind of have another set of eyes on that contract, taking a look at that, understanding that local market, I think it adds a lot of value especially on this type of purchase that you hope to be in for 5, 7, 10 years and it's probably the biggest purchase of your life.

WCI: Especially in California.

Dr. Kim: Yes, especially in California. So I love … I mean for me particularly, I like having a realtor on my side. Now I understand there are certain people who have been through this process before. They understand it. They know how to read that contract. They understand the ins and outs of what they can ask for, what they negotiate, and they feel comfortable with it. Then if that's the case, I mean perhaps they could go directly to the seller, or go to the seller's agent and try to negotiate maybe something else additional off by not bringing a realtor to the table, and I say go for it. If you're comfortable with it, do it.

Dr. Kim: A lot of times, the people that come to us also happen just to be buying in a different state. They're relocating for whatever reason. They are moving to that area, and they just don't know anybody. So sometimes they need somebody on the boots on the ground to kind of help them through that process. So that's been really helpful that I've noticed.

Dr. Kim: Now, you mentioned selling. I think that's a heated discussion I mean, on your group too. I mean, at WCI, I mean, the White Coat Investor's Group, there's a lot of discussion about that. Should I have a seller's agent or not? Should I save that 6%, or in our case here, it's typically 5%? You're not really saving the 5%. It's that half that you would give to your agent, which would be two and a half, or 3%. Is it worth saving that two and a half, 3% to not have representation? Again, that's a personal decision. If you feel comfortable with the process enough to make sure that everything on the contract is done, all of the disclosures are done correctly, and that if something gets in a little bit of A hairy situation that you can handle it, then that's fine. Go for it.

Dr. Kim: I mean, I think these days with the resources online and I think the For Sale By Owner, FSBO, is a good site for that where they kind of help owners ultimately sell their own homes without representation, there are some resources for that. I think there are some contracts there that you can look at. And if you feel comfortable with it, I say go for it. I never try to stop anybody from doing that. I mean, there are people that come to us all the time that just want some help with some guidance towards physician loans, but they say, “I want to represent myself on the realtor side,” I say, “Sure. Go for it. But if you need help, then we'll definitely connect you to someone.”

Dr. Kim: I think things are changing in that industry. I mean, obviously you've seen Redfin come along, and they've kind of changed the model a little bit where they've decreased the percentage for their selling agents. I still think they compensate those agents elsewhere, but yeah, I mean, some people do that, but they may be getting a different level of service. But, again, it's very, very … it's to the individual situation.

WCI: Yeah, I think a lot of the criticism comes because it's … it's like asset under management fees for financial advisors. All of a sudden, the guy with the two-million-dollar California house is paying four times as much as the guy with the 500,000-dollar Utah house. Same house. Same amount of work to sell it, and yet in California, you pay four times as much for it. I think that's probably what is driving a lot of these disrupting companies that are trying to disrupt the industry in this space. They're looking at and saying, “That's a lot of money to pay 5 or 6% of a two-million-dollar house.”

WCI: Do you think these companies that are trying to disrupt the industry, do you think they're gonna be successful in the long run?

Dr. Kim: You know, I've asked that same agents… sorry, that same question about the agents that I work with. I mean, do they think that their job will be around at 10 years, 20 years? But everyone seems to be pretty confident that they'll still be there. I mean, they talk a lot about it in that industry and they feel it's still a relationship business. People like to have people guiding them through these type of things, and maybe not just something online that kind of just matches the lowest price somebody will go with the highest price someone else will pay. And I think people know that there are a lot of nuances to every transaction. And so people … there will be a subset of people that will prefer some of these online platforms that just kinda match you up like a match, but then I think a lot of people will still want that personal care to make sure everything gets done correctly.

Dr. Kim: Now, I think one of the things that people do worry about that you kind of mentioned that we didn't mention is that the incentives. I mean, I think people don't like the fact that they feel like agents are just incentivized to get the deal done. I think that's something important to address. And that's … can truly be the case. I mean, they have a commission sitting there waiting for them as they represent you if that transaction gets done. So maybe they want to push that transaction and get it done.

Dr. Kim: I think some of that can be there. And I think that's the concern with just choosing whatever agent that you want to choose. And I think it really helps to make sure that you understand who that agent is, what their history is, and what kind of relationship that they're looking for.

WCI: Yeah, I've often wondered if it would be more interesting to structure the commission as rather than just percentage of the entire deal, a higher percentage of the amount over a certain amount to really incentivize them to sell it for as much as they can. I don't know that I've ever actually seen a contract structured that way, but the more I think about it, the more that's how I think maybe it should be structured.

Dr. Kim: Yeah, I mean it's possible in the future somebody can figure that out and make that happen.

WCI: I think there's a lot of inertia in the industry that's keeping it from happening. I guess I wouldn't be surprised 10 years from now if we're doing this particular business very differently. Let's turn for a minute to talk about physician mortgages. Can you explain to listeners what a physician or a doctor mortgage loan is?

Dr. Kim: Sure. I think these things were created actually initially by Bank of America. I mean, somehow somewhere down the line years ago, they figured out that physicians are in a unique position. They come out a little later in life with good incomes but high student loan debt and not a lot saved up for a down payment, and they were, by traditional methods, these people are having a hard time getting a conventional loan because of their debt to income ratios and just not having a lot saved up.

Dr. Kim: But at the same time, I think they started noticing that the default rates amongst physician borrowers were the lowest if not … yeah, I think about the lowest in terms of any population out there that they were working with. I mean, physicians, they will find a way to pay their mortgage, whether that means finding another job, working harder, getting paid more at work. I mean, they will stay in there. And maybe that's just the nature of what physicians are like, and what their work ethic and these kind of things, and their priorities so they tried to figure out, “Okay, how can we help these physicians ultimately get into these homes when they want, even though they don't have those …” I mean, again, they don't have a lot saved up.

Dr. Kim: So they figured out a way to structure the loan so that these physicians, depending on the type of home, or the size of the home and the size of the loan, to get in there with 0, 5 10% down instead of the typical 20%, and that's usually attached to a fee that normal people have to pay whenever the down payment is lower than 20%. That's called PMI or private mortgage insurance, and that can add up to a significant amount over time.

Dr. Kim: Well, they decided, “Okay, well, for these physicians, we'll be able to do these loans and we won't charge them a PMI.” But what they often do is on the back end with the rate, because they are giving at a lower down payment, maybe it's slightly higher. Now, that's not always the case, but oftentimes that's what you'll find.

Dr. Kim: And so that's … a lot of physicians … I mean, I used one myself. When I came out, especially trying to buy a home here in Los Angeles where the price points are significantly high, unfortunately, we didn't have that saved up through residency. We had a little bit saved up, but not that much. And we wanted to get into our home. So the only option for us was to use one of these physician loans where, I don't know, we use a different down payment loan, a lower down payment. And for us, it worked out great, otherwise, we wouldn't have gotten into our home, and at this point again, the appreciation was happening so quickly and so fast here, we would have been priced out.

WCI: Now, are you still on the same loan or have you refinanced out of that loan?

Dr. Kim: I have refinanced actually since.

WCI: So when is it a good idea to use one of these versus using a conventional mortgage?

Dr. Kim: Well, I mean, if you have the option, there's a couple of things that you have to consider. Number one, just compare first of all. Each bank that you work with, if they're offering you a physician loan, they can offer you a conventional loan. So see what those interest rates are and you can do a little bit of a calculation to see what might make sense. I guess part of the question is if you had that option, would you do 20% or would you put down 10%? I guess the question is what would you do with that difference in that down payment? I mean, there's an opportunity cost, I guess, of having it in your home versus not being out there and being used for something else.

Dr. Kim: And for some people who are possibly quite savvy or they have some other options for it, they may think, “Oh, it makes more sense for me to take that amount and invest it elsewhere.” Now if … you just have to know where you put that. Now, some people will take that money and just do other things with it, buy a nice car and do these type of things, which is again, if that's what they want to do, that's what they want to do, but you just have to know what the opportunity cost is for not having that money in the home and have a plan for it at the end of the day.

Dr. Kim: So I never tell people what's the right decision there. I think we go over these scenarios. We talked about what their other interests are, whether it's investing in real estate, or putting that in the stock market, or these type of things. Look at the market that's kind of around them at that time, see what the different rates are, what the different payments are, how that ultimately kind of adds up over time, and then make a decision from there.

WCI: Yeah, I think that's exactly the approach to take. You got to ask what else are you gonna do with the money? Now, I've never bought with a physician loan. Our last two purchases were the conventional loan, and we had a down payment, but I was also able to max out all of my retirement accounts. I didn't have any other student loans or any other kind of even moderate interest debt to pay off, and so it seemed like a good use to us of that money. But I think someone that's got a bunch of 7% student loans and it's otherwise the right time for them to buy a house for personal and professional stability reasons, I think it's okay to use that money on the student loans rather than the down payment, use a doctor loan.

WCI: What mistakes have you seen doctors make when financing a home?

Dr. Kim: I think the number one thing when people look for financing a home, when they look for a physician home loan is they just go after whoever dangles the best rate in front of them. I mean, that's what they do. They go out and everyone's used to kind of using these comparison sites, and so they kind of want to do the exact same thing for physician home loans, and they just go for the one that dangles the lowest rate in front of them.

Dr. Kim: Unfortunately, what happens is that nobody can guarantee you those loans, at least that rate, until you're actually in escrow on the property. What that means is that your offer has been accepted, the contract has been signed, and then you can go back to that same lender and lock in a rate. Now, what people tend to find is that when you go to lock in that rate, it's not necessarily a loan that they initially told you that you would get. I mean, the market changes. Market changes often times, rates change twice a day, whatever the Fed's doing. Things slowly kind of change over time and maybe you were looking 30 days ago, but I think people chase the lowest rate and they don't necessarily think about the service that they're gonna get.

Dr. Kim: I mean, we have people come to us … I mean, not a lot, but it definitely happens to us, where they're late in the process. They need their loan to go through, and a lot of these deadlines are getting close to the end, and the bank, even though they promised them a certain rate, just ultimately either based on some other indicating factors or that they kind of reveal to them, oh, they had to jump the rate another half percent because of that. They felt like maybe a little bit of a bait and switch, or they kind of get to the end and they say, “You know what, unfortunately, we're not gonna be able to offer this loan. There are some issues here and there.”

Dr. Kim: And I think people, often times, just get tricked into certain lenders because of just the rate that's dangled in front of them. So I think it's important to understand the ability for that lender to close, what their track record is, and who you're working with at that particular bank. I mean, it does matter. I mean, you can go to the same bank and try to get a loan there, and it does matter who the loan officer and the front person that you're working with because depending on how they package you, how they kind of counsel you from the beginning, some of them will know from the very beginning that you will not really qualify for this loan at our bank, so it's not even worth trying. I mean, so it doesn't matter who you go to.

WCI: Thanks very much. I think we're getting short on time here. We better wrap this up. But thank you, Dr. Kim, for being on the podcast today and for sharing your expertise on these subjects.

Dr. Kim: Cool. Thanks for having me. I mean, people can reach out to us anytime. We're just happy to talk about home buying, whatever the topic is. Yeah, that's our passion. We love it.

WCI: Thank you so much.

Dr. Kim: Thanks.

WCI: This episode was sponsored by Curbside Real Estate.com, a free real estate concierge service for physicians by physicians. After struggling through his first home purchase, Dr. Peter Kim founded Curbside Real Estate to address physician-specific issues encountered during the home-buying process. In addition to providing news and information, curbsiderealestate.com is your physician-led Curbside consult for physician home loans, expert real estate agents, relocation and everything in between.

WCI: Whether you're securing your first home loan, just beginning your home search, or you're not sure where to start, curbsiderealestate.com can help you navigate the home-buying process confidently and efficiently, saving you valuable time and money. There's an exclusive bonus for White Club Investor readers, 100-dollar bonus at closing if you go through the links in the show notes. Contact curbsiderealestate.com at [email protected] or 323-515-9507 for a no-commitment consultation.

WCI: Be sure to check out the new White Coat Investor's Financial Boot Camp book. It's available on Amazon right now. Thanks for subscribing to the podcast and for giving us a five-star rating on iTunes. That really does help spread this message to other people. Head up, shoulders back, you've got this. We can help. We'll see you next time on the White Coat Investor podcast.

Disclaimer: My dad, your host, Dr. Dahle is a practicing emergency physician, blogger, author, and podcaster. He is not a licensed accountant, attorney, or financial advisor. So this podcast is for your entertainment and information only and should not be considered official personalized financial advice.