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Major Dilemma: Buy a House or Grow a Practice? – Episode 186


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Is it really possible to have that dream home and an ideal practice at the same time?

Is getting into that perfect home on your mind? On this episode of the Dentist Money™ Show, Reese and Ryan talk about why that’s such a big decision—and why it can affect your effort to build the ideal practice.  

Mixing thoughts about a new home when you’re focused on growing your practice can leave you in a serious quandary. Find out how doing things in the right order will result in greater personal net worth.

To learn the steps to make your ideal house and ultimate practice dreams come true.

Podcast Transcript:

Reese Harper: Dentist morning show listeners, we’ve got a great one for you today. We are talking about the huge decision of buying a primary residence and the effect it has on your business, on your net worth, on your cashflow. And we’re comparing it to one of my favorite things, and my favorite times a year, which is watching fireworks explode in the sky. I hope you join us for this episode where talk about the cost of owning a home, the things to think about before investing in your dream house. And have a great 4th of July, we love you. Thanks for listening. Carry on.

Speaker: Consultant advisor or condense your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now here’s your host, Reese Harper.

Reese Harper: And welcome to the Dentist Money show where we help dentists make smart financial decisions. I’m your host Reese Harper, here with my trusty old cohost, Sir Ryan Isaac.

Ryan Isaac: Yup, thank you. This is one of my favorite times a year because we like fireworks.

Reese Harper: Do you-

Ryan Isaac: Do you like fireworks? I love fireworks, I’m such a sucker for a fireworks show.

Reese Harper: I love fireworks. I just don’t like waiting in line for a spot on the grass.

Ryan Isaac: It makes you onri-

Reese Harper: In front of like, especially if people are trying to like encroach my blanky.

Ryan Isaac: With thousands of people. Ooh-

Reese Harper: That’s my corner.

Ryan Isaac: Blanky encroachment-

Reese Harper: Stay away from my blanket.

Ryan Isaac: Or blanky.

Reese Harper: Yeah.

Ryan Isaac: One of those two.

Reese Harper: Yeah.

Ryan Isaac: Today on the show we’re going to talk about something that’s kind of, it’s a huge decision most people end up making, which is what is the impact on your life, in your business, your net worth, your cashflow that the primary residence, the house you live in, that decision. What impact does that have on your life? That’s we’re going to talk about today. But to start, I kind of wanted to talk about one of my favorite things, which is what I just said, which is fireworks.

Reese Harper: Okay.

Ryan Isaac: Because I was thinking about the old fire. Do you know what the history is of it by the way?

Reese Harper: Something about-

Ryan Isaac: Do you know?

Reese Harper: The 18th century war.

Ryan Isaac: It’s a long time ago. It actually started, the Chinese used to like put bamboo in fires in the air pockets in bamboo would explode and pop, but it used to be to ward off evil spirits, which I don’t know if that helps or not, maybe it does in the fireworks-

Reese Harper: Yeah, I could see it.

Ryan Isaac: Eventually they started mixing, this was like 200, no, 600A.D, they started mixing all these chemicals. Basically they ended up accidentally building gunpowder, and then they would put it in bamboo and then throw it in the fire.

Reese Harper: Wow.

Ryan Isaac: But they did this because it made the explosions bigger which helped ward off even bigger evil spirits that was there[crosstalk 00:02:35]-

Reese Harper: Violent little critters.

Ryan Isaac: Yeah, that was the point of it. But I started thinking about the history of fireworks ’cause it’s one of my favorite things. I love this time of year. I love lighting fireworks and buying them and watching them and smelling them. Do you like the smell of them when they like that sulfuric smell? You guys know what I’m talking about?

Jenni: This is just really in depth, but yeah.

Reese Harper: This are like yard, this are some of the-

Ryan Isaac: Am I alone?

Reese Harper: This might a projecting slightly.

Jenni: No.

Ryan Isaac: I mean, do you like the way the concrete smells in the summer when it rains?

Jenni: Yeah.

Reese Harper: Yeah.

Ryan Isaac: And fireworks are done being lit, they’re just like, you can smell them.

Reese Harper: Yeah, I think a little differently, but I mean-

Ryan Isaac: It’s probably true.

Reese Harper: I’m not saying that this isn’t something I resonate with.

Ryan Isaac: That’s fine.

Reese Harper: But this may be your personal-

Ryan Isaac: It is.

Reese Harper: Like a personal thing that we just want to respect.

Ryan Isaac: It might be just one of my weird quirks that we just add in the list.

Reese Harper: We just let you have it.

Ryan Isaac: Let me have it, let me own this.

Reese Harper: I like seeing them-

Ryan Isaac: Yeah.

Reese Harper: The smell might’ve been not on my list of things I was like, oh, the smell of the fireworks in the air.

Ryan Isaac: It just feels good.

Reese Harper: It was more like the site of the fireworks in here.

Jenni: Yeah.

Reese Harper: But you know like-

Ryan Isaac: Okay, Laura let me ask you this then, what’s the best music to accompany a firework show?

Jenni: Taylor Swift.

Ryan Isaac: T Swift. Are you going-

Reese Harper: You guys would say about anything.

Ryan Isaac: I know, we would.

Jenni: What’s the 1820 overture?

Reese Harper: Yeah, I mean-

Jenni: Is that [inaudible 00:03:47].

Ryan Isaac: Are you going Neil?

Reese Harper: This is like class, I would say Bob Dylan.

Ryan Isaac: Bob Dylan. Okay.

Reese Harper: Yeah. I mean-

Ryan Isaac: But not like-

Reese Harper: Americana, probably like forever young-

Ryan Isaac: Neil Diamond?

Reese Harper: The first version. I mean-

Ryan Isaac: Every public park does Neil Diamond fireworks.

Jenni: Well, there’s like this Spotify list of firework music and it’s like Neil Young.

Ryan Isaac: Yeah.

Jenni: Bob Dylan. [crosstalk 00:04:09].

Reese Harper: I mean, Bob Dylan to is a very further step ahead, is a very significant step up from Neil Young.

Ryan Isaac: There’s a lot of different opinions, fine.

Reese Harper: Yeah.

Ryan Isaac: We all like fire … Here’s what I was thinking about. We have these two things and both of these things have some things in common. They both make people happy. They invoke emotions. They can make people excited. They can be symbols of like success or independence. They bring people together. I’m talking about houses and fireworks. But if you do them wrong, you go too big, you overdo it, if you’re careless, you’re rushed, you didn’t plan ahead, you have poor timing or you’re just an idiot with it, you can hurt yourself and put yourself in jeopardy. ‘Cause the other side of the story is, I was really curious of course about how many injuries there are every year due to fireworks. What would you guys guess every year annually like how many injuries, firework related injuries are reported every year?

Jenni: In the US?

Ryan Isaac: Yeah in the US.

Reese Harper: What do you think?

Ryan Isaac: I mean, come on, it’s not staggering, it’s not like mosquito deaths or something-

Jenni: I mean-

Reese Harper: What’s your guess?

Jenni: I don’t know, like 3,500.

Ryan Isaac: Okay.

Reese Harper: I was going to say like a few hundred.

Ryan Isaac: Yeah. Okay.

Reese Harper: I was gonna say like hundreds.

Ryan Isaac: You set me up nicely. The latest have been between 11 and 12,000-

Reese Harper: Really?

Ryan Isaac: firework related injuries every year. Not surprising is 70%-

Reese Harper: Like its’ a snap, like you’ve thrown a snap on the ground and it like-

Ryan Isaac: No, these are like, go to the hospital, report it.

Reese Harper: Really?

Ryan Isaac: Yeah, it’s crazy.

Reese Harper: Wow.

Ryan Isaac: And there’s actually this chart they spiked in the … Of course because this is the best decade of the history of mankind, in the 80s they spiked like 16,000 and then there was regulation that was put in by the states that like cut down on this stuff. But it’s about 12,000, last report it was a 2016.

Reese Harper: Wow.

Ryan Isaac: But these are like hospital, going to emergency room in hospitals.

Jenni: Is this two thirds of injuries?

Ryan Isaac: Say it.

Jenni: Were burns, and then 17% were contusions or lacerations?

Ryan Isaac: Yeah.

Reese Harper: No contusions.

Jenni: And they were all hands and fingers?

Ryan Isaac: Hand and fingers and faces. Now, not surprisingly, 70% of firework related accidents are from men.

Reese Harper: Yeah. Okay.

Ryan Isaac: Just getting tanked up on the 4th of July and lighting fireworks in the street-

Reese Harper: It’s your job-

Ryan Isaac: It’s your picture-

Reese Harper: One of the only things you do.

Ryan Isaac: Okay, look, but here I was just thinking about this week and I love fireworks, but we were going to talk about how doing the housing decision the wrong way, going too big, having the wrong timing, being foolish about it, any number of things can actually jeopardize and hurt you financially quite a bit. It can hurt your business, your net worth, your cashflow. So we’re going to talk about a few points about the, not real estate in general but the primary residence, which I’ll just make a little plug here. The advisors at the firm we have like case study discussions every week and we were talking about this a couple of weeks ago and there’s kind of this consensus. I’d wonder what you think Reese, you weren’t in this discussion but that the primary residence decision is probably the biggest and most emotional decision your client will ever go through. Do you think that’s, would you like is there one bigger and more emotional than the primary residence? The dream house discussion?

Reese Harper: On average I would say it’s up there. There’s a few that could rival it, but I could if I did enough surveying it wouldn’t surprise me if it was-

Ryan Isaac: Majority.

Reese Harper: The only people that don’t freak out about it or freak might be a wrong on word, it carries a lot of stress.

Ryan Isaac: Yes and ton of emotions.

Reese Harper: It’s like the whole point of your work is like, ’cause I have a nice home-

Ryan Isaac: It’s the American dream.

Reese Harper: Everything goes with the home too. It’s like you judge your life success based a lot of people judge their life success based on your landscape, your cars, the vacations you can take, what’s in your garage on your, the organization of your garage. The stuff you store-

Ryan Isaac: I’m judgey about that, I’d see in messy garage in line.

Reese Harper: Whether you have a home gym, whether you have a grand piano or you’re an upright family, whether you’re like, what kind of computers you’ve put on your office furniture. What kind of artwork, kind of family, what kind of pet family are you?

Ryan Isaac: That’s a sensitive subject for me lately.

Reese Harper: Kind of like food do you have, are you like, you can’t like a sub zero. Like I care about my groceries that to that level-

Ryan Isaac: $10,000 French [crosstalk 00:08:52]

Reese Harper: My vegetables like I do like kind of person are you like just that like really pragmatically GE family? Doesn’t really care about-

Ryan Isaac: It’s cold enough it’s just not hot-

Reese Harper: The Wolf Range. it’s not just the size and complexity and-

Ryan Isaac: Well it’s the street, it’s the corner of the neighborhood, it’s the school district.

Reese Harper: The House says so much about you it’s not just the house, right?

Ryan Isaac: It’s never the house.

Reese Harper: It’s the architecture of the house of something about you. Oh, you’re that guy-

Ryan Isaac: That did the modern remodel thing.

Reese Harper: You’re, oh, that’s a modern home really modern home kind of a person. Or like in today’s kind of design aesthetic, it’s like, Oh, White House, Huh? The White House. Like white houses are big right now. So if you do a White House, you’re either like real to some people you’re cutting edge and you’re like, and telling people be like, oh, you’re way behind the trend. We’re way past White House.

Ryan Isaac: [crosstalk 00:09:46] Other than Phoenix and I think it’s illegal to have [crosstalk 00:09:47] And Phoenix, it’s illegal to have anything but brown Stucco, I think.

Reese Harper: Yeah. It literally is, it’s the only way you can handle the heat. Yeah, so those are really critical topic.

Ryan Isaac: So I think I would want you to just tell maybe a quick story about your … And then we’ll just introduce these three points. I think that can be overlooked when thinking about a primary residence, a quick story kind of about your decisions. And that more importantly, the timing of decisions of investing in the House-

Reese Harper: You mean my own house?

Ryan Isaac: Your own house and and investing in the business. It’s really about the timing of these things and the opportunity of costs. But I’ll finish, my thought was going to say is I think the primary residence decision, it might be the single subject that makes an adviser feel like they have the least amount of control to help direct a decision. Because in my experience, now this is a small set of people out of the thousands and thousands out there buying houses. But my experience is that as soon as a person like reaches out to say, “Ryan, we found the dream house.”

Reese Harper: Yeah.

Ryan Isaac: Like we found it and then they give you all the reasons why they and their spouse or like behind it why it makes sense. Why like every reason you can think of. It’s most of the time going to happen. Like it’s just gonna happen.

Reese Harper: 90% of the time they’re [crosstalk 00:11:06]

Ryan Isaac: And they are not calling to ask like, “Is the math okay?” They asked that like, can I afford it? Doesn’t matter, or should I do this or should I wait? It’s going to happen. So it’s more about like let’s just skip the part where we pretend we’re analyzing the payment and just get to the point where like, what are the consequences of this thing? Then let’s get to that. And accept them now so you’re not mad entirely.

Reese Harper: Some people I’ve found like to be remarkably persuadable when they call in with that question but it’s the minority of people. Some people can be persuaded to make a rational decision and I-

Ryan Isaac: Minority people.

Reese Harper: And I have seen it happen, but it is the minority. Most people, the majority of people they’re looking for kind of if you tell them something other than go for it, they’re going to go radio silent on you for a while and do it anyway. I just had that moment like a year ago. It was like radio silence for four months and then kind of like, they knew I was kind of philosophically opposed to this particular purchase. ‘Cause I was like does totally negligent. You cannot afford it. This is going to bury your practice. And then it was six months later so kind of like, “Hey man, I know we haven’t called and chatted for awhile, but you know, and I know you told me this but can we talk again?”

Ryan Isaac: But how do we all done it though? With our houses?

Reese Harper: Yeah. But like I mean some of us have yes at some point, but I don’t think all people do.

Ryan Isaac: No. All people don’t. And you don’t always repeat the same thing.

Reese Harper: No, I just think you’re right, it is a very emotional decision, but I think the consequences of doing it the wrong way are pretty significant, and I think it’s important to try to make the decision with as little emotion as possible if you can.

Ryan Isaac: Or at the very least-

Reese Harper: The best part if I can say it is, find a way to be happy with the choice that works for you financially and for the preferences you have.

Ryan Isaac: If I say this-

Reese Harper: There is a choice that works for both, there always there’s a choice that works financially and that gives you some measure of your preferences that you wanted, but it’s usually not the exact thing you want, it isn’t.

Ryan Isaac: No.

Reese Harper: You just can’t get exactly what you want and do the financially responsible thing and do the thing that’s good for your practice and like you-

Ryan Isaac: Just opposing, yeah.

Reese Harper: You have to be okay with the things you didn’t get.

Ryan Isaac: Which I think is part of like having-

Jenni: It’s not that easy.

Ryan Isaac: What?

Jenni: It’s not that easy.

Ryan Isaac: Okay, describe it. Describe this point of view, I like want to hear your point of view on it. What does that make you feel or think?

Jenni: I’m like, if I’m going to take that step and buy something bigger, more interesting, I want it to be exactly what I’m after. Literally having this conversation in my life right now too, it’s like should we remodel a house? Should we buy a bigger house? What should we do with it or should we just stay in the small one? And I’m like, no, I want everything, so for making this move we’re getting everything.

Reese Harper: We’re getting it.

Ryan Isaac: Then you get everything you want from the house but then you might not get everything you want like financially, is it right?

Jenni: I want everything, I was the first to buy it.

Ryan Isaac: I don’t want to know.

Reese Harper: You’re kind of making our point unfortunately.

Ryan Isaac: No, [crosstalk 00:14:25].

Jenni: No, you’re right. Like I say, you’re absolutely right.

Ryan Isaac: I think maybe then the role of a good financial advisor when you’re going to make these big, two to three, four times in your life decisions isn’t so much like always talking you out of it, ’cause sometimes that will happen and I have tons of experiences like that too. But sometimes it’s just like, look, you’re going to do this, so let’s set good expectations now about what this does to your cashflow, your net worth and your timeframe of how long you’re going to work, and don’t be meddling it.

Reese Harper: I think sometimes you’re really nice-

Ryan Isaac: I’m very nice.

Reese Harper: And I don’t think your result, like I’m the guy that people just really don’t want to talk to you about it and you’re kind of the person they don’t want to talk to about it.

Ryan Isaac: They don’t mind calling me.

Reese Harper: I think certain people have like, I think like to Jenny’s point, can you have the house that you want? Of course you can.

Ryan Isaac: Yeah.

Reese Harper: Now the cost of that is-

Ryan Isaac: Is-

Reese Harper: Either time, you’ve got to wait longer to get exactly what you want and that might be the choice you make. My point was you can’t get exactly what you want but-

Ryan Isaac: It’s got a trade something for.

Reese Harper: Exactly what you want might be longer than you’re willing to wait, and most of what you want might be like halfway there or in time and duration. Like in the dentist specific case, bringing this home, the practice, the ideal practice that is the most healthy, vibrant value maximization, profitability maximization practice, is completely in contrast to the ideal house as early as you want it, as nice as you want it with everything you want it.

Ryan Isaac: For sure.

Reese Harper: They’re completely contradicting each other.

Ryan Isaac: Opposing-

Reese Harper: They fight, they are opposing goals, and you have to find the right mix for your situation, because you don’t kid yourself by saying, I can do both.

Ryan Isaac: Have the dream house early in your career and feed the business with[crosstalk 00:16:26]

Reese Harper: You can’t. I’m telling you right now, like all of you listening, I know you’re telling yourself this, I can do both. I can do both, I can have a great practice and I can have the house I want.

Ryan Isaac: Well, not at the same time.

Reese Harper: [crosstalk 00:16:37]Not at the same time as early as you want it, they are trade-offs.

Ryan Isaac: You could have like a fine practice and the dream home, but you can’t have the maximize ideal practice and the dream home at the same time.

Reese Harper: You could have … There’s just a trade off there and I’m not going to define it more than that.

Ryan Isaac: That’s fine.

Reese Harper: There’s just a-

Ryan Isaac: That’s a universal law about life, just as a cost of everything. Okay Reese, let’s, before we get to the next point, let’s go ahead and take a quick break and go to a quick commercial and we’ll be right back.

Reese Harper: We know there are listeners who want to know what Dentist Advisors can do for them, but they’re a little reluctant to reach out. Stop hesitating, let’s just chat. Our consultations are completely free. You can just call 833 DSS Plan or go to dentistadvisors.com and click book free consultation. We’ll see you soon.

Ryan Isaac: Okay. So let’s just go through three areas where you could say that, things to think about when buying a home in the context of how it will affect your practice specifically. Maybe just give us a little context from your own personal experience.

Reese Harper: Well, here’s the journey I think people go through-

Ryan Isaac: Journey.

Reese Harper: Just to give us a context.

Ryan Isaac: Can we play journey in the background while you talk.

Reese Harper: If you start out, as you age and as your life evolves, your preferences change, and the longer you can wait to make your housing decision, the better chance you have at minimizing the cost of it. Maybe you don’t care about, like if you don’t care about maximizing your net worth and making smart financial decisions, this is not the podcast for you. I’m assuming you care about this. If you don’t care about it and you just want to like always have a nice house and you don’t care, then upgrade as many times as you want, as frequently as you can possibly qualify for, and just make sure you make payments.

Ryan Isaac: Just go for it.

Reese Harper: I get that that’s an option. And for most Americans like that is their, they’re fine with that. But if I’m saying for, if you’re trying to … The ideal scenario is, you actually don’t commit to a house until you buy it and then you can live in it as long as physically possible. The same way you like invest in a stock and hold it for a long period of time. Your housing decision is most efficient if you can buy a house and like don’t change for a long time. So the more you change that’s where the cost comes from. It’s the frequency of changes like we, well this was great while we were-

Ryan Isaac: The fewer the changes, the more progress you-

Reese Harper: We had to buy a condo cause we were a young couple and then we switched to the single family home, and then once we got a pet we had to switch to new house, and we got three pets in the new house.

Ryan Isaac: Freaking pets.

Reese Harper: Then we got kids, we had the starter home for the kids and then once we had all of our kids really teenagers-

Ryan Isaac: The teen.

Reese Harper: We need the teenage house and then we have to have the retirement home and then of course we got a downsize again, the retirement house is not quite as big as it was ’cause we’re too big. And then it’s like you make seven housing decisions like that. There is a ton of net worth waste that happens, like furniture waste, landscape waste, like commissions waste.

Ryan Isaac: Oh man.

Reese Harper: I mean I’ve recycle, I mean I’ve done this the wrong way like three times, so I’m telling you, it’s coming from experience like, the money that you will recycle because of change is significant. And so my suggestion for you, I don’t want to say I’ve done it the wrong way, I mean I’ve only owned two primary residences yet in my life as an adult. So two primary residences, well-

Ryan Isaac: I’d say you’d probably did the second one better than the first. You and I bought the first at the same time and oh five is young, up and coming.

Reese Harper: Yeah-

Ryan Isaac: With[crosstalk 00:20:19]

Reese Harper: I think I was frustrated ’cause I think I bought under what I could afford, I wanted something bigger. All my friends got something bigger that first time though, and I remember you kind of frustrated that I got like the small-

Ryan Isaac: Oh, for sure. Yeah.

Reese Harper: Not the best option.

Ryan Isaac: Oh yeah.

Reese Harper: But it was a conscious thing of like, well, I’ve got a business I’ve got to make sure I take care of, I don’t know if I can afford anything bigger than this. And so I don’t think my first housing decision really affected my business growing ability all but I would look back and just say I didn’t need to own a house-

Ryan Isaac: Yeah, exactly.

Reese Harper: At all. I didn’t need to own one, but it was great and I probably could’ve signed a rental agreement for five years on the same thing.

Ryan Isaac: 10.

Reese Harper: 10 years, and it would’ve been a similar financial outcome. And a lot of people are hearing that and going, no way that’s not possible, and it’s like well, if you look at real estate, you have to look at it as a 10 year holding period ’cause sometimes 10 years are going to be flat, like from 2007 to 2017 or 09 or 08 to 2018. Or sometimes it’s going to be amazing, like the bottom of 2011 til now or 2010 til now like you gotta-

Ryan Isaac: Or late 90’s to early 2000s.

Reese Harper: 2009 til now.

Ryan Isaac: Yeah.

Reese Harper: You just don’t know what period you’re in. So I think holding a real estate asset for a minimum of 10 years is like a good goal, just like a stock would be-

Ryan Isaac: Anything worthwhile, worth owning that’s gonna give you meaningful growth has to be held for a long time, like a baby.

Reese Harper: Yeah. I just think that, I don’t know there’s things I would’ve done differently, I’m glad that when I did buy a house, I bought less than what I could afford and that I was allowed. I let my money kind of stay accessible to be able to invest and grow my business, because without that I wouldn’t have grown the company, it wouldn’t have been possible. And what my point is about this, the home, our kind of current home is that when we moved, I think there’s a lot of competing variables that people struggle with, and I don’t want to make this be super difficult to understand, but I think you need to look at all of the variables that you’re moving for and try to understand that each of them come with trade-offs. For example, neighborhood comes with massive amounts of trade-offs. So you can’t say, I want a certain type of home in a certain neighborhood with a certain school district with a certain yard.

Ryan Isaac: Yeah, you might-

Reese Harper: So you have yard, you have house, you have school district and-

Ryan Isaac: City location, neighborhood, yeah.

Reese Harper: And those variables all drive costs. Do you want the neighborhood more than you want the house?

Ryan Isaac: Yeah, the nicer House.

Reese Harper: Then you’re going to have to have a house that’s not as nice so you can get the nicer neighborhood. If you prioritize house more, then don’t try to force the nice house in the neighborhood, just move neighborhoods and get a nicer house. I would just say that any housing costs that exceeds 20% of your gross income is starting to get kind of sketchy.

Ryan Isaac: Do you mean monthly payments? Or anything-

Reese Harper: Any housing costs that exceeds 20% of your annual income starting to get a little sketchy, and you should probably be more like 15 and never more than 25. But you can qualify for 40%, and so if I would just say like, if you use that ratio to guide your decision and you’re surprised right now ’cause you’re like, so I could only afford like $700 a month in rent then yeah, that’s what I’m saying. That’s just the reality of like, if you want to make smart financial decisions, you can’t let your house be a burden to your career optionality and your business growth goals.
Anyway, so when I moved into my current house, I think that one of the decisions we had to make, it was really hard for us was, we wanted to move into a good school district and a good neighborhood so that our kids would have the best shot, but I couldn’t afford the house that I wanted in that neighborhood. And that was a really hard decision because, I could but it would have put pressure on my business. So I think the long and short of it is, I made a decision to live in kind of the circumstances I could afford while the business caught up to the house that I wanted. Now that was like a seven year-

Ryan Isaac: It was quite a while.

Reese Harper: Six year journey of going, I can’t have it all now, so I have to wait. And if I look back at it, I could have actually qualified for the mortgage and done my house earlier.

Ryan Isaac: I was just going to go, I was just sitting here thinking like, you could have and I’m thinking, how would the bids have been different along the way if more of your cash had to go to house.

Reese Harper: Well, I told Barbie, I just said, look, I know you and I both want a nicer house, but we have a couple of options right now. This this is when the company is like three people, four people-

Ryan Isaac: [inaudible 00:25:22].

Reese Harper: Like five. It’s like if we don’t get like a manager in here, someone with a good business background who can take some pressure off of me and Ryan, I don’t think we’re going to be able to like-

Ryan Isaac: We’re just going to stumble.

Reese Harper: I think we’re going to like stick at our current size for a long time, ’cause I’m buried, my time is gone, and so we can either hire one. It was like basically like one and a half people or we can have the new house. I’m just painting this picture ’cause as insignificant as that sounds, right now like one to one and a half people like that was the choice.

Ryan Isaac: It was pivotal though.

Reese Harper: It was like you either are going to be able to have the house you want or you’re going to be able to hire one more person. And that one more person when you’re that small, it’s like the difference between, you know like it just has a massive compound effect on your practice over the next five to seven years. If you hire that associate, that office manager, maybe it’s a consultant, maybe you’re going to hire your first associate or open a second location-

Ryan Isaac: Or finally do some significant marketing strategies you’ve never done.

Reese Harper: Finally market properly in a way that will help you position yourself well in your community. It might only be, like in my case this expense was only about, it was a $90,000, $200,000 a year expense for one person. That was probably the difference in what I could have, ’cause I had to take my liquidity that I had and put it in a down payment and I would have had to use furniture money, and I’ve had to use some landscape costs and it would have added up and I really would have been bone dry seven years ago. Or I could take some of that liquidity-

Ryan Isaac: Under one person.

Reese Harper: And put it in one person and then if it worked I could do two and then maybe three. And just looking back it’s just kind of, the cost was, for me it was only, I still made the decision to get a house that isn’t exactly what I wanted, but it’s close, and it’s really-

Ryan Isaac: Where it’s checked off a few of the other boxes that you wanted.

Reese Harper: Yeah, they checked out. I got like 90% of what I wanted-

Ryan Isaac: But still had to make some sacrifices for the business.

Reese Harper: But I got really close to what I wanted and this property now can last me till indefinitely because it isn’t too big and it’s not too small and it’s where I want it to be and I don’t have to like have a downgrade house later. That really ends up costing more because once you downgrade properties in 20 years,[crosstalk 00:28:04]-

Ryan Isaac: Diffuse furniture, give away stuff.

Reese Harper: You still pay more for the house. You might downgrade the size, but it’s going to be a lateral move.

Ryan Isaac: People downsize, but they don’t downgrade.

Reese Harper: No.

Ryan Isaac: They don’t. They-

Reese Harper: I always say that tell me one, tell me the things in your life that you cannot downgrade from.

Ryan Isaac: I know, yeah. Food-

Reese Harper: Food.

Ryan Isaac: Housing, cars.

Reese Harper: Yep.

Ryan Isaac: Golf clubs.

Reese Harper: Mountain bikes.

Ryan Isaac: Yeah. Now I have a pretty low mountain bike.

Reese Harper: So you’re not gonna ever buy one worse than that.

Ryan Isaac: I would never buy like a hard tail where a dual suspension is needed.

Reese Harper: Yeah. Dude. Yeah. I mean there’s just some things you’re never going to downgrade from and housing’s one of them.

Ryan Isaac: Yeah, it’s true. And everyone thinks that in the future that downsizing is downgrading. Many people downsize and spend more money in getting a smaller house in the better city, a better neighborhood or something. So, okay. So in that light then, let’s hit a few quick, let’s say three points. Three things to think about when making this initial personal residence decision earlier in your career with the main thought being the fact that the faster you build the business and the faster you get your income as high as it can go, the bigger your net worth has a chance to get over your lifetime.
The more opportunities you’re going to have. I mean, it’s like your income is like the driving factor in your entire future and the business is the whole thing by. So number one would be houses, this, I think it’s a thing that everyone knows, but still we all act like it’s surprising is how’s this cost more than we think they’re going to cost. We always do the payment calculator. Which is 400 to a thousand dollars short of taxes and insurance.

Reese Harper: Yeah. Or more depending on the state you live in.

Ryan Isaac: Or more depending the state you live in.

Reese Harper: Yeah.

Ryan Isaac: But then there’s the things throughout the year that you just don’t think about it. Now you’ve said, what would you say for annual ongoing repairs and expenses and maintenance and just costs of owning that home are gonna cost you every year?

Reese Harper: Independent of property tax so property tax varies based on state could be 2% maybe if you’re in southern California, paid Mello Roos tax too, still a half a percent to three quarters of a percent in most any market. Above and beyond that, I think you’d be crazy to not assume at least 1% in just like of of property value just broken stuff and fixing stuff. I’m personally-

Ryan Isaac: If I live in a half a million dollar house, then I’ve got five grand a year of stuff to fix?

Reese Harper: Minimum.

Ryan Isaac: Easily.

Reese Harper: Now.

Ryan Isaac: That’s easy.

Reese Harper: Now people, there’s no chance that it’ll be less than that. 2% you say I live in a half a million dollar house where you have $10,000 worth of stuff[crosstalk 00:30:46]-

Ryan Isaac: Not every year.

Reese Harper: Not every year, most likely, but on average it’s pretty close.

Ryan Isaac: Every time you call the sprinkler guy and he’s like, all right, it’s 300 bucks, whatever. No big deal. Like you do that across the air AC, the pool.

Reese Harper: So one and a half I’d say for sure that’s a good budget. Then the question is what about the things that are not repairs and randomness, but the things that are like nice upgrades. So now we’re talking decor and furnishings or talking interior design. Upgrades of your aesthetic appliance upgrades.[inaudible 00:31:24] Making the place nicer.

Ryan Isaac: Well-

Reese Harper: How much do you spend per year making it nicer? Well, fixing it we say is at least 1% maybe one and a half. Making it nicer on average I mean I kinda throw another, at least 1% at you for making it nice.

Ryan Isaac: Yeah, at 1% and then-

Reese Harper: Think about rugs, think about painting, think about paint, think about TVs, think about appliances.

Ryan Isaac: One nice couch is five grand-

Reese Harper: I’m saying-

Ryan Isaac: Get a big plush squishy couch-

Reese Harper: On average, I gotta throw at least another percentage at you if I’m being more realistic, like in my own case right now, I’m front loading a ton of my-

Ryan Isaac: Not to mention the actual move itself.

Reese Harper: Yeah.

Ryan Isaac: All the up front stuff.

Reese Harper: I’m front-loading a ton of my furniture costs ’cause I saved up and waited and now I’ve got a little bit of liquidity to be able to do that. But I mean I’m being as conservative as I possibly can be and I’m going to probably spend seven to 8% of my house value just to get it furnished.

Ryan Isaac: Just to furnish it.

Reese Harper: And I don’t get what I want.

Ryan Isaac: depreciating assets.

Reese Harper: And that’s a lot.

Ryan Isaac: Yeah.

Reese Harper: And most people would think about that and go, okay, yeah smells about right. So let’s say I don’t have any furniture purchases for six or seven years right now. That’s still one and a half percent per year.

Ryan Isaac: Yeah.

Reese Harper: And I think that’s pretty realistic.

Ryan Isaac: I think it’s realistic, man. Not to mention what you were just saying this earlier, not to mention the frequency of how often you move. I mean every time you … Like I just moved and the amount of stuff I threw away and just like little things like garbage cans and baskets that used to, I couldn’t fit in the pods to move and like I had to rebuy like boxes of hangers and just weird things that stupid things like, well the old countertop was a lot higher. So these stools don’t, we need lower ones now and like just really dumb things that you just constantly [crosstalk 00:33:27].

Reese Harper: So I just think you did-

Ryan Isaac: Houses cost more than you think they do.

Reese Harper: You wouldn’t be crazy if you said 3% a year.

Ryan Isaac: That’s a good takeaway.

Reese Harper: Is the cost of maintaining and repairs and updating and improving and I’m not even … I mean landscape if you say, okay, I’ve got a land, a house, I’ve got a landscape ’cause I’m doing now, this is very different if you buy an existing home. If you buy an existing home and it’s newer on the newer end of someone already fronted all those costs, then you might not front the 3% but someone else did.

Ryan Isaac: Someone else did but you still might buy the house with a ton of grass and want to pool instead.

Reese Harper: I still think you’d be crazy not to budget 2%.

Ryan Isaac: Okay. I think that’s smart. And I was gonna throw in here too, there’s a lot of studies that show that we just human beings, it’s our nature we do keep up with the Jones’s, you know the phrase, but it’s not like this malicious conscious thing, but we do tend to rise to just the level of our surroundings.

Reese Harper: Oh, totally.

Ryan Isaac: And no one ever moves into the house and be like, oh, they’ve got to be around. I’ve got to get a beamer now. But eventually you do. Eventually you vacation the same and you eat the same, you go to the same restaurant-

Reese Harper: It’s just a slow burn-

Ryan Isaac: Yeah it’s-

Reese Harper: It’s like a frog and a boiling pot.

Ryan Isaac: Frog in the pot. So there’s just like the cost of like you’ll just be spending more money if you live in a place where people spend more money.

Reese Harper: I just think your point is well taken is that you get adapt your surroundings. So be careful-

Ryan Isaac: We’re adaptive creatures.

Reese Harper: When you move like you might as well say goodbye to some of your net worth if you move into a nicer neighborhood. And I would say only move to the neighborhood that’s as nice as you possibly can … Whatever is the minimum you could possibly be okay with. For some of the it’s harder than others, but if you can be okay with living in a neighborhood that doesn’t quite have the pizzazz as another neighborhood, it will save you money.

Ryan Isaac: It will save you money because your habits will be different. They will be different man.

Reese Harper: But if you go this weekend, it’s like your vacations, like where people do, where they eat-

Ryan Isaac: Think about, and then it’s like really competitive with kids like are they just on the like directly team or are they in club sports-

Reese Harper: You’re club, right?

Ryan Isaac: You’re in club, you travel? No. Like they got, everyone got a trophy. I don’t know. Like-

Reese Harper: You guys are like, this is the one I’ve been here lately. You don’t have a Palo houseboat like hospital Powell. I’m like dude, I aint in bend a Powell, like I love Powell that like, I might still like-

Ryan Isaac: Bearly find it on a map.

Reese Harper: Kids when go west Yellowstone right now you don’t try it. And we got a truck. I’m Chevy truck guy. So there’s little things like that where it’s like, it surprises me. Oh, so you guys don’t, you haven’t done that before or you haven’t done this. And your kid’s like, yeah dad, what’s that up with? Why don’t we have a houseboat right here? Come on dude. [crosstalk 00:36:01].

Ryan Isaac: Well, we never think like, I’m a greedy person. I won’t I don’t need to keep up with people-

Reese Harper: Yeah, shout out to all houseboat owners I just offended. I get it-

Ryan Isaac: We will rise to the level of-

Reese Harper: I’m going to get a houseboat I will have one.

Ryan Isaac: Oh, that’s the best kind of houseboat to get as a friend with a houseboat. The best kind of boat to own is a friend’s boat. So please get it. All right, let’s go-

Jenni: You guys have a successfully talk to me I’m now moving and having children-

Ryan Isaac: Don’t do it. Just stop it. I’ll save your money.

Jenni: PSA for the day.

Ryan Isaac: Okay. What about the cost of liquidity? I mean if you’re in the first years of your business and you’re going to give you liquidity to a house versus like that other associate or that marketing implementation or that consultant, that could be the difference of triple growth that you could have experienced.

Reese Harper: I think we’ve planted the seed deep enough here. I mean you just got to decide if it’s worth it to you. To me personally, I just didn’t want to look back and have the I didn’t want to have the dream house before I had the business I was proud of or happy with or that met my goals and my goals are not your goals. So if you are fine with where your business is and you do not have and you’re fine with the financial path that you’re on and you don’t have anxiety about it at all, then you know it’s fine.
You then make sure your housing payment still at 20 to 20% less of your income and don’t worry about it. But man, I had to keep my housing at like 10% of my income so that I could afford to-

Ryan Isaac: Hire somebody.

Reese Harper: Hire the right people. I had to bring my housing costs down.

Ryan Isaac: And it changed everything. It changed the whole trajectory of everything in the business.

Reese Harper: Yeah. I mean I like my net worth is like probably 10 times higher than it could have been. And it, there’s no question-

Ryan Isaac: could you, we wouldn’t have been able to raise any money or build any tech or have the people that we have if we hadn’t had those first people to like build something worth investing in.

Reese Harper: And like recruiting today compared to recruiting three years ago, like it just wouldn’t be the same. It’s really hard when you’re trying to get the right team, the right associate, I’ll and anyone out there who’s tried to recruit an associate in a business and retain them, knows how difficult that can be. And I just think it really, really helps to make sure that you don’t have your personal lifestyle cramping your business growth.

Ryan Isaac: Okay. So close this out here with what would you invite a dentist like practically do then if they’re facing, I mean this is these are common decisions like moving and buying a house or buying a house you really want, what should someone be considering or like what practical advice would you give?

Reese Harper: I would say figure out what it’s really going to take to make you be happy with a house, long term. Forget the neighborhoods you want to be in, the be realistic about the cost of the house. I knew that there was only like a couple neighborhoods that I could really like settle in and stay in longterm.

Ryan Isaac: So stop thinking about, because you hear this a lot. Oh, this is our five-year house.

Reese Harper: I don’t like that.

Ryan Isaac: Don’t do that.

Reese Harper: I think the fight in your house-

Ryan Isaac: It never ends up being five years.

Reese Harper: Well the five year house just slows your business down there slows down you’re like-

Ryan Isaac: So don’t do that. Okay.

Reese Harper: I prefer to like say all of us are gonna have a five year house, like at some point probably in our life. I mean it’s … ’cause you can’t anticipate that perfectly.

Ryan Isaac: It’s fine.

Reese Harper: But if you could just wait until you could buy the house that you could stay in for a longer period of time. That’s great. So I would just say you’re trying to maximize the time you can stay somewhere. That’s what you’re trying to do. And you’re trying to get to the point where you can say, I will be happy in this perhaps indefinitely. The sooner you can get into that house and not have to move, the better off you’ll be, as long as you get into that house at a point that you can afford it properly.

Ryan Isaac: Okay. And then if you just looked at your income and you said, I need all housing expenses including ongoing upkeep and just buying stuff for the house of one and a half to two to 3% a year, is going to be under 20% of my income.

Reese Harper: That would be awesome-

Ryan Isaac: Payment taxes.

Reese Harper: I would lose my mind if my income was growing and I was at 25-

Ryan Isaac: Do not make this man lose his mind. I’ve seen it.

Reese Harper: For me, I’m saying if I were in your shoes I wouldn’t freak out if I wasn’t exactly at that ratio, but use that as your target.

Ryan Isaac: Okay, so-

Reese Harper: 30% is not your target.

Ryan Isaac: The bank, what the bank will allow is not your target. Don’t go there.

Reese Harper: 40% is definitely not your target the bank Will allow that. So anyone I say as a closing thought here is, even though along the way it’s been super, super hard for me to not get what I want when I wanted it. I’m like super happy right now with what I’ve got. I finally got the house I wanted and it’s got all my audio equipment in it. It’s got my suite basement hanging out. I’ve got all my cool electronic gear-

Ryan Isaac: Did you do the cool driveway? Are you a respectable driver?

Reese Harper: I get a respectable driveway, I get cool [crosstalk 00:40:56] I’ve got like an awesome kitchen. My wife’s stoked about it. Like all the finishes she wanted, like everything’s the way we wanted it. Now it’s not perfect and we had to settle on a couple of things.

Ryan Isaac: It’s just like eight years later.

Reese Harper: You’re going to have to do but I would say like it’s a nine out of 10. If 10 out of 10 would have been perfect. We’re like a nine. It’s a little bit longer than I wanted to wait. But and I could still say, hey, I shouldn’t have done it. Even now. It would have been better to not do it now. And I could’ve invested more in the business. But the business got to the size that I was comfortable with. I was fine with this level of-

Ryan Isaac: But you knew what you wanted to, which then it gives you-

Reese Harper: And if you know that you gotta just know exactly kind of the size of what you’re trying to accomplish and have a financial advisor that helps you figure out what’s big enough business wise and what’s time wealthy enough for you. And, but it feels really good to have delayed that gratification just a little bit longer so that I could have my cake and eat it too. ‘Cause as of today, I don’t, I know I wouldn’t have been any happier having this house like for the last seven years. But it’s kind of at a point now where I’m like I’m kind of over having a bigger business.

Ryan Isaac: Timing is everything.

Reese Harper: At the expense of a house that is I’m continuing to delay. But it’s nice to be able to get into a house where I know that I’m kinda done with having to make a ton of life transitions and upgrades again. So I don’t know.

Ryan Isaac: That’s good advice. I think that’s good advice and-

Reese Harper: And I’m feeling good. I’m not like depressed about it as I think this is episode. It’s kind of like a lot of bad news for people. I think the good news is like there is a really good spot where you can end up if you do this in the right order.

Ryan Isaac: Cool. Okay. So a couple of invitations. One is more just like, hey be safe lighting fireworks.

Reese Harper: Yes, for sure.

Ryan Isaac: Enjoy them. Don’t blow your hands off. Dentists. If you have any big questions about like housing purchase you’re about to make or want to make or any of the large question in your life, there’s two things you can do. One of them is really easy and you can just go to our Facebook group, dentistadvisors.com/group go in there and post a question. We will go into personally answer it along with a lot of other smart people that will chime in and be very nice and respectful. We have a very nice, respectful Facebook group.

Reese Harper: Yeah, there are.

Ryan Isaac: There’s no like-

Reese Harper: Friendly fire.

Ryan Isaac: No degeneration of insults like three comments deep. The other thing that’s a pretty easy too is you can go to our website, dentistadvisors.com you can click on book free consultation and schedule is to free easy chat with one of our advisors.

Reese Harper: We like to call them our buddies.

Ryan Isaac: our buddies. It’s better with the buddy okay better with a buddy, so you got to dentisadvisors.com. Click on the better with the buddy button. Also known as book free consultation. Schedule a call with a buddy, have a chat, ask them questions, see if we can get you pointed in the right direction, thanks for listening.

Reese Harper: Carry on.

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