In the Bay Area, it can feel as though there is never a perfect time to buy. Or that waiting even a little longer means falling permanently behind.
In this episode, Andrew speaks with Justin Harvey, CFP®, founder of APM Wealth and co-host of Money Meets Medicine, about how buyers can navigate this tension. They discuss buying vs renting in the Bay Area, hidden costs of homeownership, how to determine what you can realistically afford, and how career plans, values, and risk tolerance should shape your choices.
This episode is designed to help local buyers move beyond vague advice and feel confident making smart decisions based on their own circumstances. Whether you are just starting your home search or deep in the process, this episode will help you think more clearly about when buying a home makes sense, and when waiting may be the wiser choice.
Key Takeaways
Buy when your finances and priorities align—not because of FOMO. Justin emphasizes personal readiness over predictions about interest rates, home prices, or the next tech IPO.
Renting isn’t automatically throwing money away. It provides flexibility and more predictable costs. Early mortgage payments can go largely toward interest rather than building equity.
Measure affordability using take-home income and your whole budget. Account for childcare, education, retirement savings, and family responsibilities—not just what a lender will approve.
Plan for life after closing. Moving, furnishing, repairs, and unexpected expenses require cash. Consider how you would manage reduced income, job loss, or disability.
Understand the trade-offs of mortgage options. Justin discusses physician loans as a way to preserve cash, while cautioning that adjustable-rate mortgages can add risk when payments already stretch the budget.
About the Guest
Justin Harvey, CFP®, ChFC®, RICP®, is a fee-only financial advisor with 17 years of experience in the industry and more than 15 years as a business owner. He is also a physician spouse, father of three, podcast host, and—as he puts it—a resident of a “terrible tax jurisdiction.”
Justin is the founder of a wealth management firm built for physicians and high-net-worth families seeking greater clarity, coordination, and control. He works closely with anesthesiologists, pain physicians, practice owners, and physician entrepreneurs. His firm focuses on simplifying complexity for delegation-minded families and helping them make well-calibrated decisions at the intersection of wealth, work, and family.
You can reach Justin at justin@apmsuccess.com.
Resources and Links
https://www.apm-wealth.com/ — Justin’s wealth-management firm, APM Wealth
APM Success — Justin’s podcast
Money Meets Medicine Podcast — Co-hosted by Justin Harvey and Dr. Jimmy Turner
Redfin: Renting Versus Buying in Major U.S. Markets — The rent-versus-buy comparison discussed during the episode
-
Andrew:
Welcome back to House Call SF. Today we're asking when is the right time to buy a home in the Bay Area? Is it when interest rates fall? When we finally see a dip in housing prices? Or maybe it's just when you come to terms with the high demand for homes and the fact that every open house will have at least 12 other people crowded around, trying to read that one heartfelt letter from the current homeowners, and then you'll decide you want to get in the game yourself.
In episode one, I explained why my own home buying experience sent me far enough down the real estate rabbit hole to earn a license. Today we build on that story by tackling the question almost every prospective buyer eventually asks when's the right time for me to buy a home?
But first, a little housekeeping. Number one, House Call SF was created with healthcare professionals in mind, but I want to remind listeners that anyone who finds this information useful is welcome here. And I think today's discussion applies broadly and well beyond healthcare, actually.
And number two, we're starting this podcast with a few test episodes. Listeners, if you find them valuable, we'll keep the show going. So if you do find this helpful, please follow us on Apple Podcasts or Spotify, share it with a friend to get the word out, or write to us at housecallsf.com.
Okay, back to today's episode. We've got our first guest interview. I'll clarify the ground rules for this and future episodes. Guests do not pay to appear. I receive no compensation from them, and their participation should not be interpreted as an endorsement of their services. And as always, this podcast provides general educational information, not individualized legal, real estate tax, or financial advice. So please consult an appropriately qualified professional about your own circumstances if you have questions.
Meet Justin Harvey
Andrew: With that out of the way, I'm excited to tell you about our guest, financial advisor Justin Harvey. I first discovered Justin while I was listening to the personal finance podcast Money Needs Medicine, which he co-hosts with anesthesiologist Dr. Jimmy Turner. Justin also has a couple other interesting links to healthcare in that he's married to a physician, and he founded APM Wealth, a wealth management firm specifically designed to serve physicians and their families. He also hosts the APM Success Podcast. We'll link all this in the show notes, by the way. He's got 17 years experience in the industry, and you'll see he really knows his stuff. What initially resonated with me was Justin's philosophy on personal finance. Across his podcasts, I've heard him offer sensible advice that is driven by goals and values. And the understanding that money is just a tool to help you create the life that you want. And being also based on the West Coast, he understands what it means to live in a very high cost of living area. We discuss why purchasing a home here is especially driven by values more so than producing the best financial return and why that's okay. We also cover rules of thumb for deciding how much house you can comfortably afford and talk about whether outside forces like interest rates, the stock market, anticipated tech IPOs should influence the timing of your home purchase. I'm excited for you to hear this. Let's get into it.
All right, today we are very lucky to have as House Call SF's first guest expert interviewee, Justin Harvey. Justin, welcome to House Call SF.
Justin: Andrew, I'm really pleased to be here. Thanks for having me.
Andrew: It's my pleasure.
Rent vs Buy Discussion
Andrew: Well, let's get right into it. So this episode is about figuring out when is the right time to buy a first home. But I want to back things up because there's a question that even comes before that. And that question is whether buying a home in this market is even the right decision in the first place. And I know this rent versus buy discussion is hotly debated.
I'll throw some stats your way here. In June of 2026, this year, the median sale price of a detached single-family home in the Bay Area was $1.4 million. I'm going to break it down by county. That price was $1.3 million in the inner East Bay, Alameda County, nearly $1.8 million in Marin, $2.1 million in San Francisco, and $2.3 million in San Mateo County. So Justin, with prices this high, does it even make sense to buy a home in the first place, or should we all just be renting?
Justin: That is a great question. And the one of the themes you're going to encounter as you talk about this with financial advisors like me is the answer is always it depends. So I'm going to try to not just say it depends and leave it at that. But personal circumstances are highly determinative of whether or not buying is the right path to take, or whether or not waiting for a period of time or renting permanently or some other more creative permutation is the right way.
I will say the time horizon question is very instructive, no matter what financial planning question you're addressing. I would say the home purchase question is near the top of this list, but also how should I invest with my money? The answer is, well, it depends on when you're going to need that money. Is this six or 12-month money? Is this 10-year, 20, 30-year money? And that will often determine how you want to approach potential solutions.
So with buying in a very high cost market like the Bay Area, physicians are faced with what I call the double whipsaw. I'll put this in air quotes. So you have two headwinds that are hitting you at the same time as a physician in the Bay Area. Number one is you're living in a place that a lot of people want to be. And this is true in most of the major metro areas. And so as a result, the the joke is you get the last hundred thousand dollars of your compensation payable in prestige, not US dollars. And so that hurts when it comes time to purchase a home. That's the first countervailing force.
And the second is you're just in a market where everything's expensive. So you're making less than your peers, similarly situated, and you're buying stuff that's more expensive, whether it's a house or general cost of living. So you're facing a lot of challenges, and it's going to be more expensive for you than one of your peers who lives in Des Moines, to take a sort of funny example. I'm from Pittsburgh. So, like you, Andrew, when I came to the West Coast, it was kind of a reality check. I live in Portland, Oregon, which is seen to be a relatively affordable market compared to my friends to the south, and even in Seattle to the north. This is kind of the place where once people make their money, they just come to Portland and buy stuff in cash. It's frustrating for people participating in the market here locally. But for physicians, yeah, for physicians facing this question in your locale, I think understanding where you're at in your journey, what resource do you have, and what trade-offs are you willing to make are the first questions I would want to understand.
So let me give you a couple sort of prototypical examples and the way I might interact with this rent versus buy question. If you're in training and you're either not married, maybe you're married to a resident, or married to someone outside of medicine or someone who's making a normal blue to white color salary in the high five to low six figures, it's hard to make a case for buying at that point. Not only are you working a lot of hours, being very busy learning how to be a doctor, uh and not wanting to deal with just the knickknacky things that inevitably will break when you buy a home, but you're just you're on the PGY scale. You're not making a lot of money yet. And so coming up with the dollars needed to be able to pay your mortgage is very, very difficult, unless you're gonna live way out on the sticks. But as you know, if you're on call or you have to be able to quickly access your hospital, it's that you that's not really a viable solution. So you're left with like you basically have to rent. There are some institutions that will provide subsidies, sometimes for renting, sometimes for purchasing. I don't know about the Bay Area hospitals or academic centers there, what they do in that department, but I would say that's an important thing to understand. Less so for trainees, more so for attendings, but that is one kind of starting point. It's hard to buy if you're not attending.
Once you are an attending, then you get more into the what are the intangibles that are going to influence the way you process the trade-off question. And specifically, my grandparents are from here, my parents are from here, I have six siblings, they all live in the Bay Area, and I can literally never imagine living anywhere else. To me, that says, okay, we're willing to make some trade-offs to perhaps spend a bit more as a percentage of our gross income in order to be here, because it's unlikely that any other geography is ever going to make sense for us. So for that person, I would say we're willing to go a little further out on the branch of risk.
The rule of thumb you alluded in your pre-call notes is two times gross income. A doctor should only have two times their gross income in a mortgage in order to buy a house. So if you're making half a million bucks, that means a million-dollar mortgage. As you know, that is gonna get you a cardboard box on Main Street there in San Francisco. So we have to modify this to three times, three and a half times, four times in some cases. And now we're really stretching. The concern is we're gonna be house poor. We're gonna be spending such a large percentage of our income on housing that we're not gonna be able to save for retirement. We can't save for our kids' education. And we're living in trade-off territory. And for that attending who's like, you know, I'm fourth gen Bay Area, all my family is here, and I'm never gonna be anywhere else. Typically, that person would say, I'm willing to accept the trade-offs. And by the way, if you're fourth gen Bay Area, perhaps there's some family money floating around that may be able to help with either the home purchase or with the kids' education. And so you're gonna be more comfortable spending a higher percentage than someone who, you know, maybe it's your first job out of training and like we're just trying to see if this is the place we want to be. And it's nice to make a bigger number, but I'm not ready to commit to a $2 million mortgage on $600,000 of income. And so the trade-off for that person is going to be quite a bit different, and they're probably gonna want to rent for long enough to develop conviction about yes, we want to be here, or continue to keep your options open to see if perhaps moving to a lower cost locale maybe in the cards.
Andrew: Yeah. So, I mean, I wish there was a blanket answer to this question. It sounds like no, it's all a little bit based on personal comfort and out here there are going to be trade-offs, is kind of the take home that I'm hearing. And it's just a matter of how comfortable are you accepting those trade-offs? You touched on time horizon as one thing maybe we can dig into a little bit more. Sometimes this comes up in the buy versus rent question. I'm wondering, is there a minimum amount of time that someone should expect to remain in, you know, the home that they bought to get a return on investment that would make it economically worth it to buy instead of rent in the Bay Area? Do you have any insight into like what's the general break-even around here?
Justin: So I do a lot of helping clients think about break-even return on investment, this sort of language that we have around how do I make money in the way that I deploy my resources. I would contend that your purchase of a primary residence is a place where you should kind of chuck that out the window, as much as it's anathema to the mathematically minded among us, because you have to live somewhere. And if you're married, having a place where your family, your spouse is going to feel comfortable, stable, you can't put a price on that. And so you have no idea what markets are going to do in the future, the local real estate market and interest rates, and both of those are going to be very influential in terms of the value of your home. And the fact is, it doesn't have to matter what's going to happen. It's unknowable and it need not impact the decision if you make the time horizon sort of commitment, meaning, I think I'm going to be here for a while. And the price point is affordable. Whatever affordable means to you, it's affordable today. I can afford that $10,000, $12,000, $15,000 a month payment. If I can afford it today and I have reasonable expectation of job security and income at a certain threshold for my household, that for me is the launching off point for making the decision rather than a break-even calculation, what are, you know, inflation versus home prices and the growth of the math. Like the only math that I'm really doing in helping people assess this question is can you afford it? And are the trade-offs acceptable given your priorities?
And a couple priorities would be a sense of belonging. That's pretty intangible, a desire for hospitality. Like, I want to have people in my space. I want to maybe have a guest room. So if I have parents who live out of town and they're going to come and visit me, I need to be able to afford that bedroom that's maybe going to be empty a lot of the time, but it's a luxury that I'm going to pay for that is in accordance with my values. That's another values-driven motivator. School district, to the extent that education is a value, these are all areas in which understanding what's important can help you make that, as you said, well-calibrated decision. Because at the end of the day, you're going to put your head down on your pillow. And the long-term you, if you do some other things correctly in terms of setting a savings rate, investing wisely.
My opinion is I'm a sort of an abundance-minded person. You'll you'll pick up on this. So I think I'm an optimist and I think everything's gonna work out. I have a lot of faith in humans to creatively solve problems if you're appropriately motivated. And so making sure that it's working today and hoping for the best for the future is often sufficient to say, okay, let's sign on the dotted line, let's move in, let's paint the walls, whatever color we darn well please, and let's enjoy it while we're doing it.
Andrew: Yeah. I think that's the bottom line, is there's a lot that goes into this decision in the first place, aside from the finances. There's a whole psychological aspect of it all and what you want your life and your family like to look like as well. But before we leave this rent versus buy portion of the episode, I do want to just talk about hidden costs or surprise costs of home ownership. As you know, this is a podcast for healthcare providers. I didn't know anything about real estate year and a half, two years ago. I was surprised to learn about a lot of these costs that come with first-time home ownership. So, Justin, what are some of these surprise costs of home ownership?
Justin: So there's ongoing maintenance, which are little knick-knacky things. There's uh, you know, pests that you have to deal with. There's the classic like roof or toilet leak, there's paying for plumbers and electricians. Any of those are sort of fair game. There's also, I literally, right before this call, I got a text from the person to whom I sold my house in Philadelphia five years ago. They said, Hey, we just got back from a trip. There was a a leak in the skylight, and I think you said there was a carryover from the warranty. So can you get us in touch with the roofers?
So I mean, anyone who's owned a home knows that this happens. And it's a it's a sort of a classic example, but it's a real thing that happens.
And man, water, water. It just seems so it's inert, it's necessary for life, but dang, it is destructive, especially if you're out of town while it's happening. So any of that could create big one-time expenses that if you're renting, it's the landlord's problem to deal with. And if you don't have reserve, like the cash on hand to be able to meet whatever the bill is, then you're looking at credit card debt and it's not a good place to be.
And it's a common thing that I've heard that renting is just throwing away money. And this is one area where that's actually demonstrably false because you're locking in and it's like an insurance premium. You know, you pay X number of dollars for your car insurance or for your life insurance. And yeah, maybe that feels expensive, but what you're doing is you're capping your costs to say if my car gets totaled tomorrow, I'm not gonna have to pay to replace the car. I have insurance to cover that. Similarly for rent, if my roof leaks or the toilet leaks, or I'm out of town and some crazy thing happens, I've locked in my cost, hopefully. I mean, assuming your landlord's not a scumbag, but you're creating a more predictable and reliable financial trajectory, which can bring a lot of peace of mind.
Andrew: Are there any rules that people should budget for you know home repair costs per year? I've heard maybe estimate that to be 1% of the purchase price annually.
Justin: I think 1% annually is a good number, and it tends to be lumpy. So it doesn't show up all at once. It's probably like 0.2% most years and then a couple percent now and then has been my experience in observation.
Another thing to be aware of is with how mortgages work, there's a thing called the amortization schedule, which is the big complicated spreadsheet that says for every mortgage payment that I make over the next 360 months on a 30-year fixed mortgage, here's how every dollar is going to be allocated. And it's primarily into four buckets principal, interest, taxes, and insurance. P-I-T-I is the acronym. And you'll be shocked, maybe you won't, because we're having this conversation. So clearly you know a thing or two, how little at the beginning of the amortization schedule, like in months one to 12 specifically, how little goes to principal. So it's a common misconception that renting is quote unquote throwing away money. But if I can rent a place for eight grand and my mortgage payment is 10 grand and I feel like, well, at least I'm building some equity. Actually, once you look at the amortization schedule, you're probably only putting $1,000, $1,200,000, $1,500 a month towards principal paydown of that $10,000. So $10,000, that means $8,500 is getting lit on fire for taxes and insurance, but mostly it's interest on the front end of the amortization schedule. And as you pay through and pay through and pay through in months 200 and 250 and 300, the ratio flips and it's mostly principal, but it is back end loaded where most of the mortgage pay down happens on the latter half of your mortgage. So what this means for buyers is if you think you're going to be throwing away money by renting, I would encourage you to say, what is the home that we would buy instead?
And Zillow has a nice little mortgage calculator. There's a million of them out there, but this is one that I like to use. And just look up the amortization schedule for that purchase at that price point, and you might find that actually, even though I'm quote unquote lighting that $8,000 a month on fire, you'd be lighting a lot more on fire if you made the purchase, totally excluding any maintenance costs which may pop up. So renting can actually be a very financially viable decision, especially in a market like the Bay Area.
Andrew: Yeah, I mean, that's really interesting to flip the paradigm of what is actually lighting the money on fire there. You can deduct some of the money that you pay towards mortgage interest, but only a portion of it out here. Let's do a worked example. I was on the Zillow calculator earlier. So let's say you purchase a $2 million home in San Francisco. Let's say you put down a 20% down payment of $400,000. That leaves you with a mortgage loan from the bank for $1.6 million that you'll have to pay back. We're going to figure out what your monthly payments actually look like there. So, first thing at the current interest rates of this week, around 6.6%, 6.7% on a 30-year fixed mortgage. That would come out to about $10,000 a month just for the principal and the interest on the loan. And Justin, like you're saying, that's mostly the interest on the loan up front. Second, there's going to be property tax payments. I didn't know this, but property taxes for the year will be one of the assessed value or the sale price of the home if it's newly bought. So for this $2 million sale price, that's an additional $20,000 a year, roughly another $1,700 a month. And then third, there's going to be a homeowner's insurance, like you mentioned, likely to at least be several hundred dollars a month. And now you're looking at over $12,000 a month towards housing costs compared to renting, where, you know, even if paying $6,000 a month feels painful, it leaves you with much better cash flow and freed up to invest the rest, if you'd like. Just to illustrate how stark the difference between the payments can be for renting versus buying.
How Much Home Can You Afford?
Andrew: But let's say for all those non-financial and psychological and just how you envision your life looking reasons, you do decide to go ahead and purchase a home. The next part I remember after coming to that decision was pulling my hair out, trying to figure out well, how much home can we afford? I wished there were hard and fast rules for this as well to tell me what a safe purchase price was. Really couldn't find any out there. There was the generic advice that you mentioned earlier. Don't take on a mortgage more than two times your gross income. That's harder to do out here, like you mentioned. Justin, I'm curious, what do you tell your clients to help them determine how much house they can comfortably afford? How is this different in the Bay Area specifically? Is there anything beyond those gross income numbers that you mentioned before to get even nittier, grittier?
Justin: Yeah. In California, it's helpful to look at net dollars because it's a high tax state. There's, you know, taxes are a big bite. And it depends on your household income, how big of a bite they are and whether or not you're self employed versus W2 employed. But working with net dollars, after Uncle Sam takes his chunk, what's left over and what percentage of that should go to housing. So in a perfect world, if we're in the twenties, twenty two, twenty five percent, twenty eight percent. That's pretty sustainable and that leaves plenty of room for other things. If we're in the 30s, that's probably more typical for a physician who's like, I'm new in attending-hood and I want to, I don't want to buy a house and then move in four years. I want to like get the forever home today. And often, because they're earlier in their journey clinically, they're gonna be making a little less than they hope to eventually. So they're probably gonna be in the 32, 34% range, basically a third of your income. In the Bay, you're probably looking at, you know, 35, 38, 40. If you're going beyond that, you're into like big trade-off territory. And so, you know, measure twice, cut once is what the carpenters say. So you want to carefully consider, do as much as you can create a detailed budget for the expenses that you're gonna have.
And education is a big one. So, how are we gonna educate our kids? Are they gonna be in a public school? And what does child care look like? Or are we thinking about private education, which is gonna come with its own meaningful price tag, and depending on how many kids you have, you know, I got three kids, that's an important factor. So lay everything out as much as you can to figure out how much room are we going to have to save for financial independence? Because ultimately you don't want, and I was talking with Dr. Turner, Jimmy Turner, who I co-host the Money Needs Medicine podcast with, about this literally today. Like it's one thing to say, I'm fine to be at the hospital until I'm 80 and I understand the trade-offs, and I'm just gonna work and I love working, and I'm just gonna keep on doing that. But the fact is, you may not be able, A, you may not be able to because of your health, but B, your hospital might not want you that long. And it may be that, you know, the decision is not yours and it's made for you, and you're perhaps tactfully or not shown the door at some point when you, it's much harder to pivot. If you're in your mid to late 60s and you're not financially stable and you're thinking, I'm gonna work another 10 years, you're starting to lose your ability to control that situation. So positioning yourself so that you're not in that situation to begin with is really important.
I would also, as I'm thinking about the moving parts here, think about what are the sort of intergenerational implications of this decision. So, not only for my kids, but also for my parents or grandparents, to what extent do I have financial responsibilities upstream? Are my parents financially independent and they're sitting on a big trust fund and that's gonna be mine someday? If that's the case, maybe I'm willing to save a little less for retirement between now and then. Conversely, if they are still working and may, if they have a health event, be reliant on me to contribute to their future, that's gonna make me trim my budget further, knowing that I'm gonna be on the hook for that at some point. So these are the other factors that will be very influential in the housing decision. The thing about it is, you know, every month the number is gonna hit you. That auto debit is gonna hit your checking account. And so you really want to be sure that you have enough margin to meet your other obligations.
Andrew: Yeah. Is that 35 to 38% of take home income that you're talking about? Is that trade-off territory? Or are we just getting close to the major trade-offs that come with it?
Justin: I mean, that's probably baseline for San Francisco.
Andrew: Yeah, unfortunately.
Justin: Maybe it's in the 40s and like 50% could be like a bright line. Like if it's more than 50, then what are you thinking?
Andrew: Yeah, yeah. This the stark red line.
Justin: But it really is, it really is personal. So I think once you're in the 40s, even the high 30s, you're it's good to just be aware that we're we're starting to reach financially, and there are going to be implications that we're gonna have less flexibility in the future because of this today, and we just want to make sure it's worth it.
Andrew: Yeah. Okay, know what you're getting into for yourself and your family. Just to show the difference between the you know, gross salary versus what a doc might actually take home out here. Let's say a doc makes $400,000 in California, the actual take home after federal and state taxes might actually be closer to around $240,000. So I think it does make sense to be working with the net take home numbers here because they are pretty different. Let's say you're in a specialty that’s heavily RVU based for your salary. How do you figure that out? Do you try to be as conservative as possible with this calculation and estimation?
Justin: That's a good question. Production pay is a blessing and a curse. Yeah, this is complex. And again, it always does depend. Understanding physician compensation trends for your specialty and for your geography is important. Looking at income benchmarking for your institution if you can figure it out, or MGMA data or AMGA or Medscape, there's there's a bunch of sort of data sets out there that can inform this. Uh yeah, I I think I would just speaking generally, I would be a little more conservative. And I wouldn't want to put myself in a position where, you know, especially if you're in a specialty that's reliant, you know, if you're a hospitalist, you probably you're just your day is pretty set and you're not like referral dependent, for example. You're not worried about patient volume, typically.
Andrew: Exactly.
Justin: But if you're in a more procedural specialty or you're doing more outpatient stuff or you're a practice owner and you are more reliant on new patient flow, you definitely want to build some margin in. And I would say, you know, take your average of the last three years. And realistically, if if you're in the Bay Area and you want to buy, you're just gonna be taking some risk. And you hope to refinance at a lower interest rate, and you're gonna have to work hard and you might have to get creative. And again, with the sort of optimistic abundance mindset, if I wanted to sort of plant my flag and have my family have a place where they were gonna belong, I'm taking on the risk of I might have to creatively solve some problems down the line. And that might mean relocation or finding another job or working more or picking up additional call shifts or whatever the flexible, whatever the levers are that you can pull, you might have to pull some of them. So I do think uh Tim Ferris, who's a podcaster and sort of like a personal lifestyle optimization guru, you could call him. I there was a time in my life when I was more interested in optimizing every minute of my day. I do a lot less of that anymore, but he has an interesting exercise called fear setting, which is the process of reflecting on what is the worst case scenario if all the wrong things that I'm afraid of all go wrong at the same time and what really would happen. And I think in this particular case, as we're thinking about housing expense and locking in potentially a big mortgage, there's practical value to understanding what if I lose my job? What if I am disabled? What if my hospital gets bought out by XYZ hospital across the street and my RVUs, you know, my pay per RVU is significantly diminished? Like, figure out what would that mean for you? What would you have to do? Is there a way to address that need? Or and here's what's usually what you usually find is well, it's not the end of the world. It means we're gonna have to have some uncomfortable conversations. We might need to even uproot, we might need to move. Like, I know all my six of my siblings are in the bay, but like we're just gonna have to move to somewhere we can afford to live just because that's what is necessary for our family. And while that would be disappointing and challenging, it's fine. Like you're gonna find a way to persist as a human and you're gonna hopefully create the best life you can in a new locale. So I do think that stress testing these opportunities before you dive in is a good idea. And what you'll probably find is there's gonna be a way through it. Just don't get way out over your skis because then the adjustment is gonna be even more painful.
Andrew: Yeah. It's I mean, thanks for bringing all that up. It's important to know what you're getting into as important to the contingency planning as well. I've heard you talk before about the disability income. I think that is a really important number to know in another, a different worst case scenario. Just know what that looks like as well moving forward.
Justin: Yeah, all of your insurances get way more important once because the bank doesn't care if you're hurt or not. They don't care if your RVU volume drops or not. You need to uh be even more attentive and attuned to all the vulnerabilities that you have financially, some of which can be sort of exported. Like we deal with that with a fixed cost. Some of them can't be fully exported and you need to just live with it. And that means like maybe you don't ride a motorcycle anymore, or maybe, you know, whatever hobbies that you have that were interesting and kind of dangerous, you're like, well, if something happens to me, we're gonna have to move out of the Bay Area because my disability policy that I have is not gonna cover nearly what we have what we owe, and therefore. So, you know, this is where you got to live your life and live according to your convictions and desires. But certainly you put your family at risk if you're not insured appropriately. And this is life insurance too. Like if you die, you want to make sure that, you know, if I die, I want my wife to not be -there's enough stress and trauma dealing with the unexpected sudden loss of a spouse. You don't want the economic stress to be added to that pile. So get beefy insurance everywhere you can, is my personal philosophy.
How Much Cash Is Needed After Closing?
Andrew: Yeah, all about the risk mitigation. On a similar note, in terms of like emergency planning types of things, out here it really feels like you have to kind of empty the bank account for a home purchase. How much cash should people plan to still have on hand immediately after closing for things that come up, you know, house related, like those tax bills, the new assessments that might come in? Like how much do you want to still have available liquid cash?
Justin: You're gonna move, you're gonna furnish a new place, you're gonna deal with all the little knick-knacky things that you didn't realize needed fixing. That, I mean, each of those could be a meaningful five-figure event. So, you know, it depends on like, are you gonna have all your friends over for a free pizza and get a U-Haul and do it yourself, or are you gonna pay a moving company? You know, especially if you're coming from out of town or across the country, that could be very expensive. So thinking about all the associated costs is really important. It's okay to acknowledge that right after you buy a house, you're probably gonna be at basically a low watermark of cash, maybe for the rest of your life. And what I observe for those, you know, 35-year-old attendings who are buying a house and they're scraping and scrounging every penny, and maybe mom and dad are chipping in a few bucks and they're like really draining the coffers. If you put the systems in place to replenish that over time and then begin to rebuild your financial momentum, that's probably your low watermark without, you know, unless there's a major catastrophe in the future. And so it's okay. It's okay to be at a low watermark. And if it causes some anxiety, it's probably okay. It's probably good. It's good that you're nervous to not have any money because it motivates you to do what you need to do to change that. So, you know, how much do you need? If I was to close on a house, you know, if I had 50 grand left over, that would be like very bare bones. I would also, one of the things that we do for our clients occasionally is create uh, like we call it a liquidity hierarchy, meaning it's it's sort of attached to that fear setting worst case scenario, like if a catastrophe and then another and then another, like if seven disasters hit all at once and it took every single penny of my net worth. What is the order of operations, the places from which we're going to draw cash? And this can be actually sort of a confidence building exercise too, because you've got your cash accounts, checking and savings. Maybe we've got credit cards in there, maybe we've got like a 401k loan, then we've got Roth IRAs, then we've got emptying your retirement accounts, maybe there's taxable investments in there, maybe there's other resources, maybe there's a home equity line of credit on an investment property from the house you bought in residency, all of that. Make a list of all of those things, and that can help you. You know, when you look at that, okay, we've only got 50K left in cash and we've got a lot of things we got to do with it. It's not actually just 50K, potentially. It's like we can access more than that. And even if you're carrying higher interest debt for a period of time, it's still a resource that you can access in an extreme need. And so that can help bridge the gap so that this low watermark is not ultimately where you stay.
Should External Factors Influence Timing of Your Home Purchase?
Andrew: Yeah. Gives you some feeling like there's a little bit more cushion there than perhaps you initially realized.
Justin: Exactly.
Andrew: We've talked a lot about how to make a financially responsible purchase for, you know, a home. On the other end of the spectrum, the housing market here this year in particular seems really like it's taking off. The AI boom, there's speculation that with big AI companies set to IPO in the coming months, housing prices may continue to climb. Are there ever circumstances where stretching financially now make sense so that a good opportunity doesn't drift out of reach later on? And are these kind of the same trade-offs that we were talking about earlier on with things like retirement savings, vacations, maintaining that emergency fund?
Justin: FOMO is a terrible reason to make a decision. It's a terrible reason to invest in an investment that your buddies are talking about when you're playing golf. It's a terrible reason to purchase a home and commit yourself to a massive financial IOU that you're gonna have to fulfill. So, in the best case, you're making this decision you know, logically from a set of numbers that you can see and understand. Now there's still always gonna be that step of faith. Like I might lose my job tomorrow. I can't control that. I'm still committing, and you're gonna have to figure that out if you do. But making a decision because you're afraid that the market's gonna keep running away. I don't like that. I I don't recommend that. And I can tell you from personal experience actually, I when I moved to Portland about five years ago, we rented for a while. We did sort of the classic thing you should do when you move somewhere from out of town, rent to get the feel for things, during which time it costs us money to to wait. We paid a lot in rent and the market ran away from us, so to speak. I mean, it all worked out and it was fine. And like if we bought on day zero when we moved here, we could have bought either the same house for less or a nicer house for the amount that we spent. And by the way, rates were much lower then. That's the other FOMO thing is like gotta buy while rates are low. I I reject that premise. I think that's a bad idea. You should buy when you know the variables and when it's the right time for you, and you don't know what markets are gonna do. You don't know, even neighborhoods, you know what what's gonna happen. So I just say identify that as not productive, a not productive thought process, and reject it as much as possible. And I'm not saying it's easy, but I am saying like you should, because FOMO-driven financial decision making is tends towards disaster.
Andrew: Noted and flagged. Would you say that's the most common reason that you've seen some of your physician clients buy maybe too soon or sooner than they were perhaps ready for?
Justin: Most of my clients don't because I talk them out of it. But of course, I I have I mean, yeah, it's the the other thing about physicians that I have observed, and I'm married to one and I work with dozens and dozens of them, is there tends to be a tendency towards comparison that is, I don't know, it's not like the highest of any, you know, any career, because uh in finance, actually, we tend towards this as well. But it's certainly a career where there's a lot of looking at each other. I I have people come to me and say, like, I just want to do, you know, a little bit better than what the other people are doing, or I see what everyone else is doing, and I feel like I'm missing it. Like, that's often a motivation for, in some cases, like getting your financial house in order, which can actually be a good thing. But that sense of, okay, everyone's doing a thing now, and I feel this pressure, whether it's like the car or the life, you know, the other lifestyle expansion kinds of things before you're ready for it, or certainly for a home purchase. That's another thing that like psychologically just identify that as I might feel this because doctors sometimes feel this. I also, I don't know what you've observed, Andrew, but I I would say in the Northwest, there's less of this than like the East Coast where I'm from, Pennsylvania and Philadelphia area. East Coast tends to be a little more like looking over your shoulder and seeing what else is what other people are doing.
Andrew: Yeah, I think though I’m just still learning it.
Justin: More insulation, but you know, big cities, it just is is more of that. So flag this as a thing that people do, that people in your profession are more likely to have to engage with, and just you can more easily mentally preempt it if you're prepared for it.
Andrew: Yeah, yeah, yeah. The first step is awareness there. And then it said just to go back to one other thing that you said. Let's say someone said to you, I'm gonna wait to buy until interest rates or even home prices come down. You're saying disregard what the market is doing, buy when it's a good time for you to buy for your personal circumstances. Is that what I'm hearing?
Justin: Totally. Yeah, and the same as you know, for stock market investing. I don't know if you invest in the market at all, but this is a classic, hilariously difficult thing to do. Like mere mortals like us, you know, there are some people out there who move markets with every whim and fancy that they themselves express. And therefore, it makes sense for them to wait for a pullback. But for the rest of us, we should just close our eyes and stuff money into investments in a regular, disciplined, systematic way over time, and that's how you build wealth. And for home purchasing, like shut your eyes to whatever's happening in the markets. This is my opinion, anyway, and don't worry about interest rates because they're unknowable. Don't worry about your local market. If you don't like your local market, maybe go somewhere else. But buy when it makes sense for you looking at your household financials. And, you know, if you're married, like your spouse and you should get synced up, be on the same page so that you're you're not gonna regret it. Because you're much more likely to regret a decision made from FOMO that doesn't work out than we made a well-calibrated decision that was in alignment with our values, and then a crazy thing happened. Like, you're not gonna regret buying a house that you could afford, and then, oh man, I was disabled, and like we couldn't have foreseen that. But if two of your co-fellows buy a house, you're like, oh my gosh, we got to do that too, and then it goes south. I think that is a uh a situation that is ripe for regret.
Andrew: You're totally right about that.
Justin: A lot of what I do is just like regret management. How do we minimize regret through your life and financial decision making? And that tends to be a pretty good line of best fit for how to optimize these decisions.
Physician Loans and Adjustable Rate Mortgages
Andrew: I'm sure your clients really appreciate that. I'm appreciating it now. One other thing I do want to ask you about is your thoughts on some of the tools that are available to healthcare workers and how useful or not they are. So I'm curious to hear your thoughts on physician mortgages or other low or no down payment loans, adjustable rate mortgages. Can these tools be beneficial to help you get in? Or are they maybe encouraging buyers to stretch too far?
Justin: They're definitely beneficial. In the same way that like small business, the small SBA, small business lending, there's a sort of department of the government that makes it easier or makes cash accessible to small businesses that are a little bit less credit worthy compared to what they might be able to get from a bank proper. It is an easier on-ramp to launching a business. Similarly, physician mortgages, I'm a huge fan of them. Minimum capital commitment. If everything else is well calibrated, then putting zero money down or 5% down or 10% down instead of the typical 20 or 25, it is awesome. Because cash is king, and if more cash is in my checking account and less is going towards my house. We we did this when we purchased our home. And I encourage many of my clients, often it's like put as little down as you can. It obviously depends on your cash reserves. And I have some cases in which 20 or 25% down or 30% down is appropriate. And in some cases where there's a house being sold, sometimes you're coming in with a chunk of cash and you want to roll all that equity into the new home. And that's cool too. But I'm a big fan of the products that make it easier, and you're typically getting the best rates possible for these physician products.
And adjustable rates are useful in some cases. You only retrospectively know if they were helpful, but I'm not super opposed to them. An adjustable rate mortgage is a mortgage that is fixed for a period of time, maybe five, seven, ten years. And then every anniversary after that, every one year, it resets to whatever the market rate is. Typically, there's a cap on how high it can go, and there's a cap on how high, how much a single year adjustment can be. It's a good way to save on interest in the short run. And then what it does is it sort of leaves you vulnerable to future rate changes, and you have to refinance it at some point in order to move from an adjustable to a fixed product. So it does put you on the hook for a future refi. Is that a problem? We'll know in 10 years. I've got a lot of clients right now on a 7-1 arm. And I have an adjustable rate right now. And so I think there are other ways to build safety in, you know, like if you, and this is where, you know, living in the Bay, it is tough if you're in that 33, 35, 40% or more. Like, man, if you're at 40% or 45%, and then you're on an adjustable rate and rates never go down, they only go up, that 45 is going to turn into 47.50 and more. So that's when you get really stuck. I think I would stay away from an adjustable rate if I'm in sort of I'm reaching for this territory in terms of that percentage. That that's where I might strongly consider, even if it's a little bit of a higher rate, I'm gonna lock in a rate so that if rates don't ever go down again or they stay high for a decade or more, which they definitely could. There is plenty of historical precedent for this that we're not going to. Be stuck trying to refi and not being able to.
Andrew: Got it. So maybe if you're if this is a huge stretch for you, maybe not the adjustable rate mortgage, but at least the other tools seem like interesting options to be aware of and that would be worth exploring for someone in this position looking to buy a home.
Justin: I think they're almost always worth using. There are limited cases in which it doesn't make sense. There are other tools too. Like I have some clients that would do like a VA mortgage, for example. The veterans administration has a lot of good mortgage options that actually are competitive, in some cases, superior to the physician offerings. So certainly based on whatever your professional history has been, if you're a veteran, you should definitely consider the VA options. But look at everything and just go with whichever is going to get you the best rate.
The Right Time to Buy is When...
Andrew: Right, right. Yeah, no, that makes sense. Okay. Well, we're going to wrap things up here with two final questions. We'll take them one at a time. So first, Justin, what's one commonly repeated piece of home buying advice that you disagree with?
Justin: I think it's the one I referred to earlier, which is renting is throwing away money. And I especially in a place like San Francisco and most major metros, and especially when especially if you're in training or a one-year, God forbid, a one-year fellowship, or even a two or three-year fellowship. Rent, rent, rent, rent. There's a great chart, and I'll send you this link so you can put it in the show notes. It's a few years old at this point, but it it all still holds. And I uh let's see if I can share my screen. So I'll show this to you. It's a rent versus buy chart, and it shows the premium associated with renting in different geographies. This is from 2023, and you'll see, yeah, this is still this is still it. So the top, I'm gonna read off the top four cities here: San Jose, San Francisco, Oakland. Actually, I guess it's just the top three that are the bay. There you go. And I'm sure if we zoomed into some of the others, you know, like Palo Alto and Cupertino, and they would all be on the top of this list. And what this is saying is you're paying a lot more to own a home compared to what you would have to pay for a similar home to rent. So renting in any of these geographies might make sense indefinitely, financially speaking. And so never, ever, ever, ever feel like if you're keeping your options open and you're renting because of that limited time horizon that you're throwing away money, because I just don't think you are.
Andrew: Yeah. Thank you for sharing this, listeners. We will put it in the show notes. And then last thing, Justin, we want you to complete this sentence.. “The right time to buy is when…”
Justin: I'm a big believer in the gut. And you load your brain up with all the data and you let it kind of swim around in your brain, and then you're gonna have a gut-level conviction about what is right. When it comes to something as intimately important as the space in which me and my family are going to exist, I think rely on your gut. Talk to an expert or two just to make sure you're not going off the rails, but get all the information in your brain. And then if you have these reservations about like, oh, but what if I lose my job? What if I get disabled? What, what if, what if, what if. There's plenty of reasons to be anxious, but if your gut says, I look at everything in this by golly, it just feels like the right thing, I think you should just go for it.
Andrew: Trust the gut, trust the intuition. Justin Harvey, thank you so much for coming on House Call SF to share your wisdom. It's been a real pleasure having you. Can you please tell our listeners where they can go to learn more from you?
Justin: Yeah, so I've got a podcast called APM Success, apmsuccess.com. I co-host a really fun one with Dr. Jimmy Turner called Money Meets Medicine. You can, if you if this wasn't enough and you want to hear me yakking at you some more, you could go to moneymeetsmedicine.com and uh I run a wealth management firm, apm-wealth.com. So if any of those are of interest, you can check out those websites.
Andrew: And we'll put those in the show notes too.
Andrew: Thank you, Justin.
Justin: Thanks, Andrew. It's been a pleasure.
Andrew: I hope today's conversation gave you a more practical way to think about whether and when buying a hole makes sense for you. We also want to hear from you. Visit housecallsf.com and use the contact us page to send us your questions, suggest a future episode topic, or tell us about the challenges and successes you've experienced while house hunting.
We want to build this show around the questions that are most useful to you. And if you found this episode helpful, please follow HouseCall SF on Apple Podcasts or Spotify and share it with someone who might benefit. Thanks for listening. We'll see you next time.
