Money

Go on any major finance forum or site and the old adage is to stash 3-6 months of expenses towards an “emergency fund” before investing and saving for other purposes. Let's define an emergency fund first.

Well, that's the problem right there. There are different definitions of what an emergency fund is used for, here are a few:

• Unexpected expenses
• Job loss
• Car issues
• Home repairs
• Medical emergencies
• Pandemic

In my opinion, there are actually very few things that are truly unexpected like job loss and medical emergencies.  But even with the latter, one should know their health insurance plan and deductibles and have an idea of what a true medical emergency will cost. If you own a home – home maintenance and occasional repairs are expected and one should have a fund for that. If you have a car, regular maintenance and occasional repairs are also expected and one should have a fund for that. Death, disability and divorce are among the large ticket emergencies but that's what insurance is for.

Dave Ramsey's popular get out of debt plan has saving for a small emergency fund of $1,000 as it's first step before attacking the debt. I think his baby step plan is sound advice in terms of order of attack but doesn't quite fit for high income and stable earners like doctors.

Big Law Investor has a strong argument for why high-income earners don't need a traditional emergency fund, at least right off the bat. And Millennial Money has a nice checklist to help you decide if you need a traditional emergency fund in cash, summarized here with my take on it.

1. Do you have a stable job? The good news is that physicians have incredible job stability.
2. Ability to have additional income opportunities. Most physicians can easily hustle to work extra shifts and moonlight if there is a need for more income.
3. Investments you could sell if you needed. Never a good idea to withdraw from your retirement accounts, but many of us have a taxable account that we can draw upon. I never recommend taking out a loan from your 401(k), but it can be tapped in true emergencies.
4. Quality insurance coverage. I always recommend insuring against financial catastrophes only (life, disability, divorce, liability, auto, home)- doctors can generally self-insure the rest (like, you don't need to buy that insurance for your phone). In addition, most of us (really, all of us should) have disability insurance but most have a 3-6 month waiting period to get benefits. This is definitely a reason to have at least that much saved in expenses to get you through that waiting period.
5. High credit card limits. Most of us can leverage our available credit in true emergencies until we can figure out how to obtain the money (extra shifts, investments, etc). Obviously going into a credit card is never a good idea, but they are available if need be.

So what am I doing?

We are currently debt-free (2019). We have 1-2 months of expenses in our checking account and “the rest” in our taxable brokerage account at Vanguard. We invest aggressively 90/10 stocks/bonds. We just consider it a part of our overall portfolio. We have enough that it'll still be more than sufficient if the market drops and we need to pull some out.

However, our first likely source of “cash” might be a loan against our eQRPs, our self-directed retirement account that we use to invest in real estate.

The beauty of personal finance is the personal part. Guidelines are nice, but one should really examine and question if the advice is right for you.

How much is in your emergency fund? What is it for? 

Read More about Rethinking Emergency Funds

This is a guest post by Dr. Linda Street. Dr. Linda Street is a Certified Life Coach with a focus on Negotiations, a Board-certified Obstetrician and Maternal Fetal Medicine specialist, blogger, speaker and Founder/admin of NegotiatHER facebook group.

Up until now, your entire medical education has been an uphill climb competing for a few choice spots.  Shifting gears from vying for that coveted position at your ideal program to interviewing for your first job is a complete 180-degree turn.  This is one of the most important financial choices you will make. How much you earn directly correlates to how much you can save/invest/spend etc. AND is the jumping point for all future salary increases.

So now that I’ve convinced you this is important, how do you do it? 

The most crucial step to nailing a negotiation is preparation. Preparation begins with finding the right job (or two if you want more leverage).  Next comes offers. What about your offer do you like? What don’t you like? Look at it from the lens of your needs, then go back and look at it to gain insight on your potential employer’s needs to help frame your negotiation.   Next, follow these 6 steps.

Ace the negotiation before you walk into the door (or bomb it…) 

90% of negotiation is mindset. Managing your mind is essential.  Stick with me. Let’s look at a tale of two docs. 

• Doctor A is terrified of negotiating.  She is convinced she’s bad at it. She thinks they won’t give her any more than the initial offer so why bother.  Doc A isn’t sure she deserves any more money and is glad they’re offering her a job and not seeing her as the imposter she thinks she is.  She is likely to take their first offer and call it a day. 

• Doctor B hasn’t negotiated before either, but she knows she can figure things out.  She knows the value she brings and shows up with confidence. Doc B feels like this is important enough to do her homework and get the best deal possible.  

These two docs have the same skill set.  Who do you think gets the better deal? Who do you want to hire? 

Doctor B comes out ahead for two reasons, 

1. She asks for what she’s worth and she expects she’ll get it.
2. She exudes confidence and that makes her employer WANT her more which makes them more likely to respect her requests.  Wouldn’t you want a confident partner who can stay collected under pressure?

If you need help with this spend some time writing out everything you have to offer and why they would be lucky to have you.  If you need more help, consider hiring a coach. This is not the place to pinch pennies and the return on your investment will be worth it.  Your mindset sets the stage for the entire process.

Don’t accept a Corolla on a Tesla Budget 

Know your worth.  If you walk in with no idea of what you SHOULD be being paid you will have absolutely no idea whether your offer is good or bad.  You don’t want to be offered a 5^th percentile salary and say yes just because it dwarfs your PGY-4 paycheck.  It also may not serve you to walk in fresh out of training asking for a salary in the 99^th percentile.  So due diligence is key.  

Great resources include: 

• Co-residents who recently graduated (the stigma against discussing money has got to stop!) and faculty in your training program. 
• Survey-based data such as 
  • Medscape
  • Doximity
  • MGMA

Having an idea of what you would like to make BEFORE you have a job offer is a great way to look at this objectively before your brain is constrained by an offer in hand. Write this down, aim for no lower than the 50^th percentile for your field (better yet aim for the 75^th!).  Richard Shell, a professor at Wharton Business School and author of “Bargaining for Advantage: Negotiation Strategies for Reasonable People” teaches that JUST by having higher expectations people on average negotiate a higher amount.

The only failure is not asking

We’re brought up to think failure is kryptonite for eery type A medical brain.  But what if it wasn’t? What if failure was just learning one way that didn’t work and then going back and asking a different way? The only failure in negotiation is not asking.  Do NOT be afraid to ask! Odds are your future group EXPECTS you to negotiate. Their first offer is simply a jumping-off point, view it as such. Look at the contract and evaluate it critically, have a trusted mentor/friend/lawyer help (do NOT skip the lawyer!).  

Where is the salary compared to the goal you set in the last step? What is the bonus structure? How does your compensation change over time (i.e. when do you become partner? What is your buy-in? When can you expect a raise? Does the compensation change from guarantee to production?) This segues nicely into the next step.

Understand how you are paid

A little homework in compensation structures will go a long way. Payment for physicians can come from many different buckets, common ones include 

• Salary (aka “guarantee”)- this is money that shows up in equal increments in your paychecks.  This doesn’t vary based on what you do. The advantage of a pure salary position is that it is reliable, the caveat is that you get paid the same no matter how hard you work.
• Production based- this comes in two flavors, collections (impacted by collection rates, payer mix, lag time) or work relative value units or wRVU.  wRVU is a standardized measure assigned by CMS that is based on the encounter or procedure you are billing. Your employer will then assign a certain dollar value to each wRVU which can either be tiered or not and then you’re paid based on how many wRVUs you earn.  There’s a great calculator at https://www.aapc.com/practice-management/rvu-calculator.aspx that lets you calculate how many wRVU’s you get per common CPT codes. If I am speaking Greek here you may need to do some googling, these terms will likely be important in attending life!
• A Hybrid model- Any imaginable mix of the above with a base salary and a bonus structure based on wRVUs or collections (or quality metrics etc.)

But wait, Money isn’t everything

Know the value of non-financial asks. These are things that can have enormous value to you personally but do not always have a dollar amount associated with them.  Non-financial asks are a great way to sweeten the pot when you are close to making a deal but not quite there. These are things like benefits (health insurance, vision, dental, contribution to retirement accounts) vacation time/PTO, administrative time (for charting catch up, participation in hospital committees, teaching) and things that make your life easier (scribes, etc.)

You’re marrying your job, don’t do it without a prenup 

While many of us want our job to be the perfect fit and last forever, that is typically not the case.  While this varies by specialty, a quick google search reveals that up to 70% of doctors leave their first job within 5 years.  This makes it absolutely essential to plan for this in your contract. Two main considerations are 

• Malpractice tail insurance. If you are offered an occurrence-based malpractice policy, congratulations you can stop reading.  However, most policies are claims-made which means that if you leave your employer and get sued afterwards you’ll need some coverage.  This is where tail insurance is important, it covers you until a suit can no longer be filed. Depending on what area of the country you practice in and what specialty you are this could vary from being a nuisance purchase to a 6 figure investment. If you are able to negotiate it into your contract it’s simply taken care of.  Some places will foot the entire bill and others will be willing to incorporate tail insurance as an incremental benefit based on how long you stay in your job (i.e. if you stay 1 year they’ll pay 25% of your tail and increase for each year you stay with complete payment if you stay more than say 3-5 years).  
• Restrictive covenants or “non-competes”.  Enforceability depends on what state you practice in, but the process can be a headache at best and a legal battle at worst. While you’re on the front end it's wise to assume that this will be enforceable and negotiate to either not have one or to limit the distance/time frame.  

This is an exciting time to transition from training into actually doing what you have always wanted to do.  Make sure you can do it with peace of mind by following these 6 simple steps to ensure you’ve negotiated the job of your dreams. 

Read More about Negotiate Your First Attending Job: A 6-step Guide

Giving to charity and to those in need is on most people’s mind this time of year. The new higher standard deductions that came with the recent tax changes have made it more challenging to deduct donations.

I hope no one gives just for the tax break, but paying less taxes is always a good thing. So, what can you do? Consider opening a Donor Advised Fund!

What is a Donor Advised Fund (DAF)?

A donor advised fund is an investment account for charity. You donate cash or investments. You can then donate to charity from the fund and invest it so it can keep growing (and can keep giving).

The year you donate to the DAF counts as a charitable contribution. Then you are free to take your time to give to individual charities. This means you can make larger lump sum donations strategically, say every other year or so, so that you are able to itemize deductions on your taxes.

But the best part, in my opinion, is that you don’t need to keep track of every donation you make for taxes anymore. You got the tax deduction when you donated to the fund. So that is the only transaction you need to keep track of.

Where should I open a DAF?

The 3 DAF custodians I looked at are Vanguard Charitable, Fidelity Charitable and Schwab Charitable. TD Ameritrade currently only allows institutional clients to open one, but at the time of this writing, Charles Schwab bought TD Ameritrade, so that might change soon.

Fidelity & Schwab have initial account minimums of $5,000 and require a minimum donation of $50. Vanguard requires an initial account minimum of $25,000 and requires a minimum donation of $500. All three accept cash and securities, including appreciated securities.

My recommendation is to choose the custodian you already use for your taxable if that’s an option. Most people will probably go with Fidelity or Schwab for the lower initial minimum and lower donation minimum of $50.

Why donating appreciated shares is a win/win

Appreciated shares in a taxable account is subject to either long term or short term capital gains tax. Long term capital gains starts at 15% (up to 20%) + state income tax + 3.8% extra tax for higher-income folks. 

But, if you donate these shares to charity (via a DAF or not), you don’t pay any taxes on it and neither does the charity. They get the fully appreciated shares tax-free if you held the shares for at least a year. And you can write off the amount of the appreciated shares too! So really, it’s a win/win/win in my book.

If you held the appreciated shares for less than a year, you can deduct the original cost (or cost basis) of the shares, not the appreciated value. So it’s best to donate appreciated shares that you’ve owned for more than a year.

Giving via a DAF or via donating appreciated shares is cheaper than “giving cash” due to the tax savings.

Should you give?

Giving is personal. I only started giving relatively recently.

When I was a resident, I said “I'll give when I'm an attending.” That seemed logical – I wasn't making a lot and had student loans accumulating interest every day. Then I became an attending. Then I said “I'll give once I don't have so many loans” or “I'll give once I get some financial footing.”

Somewhere along the way, I discovered Farnoosh Torabi's So Money podcast. I started with her inaugural podcast with guest Tony Robbins. One part really got to me:

People say, ‘When I'm rich, I'll give', they're lying. If you won't give a dime out of a dollar, there's no way you're gonna give a 100 million out of a billion, you're lying to yourself. But if you can do it today, the biggest thing that giving does, is it teaches your brain there's more than enough.

Tony Robbins

Right after I listened to that podcast, I made my first donation – I pledged to give a small amount quarterly to my alma mater Barnard College and specifically earmarked the funds for financial aid. I received generous financial aid in the form of grants and work-study and hope that my small contribution will help someone else attend.

I have since given to:

• Camp Discovery – a summer camp for kids with severe skin diseases
• KACFNY – Korean American Community Foundation of NY
• Village Impact – a foundation that builds sustainable schools in Kenya

My goal for 2020 is to open an account with Vanguard Charitable with at least $25,000. I chose Vanguard since that is where is my taxable brokerage account is, meaning I can easily transfer appreciated shares from my taxable account. One thing I learned this year is that the more money I make, the more impact I can have. Wealthy Mom MD is working on a project where we will donate 50% of the profits to this DAF, I can’t wait to tell you more about it!

Read More about The Smart Way to Give to Charity – Donor Advised Funds

Disclaimer: Please note that some of the links below are affiliate links. This means that I may receive a commission if you purchase through one of my links. I highly recommend all of the products & services because they are companies that I have found to be helpful and trustworthy. I use many of these products & services myself. 

This is a guest post by Dr. Letizia Alto of Semi-Retired MD. Dr. Alto iis currently a part-time hospitalist located in Seattle, WA. She and her hospitalist husband, Kenji Asakura, MD, started investing in real estate together in early 2015 and, since then, they’ve built a sizable portfolio currently consisting of over 70 doors. 

Their mission is to help other physicians achieve financial freedom through real estate while they’re still young enough to enjoy it (Fast FIRE). 

Leti and Kenji teach physicians how to invest in cash flowing rentals in their introductory investment course, Zero to Freedom Through Cashflowing Rentals. The course is focused on helping doctors and other high-income professionals who have little to no real estate investment experience to get to a place where they can confidently invest in cash flowing rentals. AND it comes with CME!

In the meantime, be sure to sign up for Semi-Retired MD’s free minicourse! Note: Registration will be closed while the course cart is open.

If you’ve ever considered investing in real estate, you probably know that there are a lot of ways to make money by owning rentals.

There’s the cash flow (the money you put in your pocket after expenses), debt paydown by your renters, market appreciation, rent appreciation and forced appreciation. 

You’re also using the power of leverage, so you’re making money on the bank’s money. And then you add in the tax loopholes only available to real estate investors and your returns become exponential! It’s no wonder that so many of America’s wealthiest families have made their fortunes from owning real estate. 

Most people assume that you need a lot of money to make money with real estate. The truth of the matter is, you don’t need as much as you might think. 

In this post, I show you the path to financial freedom through cashflowing rentals if you don’t have much money. I do this by running you through your options if you have $50,000 to invest per year, so that you get a sense of all the possibilities if you don’t have much cash on hand right now.

But before we start….

Before we jump in and discuss strategy, let’s explore your mindset. 

Those of you who are regular readers of Wealthy Mom MD know that Bonnie frequently discusses how much of a role your view of money plays in whether you take control of your finances and become wealthy. Well, the same can be said of investing in real estate.

Mindset is vital to being a successful real estate investor. If you can master your fears and rid yourself of limiting beliefs then it doesn’t matter how much cash you currently have on hand to invest. You will figure out how to make it work. You will find a way to be successful. 

“Success in life is 80% psychology [mindset] and only 20% mechanics [strategies]”

Tony Robbins

So, before you do anything, make sure you’ve really explored your reason for investing (your why) and have started challenging some of your own limiting beliefs (I don’t have enough time, I don’t have enough money, etc…)

Doing this alone will make all the difference in what you are able to accomplish, independent of how much money you have on hand. 

With that, let’s jump into the strategy!

What if I don’t have any money?

First off, is this really true? 

Now, it may be that you don’t want to tap any of the money you do have available (equity in primary home, 401K, rainy day fund) or make the changes necessary to get more money (cut back on spending, work more shifts) or make any tough sacrifices (sell your primary residence, live in an apartment building that you own) because real estate investing is not a priority for you right now. 

But that is very different from saying you don’t have access to any cash. 

Now, a different problem is having a negative net worth. All of us know this is an extremely common situation for physicians, especially when you’ve just graduated from medical school or residency.

I realize this is a tough situation. I’ve been there myself! If you’re staring at hundreds of thousands of dollars of owed money, it can be difficult to decide to buy property instead of aggressively paying them off. There is an emotional benefit for many of us to paying off our loans even if it slows down our path to financial freedom. 

So, that being said, I know investing in real estate while you have student loans is not the right path for everyone. Ultimately you have to do what you feel comfortable with and what aligns with your “why” and goals.

But here’s why I would still buy rentals: they will help you pay off your student debt faster than just saving up to pay them off directly.

How does that work?

When we buy properties, Kenji and I buy deals that return a minimum of 10% cash-on-cash. This cashflow is tax-free. Then, when you add in the value of the equity paydown and all the types of appreciation (remember you’re making money on the banks money too using leverage!). And then you add in the tax breaks you can get from getting real estate professional tax status and the compounding you get when you reinvest the earnings of your properties into more properties…. Your returns add up quickly.

When we’ve modeled the analysis using our minimum threshold returns, we show returns of greater than 25% return per year. Our personal portfolio actual returns have far exceed even that. 

This is in contrast to just taking your post-tax dollars and putting them into paying off your loans (and saving a little in paid interest) directly.

The fact is: you will get to financial freedom much faster if you invest in cashflowing rentals instead of paying off your student loans first. 

So, now that we’ve tackled having no money and having significant student loans, let’s cover what your options are if you only have a small amount of cash saved. 

I only have $50,000… What are my options?

If you only have $50,000, you actually have a number of options to start investing in the cashflowing rentals (note I’m excluding passive modes of real estate investing including syndication and debt funds in this article).

One of the best options is to Buy, Rehab, Rent, Refinance or BRRRR a property. This is an attractive model because you can do this with no money down. BRRRR stands for buy, rent, rehab, refinance and repeat. The goal of the BRRRR strategy is to get all your money out of a property quickly and re-use it for future purchases. The key with this strategy is that you must buy a property in need of rehab at a below-market price. You buy the property with your $50,000 cash. You then rehab the property and rent it out. A bank then uses the new rent to establish the value of the property, which allows you to walk away with significant equity and all your initially invested money back in your pocket. When you successfully BRRRR, you have infinite cash-on-cash return.

A second option is to do something called “house hack.” If you use this strategy, you can buy a multi-family property with very little money down using an FHA loan. With an FHA loan, you have to live in the property (and rent out the other units) to qualify for their low money down program (only 3.5%). House hacking allows you to buy a much larger property than you would otherwise be able to afford and to be able to pay minimal rent or live rent-free in your unit, saving money for a second purchase.

The third option is a standard purchase, putting down 25% down on a $200,000 multifamily property. Depending on your market, you could buy between 2-4 units with that amount. 

I’ve bought myself a standard duplex, now what?

In this case, if you collected 10% cash-on-cash on your duplex deal, you’d be making $5,000 in cashflow a year plus having your renters pay down $2,500 per year on your loan. It may not seem like you’ve done much to change your situation.

But you have.

Because this is when you roll up your sleeves and get to work increasing the duplex’s worth so you can trade it up to a bigger property…soon.

How do you add value to your duplex with little to no money? 

First, you can increase rents. When we look for something we call “hidden value” in investment properties, one of the most frequent things we see is under-market rents. Ideally, what you’ve bought is a $200,000 duplex that was renting for $1800 a month, but should actually be renting for $2100 a month ($300 added rent per month). 

Other sources that you may be able to tap to increase the income of your property without or with minimal cost include renting out storage units, detached garages, adding pet rent, charging for reserved parking spots and adding in coin laundry. Let’s say you increase rents by $100 a month here. 

The second thing you can do to increase the value of your property is to lower expenses. You can do this with no cost to yourself by billing back utilities or giving your tenants responsibility for landscaping costs. Let’s say you save $200 a month in utilities here. 

Let’s say you do all that year one of owning the property. And, as a result, you’ve added $600 a month to rent – and approximately $120,000 of value to your property. While that may seem like a lot, it’s actually fairly easy to add this kind of value if you’ve bought a property right in the first place. 

Now your $200,000 purchase is worth $320,000. After one year you could get an appraisal and take out money to buy a second property. Or you could sell this property and roll it into a bigger one. 

But, for the sake of this model, let’s say you keep it. 

It’s year two…

Now, the second year of owning the property, you put $50,000 in to rehab it. 

Maybe you add an extra bedroom or unit. Maybe you lower maintenance costs and increase rent by putting in flooring instead of carpeting, adding nice grade finishes in the kitchen, repainting and fixing up the bathrooms. 

What this $50,000 rehab does is result in much higher rents (you get >10% return on investment for your rehab), and it adds value to your property, like I showed you increasing income and decreasing expenses did above.   

This is called forcing appreciation.

The value of multifamily properties is based on their net operating income (income minus expenses). When you increase income (by raising under-market rents or do rehab that results in higher rents for example) you, increase the value of the property by a multiplier. Although this multiplier is different in each market, for the sake of this example, we’ve chosen a very reasonable multiplier: for every $30 dollars of increased rent per month, you raise the property value by $6,000 (CAP rate of 6 for those of you who have real estate experience).

So, in this case, as a result of your rehab, you increase rents by $400 a month, resulting in $80,000 in value. Not only that, your rehab was also a tax write-off (though it resulted in a passive loss, which isn’t as useful as an active loss, as you’ll see below).

Now you decide to sell! 

You sell your $200,000 purchase for $400,000 using a 1031 exchange, so you can do it in a tax-deferred way. Again, this may seem crazy, but we’ve done this exact scenario multiple times. 

You now have about $250,000 to roll into your next property using  (yes, I didn’t count selling costs here, but I also left out the cashflow you made while you owned the property and the equity pay down by your renters during the time you owned your property too).

What’s next?

For the sake of simplicity, let’s say you go bigger and just buy one property. $250,000 down will buy you an $830,000 property if you put 30% down (needed for many commercial loans). Let’s say you buy a 12-plex with this money. Your cashflow becomes $25,000 each year (tax-free!). 

And now you claim real estate professional tax status.

What is real estate professional tax status?

Real estate professional tax status is a tax status that you can claim if you meet two criteria. First, you must do the majority of your working time on real estate. If you or your spouse doesn’t have a W2 job or you work part-time, this can be a fairly easy criteria to meet. Second, you need to spend a minimum of 750 hours on real estate investing each year (with at least 500 of those hours being spent on material participation on your own properties). 

You can read more about real estate professional status here.

Now that you own 12 units, it’s likely that you (or your spouse) are going to meet criteria, especially if you are doing significant work on your property such as self-managing it, overseeing a rehab or visiting the site or managing your property managers.

So what does real estate professional tax status get you?

Now all of your paper losses on that property can become active losses on your taxes, sheltering your clinical or other W2 income. So now you can write off massive losses from bonus depreciation and rehabs, reducing or even eliminate your income taxes. 

Having real estate professional tax status has saved us six-figures in taxes every single year. You can imagine what that does to your growth.

Therefore, the next year, you buy a new duplex with your tax savings alone. And now you’re that much closer to financial freedom. 

Can you see how even a small amount of money invested in real estate can get you to financial freedom?

Real estate investing can seem overwhelming to people. They don’t know where to start.

But, as you’ve now seen, a fortune can start with just one small purchase. The key is buying the right property at the right price and knowing how to harvest hidden value and force appreciation. And then achieve real estate professional tax status quickly.

So how can you make sure you get the right property, a property that will get you that much closer to financial freedom? 

You must become an educated investor. That involves not only gaining knowledge, but also finding yourself a mentor to help you avoid mistakes and a community of like-minded investors who will hold you to a higher standard. 

When you have these three ingredients, there’s no limit to what you can accomplish.

Ready to start? Check out Semi-Retired MD’s FREE introductory video course.

Read More about How Much Money Do I Need to Start Investing in Active Real Estate?

Welcome to another installment of Interviews with Real Female Physicians. The goal of this series is to share their story so that you, the reader, may learn and be inspired by their experiences – good and bad. We all come from different backgrounds and have different situations. Some of you are married, some are not, some with kids, some with blended families. Let’s show other women that any of these can work financially! 

Tell us about yourself:

My name is Harriet Hopf. I’m an anesthesiologist and professor at the University of Utah in Salt Lake City, UT. I have been married for 31 years to Leo, a self-employed management consultant, author, and educator who focuses on strategy and decision-making. We have one child, E McKinley, who recently graduated from Colby College in Maine with a BA in American Studies, is back home coaching volleyball and applying to graduate school, and has a passion for justice and educating their peers about sexuality and health. We love sports: we have season tickets to the Utah Jazz NBA team and U of U women’s volleyball, basketball, and gymnastics, and men’s football and lacrosse, and I served on the Athletics Advisory Council at the University of Utah for six years. When we aren’t being spectators, we love hiking, biking, and snowshoeing in the spectacular landscapes of Utah; dance; music; and travel.

I grew up in New Hampshire. I met my husband at an intramural volleyball game between the business school and the medical school. I knew he was the guy for me when I smashed the ball in his face and that inspired him to ask me out. I completed anesthesiology training at the University of California, San Francisco, including research fellowship, in 1992, and was on the faculty there for 14 years before moving to the University of Utah in 2006. 

I love my specialty, although it took me a while to figure that out. I matched in surgery but realized quickly it wasn’t right for me. After internship, I went to a surgery lab at UCSF to study oxygen and wound healing. I quickly realized that anesthesiologists hold a key to preventing surgical site infections through managing patient physiology, so I made the jump to anesthesiology residency. It was only on the first day I realized the many reasons I had made the right choice: 1) anesthesiologists monitor everything, so there’s immense opportunity to understand what is going on with a patient, as well as to see the immediate impact of interventions; 2) I love invasive procedures and was worried I would lose that in leaving surgery, but anesthesia procedures, including vascular access, peripheral nerve blocks, and neuraxial blocks, often require a much higher level of creativity (finding a vein when none is visible, or finding the epidural space by feel and loss of resistance, for example) and thus I enjoy them more; 3) patient interactions, though brief, are high stakes: I have to gain a patient’s trust when they are frightened and often overwhelmed; 4) when I’m working clinically, it is intense and requires my full focus; when I have a non-clinical day, there is virtually no chance I will get called to the operating room. I love both the intensity of practice and the ability to protect time for other pursuits (research, education, administration). For medical students considering anesthesiology, it’s good to like planning and preparation, and also making quick decisions in a crisis; in fact, much of our training is learning how to make the right decisions in a crisis. You have to be good at managing a team and leading when you are not “in charge.” The better we do our job, the less we are noticed. For some, that is uncomfortable, but I happen to enjoy the challenge.

Did you graduate with student loans?

I grew up in the one state (NH) that has neither a state medical school nor an agreement with another state medical school, so I attended the closest thing to a state school for me: Dartmouth, where tuition and fees were, of course, higher than at a state school.  My state loaned me $10,000 for my education, with no interest until I finished training, then at 7% interest. For context, HEAL loans had an interest rate of 19% at the time, so it was a great deal. I received very generous scholarships during medical school, which helped immensely, and which is why I donate to the scholarship fund every year. I was parsimonious and lived on $3000 less than they thought I should (the contribution “expected” from my parents), in an unfinished basement apartment my husband (then boyfriend) and his business school friends called the Hobbit Hole. I graduated with $130,000 in debt (1986 dollars), a combination of GSL loans at 7% (including those from college; no-interest until I finished training and I went to med school immediately after college graduation), Dartmouth’s version of HEAL loans at 12% compounded immediately, and the state loan.

How fast (or not) are you paying them off and how are you paying them off?

We paid off all our loans (my husband’s $30,000 from business school plus mine) 7 years after graduation.  As an intern, before we were married, I was paid a princely $20,000. Because this was before work hours rules (100-140 hour weeks at my program), I didn’t have time to spend money and I managed to pay $100 more than the interest each month on my HEAL loans. Leo and I were in different states at the time. When I moved to San Francisco after internship, we moved in together (and married a year later). At that point, we chose to use all of my income (which increased to $35,000 a year) and half of his to pay off loans. Our life-style got better every year, since Leo got a raise each year at his consulting job, which was better paid than residency.  Once we had paid off the loans (a year after I completed training; at that point, my faculty salary was $130,000 a year), we continued that model for a year, which enabled us to save $100,000. We used that money to fund a 14 month trip around the world, plus the down-payment on a house when we returned home. I recognize how fortunate I was to 1) go directly to medical school, 2) find a partner who also had a good income, and 3) have the option to delay having a child.

Financial aspects of kids

When did you have them?

We had our child 6 years after I finished training, 10 years after we got married, and 6 months before I submitted my promotion file. We chose to delay having kids, mostly so we could go on our big trip. We thought we would want more than one child, but the family unit just felt right, so we stopped at one.

Are you planning to fund their college expenses?

We were fortunate that Leo’s mother made yearly contributions to a 529 for her grandchildren, starting when they were born.  We also contributed. The 529 covered the first 3 years (with child expected to earn enough to cover personal expenses). We are fortunate to have the means to cover the 4^th. The kid was offered scholarships at many schools, but chose one that did not offer scholarships- we were fortunate to be in a position to allow that choice. We had a lot of discussion on this topic. My husband went to state school and paid his own way. I went to a private liberal arts college and my parents paid tuition, room, and board for me, except for the GSL loans I took out that covered about 25%; part of the funds came from their benefits as college professors. The reality now is that the ratio between what a college student can earn and what they have to pay for tuition is sadly out of whack and substantially higher than when we went to college. I’m glad our kid was able to focus on school and not finances. And I’m acutely aware of the extent of our privilege to be able to do that.

What were your childcare expenses?

We had a full-time nanny until our kid was in middle school, and then had a part-time nanny, mostly for transportation. We chose that because of my work hours (early and late), the fact that both my husband and I travel a lot, and the fact that sick kids can’t go to most day-cares. It worked well for us. We paid at the high end of going rates (privilege, again), salaried at more hours than they actually worked (which gave both flexibility and loyalty), and provided health insurance and 3 weeks of paid vacation. 

Was your child in private or public school?

Our child attended a Montessori school for kindergarten. They attended public school for 1^st-3^rd grade in CA, where we contributed ~$4000 / year to fund PE, music, and computer education because they were not covered by state funds. When we moved to Utah, they attended a private, independent school which cost ~$15,000 annually.

Financial aspects of marriage

Did you get a pre-nuptial or post-nuptial agreement?

We had a pre-nuptial agreement that stated that neither one of us had any assets and that one of us helping with the other one’s loan repayment did not constitute an agreement to continue to pay if we got divorced. It was drawn up by one of my recreation basketball teammates who was a lawyer and did it for free. We burned the agreement the day we paid off our loans, 5 years into our marriage.

Do you and your partner agree on finances?

Generally, yes. My husband has an MBA, so he has taken the lead on finance. Both of us hate debt, so it was easy to agree to our arrangement to live on half his salary to get the loans paid off.  When we moved in together, we had separate bank accounts. We calculated our monthly costs and each contributed monthly (on a sliding scale by income) to a joint account that we used to pay the bills. We continued that until we had been married about 5 years, when we both felt comfortable doing everything as a joint account.  

Early on, we agreed on a “spending limit,” the amount either one of us could spend without consulting the other. At the beginning, it was in the range of $50 and has risen over time to $500.  When my husband was in a consulting firm, he got annual bonuses. One of the best things we ever did was to contribute 5% of the bonus to an individual account (in the range of $2000 a year) for each of us. This is money we can spend however we want, without input or judgment from the other.  This prevented a lot of uncomfortable discussions about expensive camera equipment or paying for travel for family members, for example. Once he went out on his own, it was based on his income for the year.

My husband also made me contribute to 403b/401k starting as an intern, for which I am grateful. I didn’t know what they were and thought I couldn’t afford it, but he pointed out that pre-tax donations cost almost nothing and early contributions to retirement accounts have the most impact on retirement income. 

Are you the breadwinner?

We are dual breadwinners, although I have only out-earned my husband once in 31 years. On the other hand, it is my health insurance and steady income that allowed him to go out on his own 16 years ago.

Financial mistakes:

What financial mistakes have you made?

When I was a 4t^h-year medical student, Leo was appalled to learn that my car insurance deductible was only $100. He made me read “The Only Investment Guide You’ll Ever Need” by Andrew Tobias (which everyone should) and raise it to $1000. The day I did, my mother borrowed my car and was in an accident ($2700 damage, all to the car, none to her or the other driver).  The good news? The deductible change didn't go into effect until the next day.

General Finances

Who handles the finances in your relationship? Do you DIY or do you have a financial advisor?

My husband has an MBA, so he generally handles the finances, but we discuss all decisions and all assets are in a joint trust we created before our child was born. We were DIY until our finances became complicated by things like start-up investments and a child. We are mutual fund investors and don’t play the markets. We have paid cash for each of our cars, which we tend to own for a long time, including one of our current cars, which is 21 years old and has 215,000 miles on it. We just paid off our home loan, 12 years after buying the house. These habits, plus living in a cheap apartment and not buying furniture until we were 35, plus buying a house in the Bay Area in 1995 and selling it in 2006 at more than twice what we paid for it, have allowed us to not have to worry much about our finances. 

How are you saving for FI/retirement?

I have a 403(b) to which I have always contributed the maximum and a 14.2% defined contribution retirement plan through my work. I rolled my UCSF retirement accounts over into Roth IRAs, where we have put the rest of our retirement savings as well. We invest in index funds with a fairly conservative allocation which we re-evaluate annually but change very little. We have a house with no mortgage. We have enough to retire when we want to. 

Do you have insurance?

We both have long term disability insurance, and mine is specific for my specialty. We both have life insurance, a large amount of term that expires a few years after we retire and a modest amount of whole. We also have long-term care insurance. We just reassessed all of our insurance and created a new will after E turned in January. 

Have you had to use (long term) disability insurance?

 I’m particularly grateful right now for the specialty-specific long-term insurance. I have bilateral basal thumb arthritis that became so bad in July I had to step out of my clinical practice. I had a tendon transfer and MCP release on my left thumb in August and I’m scheduled to have the right thumb surgery in February. Thus, I’m on what is likely to be a year-long hiatus from clinical practice. Although I can continue to work full time as a professor, most of my salary comes from clinical practice. Our finances are such that we’d be okay with only my base salary, but it’s nice to have at least a percentage of my clinical salary as well.

If you are FI or “retired” – what are you doing?

I’d call us FI. We spent very little early on and paid off our school loans quickly. Once they were paid off, and given we had two good incomes, we were able to spend more freely and focus on retirement funding. We just assessed our total assets as we re-did our will, and the retirement funds are much larger than we had realized. I hit 59 ½ years old on Thanksgiving day, so we can now access our retirement accounts if we need to. We continue to work because we both have jobs we love. It’s nice to know we can retire when we want to, though. And it’s fun to consider what the next chapter will look like, even though it is a few years off.

Do you give to charity?

I give to a number of charities annually, as does my husband, and we make some donations jointly. For my undergraduate college, I give to the general fund and to the basketball program, in gratitude for the impact they had on my life.  I give to the scholarship fund for my medical school, to pay it forward. I donate to the Executive Leadership in Academic Medicine program at Drexel University to support leadership education for women in the health sciences, in gratitude for the impact the program has had in my life. I donate to the Foundation for Anesthesia Education and Research because of the important contributions they make to developing future clinician-scientists and advancing my field. I donate to several environmental and civil rights groups. We provide support to two local, innovative dance companies, the Utah Symphony, and the University of Utah College of Fine Arts, because of the importance of the arts in society.  We donate to the University of Utah general fund, specific initiatives, and in support of women’s athletics generally and the volleyball team specifically.

Any parting words of wisdom?

Choose your life partner (if any) wisely. In particular, make sure they are enthusiastic about your success and are willing to be equal partners. If possible, try to find someone who is not in medicine. Your conversations will be more interesting and they will stretch you to see and experience the world in different ways. My strategy and decision-making guru has been a remarkable peer mentor, even though my personal style of decision-making runs to the intuitive.

Tell readers a fun/random fact about you:

I played 3 sports in college: basketball, softball, and track. I was a walk-on in all three sports (different era!). I was a starter in basketball as a junior/senior, in softball as a senior, and set the high jump record in my first year.

And finally, where can people connect with you?

Twitter: @HarrietHopfMD 

Read More about Interview with Real Women Physicians – Harriet

As a working mom, you’re looking to build wealth for yourself and for your family. You’ve likely heard over and over again that real estate is one of the most effective ways to do that. However, if you’re anything like I was, you are probably unsure where to start. Understanding how real estate debt funds work can help you determine if passive real estate investing is right for you. If it is, we’ll even guide you to resources to get started with real estate debt funds. 

The Basics of Real Estate Debt Funds

If you’re new to the concept of real estate investing, there’s a good chance you haven’t yet heard of debt funds. A good way to think of debt funds is to think of them as the bonds of the real estate world, whereas buying property is akin to purchasing stocks. The comparison holds, but it is also worth noting that debt funds won’t be as predictable as government bonds. 

After the 2008 crash, real estate debt funds started to increase in popularity. While the number of people involved in funds is growing, it is still a niche part of real estate investing. 

A debt fund typically aims to connect a borrower, who is usually a project developer, with access to short-term capital. They use this funding for large-scale projects, such as shopping malls and apartment complexes. Periodic payments are made to investors from interest and security charged against the loan and the assets respectively. 

Things to Note About Debt Funds

Building wealth isn’t simply about growing income. Understanding how money is taxed is an important pillar of growing wealth. As such, it is necessary to know how debt funds are taxed. If you generate income through a debt fund payout, it will be taxed like ordinary income.

Building wealth isn’t simply about growing income. Share on X

To shelter that income, you need to open a self-directed IRA, or SDIRA. You need a special self-directed custodian or provider to fund an SDIRA. When choosing a provider, it is important to research the different costs you may incur and how much support you’ll receive from the provider. Check out all the details of self-directed IRAs here. 

How I Got Started in Real Estate

Originally, I brushed off the idea of real estate investing. It seemed like it would be complicated and require more time than I wanted to expend. Instead, I chose to laser focus on paying down my loans. Eventually, though, I realized that real estate investing doesn’t have to be overly complex. Plus, it can certainly be passive. 

When I decided to grow my wealth with real estate, I used real estate syndications to get started. Real estate syndications are powerful investments that can help you build wealth. Let’s take a deeper dive into syndications to see how they might fit into your investment portfolio. 

What Are Real Estate Syndications?

Often times, people are turned off to the idea of investing simply because of the terminology involved. That makes sense. When it sounds like someone is speaking a foreign language, of course, your confidence might start to wane. To understand how real estate syndications work, let’s start by breaking down several key terms:

Syndicate

When a group of investors pool their money, a syndicate is formed. This syndicate uses the pool of money to purchase real estate. Since the money is pulled from multiple people or groups, real estate can be purchased on a much larger scale compared to what an individual investor could likely purchase. 

Commercial Real Estate

Syndicates often purchase commercial real estate. Rather than buying residential real estate, such as a single-family home, commercial real estate is a much larger investment, not just in terms of the price tag but actual size as well. Common commercial real estate syndications might involve senior living facilities, self-storage buildings, and high-rise apartment complexes. 

Sponsor

The sponsor is also sometimes called a syndicator. This person or group is responsible for identifying the real estate project and setting up the purchase. They are involved in locating the property and finding investors to support their purchase. In an equity syndication, the sponsors generally put forth up to 20% of the equity. 

Investor

If hearing the word investor makes you think of someone who is glued to a stock ticker, rest assured that is not the only type of investor in the finance world. In syndications, investors are passive investors. That means that the investors contribute the funds, but the active work related to the real estate project is handled by the project sponsor. Remember that in order for it to be a syndication, there is a group, or pool, of investors backing the project. 

A Closer Look at Real Estate Syndications

In short, a real estate syndication is a deal between a group of investors and a sponsor that allows a group of investors to purchase a real estate project that they wouldn’t have access to on their own. Because it is a type of passive real estate, investors don’t have to worry about having the time or experience that is required in active real estate investing. 

Until 2012, real estate syndications were not talked about much. Why? Public advertising was actually prohibited until the JOBS Act of 2012 relaxed some of the rules around syndications. One of the most important criteria that still stands is that syndication investors must be accredited. 

To be an accredited investor, you will need to make at least $200,000 a year as an individual or $300,000 as a married couple. You also need to have earned this level of income within the last two years. Another way to have accredited investor status is to have at least $1 million in net worth outside of your primary residence. 

Most syndications require between $25,000 and $100,000 to start investing, However, some may allow you to buy in with $10,000. In addition to having the money to buy into the syndication, you will also be asked about accredited investor status. 

What Are Equity Syndications?

When you invest in an equity syndication, you aren’t just a lender; you become an owner as well. That is because investors in equity syndications are granted partial ownership of the project. That means that you are not only entitled to a return on your loan, but you can also receive a portion of the profit when the real estate project is resold or refinanced. It is worth noting that equity projects tend to take longer to complete. A ballpark range of at least 2-3 years should be helpful when determining if this type of investment is right for you. 

What Are Debt Syndications?

Debt syndications will have you harkening back to your Monopoly days because you and your fellow investors become the bank. Approved borrowers can access your pool of funds to complete their real estate projects. Throughout the length of the project–usually 18 months or less–each investor receives monthly dividend checks for pre-determined amounts as the borrower repays the loan. Unlike equity syndications, investors in debt syndications do not have any ownership rights. However, your investment is protected in that you have the right to foreclose should the borrower default on their repayments. 

What Are The Big Differences Between Equity and Debt Syndication?

One of the biggest differences between equity and debt syndications is how they make money. Both syndicates earn money on the loan interest and the fees. However, only equity syndicates earn money when the property is (re)sold or refinanced. 

Another major difference between the two types of syndication is in regards to ownership. In an equity syndicate, each member possesses partial ownership. That means that they have both shared ownership and shared liability. On the other hand, members of a debt syndicate do not actually have any ownership, so they have no liability risk either. 

Returns are a third distinguishing factor between equity and debt syndication types. In order to receive final returns on an equity syndicate, the project has to increase in value, whereas debt syndicates are entitled to the return regardless. 

Getting Started with Debt Funds & Syndications

The idea of getting started with real estate can be daunting. It’s important to remember that real estate isn’t always about rolling up your sleeves to flip properties or being on-call around the clock as a landlord. Passive real estate opportunities, such as syndications, exist, and they can be great tools to generate wealth even while you sleep. 

If you’re ready to take the next step passive real estate investing, check out Dr. Peter Kim’s Passive Real Estate Academy. In this 4 week online course he will teach you everything you need to know to vet and analyze a syndication deal so you can be confident investing in it. It only runs a few times a year. As a special bonus to my readers, if you purchase through me, you will receive some timely bonuses. I announce them as the course date approaches, so stay tuned!

Disclaimer: Please note that some of the links below are affiliate links. This means that I may receive a commission if you purchase through one of my links. I highly recommend all of the products & services because they are companies that I have found to be helpful and trustworthy. I use many of these products & services myself.

Read More about Exploring Real Estate Debt Funds and Syndications