Are you a practicing dentist that’s ready for a vacation home? It can be tough to know when this big purchase makes sense.
Here are a few things that indicate it might be the right time.
Recruiting, training and keeping quality team members can sometimes be a hassle for dentists. If your office door seems like it's revolving, you're not alone. The dental industry can be stressful and it's not the right career for everyone.
Work towards creating a team that can work efficiently in your absence. This may sound counter-intuitive since it's your practice, but to be able to enjoy your vacation home, you'll need to leave the office from time to time. Wait to purchase a vacation home until you're confident that you've built a winning dental team that is committed to the longevity and success of your practice.
If you're a new dental practice owner, you may want to give it some time before plunging ahead with a second home. However, if your practice is well-established, has a growing patient base, and is thriving financially, a vacation home could reasonably be on the table.
Work with your accountant or chief financial officer (CFO) to determine where your practice is financially. If you don't have the revenue to move forward with a vacation home yet, consider where you need to be and start setting concrete goals to help you get there.
Many dental students graduate with a significant amount of debt in the form of student loans. If you've started your own practice, you likely had to take out business loans to purchase your office building, dental equipment and technology, supplies and other critical necessities.
If you still owe on your student or business loans, you may want to pay those down before investing in a vacation home. Purchasing a vacation home should be within the context of an overall financial plan. Debt repayment and retirement funding should not be compromised for the purpose of purchasing a vacation home.
If you have enough income and other cash to cover both your loans and a vacation home, consider the snowball strategy for reducing your loan debt. First, make minimum payments on all loans except the one with the smallest balance. Second, pay more than the minimum payment on that loan until it is paid off. Repeat these steps until all loans are paid off. By paying off one loan at a time, you resolve them more quickly and pay less interest than if you just made minimum payments.
Then, when your loans are satisfied, you'll have more cash available to put towards your vacation home.
Never buy a home — vacation or otherwise — unless you have the means to cover the down payment. You can acquire more affordable monthly payments by making a down payment on the house. You can expect that the down payment may be up to 20% of the purchase price of the home.
This helps keep the monthly mortgage payments low and affordable, even if you happen upon harder times financially.
If you have the means to cover the down payment without putting yourself or your dental practice into financial distress, it may be a good time to give more serious thought to a vacation home.
If you can’t pay for a second home with cash, you’ll need a mortgage. If you have the means to make on-time payments on your vacation home mortgage along with the mortgage for your primary home, it shouldn't be too much of an issue.
However, if you find yourself looking at more than one loan to be able to purchase second home, your vacation home just became a major liability to your future. It might not be time to invest in a vacation home just yet.
If you have to wait until your current home is paid off — or until your practice generates more revenue — it’s better to wait than to purchase early with uncertain funds.
Before you take the plunge and purchase a vacation home, think about more than the initial purchase price.
Do you have money set aside for repairs, especially if the home needs some fixing up first? Is your practice generating enough revenue that you'll feasibly be able to keep up with the maintenance on your primary home as well as your new vacation home?
Be as prepared for problems to pop up with your vacation home as you are for your primary residence. If a major repair is needed, such as the water heater or HVAC system, at the same time you're dealing with an issue in your primary home, you'll need to have the resources to address both.
At Treloar & Heisel, we're committed to providing support, resources, and quality insurance coverage to dental professionals. To learn more about how we can help you to try to grow your patient list, protect your practice, and pursue your goals, contact us today.
TH-200084