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Need Advice: Helping Mom with Housing, and Other Questions

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  • Need Advice: Helping Mom with Housing, and Other Questions

    I have recently started following WCI and have been binging on the podcast. Like a lot of people here, I have made some dumb financial decisions, and I'm ready to turn it around. I know I could benefit from some sound advice. My wife and I are at a big decision point, and we don't want to screw it up!

    Background:

    I am a 30-y.o. physician, and my wife is a 28-y.o. accountant. We don’t have kids yet. I have completed a family medicine internship and have been practicing as a GP in the military for 3.5 years, in order to pay off my military scholarship. Next summer, I’ll be exiting the military and then finishing a family medicine residency (2 years remaining) in the civilian sector. Since my residency contract is a little unique, it includes 3 additional years as an attending after residency (long story). So we’ll be in that location for at least 5 -6 years. My residency program is in my hometown, where my mother still lives.

    Finances:
    • Combined income during residency: $110,000/yr
    • Savings/Checking Balance: $40,000
    • Roth TSP: $10,000
    • Student loan debt (undergrad): $84,000
      • Already refinanced at 6.38%, and acknowledge this was stupid, should have done PSLF. Will refinance when residency starts.
    • Car loan: $29,000
    • No mortgage (we rent an apartment)
    • No credit card debt (anymore!)
    • Wife has no car loan, no student loans
    The Situation:

    My mother (age 57) has been single for almost 30 years and makes a relatively low income. She is renting a very old house that is falling apart, for $650/mo. Believe it or not, it has 3 bedrooms, 1.5 baths, and a garage, on a half-acre. She is “stuck” there, unable to find better housing for that price, and has no ability or interest in ever buying a home. We fear that eventually, the owner will want to sell or renovate the home, increasing the rent drastically, and she will no longer be able to afford it.

    Plan:
    1. Use the bulk of our discretionary income to pay off remaining student loans.
    2. After residency, my wife will probably stop working, and become a stay-at-home mother.
    3. One of our top financial/life goals is to obtain more secure housing for Mom.
      1. The way we’re thinking of doing that is to purchase a modest home ($175-200k) next summer to live in during our 5-year stint in that area. Then, we’d like to rent it out to my mother indefinitely, for an amount she can afford. This will allow her to be in a nicer, more comfortable place, with the security of knowing her rent won’t increase and the owners won’t sell it. This will also ensure that rather than blowing thousands of dollars on renting a place for the next 5+ years, we’re investing our money into something.
    4. We also want to purchase a home for ourselves, probably in the $400k range, just under the “2x your gross income” rule. The ~$400k home for us wouldn’t happen until 6-7 years down the road, when I’m long out of residency, my mom is renting the other place, etc.
    5. Other goals: save $200k for college tuition, retire around age 60 with $3.5M-ish.
    Problems/Questions:
    • I’ve been reading about the pros/cons to renting a house out to a parent.
    • I understand that if I rent it to her for less than a fair market price, I will not be able to receive the tax advantages of renting out a home.
    • I understand that buying a second home likely means a higher interest rate on that second mortgage.
    • What type of home loans should I be considering for the $200k rental home, and the $400k personal home? VA loan, physician’s loan, conventional or FHA loan?
    • Do you think that once we have the $200k home, we will have a difficult time qualifying for the second $400k home, on solely a family physician’s income?
    • Is there a smarter way to assist my mother with a secure housing plan (besides having her move in with us)?
    • With $84k of student loans, and $40k in the bank (saved for down payment on a house), should we actually just put all our savings on the student loans, and take out a mortgage with 0% down?
    • Any additional advice or alternative methods of accomplishing our goals?
    Thank you very much in advance!
    Last edited by Peds; 12-14-2019, 04:46 PM.

  • #2
    welcome.

    Originally posted by TurningPoint2019 View Post
    [*]Student loan debt (undergrad): $84,000[*]Refinanced at 6.38%.
    would work on re-financing again. hopefully can get a better rate.

    Originally posted by TurningPoint2019 View Post
    [*]Car loan: $29,000
    you cant afford a car loan like that.
    get rid of it, buy something for 5-10K cash.

    Originally posted by TurningPoint2019 View Post
    The way we’re thinking of doing that is to purchase a modest home ($175-200k) next summer to live in during our 5-year stint in that area.[*]We also want to purchase a home for ourselves, probably in the $400k range, just under the “2x your gross income” rule.
    well the 2x rule includes all mortgages....

    basically you can do some of your list, but not all of your list.
    on 110K income you should shoot for ~20K retirement. Either all rTSP, or rIRA as well.
    keep some efund, up to you how much. the rest can be spent on fixing the car situation as well as the loans.

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    • #3
      You got a lot of ifs in your plan that have to work out but I don't see anything too worrisome. Make sure your wife is on board with helping support your mother. It can sometimes breed resentment.
      I I do not think you made a mistake with her financing you have less than 1x salary in loans. Just keep on working towards paying those off. Plan to have them gone within two to five years of finishing your training.

      Contribute 20% of your salary towards your retirement. If you can do this then the rest of the money is yours to spend on how you see fit.

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