Menu

Horror Stories From People Who Bought a House in Residency

Home Mortgages and Home Buying Horror Stories From People Who Bought a House in Residency

  • The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 3820
    Joined: 05/13/2011

    I generally recommend against residents buying a house, or at least considering renting as the default option. I figure in a 3 year residency you have about a 1/3 chance of coming out ahead and maybe 1/2 chance for a 5 year residency. But I keep hearing horror stories from people who bought a house in residency. That made sense at first when the blog was young and 2006-2010 real estate crash was fresh, but I’m still hearing them. So I thought I’d start collecting them like I do the inappropriate whole life insurance policies I keep hearing about. Feel free to contribute your story.

    Here’s the first:

    The same thing almost happened to me in 2010. Had a buyer for my short-sale house and I was going to make up the difference with a signature loan….so the bank would actually get the FULL payoff price of the home. They almost said no simply because the lackys working in the mortgage department kept forgetting to mention that there was a signature loan and “corporate” didn’t want to consider short-sales unless they were 6+ months in arrears (we were only one, intentionally, since they wouldn’t talk to us at ALL about a short-sale unless we were behind. I needed the house sold NOW because I was coming out of residency and my salary couldn’t cover a mortgage, rent on the other side, plus my now-in-repayment student loans). It took lawyers to get them to listen and we got out from under the house by continuing to pay an $80K difference…for the next 5 years. Oh…and Hurricane Irene hit the house 5 weeks before it sold & did $20K in damage (raising our insurance rates to $3500/yr for the next 5 years….sigh. Sometimes truth is worse than fiction).

     

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #169980 Reply
     angeladiaz99 
    Participant
    Status: Physician
    Posts: 38
    Joined: 09/30/2018

    I think you can even extend this to young attendings.

    My sister was a recent graduate, about to complete her 1st year as an attending. From what she was telling me in terms of patient volume, I could tell her department could not support two physicians no matter how understanding and supportive the department head was.

    She was still set on buying instead of renting. She did not want to listen.

    She overextended herself and had to borrow from family to get the 20% down (warning sign #1 you can’t afford the home)

    No exaggeration, she got laid off 48 hours after she closed on the property. Fortunately this was in a hot real estate market and she was able to turn around sell the house for a $50,000 loss which in the end, is a small price to pay for learning a valuable lesson.

    Don’t buy until you are certain you’ll be there at least 5+ years.

    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 4986
    Joined: 01/12/2016

    I bought in 2006 so terrible time as is pretty much my style I’ve learned. Six year residency, house was super cheap but in an area where they just built more, my six year old house was no longer cool. Did a year long fellowship, it was on the market last six months of residency and all fellowship. Finally sold at a loss of around 10k at closing by November my first year as an attending.

    I think the odds of coming out ahead in 5 years with real costs included is still below 50%, maybe much lower.

    #169991 Reply
    Liked by jz, Tim
     climbhigh 
    Participant
    Status: Physician
    Posts: 38
    Joined: 02/22/2016

    Well, I have quite the opposite of “horror” stories. I just finished a 5 year residency this past summer. We bought a house in 2013 for $180,000 and sold it this year for $225,000. Never had to list the house on the market, sold by word of mouth. I had spent nearly $10k for some repairs/new roof prior to selling, and over the course of the 5 years had done another few thousand in upgrades. So I figure that I made a net gain of $30,000+. All of my co-residents who bought houses made similar gains, one of which sold his house for about $100,000 over what he bought it for.

    #169995 Reply
     SLC OB 
    Participant
    Status: Physician
    Posts: 181
    Joined: 06/23/2018

    Well, I have quite the opposite of “horror” stories. I just finished a 5 year residency this past summer. We bought a house in 2013 for $180,000 and sold it this year for $225,000. Never had to list the house on the market, sold by word of mouth. I had spent nearly $10k for some repairs/new roof prior to selling, and over the course of the 5 years had done another few thousand in upgrades. So I figure that I made a net gain of $30,000+. All of my co-residents who bought houses made similar gains, one of which sold his house for about $100,000 over what he bought it for.

    Click to expand…

    I think it just depends on when you got in the market, as with anything.
    I did the same, bought in 2000 for $86K (mortgage was only about $450, those were the days!) and sold in 2003 for $125K (had put $16K down).

    We were lucky though…

    Did the same thing with our current house and our rental house (was our house out of residency for almost 10 years)… but we got lucky… has been a great investment for us but can be bad.

    #169998 Reply
     Dont_know_mind 
    Participant
    Status: Physician
    Posts: 644
    Joined: 11/21/2017

    I guess it is like stocks. Holding period must be more than 5 years or when it goes up.

    If you sell it when it hasn’t gone up, you will make a loss.

    Depending on the market, housing can have periods of 5-10 years (or longer) where it plateaus and goes nowhere (or even down). If you buy and sell at those times without value adding, you may well make a loss after transactional costs.

    I only sell if it has gone up a bit (or a lot). I haven’t made a loss yet on property sales yet. Wish I was as lucky with stocks.

    Housing can be very profitable due to leverage. Losses can also be greater due to this.

    Buy and then sell higher, it’s easy ! (except when it isn’t)

    It’s probably not as hard or as easy as people say.

    I wonder where all these people who sold at a loss would be if they held 20 years later ? If they would still be at a loss and it is a semi-livable area, I would be interested in that market. Demographics, population growth, infrastructure, income growth of the residents and valuation compression are important factors I think.

    #170017 Reply
    Liked by hatton1
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 3820
    Joined: 05/13/2011

    Well, I have quite the opposite of “horror” stories. I just finished a 5 year residency this past summer. We bought a house in 2013 for $180,000 and sold it this year for $225,000. Never had to list the house on the market, sold by word of mouth. I had spent nearly $10k for some repairs/new roof prior to selling, and over the course of the 5 years had done another few thousand in upgrades. So I figure that I made a net gain of $30,000+. All of my co-residents who bought houses made similar gains, one of which sold his house for about $100,000 over what he bought it for.

    Click to expand…

    Yup. Residents in my residency had a similar experience from 2003-2006, but that’s not what this thread is for!

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #170021 Reply
    Liked by MPMD, Peds
    SerrateAndDominate SerrateAndDominate 
    Participant
    Status: Physician
    Posts: 252
    Joined: 02/01/2018

    I was a moron and bought a house in 2014 before starting a 4 year residency. Plan was to stick around another 1-2 years for some path fellowships. That didn’t work out, although fellowship wise it worked out way better.

    Had a roommate the first year but didn’t use those funds as efficiently as I should have. Last year of residency, got married. Tried to sell the house after third year of training and minimize any losses. Offers fell through after some buyers wanting way too many things done. One guy wanted easily $20k worth of work (everything on the inspection) for his princess’ first house. Two other offers fell through up to last fall. We found a very good handyman and knocked out most of the inspection stuff very cheaply.

    However, we probably lost $7k after repairs and the sale. I got lucky and saved some money by bringing my own buyer to the agent.

    Since then, I’ve vowed to do a FSBOand not do a doctor’s loans. My stupid tax could have been worse.

    Earn everything.

    #170026 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 2197
    Joined: 01/14/2017

    5 years of residency don’t make up for buying at a bad time. Only thing that has made the decision more palatable has been holding it and finding renters to pay it off. Had I sold the place I would have had recouped part of my down payment and lost money. Now I’m in a position where I’ve doubled the amount I’d get back by waiting and having someone else pay it off. However, if I could have done it all over again I’d slap my 26 year old self in the face and tell that idiot to rent.

    hatton1 hatton1 
    Participant
    Status: Physician
    Posts: 2737
    Joined: 01/11/2016

    Most of the time making money on your primary residence involves things beyond your control.  You cannot control population growth or unemployment rates or zoning changes or road repairs but all of these effect your ability to sell a house.  I view a house as a consumption item and not an investment.

     Generic Logic 
    Participant
    Status: Physician
    Posts: 5
    Joined: 11/25/2018

    If you’re losing that much due to market factors, doesn’t that mean your larger and more expensive house as an attending is also cheaper?

    I’ll gladly take a 50k loss if it means I can get that doctor house 150k off

    #170035 Reply
    Liked by Craigy
     Kamban 
    Participant
    Status: Physician
    Posts: 1808
    Joined: 08/01/2016

    If you’re losing that much due to market factors, doesn’t that mean your larger and more expensive house as an attending is also cheaper?

    I’ll gladly take a 50k loss if it means I can get that doctor house 150k off

    Click to expand…

    Unfortunately residency and attending are usually not in the same location so a $50K loss would not translate to a $150K windfall on a new house. Most issues are local or a geographic region unless there is a great nationwide recession.

    #170059 Reply
     Gamma Knives 
    Participant
    Status: Physician
    Posts: 101
    Joined: 06/25/2017

    If you’re losing that much due to market factors, doesn’t that mean your larger and more expensive house as an attending is also cheaper?

    I’ll gladly take a 50k loss if it means I can get that doctor house 150k off

    Click to expand…

    That’s also assuming you are buying your attending house right as you complete residency. This also may be difficult to do if you have lost so much equity that you have to bring money to closing. The ideal would be that you were renting so you don’t take the loss.

    #170070 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 2197
    Joined: 01/14/2017

    Seems like a good thread to post this spreadsheet again.  Beware the home purchase in residency.  Even if the numbers spit out a buy decision it’s important to realize the pain of the transactions (decreased utility) as well as the variation with changes to your assumptions (safety).

    Attachments:
    You must be logged in to view attached files.
    #170071 Reply
    Liked by Tim
     ticker 
    Participant
    Status: Physician
    Posts: 142
    Joined: 08/14/2016

    I was feeling foolish in residency as the local real estate market went on a tear and I was renting.  Then, one day my poor junior resident went home to find a pipe had burst in his condo and flooded a bunch of it… and the condo next to him… and the one below him… and those neighbors weren’t happy and wanted compensation… and he was on 2 weeks of nights… and insurance people want to work with you during business hours… and he had to coordinate to have the repair people let in while he was still at the hospital each morning… and he had to sleep/shower at the hospital for a week because of course the repair people wanted to work during the day when he needed to sleep.

    I trust he made out fine in the end.  But, I was very glad not to be responsible for my dwelling after that.  When my pipe burst, I called the maintenance guy.  He was there in 20 minutes.  I left the apartment.  He dealt with the neighbors.  Total bill: $0.

     

    #170079 Reply

Reply To: Horror Stories From People Who Bought a House in Residency

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

you're currently offline

Notifications Mark all as read  |  Clear