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How and When to Get a Home: A Spin on the Residency Question

Home Mortgages and Home Buying How and When to Get a Home: A Spin on the Residency Question

  • CordMcNally CordMcNally 
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    This is not a relevant comment.  Peds I very much appreciate your previous comments and ongoing help in the forum, but this is not one of them (Though I understand you’re making a joke). LOTS of people buy houses in fellowship. Is it a great idea? Sounds not based on the feedback above, and I very much appreciate the opinions provided. But it happens, a lot, and its important to hear the plus/minuses.

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    While straightforward, the point he makes is a good one and I don’t think @peds was joking. Everybody assumes their situation is different or unique. They’re usually in training or just moved to a new area. They don’t have the money or cash flow to truly deal with expensive foreseen or unforeseen home maintenance issues. In the back of their minds, they all think renting is ‘throwing money away’ although everyone words it a little differently. In the end, they know what the answer is going to be.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    Rogue Dad, M.D. Rogue Dad, M.D. 
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    I bought a house in fellowship. Only sort of partially realized how bad a decision it could have been. It worked out financially, but also could have been an epic disaster. I believe I already wrote about it here:

    A Doctor’s Guide to the Doctor Loan & Other Home Loans

    http://www.RogueDadMD.com

    An alt-brown look at medicine, money, faith, and family

    #214087 Reply
    EndlessSummer EndlessSummer 
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    This situation is essentially identical to the “should I buy during residency?” question.  Same pluses and minuses.

    #214089 Reply
    Liked by ENT Doc, Peds
    Avatar bullsdoc 
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    I bought a house in fellowship. Only sort of partially realized how bad a decision it could have been. It worked out financially, but also could have been an epic disaster. I believe I already wrote about it here:

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    Really nice piece, thank you for sharing

    #214108 Reply
    Avatar bullsdoc 
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    This situation is essentially identical to the “should I buy during residency?” question.  Same pluses and minuses.

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    It was and is a slightly different situation in my mind, a lot of posters provided wonderful and helpful answers, and I learned more about the topic than I had with a search of prior posts. Is that not the purpose of the forum?

    #214111 Reply
    Liked by ddswifey
    Avatar Financial Naive MD 
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    I would say “No” on buying. Now is not a good time to buy a house as an investment, especially in your situation (a few years ago, when house price was much lower, may be).   I own a few rental properties and I am looking to buy more.  You will have plenty of time in the future.  Don’t let the headache of home ownership distracts your career.

    #214117 Reply
    Avatar treesrock 
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    If you really think about it, from a financial perspective this question is the same as “should I buy in residency”.  Salary and training timeframe are the same, the only difference you mention is that other fellows seem to be buying houses in this situation, more so than during residency, which is probably true.

    You need to figure out what your reasons for wanting to buy a home are?  And why you can’t achieve those goals by renting?

    As an anecdote, I work in academics, and a few of our graduating fellows are trying to sell their houses on a limited timeframe before moving on to their attending jobs elsewhere.  It’s mayhem for them, trying to finish out their clinical work, finishing up research projects, and juggling house showings etc.  Sure, they may come out slightly ahead financially compared to renting, but it’s small peanuts in the long run and WAY more work during a time when you should be focused on the most stressful career transition that occurs.

    #214137 Reply
    Liked by hatton1, MaxPower
    MPMD MPMD 
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    Thanks for the response. As a follow-up, can I ask a question here about the relative cost of renting versus mortgage payments?  Granted as the homeowner you have a number of additional costs, but what I’ve noticed in my area and others is that rent for a decent, not even great, two bedroom apartment is as much as the monthly mortgage payment on a three bedroom house.

    And with renting you are of course not making any progress on equity.  How does this factor in? Am I missing the mark here?  Thanks again

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    Your bolded statement is something that everyone trying to justify buying a house at the wrong time notices pretty much all the time.

    Of course you’re not making progress on equity, you’re also not riding your equity into the pooper if we get another housing correction.

    If you’re upside down on a house you get to bring a check to closing.

    #214155 Reply
    MPMD MPMD 
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    As an anecdote, I work in academics, and a few of our graduating fellows are trying to sell their houses on a limited timeframe before moving on to their attending jobs elsewhere.  It’s mayhem for them, trying to finish out their clinical work, finishing up research projects, and juggling house showings etc.  Sure, they may come out slightly ahead financially compared to renting, but it’s small peanuts in the long run and WAY more work during a time when you should be focused on the most stressful career transition that occurs.

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    Bingo, ditto.

    All that money you “wasted on rent” was actually broken up into monthly payments on a sweet luxury item called “handing the landlord my keys and maybe running a sweeper.”

    #214156 Reply
    wonka31 wonka31 
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    alpha investing

    Unless you’re 120% sure you’re staying in the place you purchase said house during fellowship, the answer is no. Flexibility in renting is the wise decision.

     

    The other thing that hasn’t been mentioned is that your salary will likely significantly increase after fellowship. Your lifestyle and plan may change as well (ie kids, moving to another part of the city/town), not to mention that the place you buy today will likely not be the place you will want to buy/live in when you’re an attending. Your affordability is likely relatively low as compared to 3-4 years from now. That doesn’t mean you buy a ridiculously expensive house/condo, however you likely will buy something much different down the road. Your odds of wanting to ‘upgrade’ in 3-5 years is quite high and that’s ok do a reasonable degree. The house I live in now would have been unaffordable in residency. Now, it’s <.8 mortgage/salary ratio and thus quite affordable.

    #214172 Reply
    Liked by Tim, bullsdoc
    Avatar bullsdoc 
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    Many tremendously helpful answers.  Thank you all for your time

    #214178 Reply
    Avatar fasteddie911 
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    Just needed to comment as I saw this happen with many of my peers that did fellowship.  In residency they were ok renting thinking it’s 3yrs and they don’t know where they’ll be for fellowship.  But once they matched into fellowship they started buying houses for some reason even if it was again 3yrs and they don’t know where they’ll be as an attending.  It didn’t make sense. Only time it would is if you’re near certain you’re gonna stay as an attending or possibly if it’s a 5yr fellowship or something.

    #214214 Reply
    Liked by Peds
    Avatar Jack_Sparrow 
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    I’m a 5 year fellow, and I bought. it was a mistake. I understand the lure of buying, FOMO, want your own house, etc. but wished Id listened to elders. I did the fancy spreadsheet, factored in just about everything that you can reasonably predict. I have a background in managing rental property for my parents during college/Med School so have a general understanding. Spreadsheets showed min 30k in profits. I’ll be lucky if we break even in a year if the housing market holds.

    If you want a house, then id say go for it. There’s a lot of intangible, feeling of being a homeowner, you can put in sweat equity for improvements, decorating, gardening, maybe you hate the apartment scene, etc.  But if your decision is financially motivated (i hate throwing money away in rent) its a bad move. That 10-30k you might make in equity- make sure you understand you are going to “earn” that. When you rent you can always find a cheaper place, or upgrade to a nicer place, move closer to friends, family, etc. A house locks you in.

    #214234 Reply
    Liked by MPMD
    White.Beard.Doc White.Beard.Doc 
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    If you get a little lucky, then buying a house in fellowship can work out.  But there are so many ways it could not work out….  You decide to move and have difficulty selling.  You lose more on transaction costs than you made on the house.  The market tanks and you cannot sell at a price high enough to pay off the remaining mortgage balance, so you end up renting at a monthly loss, and you have to navigate expensive repairs long distance, and your new tenants decide to start manufacturing crystal meth in your house.

    Buying makes more sense when you know you will stay in the house a minimum of 10 years.  That would be hard to know when you are a fellow.  If you do buy, and you get lucky with the house appreciating, and the furnace, hot water heater and A/C hold up, and no flooding or burst pipes, and no need to move, then buying could be good for your financial health.  However, caution is advised as the list of if’s is very long.

    #214563 Reply
    Liked by portlandia, Hank
    CordMcNally CordMcNally 
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    But if your decision is financially motivated (i hate throwing money away in rent) its not a bad move.

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    I thought you were on to something and your post was going to end just as well as it began and then I came to this. I had such high hopes since you said you had some experience in managing rentals for your parents. Renting is not throwing money away. I’m going to repeat it because it’s that important. Renting is not throwing money away. Once people understand that, they’ll look at their situation differently and we won’t have the 50th ‘Rent vs. Buy’ thread this month*.

     

    *Repeat threads don’t really bother me as it’s a chance for everyone (including myself) to learn something.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #214573 Reply

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