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How much house?

Home Mortgages and Home Buying How much house?

  • Avatar Blessed 
    Participant
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    Joined: 07/26/2019

    First time poster with a question on home buying.

    I am in residency with one year left, starting to look at housing for next year. Will be paid as a percentage of production but am told it is reasonable to expect income of ~$250K to start, with the expectation for significant growth over the first five years.

    I am married with kids, and we are extremely fortunate. We have zero debt, and have net worth of ~1M in assets through a family trust. We want to move to an expensive area and will commit to staying for at least 10 years.

    I know the off hand rule is not to spend more than 2x-3x income, but does our situation change that? The nice houses in the area are well over $500K and our income potential is much greater than $250K if all goes well

    #233688 Reply
    Vagabond MD Vagabond MD 
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    Status: Physician
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    Joined: 01/21/2016

    Rather than framing it as how large or expensive a house you can buy, you would be better served, in the long run, to think about how small and inexpensive you can tolerate.

    fatlittlepig fatlittlepig 
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    Joined: 01/26/2017

    how do these trusts things work? can you access the funds for a down payment. does your spouse work?

    #233692 Reply
    Avatar Blessed 
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    Joined: 07/26/2019

    Yes to downpayment, no to spouse

    #233695 Reply
    Avatar ZZZ 
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    Joined: 06/18/2018

    “The nice houses in the area are well over $500K”

    What does ‘well over’ mean to you. $1.5M? 650k?

    “AM told it is reasonable to expect income of ~$250K to start, with the expectation for significant growth over the first five years.”

    What does ‘significant growth’ mean? 400k. $1M.

    How certain are you the job works out? How certain are you you’ll be able to hit the production targets?

    Your numbers are too vague to get a reasonable upper limit. If you can raid your trust, just use that to buy a house. Otherwise, you may well have cash flow issues only making 250k with a big mortgage.

    Echoing vagabond, you’re asking the wrong question. What is the least you can spend to buy a house that will meet your needs and you’ll enjoy.

    #233699 Reply
    q-school q-school 
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    Joined: 05/07/2017

    i think what we are saying is, how sure are you that you can commit to ten years.

    if you go to a place with a noncompete and you really don’t like the job, what happens?  no one likes to think it, but these days docs get fired.  their practice ‘screws’ them out of partnership.  market changes and there is no real financial opportunity for you.

    real estate in HCOL is hard to evaluate for me.  i’ve never lost money even if i had to sell in one or two years in HCOL areas.  we always picked the house carefully and purchased at a good price.  you make your money on the purchase price.  however, if you buy your forever house, you may not be able to get a value.  you may be looking at 200k loss after realtor fees if you have to sell short term during a difficult time to sell.

    would you feel okay with losing 20% of the family trust?

    your budget can probably absorb the home, depending on what your final income will be.  it’s probably not the wise thing to do.  BUT that’s what money is–freedom to choose what you want, even if not smart.  and there is no guarantee this worst case scenario will play out.  the house may appreciate 10% per year also.  mine did at least that in HCOL areas.

     

     

     

    Avatar DCdoc 
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    Status: Physician
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    Joined: 06/14/2016

    I echo @zzz. You’re asking a specific question to get presumably a specific answer without procuring adequate information regarding future salary and housing costs where you live. Without specifics, you’ll never get a specific answer. The broad generalized answer is that, of course, you can afford a more expensive house than someone with the same salary, large student loans, and no assets.

    #233703 Reply
    Avatar Blessed 
    Participant
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    Joined: 07/26/2019

    The “forever houses” that we’d consider ideal are anywhere from $800 to $1.2M depending on the town/school district

    Income potential is probably $500-600K after a few years to get established

    #233705 Reply
    Avatar angeladiaz99 
    Participant
    Status: Physician
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    Joined: 09/30/2018

    I wouldn’t buy until you’ve completed at least one year at your job as an attending physician

    Avatar Kamban 
    Participant
    Status: Physician
    Posts: 2565
    Joined: 08/01/2016
    I am in residency with one year left, starting to look at housing for next year.

    Click to expand…

    This is your first job, I guess. How sure are you that you want to be employed. I guess that as a dentist, you will be an associate. Do you want to be an associate and work for someone forever. or start your own practice. If the latter, how will non compete work out and where will be your practice.

    The answer, with or without trusts, is the same as for physicians. Rent for the fist year or two and make sure that you like the place and the place likes you before you buy a house. But then it is your money to spend as you like.

    #233709 Reply
    Avatar Peds 
    Moderator
    Status: Physician
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    Joined: 01/08/2016
    The answer, with or without trusts, is the same as for physicians. Rent for the fist year or two and make sure that you like the place and the place likes you before you buy a house. But then it is your money to spend as you like.

    Click to expand…

    wonder where ive heard this before.

     

    listen OP.

    #233710 Reply
    CordMcNally CordMcNally 
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    Joined: 01/03/2017

    I would wait until you’re a year or so into your job so everything will become a little more clear.

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

    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 726
    Joined: 06/18/2018

    You’ve got $1M in a trust. You want to spend $1M on a house. Turn your trust into a house — you start your career with zero debt, own a nice house outright, and should have great cash-flow to start investing such that you can accumulate assets. Still a little risky the job won’t work out, but that’s not an unreasonable plan. I wouldn’t spend that much on a house in your situation, but you can certainly afford to do so if that’s what you choose.

    Just keep in mind that you’re going to need to furnish that million-dollar home. And pay property taxes and insurance and upkeep on a million-dollar home. And you’ll probably want to buy pricey cars like your neighbors. Keep the rest of your spending in check and you’ll be fine.

    With the benefit of such a head start, you should be able to grow your wealth such that you can pay for your kids education and hopefully set up a trust for them so they can get a head start, too.

    #233719 Reply
    Avatar SValleyMD 
    Participant
    Status: Physician
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    Joined: 05/12/2016

    I would wait a year but then would have no problem pulling trigger on a 1-1.2m house.

    #233724 Reply
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 607
    Joined: 12/02/2016

    Wait at least a year before buying a house.  You don’t know how this job situation is going to work out.  We just recently had a horrible example of this on another thread (which I can’t find now), where a young physician found the promises made to him when he signed on were in fact written on tissue paper.

    Once you’re fairly sure the job is indeed what you expected it to be, then you can go house-hunting.

    #233726 Reply

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