I have long maintained that owning your home during residency is generally a bad financial move. With the recent increase in standard deduction, it became an even worse move. However, this little piece of advice is probably the most frequently ignored advice I give. Exhibit A, this email I received recently:
Gold Level Scholarship Sponsor
My daughter and son-in-law graduate medical school this year and for the most part they are loving what you are offering. The only point of contention is buying a house.
My SIL is insistent he can smartly buy a house and make money in three years. He falls back on paying rent is 100% throwing money away and interest is deductible. He had not thought about interest only being deductible if over the standard deduction (not likely in a residents case) and in the first 3 years, virtually all of their money is going to interest.
I wonder if you could go through the numbers of buying a “typical” resident house. You are right that it is unlikely you will break-even in less than 5 years (despite avid home buyers always pointing to the minority who do), but I think it might open some eyes when they realize their interest is most likely not deductible and they are not paying off their house in any real sense.
Yes, Residents Can Come Out Ahead Buying a House
I figure that on average, you can make money owning a house about 1/3 of the time in a 3-year residency and about 1/2 the time in a 5-year residency. It's a little bit like telling someone not to buy individual stocks. Most of the time it doesn't work out well, but occasionally it does (although more often due to luck than skill) so people can always find someone who did it. However far more frequently the person picking stocks isn't actually doing a good job of keeping track of whether she's making money or not. It's the same with buying a house. You think you made money because you sold it for more than you bought it for. But you ignored all the other costs of homeownership, particularly transaction costs.
Appreciation Matters Most but is Difficult to Predict
Another factor that leads people to make this decision incorrectly over and over again is the cyclical nature of the housing market. People see that housing skyrocketed in price over the last 3-5 years while they were stuck in med school, so they buy for residency, just in time for the downturn. 3-5 years later, the residents coming in “know” that buying a house always sucks and so they don't buy, just in time for the market to go back up and the cycle to repeat.
You see, buying a house for a 3-year residency is the wrong move, but only ON AVERAGE. In those times when the market goes up dramatically most of the purchasers come out ahead. And when the market goes down dramatically, everyone comes out behind. So if you have a working crystal ball, it's a lot easier to know what you should do.
It's actually hard for me to tell residents not to buy homes for many reasons:
- I was a resident in 2003-2006 in Arizona. We rented after getting our shirt handed to us owning from 1999-2003, but most of my co-residents bought and made out like bandits during perhaps the biggest housing boom ever.
- I have lots of advertisers that want to sell you mortgage and realtor services. My conflict of interest is to tell you to buy, not rent.
- I'm a huge fan of ownership. I think most docs eventually should buy a home, own their own practice, have equity investments like stocks and real estate, and start small businesses.
Ownership is a great path to wealth. So when I tell you don't buy a house during residency, it's because I actually care about you and have actually run the numbers. WCI forum members are FAR more adamant than I am on this topic. But if I can't talk you out of it, great! Here are my recommended physician mortgage lenders and realtor service.
If you still can be talked out of it, don't forget my
10 Reasons Why Residents Shouldn't Buy a House
first published 6 years ago.
- You don't have a down payment
- You don't have any income
- You have a ton of debt already*
- Residency is only 3-5 years long
- You can rent a house
New homeowners underestimate the costs of ownership- You won't want to live in that house as an attending
- Home maintenance costs either time or money
- Residents don't get a tax break for owning a home*
- Budgeting is easier as a renter
Two of those factors (the starred ones) have only gotten worse in the last 6 years and the rest are unchanged. None have gotten better. But let's run the numbers to see if maybe that will help someone like the emailer's kids.
You don't have to think about this topic for very long to realize that just because a mortgage is less than a rent payment for a similar place doesn't make buying the right move. Nor does selling the house for more than you paid for it mean you made money. Nor is renting “throwing money away.” If that is as deep as your thought process has gone about buying a house, you have no business buying one at all. There is just a lot more that goes into it than that. Yet those are the three rationalizations most frequently cited by those who are really buying a house to meet some strange emotional, burning desire to demonstrate they've achieved the American Dream.
Running the Numbers
Let's assume, just for ease of calculations, that rent goes up at a steady 3% a year, that you have no money to put down, that your favored mortgage is a 30 year fixed mortgage at 5%, that houses appreciate at a steady 3% per year, that you spend 1.5% of the value of a house on maintenance each year, that your round trip transaction costs on buying and selling a house will be 15%, and that you will sell the house after residency.
I picked a random 3 bedroom house in my residency town. It costs $335K and rents for $2,000 per month. Same same. Apples to Apples. Don't be an idiot and compare buying a four-bedroom house to renting a 1 bedroom apartment.
Platinum Level Scholarship Sponsor
Now let's run the numbers for a 3-year residency.
The 3-Year Renter
This doc pays $2,000 for the first twelve months, then $2,060 for twelve months, then $2,122 for twelve months. Total housing cost for three years = $74,184.
The 3-Year Buyer
This doc borrows all $335K at 5% on a 30 year fixed mortgage. Adding in $2,000 per year in property taxes and $600 a year in insurance above and beyond what renter's insurance would cost leaves a mortgage payment of $2,032.69. We'll round it to $2,030 just for ease of calculation. So over 3 years, this doc pays $73,080 in mortgage payments. Not much of those payments go toward principal. With the first payment, it's about $402.53. With the last payment, $465.58 goes toward principal. Overall, in three years $15,599.23 goes toward principal. Meanwhile, the house appreciates at 3% per year. After three years, it is worth $366,000. Maintenance costs are 1.5% * 335,000 * 3 years = $15,075. Transaction costs are 5% * $335,000 + 10% * $366,000 = $53,350. Now add it all up.
Positives:
- Principal Paydown $15,599.23
- Appreciation: $31,000
- Total positives: $46,599.23
Negatives
- Mortgage payments: $73,080
- Transaction costs: $53,350
- Maintenance costs: $15,075
- Total negatives: $141,505
Grand Total: $46,599 – $141,505 = – $94,906
Yes, you lost $94,906 buying that house. This isn't a money-making activity. The question that matters, however, isn't whether you made money or not. You exchanged $94,906 for housing. The question is whether you could have exchanged less money for housing by renting.
In this 3 year scenario, the renter paid $74,184 for housing and the buyer pays $94,906 for housing over those three years, a difference of $20,770 ($6,923 per year or $577 per month.) Clearly, buying was the wrong move unless your numbers are significantly different than the assumptions here. For instance, if the house appreciates 8%/year, then the buyer would come out ahead by more than $60K! Of course, if the house went down in value at 8% a year, the buyer would come out behind by over $84K!
Let's look at it over a 5-year residency to see how that extra time in the house changes things.
The 5-Year Renter
This doc pays $2,000 for the first twelve months, then $2,060 for twelve months, then $2,122 for twelve months, then $2,185 for twelve months, and finally $2,251 for twelve months. Total housing cost for five years = $127,416
The 5-Year Buyer
Let's use those same $2,030 mortgage payments. Yes, I know I'm not indexing the insurance, property taxes, and maintenance costs to inflation, but remember that makes buying look better than it will actually be and it's a pretty minor effect anyway. Over 5 years, $2,030 a month adds up to $121,800. In those 5 years, $27,400 goes to principal. At 3% a year, the house increases in value to $388,000. Maintenance costs are 1.5% * 335,000 * 5 years = $25,125. Transaction costs are 5% * $335,000 + 10% * $388,000 = $55,550. Add it all up.
Positives:
- Principal Paydown $27,400
- Appreciation: $53,000
- Total positives: $80,400
Gold Level Scholarship Sponsor
Negatives
- Mortgage payments: $121,800
- Transaction costs: $55,550
- Maintenance costs: $25,125
- Total negatives: $202,475
Grand Total: $120,400 – $202,475 = – $122,075
So the renter pays $127,416 for housing and the buyer pays $122,075 for housing over those five years, a difference of $5,341 ($1,068 per year or $89 per month.) Basically a wash. No guarantee you'll break even, but at five years the likelihood that you come out ahead is about the same as the likelihood that you will come out behind. Of course, this all ignores the hassles of homeownership, which are not insignificant especially for a busy resident.
But What About The Tax Benefits?
You'll notice I didn't include anything about the tax benefits of homeownership. In my opinion, these are dramatically oversold. Even if you can deduct your mortgage interest and property taxes, that's just like lowering your interest rate a little bit.
But with the new, lower tax brackets and higher standard deductible, many residents won't be deducting much of their mortgage interest or property taxes anyway. What tax bracket is a single resident making $60K in? Maybe barely into the 22% bracket and possibly still in the 12% bracket. A married resident with a stay at home spouse? 12%. Two married residents? Maybe barely into the 24% bracket. The SALT tax deduction may make the property taxes completely non-deductible for some two resident couples in high tax states and could limit it for others.
Even in our example above with a $335K house, that first year you're only paying $16K in interest and $2,000 in property taxes. Unless you're giving a bunch of money to charity or paying a bunch of money in state taxes, a single doc would only get a $6K deduction ($6K*22%= $1,320 off her taxes) above and beyond the standard deduction and a married couple wouldn't get a deduction at all since $18K < $24K.
Run the numbers for your situation and you can add those tax benefits into the equation. But saving $1-2K a year on taxes isn't going to make up for huge transaction costs and poor appreciation. Those factors simply swamp the tax bennies for a resident, if they exist at all. And remember we're talking about a $335K house here with a $335K mortgage. That's not exactly a cheap house. On a $60K income, those $2,030 mortgage payments are eating up 41% of your gross income. If you buy a more sensible place like $100-200K, the chances of you itemizing go way down.
What If I Don't Sell After Residency?
Don't kid yourself. Almost every doc sells the house after residency and those who don't wish they had. Sometimes, if the market is down you can't find anyone to buy it. Or you're so far underwater that you can't bring the cash to the table required to sell it. Maybe you think you'll rent it. You probably can, but there's a decent chance it'll turn into a long-distance landlord situation, which sucks, and even if it doesn't turn into that, it probably won't be a great rental because you didn't buy it as a rental in the first place.
We tend to overpay for homes we want to live in compared to what a savvy real estate investor would pay. You think you'll keep living in it? Fat chance. While I'd love for you to live like a resident for a solid 5 years afterward, the truth is that very few attendings are happy living in resident accommodations for long after residency.
Platinum Level Scholarship Sponsor
So, if the emailer's kids read this post (and I emailed it to him to share with them months ago) I hope they'll think long and hard about their decision, run the numbers, and go into their home buying experience with their eyes wide open. While I have long since given up on trying to talk residents into renting due to the strange, illogical burning desire to acquire a mortgage found among graduating medical students and especially their spouses, I would hope that they would at least consider renting. It really should be the default option for residents.
What do you think? Do you think the average resident should rent or buy during residency? What do you see as the exceptions to the general rule? What did you do? How did it turn out? Comment below!
I am in the same camp, though I’ll admit that my wife and I bought going into medical school and ended up staying in the house for something like 11 years (including 2 and a half years after becoming an attending). I didn’t know how the math worked back then, but certainly advise students not that – for most – buying is usually the wrong decision. It is just too difficult to break even at 3 to 5 years.
Regardless of the decision that is made, it is best for people to make an apples to apples comparison by including everything involved in ownership rather than simply looking at monthly payments. Your post does a good job reminding students and residents of that.
TPP
TPP – Just curious – have you ever done the math and figured out where in those 11 years you broke even?
This is a good example of when buying can work but it’s so rare to stay at the same institution for med school and residency (and because of the men you can’t possibly know ahead of time).
Re: the article
*Raises hand* one of those young attendings completely comfortable living in residency like accommodations. Actually my apartment is a little cheaper than the one I had in residency. The lack of spousal pressure helps me. I knew the stats on leaving your first job and it wasn’t worth buying to me. I wish more of my classmates had the same thought process. Several of them are underwater and struggling. One of my residency classmates is struggling to rent out the duplex that he said would “definitely” rent before he bought it.
I never have. It would be a good idea, though. May be a good post! I’d really have to dig through bank and tax records to figure it out. I also don’t know how how to calculate the amount of gas I spent mowing that yard for all that time 😆 which I wouldn’t have had to do if I lived in an apartment or a house where I wasn’t responsible for that. I also had to replace the roof and fix the water heater while there.
P.s. completely agree on being comfortable living in resident accomodations for a few years after finishing!
TPP
Agree.
The odds of success are against you when you try to “smartly buy a house and make money in three years.”
It would be more of a speculation. It is possible to come out ahead if you are lucky, but for most the closing costs and fees will eat you alive.
Not to mention that HVAC system that is all-but-guaranteed to go out in year 2.
My wife and I didn’t even buy a house as a new attending. We rented for the first few years because of all the same reasons listed above. No regrets.
Just like there are a lot of costs that get overlooked.
There are a lot of advantages to owning that you do not think about off hand.
Purely financial your estimate of one third to one half getting ahead in 3-5 years seems about right.
I did not make anything on the house I bought in residency even though I sold it for a 20k profit. The maintenance and transaction cost ate that up. But on a 150k house the stakes were small and I only lost a little bit. The value of learning first hand about home ownership was worth it to me. It allowed me to make better choices saving me many times more after residency. Now of I was unlucky and lost tens of thousands then it would not have been worth it.
The financial choices we make during residency are usually small and do not budge the needle much.
I am not saying that buying is always a good idea. Just another point to consider.
The renting is throwing money away propaganda really must have come from some savvy real estate agency because that was ingrained in my head when I finished medical school and thus felt the need to buy a home.
Even a 5 year residency is no indication to buy a home because if you are like me, there is no guarantee that you will even stick with that residency (2 years in I found out I didn’t like surgery and switched to radiology in another state). Bought a home both times, the first I got lucky and made money and the second was a financial anchor that I was happy to get rid of for a loss when I moved to my current job (there were a few months where I had to carry 2 mortgages and pay extra for home insurance because that home was unoccupied and deemed riskier for coverage).
Rented all the way through residency and into attending life. Love owning our home now, but never would have had time for home improvement projects as a resident. I barely have time for them now. Certainly didn’t have money as a resident to pay someone else to fix leaky plumbing, do landscaping or fix the roof. I was itching to buy, but channeled that energy into reading up on mortgages and home buying. Residency is the perfect time to bone up on the ins and outs of buying, so you’re ready when the time comes.
The biggest difference between a primary residence and a true investment is the ability to sell when it makes sense financially rather than based on life events.
Here’s my 2 cents… Consider buying as a resident if and only if:
1. No student debt
2. Married and spouse brings in income
3. Low cost area (mortgage of 1-1.5x income)
Don’t meet all three criteria? Greater chance of it being a bad decision.
We bought during residency. We had no debt. Both of us were working. It checked out with rent/buy calculators. We had a firm price range and had we not found anything during our house-hunting trip, we would have just rented. And to top it off, I enjoy house repairs and renovations. It didn’t stress us too much to replace the toilet, paint, or re-sod the yard ourselves. All in all, thanks to stable jobs and moonlighting, our total monthly house payment (even average upgrades/maintenance) comes out to be 7% debt-to-income.
A spousal income definitely contributes to making it work out, but not as much as before the higher standard deduction.
I love this concept and have been trying to teach it for years. It mostly falls on deaf ears. I put a section about it in my book The Doctors Guide to Starting Your Practice Right. Almost every doc who told me they made money on a house in residency was wrong. When I asked them to show me the numbers, as I am interested in finding a true example of making money, the numbers show they lost money. They always leave out some of the costs to convince themselves they made money.
There is a time for everything. Short term, less than five years, is the time to rent. Long term, more than five years, is the time to buy.
Consider this the same as buying a volitile stock. Stocks and houses go up and down in value in the short term. Would you buy a volitile stock if you had to sell it on June 30th, three years from now regardless of the price at the time.? Likely you wouldn’t, because the risk it will be down at the time you need to sell it is too high on the short term.
I’m going to add this to my Fawcett’s favorites for next week.
Thanks,
Dr. Cory S. Fawcett
Prescription for Fionancial Success
Oh I know lots of docs who made money on a house in residency. I was a resident in Arizona from 2003-2006 when home prices doubled in 3 years. It’s entirely possible, it just requires a very high rate of appreciation! Ask how the residents who bought those houses in 2006 did though.
I don’t disagree with the general advice and conclusion, but a few observations:
1. Price-to-rent ratios tend to decrease as you go down the price scale, so the less expensive house you want to live in, the more this calculation would swing toward buying.
2. I think the transaction costs in your scenario are likely overestimated, at least for an average; I did a four year residency, and if I remember correctly, by total costs on both ends was less than 10% combined. But again, this is possibly more true at low end (it’s been a while, but present day value of that home is around 200K).
3. I’m generally not a fan of “soft” factors, but there is something to the learning process that has value. I’ve bought and sold more securities in my life than I could ever count, but I’ve made 2 full (buy and sell) housing transactions; I might make 2 more. By the time I’m done I won’t be a complete idiot, but until then, I’m bound to make a many mistakes, but fewer each time. The cost of mistakes tends to scale with price, so better to make your biggest mistakes when the stakes are lowest. I would not want to be a new attending moving to a HCOL are and my very first exposure to the housing market in with a $1M transaction.
4. If you are sticking around the area (not going to be a long distance landlord), then this becomes a good option for rental property because you already know the ins and outs of that home – and there is an army of WCI acolyte residents every year looking to rent!
Basically, I think this decision is rarely going to be bad and rarely going to be great; in the grand scheme, it’s going to meh (unless you go off the deep end), so that makes it a perfect topic for ferocious disagreement!
I include a lot of things in my “average transaction costs” that I think should be included but to be fair others don’t. For example, I say 10% to sell. Well, 6% is going to the realtor. Almost surely you’ll have to fix some things in the inspection. It’s not unusual for it to sit empty for a month or two between move out and sale at 1-2% a month. Maybe you have to pay someone to clean it. Or to stage it. Or a storage unit to get some of your crap out of there so it can sell. You could throw moving expenses in there too.
On the buying side you have inspection and appraisal fees, lending costs, window coverings, furniture etc. In addition, most new homeowners don’t already own lawn mowers, weedeaters, snowblowers, sprinkler wrenches. I don’t think 5% there is unreasonable either. So that’s 15% round trip. $30K on a $200K home, $60K on a $400K home.
Personally, I think the closing costs as a percentage are probably HIGHER for a lower cost property because a lot of those items don’t scale with price.
I find the argument you make (and someone else made above too) of the value of “screwing up with a cheap property” a bit bizarre. While I screwed up twice buying when I shouldn’t have and that certainly informed me and motivated me not to do it again, I think I’d rather have the $70K+ I lost (not including the time value of money) than the experience/wisdom.
Sure, it seems bizarre if if a $70k (20%!) loss were at all typical. But it definitely is not, and you’re not being very charitable with your interpretation. It’s simply undeniable that you get better at playing strategic games with successive periods of play. Unless you plan on renting your whole life, you will have to do this eventually. You should try to win every financial game you play, but you are going to lose some. If your chances at success are lower the first few times, better to have played for lower stakes first, no?
When I enter the exact scenario you laid out into a high quality rent vs. buy calculator, indeed it comes out in favor or rent over a 3-year period. However, this is VERY sensitive to a) assumptions about appreciation (3% rent, 5% buy), b) transactions cost (5/10 rent, 3/8 buy), and to some degree the mortgage rate. Most other things are fairly negligible. The bottom line is over 3 years, there is not a huge difference between the bad-case and good-case scenarios (global financial crisis, notwithstanding, but again hardly typical); and for 4-5 years, there is almost certainly a financial gain to buying, though not huge.
This whole exercise just shows that, for a broad range of expectations, the financial impact is likely minimal either way. The big indicators of the which decision to make are non-financial. And, again, there is a very important learning process when wading into this market. If your first experience is with a transaction within earshot of 7-figures, between the seller, agents, and other interested parties, you will be leaving money on the table, trust me. You will feel pressure, you will not know how to negotiate, you will miss things. This should be weighted against non-financial reasons to rent, which are many. But staying out of the market solely because somebody got caught in a perfect storm once is not wise. Every resident should at the very least survey the market and go through the exercise of running the calculations.
I agree it often isn’t that much money to an attending physician, even if it is a big chunk for residents.
Good discussion here.
My wife and I bought in the beginning of my 6 year surgical residency. It was 2010 and the bottom of the Los Angeles housing market. We made out like bandits, but I readily admit it was all luck.
If I had graduated medical school just 2-3 years earlier and done the same, I’d have caught the housing crash and it would have been a disaster.
So as mentioned above, it can work out, but also might not. Will the incredible run-up in stock and housing prices continue for another 10 years? It might, but I wouldn’t count on it.
— TDD
After less than 2 years of homeownership, I’ve had to replace the HVAC, washer, and likely soon the dishwasher. Currently repairing the dryer. Climate change is causing flash flooding in our area now so I’ll probably have to add a second French/area drain and possibly regrade the backyard because the kitchen is barely raised above the porch. Not to mention replacing light fixtures and ceiling fans, painting several rooms then hiring a painter to do the more painful jobs.
…all on a 25 year old house that was recently remodeled.
I can’t imagine dealing with any of this stuff as a resident. Not only the cost, but the time, even if someone else is doing the work.
Plus, the amount you stand to profit off the sale pales in comparison to your attending salary.
You inspired me to run these same numbers with relatively similar assumptions(15% transaction cost. 1.5% cost per year) but added in my own actual numbers where I could (like the actual mortgage, principal paid, property taxes, and insurance paid). I will say if my house appreciates 3% /year on average by the time I graduate residency, I come out ahead by almost $30K. If I stay for a fellowship 1 more year, I come out ahead of renting by nearly $50K.
Perhaps our location and situation is unique, but I was able to buy a 4bedroom 2.5 bath, 2100sq feet, plus a garage, in a nice neighborhood 10 minutes from the hospital. $203,000 for the home, no money down. Interest rate of 3.375% on a 7/1 ARM. My residency is 4 years but a 1 year fellowship is a strong possibility in my future.
Renting something even remotely similar in size (not accounting for proximity to the hospital) for my family now and when we were moving here was a minimum of $1,900 a month. And this is not accounting for the cost of renter’s insurance either, which just adds to the cost of renting.
I’ve enjoyed the many things I’ve learned to do as a home-owner, but there have definitely been times that I finished a long day at work, then had to climb in my attic in the summer to fix my air conditioner and was filled with buyer’s remorse, wishing I could just call a landlord to fix it!
Did the same thing running the numbers. $20-$25k would be what it works out to for buying over renting. That might be eaten up in home repairs above 1.5% per year or poor future selling market. But it seems unlikely to be a unambiguously bad decision.
To Jim and all others, I wanted to let you know that if you’re in the military, and you bought a home during residency, or first attending job, and had to sell at a loss because of moving (PCS, or end of active duty service), the military Homeowners Assistance Program can help you recoup the difference between your buying and selling price. I was able to take advantage of this for a PCS move during the last recession.
My wife and I bought a great house in Michigan for $225K during residency and sold less than 3 years later when we moved for fellowship for $302K with multiple offers. We were paid to live there. We knew value when we saw it as the seller went FSBO and underpriced his property. It appraised for $30K more than our offer at closing. It fully appraised for our sales price 3 years later. We made most of the money on the entry price.
This is not typical, but again reiterates the need to really do your homework. Real estate is hyper local.
Hard to come out behind when you start out $30K ahead eh?
Great topic and discussion. My wife and I were open to buying or renting for residency. Currently still in residency, so time will tell how good or bad the decision was. But there were a few factors that pushed the needle to buying for us.
1. Kids: got 3 of them, so a small 1 bedroom apartment was not going to work out. 2 bedrooms would be very cramped with growing kids. 3 bedroom was our market, and the quantity of 3 bedroom rentals in our area is not large.
2. Location: my training hospital is not in a safe area and the schooling options (because older 2 are school age) are terrible in the city. So suburbs were our target. And speaking of suburbs…
3. Local regulations: greatly reduce the number of apartment complexes that can be built (some of the suburbs ban them outright) and the neighborhoods have limits on the % of rentals allowed.
So as much as we gave renting a fair shot, our apples to apples home comparison was $1600 to rent and $1200 PITI + HOA fees. Front end costs were a touch under 2% of home value. Maybe things will go south and it will end up being a huge mistake. Maybe it won’t.
1. Why do people compare buying a home with renting an apartment? You should either be comparing renting an apartment and buying a condo or renting a house and buying a house.
But I agree with your point that sometimes you have to buy if you cannot rent what you want even if it ends up costing you more.
Was not comparing to an apartment, at least not intentionally. Although on re-read, it definitely sounds like I was. Was simply trying to state we needed a bigger place, which narrows the potential rental market.
Otherwise, as mentioned later, we did our best at home to home buy vs rent comparisons.
I think one aspect being left out of the equation is the possibility of renting rooms if you buy. I bought a 3BR/2bath house in 2012 for 155K with zero down, no PMI, at 4.2%. My house payment including taxes and insurance was 1200/month. I rented out 2 bedrooms for a total of 1400/month for two years and then 1 BR for 800/month for a year. I lived without roommates for 3 years. I then sold in 2018 for 250K. The willingness/ability to rent out bedrooms added 43K to my profit. I’m fully aware this doesn’t work for everyone. But I thought it was worth mentioning. I really enjoyed having roommates before my wife moved in so I wasn’t always coming home to an empty house.
I agree that landlording requires a different calculation than just buying a place to live in.
This message of WCI rings very true for me.
Bought during residency… stayed in it for 7 yrs due to doing fellowship at the same program. Paid off the mortgage in yr 8 by cashing out of the market at its bottom (DH was making attending money). Became unintentional long-distance landlords since RE market took its time recovering. Sold 12 yrs after buying. Made 1% per yr overall during those 12 yrs. All this while the bull market was raging on. Talk about opportunity cost.
As for readers who suggest it’s a learning exercise, everything I’ve learned about the process is from reading about it. Not by making those dumb mistakes.
My wife and I purchased a house at the start of residency and ultimately it paid off. I think there are certain situations where it can be a good idea. I felt fairly confident we would stay in the same city after residency (we are both physicians), and we planned on staying in the the resident house for the first 2-3 years after residency to work on paying down medical school debt while doing our best to continue to live like residents. We ended up selling the house (only purchased it for 155,00) and ended up making a $40,000 profit… which we dumped immediately into student loans. We were able to pay down all of my wife’s loans and 75% of mine before finally giving in and purchasing our “doctor house.” And btw I read the WCI book which is what I based a lot of these decisions on. Very thankful to have stumbled on that book when it came out early in my residency .
I agree it wouldn’t make sense to buy a house unless you were motivated to stay in the same city after residency, which even then isn’t always possible. However this was a situation where it worked out.
My wife and I purchased a house at the start of residency and ultimately it paid off. I think there are certain situations where it can be a good idea. I felt fairly confident we would stay in the same city after residency (we are both physicians), and we planned on staying in the the resident house for the first 2-3 years after residency to work on paying down medical school debt while doing our best to continue to live like residents. We ended up selling the house (only purchased it for 155,00) and ended up making a $40,000 profit… which we dumped immediately into student loans. We were able to pay down all of my wife’s loans and 75% of mine before finally giving in and purchasing our “doctor house.” And btw I read the WCI book which is what I based a lot of these decisions on. Very thankful to have stumbled on that book when it came out early in my residency .
I agree it wouldn’t make sense to buy a house unless you were motivated to stay in the same city after residency, which even then isn’t always possible. So many unknowns with job path hard to predict this in the future, luckily it worked out for us.
And thanks for everything you do, long time reader, first time poster 🙂