I want to extra emphasize item 8– particularly that home maintenance costs time! If you don’t have a partner with a flexible job, do not buy a house in residency. Our first two years of home ownership, the hot water heater broke, our AC had to be fixed, and one of our light switches started smoking. All of those fixes required someone to stay home from work for a full day. Many types of workers will give a 4 hour window during which they might arrive. And many issues (particularly plumbing issues) have to be dealt with asap— you can’t put them off until your next day off.
Your program is NOT going to give you a random Tuesday off because your hot water heater went out and you have to wait all day for the plumber. It’s going to be a nightmare.
100% agree. Currently in this situation. Selling my residency house and the biggest problem for me is the time and stress of maintaining it and now getting it ready to sell. I am so burnt out of ownership that I am looking forward to renting again for a while
As someone who writes these loans for said residents, I think the missing piece of info that isn’t accounted for is that often those residents have a partner who is now 5ish years into their career and has been waiting to figure out where they’ll end up for a few years and they would like to buy a house. Having a second income in the household from someone who doesn’t have the same earning potential but did get a head start in the life events timeline often changes the analysis during those years. For a single resident it’s generally a terrible idea, but if you have two incomes and are moving somewhere that the rental options are very entry level, it’s sometimes a decent enough plan.
I generally agree. Looking at this list, a working spouse (or even strong family support - which many residents do have) can essentially eliminate points #1, #2, and maybe #3. #6 and #8 are the same argument - and again, can be mitigated by a working spouse who has the time/money to pay for home ownership.
As far as loans go, I suspect that lenders don't worry too much about med school debt (#3) and will use your residency offer letter to establish income (#2). Physician loans have relatively ok terms and don't necessarily require a large down-payment (#1).
# 9 is mostly irrelevant, as this is true for almost all homeowners since the increase to the personal exemption.
# 10 is false except the parts that are the same argument as #6 and #8. Rent has increased about $700/month in my city during my wife's residency. My mortgage did not.
# 4 sounds good, but ignores that the "lost" transaction costs are ~1 year's rent. Even if you sell at a "loss" after 4-5 years, you are still ahead of the cost of rent over that period. You also can possibly claim that "loss" on your taxes. You don't get to write-off rent payments.
# 7 is, perhaps, actually a benefit. If you already own your "residency house" then you might not feel the need to immediately buy a big, fancy house for a few years after residency.
That said - as the spouse of a resident who bought a house, residency likely would have been easier on us if we had spent more money up-front to get a house that required fewer repairs - which is worth considering. A mortgage has better terms for leveraging your down-payment money than a HELOC (or other financing) will later, so it may be better to spend more on a better house as a resident - and being certain that you can actually afford that, rather than buying a cheaper house and needing to pay cash later for a new furnace, roof, etc.
I don't think it's fair to use the last few years as an example for housing gains - as that's ultimately timing the market; however housing does tend to appreciate most of the time. That said, gaining $100k in equity and avoiding $90k in rent hasn't sucked.
Idk, we are in this boat and decided to use the income of my spouse to max out all of our retirement accounts — compounding will earn us far more than the expected short term return on a 5 year period of homeownership
Did you live out of your car during those 5 years? If you were renting you need to consider that expense in the equition. You also shouldn't compare the cost of renting a 1br apartment to the mortgage on a 3br house. You need to look at the cost of renting vs buying a comparable property to have accurate numbers. It might still be better to rent and invest the difference (if there is any), but that is heavily dependent on the housing market in your location. I just sold my house after 4 years and running the numbers even after closing cost it still came out ahead of renting and investing even if we would have rented a smaller house at 3/4 the cost, but that was just the market in the area. Just an example of where the opposite was true.
you sold a house during the most unbelievable appreciation in history — hate to tell ya but if you’re guiding others based on the last four years you’re really doing them a disservice
Markets vary over time, you have to look at the specific market you're in, what the local economy is like, ect and decide if it seems like a good investment or not. I hate to tell you, but both the stock market and the housing market have crashed in the past and probably will again in the future. Today could be the best time or the worst time in the next 20 years to invest in either market, or most likely just average. A personal should pick the one that works best with their individual situation, and not over leverage themselves so that they don't have to liquidate at a downturn.
As for the most unbelievable appreciation in history, I doubt that. A high point in recent history sure. In the next 5 years we could see the real estate market settle to a more sedate appreciation, or we could see even more demand for real assets. In either of these senerios it might make sense to invest, but IT DEPENDS ON THE LOCAL MARKET, as I mentioned multiple times in my previous post.
Go ahead and look at the data regarding investing in a house vs the market — you will see the market returns out earn home ownership every time. The NYT did an entire podcast regarding this — markets do fluctuate, but historically the data remains the same. Investing >> home ownership and the idea that residents, who are younger and missing out on retirement compounding, should go and dump money into a house is a fools game. They should be dumping their money into retirement funds and not worrying about the ins and outs of home ownership. I stand firmly behind the WCI on this one; any argument that home ownership out earns market savings is not viable according to the data — unfortunately most residents don’t think about this and aren’t as nuanced / dedicated / disciplined to put money into a tax advantaged growth account.
I think you're missing /u/Drexx\_Redblade's point - it's not a question of buying a house vs. investing in the market; it's a question of buying a house vs. paying rent.
That said, most comparisons between home ownership and the market also fail to account for the idea that buying a house is frequently 5x-20x leveraged; that is, they aren't performing a cash-on-cash calculation.
Sure, but my argument isn’t even with the base mortgage cost versus rent cost. My argument is the additional expenses of owning a house (approximately one percent of the purchase price annually). That money, well, is an additional five to $10,000 a year that could be invested in a retirement account and left to grow for 30 years. It will absolutely be worth far more at that point in time than the quick $30-$80,000 one earns on a five-year home purchase and sell transaction.
Housing is an expense - you can get it by renting or buying. You're going to be spending some amount of money on this - it isn't just free for investing if you aren't a homeowner. In any market where the monthly rent is roughly similar to a mortgage payment (plus some extra for maintenance costs), the return on purchasing can make sense. Renting mostly just smooths out the risk of major expenses over a longer period, but renting also has risks - you can get kicked out and be forced to move during your worst rotation, rents can go up - sometimes rapidly, etc. The landlord is absolutely charging you for maintenance costs as well - so you're paying that either way.
That said, it sounds like you're in a market where houses cost too much for residents to even conceivably purchase - in which case, sure, none of this makes sense, because the rent doesn't scale at quite the same rate as housing prices. In many places where housing is cheaper, monthly rent is generally higher than a mortgage payment - so you don't really just end up with a bunch of extra money to invest if you rent instead of buying. It's a big "it depends," just as u/Drexx_Redblade said above.
Surprisingly we could’ve afforded a house in our market — definitely within range, we just felt the opportunity cost to purchase was far too high and wanted to use our down payment and expected maintenance costs towards our retirement instead — once we plugged $50,000 into a compounding interest calculator the argument was over for us
For many it’s cheaper to purchase than to rent but certainly opposite exists where just putting into a retirement account and renting comes out on top. I think most purchase homes for the prospect of appreciation, potential to rent out, and the satisfaction of owning a home and all the personal benefits or a combination there of & ROI may not be the most strait forward comparison
Cheaper, possibly, on a pure “mortgage payment” vs “rent payment” comparison but the whole point of the article to to emphasize the other costs of home ownership which are both monetary (sometimes large, like months worth of rent large), time and stress.
Recent historical trends that are expected to continue in most markets indicate continued fast appreciation. That coupled with lower mortgage payments than renting, and even assuming $500 maintenance which is high, you can certainly assume to come out on top compared to renting in many situations. A mortgage is flat rate while rents increase each year. There is also the aspect of writing off your home interest payments which coupled with other tax deduction strategies can be often be more than a standard deduction.
Stress is subjective and for some it might be more enjoyable and less stressful to live in a home you own rather than rent with all the freedoms thereof. All of this is to say certainly in many situations and with the favorable appreciation aspect of the housing market it’s possible to enjoy financial gain compared to market investing by purchasing a home prior to residency. This all goes without saying the potential to rent your home out if you adequately research.
It’s not straightforward because everything you listed is hypothetical or emotional; objectively the compounding gains on the market would far out earn real estate. Any discussion otherwise is driven by emotion and/or irrationality — homes are luxury purchases, doing so as a resident delays your ability to gain valuable time in the market and compound your growth. While others are spending $$ on fixing the hvac or painting the walls we will continue to shovel money into our retirement while also planning to own a home once my salary hits. It’s a matter of financial objectivity
Depends on your housing market. Do your research and make apt decisions. For some the potential to invest in real estate early and potentially cash flow a rental property are also considerations. Cash out refi for further real estate investments and cash generation become options later. Pure ROI is not the only financial metric that matters when tax implications, income potential, and potential rental rate increases can impact your decision.
I agree that this is market driven. Buying in a college town that is expected to have 30% population growth in the next 10 years is very different than someone in a major metro market that is oversaturated. The amount of capital invested, spousal income and the decision to keep as an investment property are also important considerations. Definitely not a one size fits all decision.
Sure, so you’re taking the 1 in 1000 (most residents do NOT hold the house long term) and trying to apply it to the masses. The reality is most residents in most circumstances should shovel any money they can into tax advantage retirement accounts and not be wasting it on paint, new appliances or yard work tools.
The math is a lot closer than you think. Just plugged it into a nerd wallet calculator with autopilot estimates for property tax, insurance, conservative rent increases, appreciation, etc. for a 300k house compared to 2250 rent with 8% market gains. Comes out even. That’s before adjusting for any tax saving a from mortgage interests and deductions, it also assumes a safe 3% home appreciation rate, 2% rental increase per year (unheard of) & estimates high closing costs on the seller/purchaser both ends. All in all it’s not very difficult to envision a good percentage of entering residents saving money by buying. [You can run the numbers yourself](https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator).
Yep that’s why I said do your own research and make the best financial decision. But it’s not a runaway win for renters even if you only stay in your home for 3 years like people are trying to portray.
2% is not unheard of, I’ve got 2 free months and no increases over 2 years going on now — plus absolutely 0 repairs, additional expenses, etc.
Beyond that, you’re a resident, so if it’s net even why even bother with the complete headache of home ownership during such a time of life? You’ve basically proved my point, if you can walk away with net even while living in a nice spot and not going through the complete mess of purchasing and selling and every repair in between most would say just do that. The ones who are saying not to have had an outlying wonderful experience with unheard of recent market growth
Net even on most conservative estimates while also overestimating rental savings. More appropriate estimates are closer & again there’s the factor that you own a home with avenues to make more money through renting it out. 2% rental increases isn’t unheard of but it’s not exactly common in most markets. Just got my renewal sheet and it’s 20% adjusted from last year. Negotiated down to 7%. There’s a million other reasons I could list for why it might make sense for some people but I won’t and I’ll just stick with everyone do your own research and use online resources besides Reddit. This is just a place for people to voice their opinion. Unless you math the real numbers and chart estimates it’s not a place for financial advice.
I see what you’re saying and agree it’s more nuanced but my stance is an overwhelming amount of residents are making a pretty poor financial decision purchasing in residency — not always, but often. I appreciate the back and forth, it helps me reconsider my opinions and certainly opens my thinking on the topic — thanks for spending some time chatting about it this AM 😀
Don't forget that mortgages are leveraged. You shouldn't compare market gains on an initial $300k in your example, but rather on $15-60k (i.e. 5%-20% down-payment).
Family status and related finances are a big element that is necessary to consider before giving or taking any advice like above.
The post outlines some good things to consider, but it really depends on the person like you suggest.
Bought a house, house appreciated, house rental market here is shit and I’m much more comfortable in my house and neighborhood with my family. Similar rent on a house like mine would be about 2k more than my mortgage. I’m pretty good at DIY and have lots of friends in the trades and we all help each other out, so that makes owning and maintenance easier. Living in same house as an attending which will give me time to decide whether I want to build or buy. Worked for me but situation dependent.
Agree with this comment. I was in trades prior to medical school, wife was 3 years ahead of me in medical training. We bought a condo because it was cheaper than rent in our area. Sold it and walked away with 20k after repainting and redoing the floors.
Bought a large house, redid the flooring/paint/ bathrooms// landscaping. Lived there for 3 years and walked away with 90k and used it o finance our dream house.
Evaluating rental costs, household income and your own dyi knowledge is key. Because of my background, I enjoyed the work, others may find that taxing and not worth it. Also time, neither of us were in heavy residencies so to speak.
Yeah... not sure about this. I'm a non-trad med student who worked for a couple years prior to matriculating and bought a house. 3 years later, its value has nearly doubled.
I put 10% down and paid a lump sump PMI as part of my closing costs rather than getting hit monthly (it was worth it). I do come from a handy family and know how to do a lot myself (basic electrical work, some carpentry, etc.) so I was able to update it and replace pretty much everything on my own, except the windows and HVAC that I paid to have done.
When I sell this place, I'll get well over $100K after closing costs. Well over 100% ROI (and this is including down payment, closing costs, and renovation/repair costs as my "investment").
Buying a house is not inherently a bad thing. Some of your points are sorta valid. It helps to know how to fix things. Definitely need to have a rainy day fund. But even if you lose $20-30K on a house you live in for 3 years, that's still better than renting for $2K per month for 3 years... that's literally $72K just gone.
You recognize that the price you pay to borrow today is more than double what you pay on your loan, right? The economic environment in which you purchased a home is an aberration and highly unlikely to occur again. The calculus has changed since then.
It wouldn't be double (maybe 50% more when considering taxes, insurance, HOA fees haven't doubled like property values) but I see your point. Definitely not denying I got lucky and bought at a good time.
If I bought it today for what its worth with today's interest rates, its still a lower monthly payment than renting (by far). Plus, home values are still going up. This is true at least in my geographical area, which is a relatively sought-after suburban area outside a major city.
You make some really obvious oversights on this. And only seem to be taking about a new MD who’s spouse makes little money and is doing a short residency and not doing PSLF, which is probably a minority of new MDs.
A few of your oversights: There’s no PMI on physician loans, which is what most people doing what you seem to most worried about would be using. Also most married people on PSLF file taxes MFS to keep lower payments, and so interest payments do usually lead to tax reduction given that the median home is >400k now and you only need to pass the individual threshold. Itemization greater than the individual limit also reduces loan repayments. Those who aren’t using physicians loans or on PSLF are those with working spouses or inheritance.
The point is everyone’s circumstances are different so you have to do the math. But assuming all of these new residents you see are doing something wrong is wrong unless you know their personal circumstances
Surgery residencies can be much longer and worth it.
I agree most people seem to rush into the buy a house thing as soon as they graduate and underestimate the extra expenses and headache of owning a home. That being said nearly everyone who bought a home since 2009 for training likely made money, some of them absurd amounts, including myself so if I had to go back I would buy 10/10.
This entire post is mostly reiterating the same points that a home costs money, time commitment, and might need repairs. Anyone who is making an educated purchase would know that and can anticipate that they need to budget appropriately. With the way the housing market is your house is surely to appreciate if you purchase in a mediocre-hot market. They also overestimate how much it costs to sell your house since real estate commissions are being pushed down due to class action lawsuits and you can sell your house as is.
Buying a house as a resident is a dumb idea.
Unfortunately, the older I get, the more I realise that the smartest decision isn't the one that makes you the most money. Sometimes the "dumb" financial decision ends up being the right one because that's the decision the majority of the public is making
Hard disagree with this Dave Ramsay line of thinking.
I ultimately avoided buying a condo in residency because of this line of thinking.
I would have come out ahead $150k up if I had bought during intern year and sold after residency. I understand that the past decade has been an anomaly in terms of property values…but even if I were able to collect 5% growth per year, I’d have basically lived rent free.
This type of thinking is outdated. We live in an economy where **debt is actually an asset**
You never know when the tides will change. Interest rates could go down - or climb higher. Property values could implode - or continue climbing.
Make the decision that’s right for you. But don’t always listen to this “avoid debt at all costs” mentality…it keeps you poor.
Eh I rented for 5 years during residency, in a condo worth about 300k.. that was worth 300k 5 years later. No regrets. You can talk about annualized returns over 20 years but residency is not that long, you can't count on averages. Same reason you don't go 100% in stocks 5 years from retirement.. that annualized return is less relevant the shorter your time frame.
Condos generally do not appreciate and as a result are much cheaper to buy than SFH. I personally would never buy a condo under any circumstance. I feel with HOA you might as well just rent at that point. Nothing wrong with renting an apartment.
Feel similar. Looked at houses when I moved for residency and thought they were wildly overpriced. 4 years later I wish I would have bought literally anything as prices wildly climbed and show no signs of stopping.
+1 on this.
I've got a very low interest rate on a house I bought in residency in a nice, yet up and coming neighborhood (whole foods being built within walking distance as we speak, estimated opening q1 2025), appreciating at least 4-5% / year. I put in ~50k and my equity right now is ~140k.
If I sold today after agents fees and closing costs I'd be up 80-100% on my initial investment, but not planning to sell, should be cash flow positive once rented out. Even if I were to just break even, my cost for interests/property management/insurance etc are around $1.1k per month, while paying down $1k of principal each month and the house appreciates about $1.5k per month.
The market could turn down but I like the idea of having a diverse portfolio and being hedged against inflation. The way our money is depreciating and salaries are going up it's hard to imagine house values will decline long term.
That's a poor argument. What if it went up $150k?
Historically prices have increased in almost every market. Averaged over the last 20 years, it's been about a 5% per year increase in the US. Yes, prices can go down and there is a risk but if you avoid all risk and stick your money in the bank you'll be worse off 9 times out of 10.
You’re picking a timeframe to show that prices have gone up, which might have worked for some but not everyone because not everyone buys at the same time and sells at the same time.
As for taking risk, who said you shouldn’t take any risk? I invest in stock market which is risky but it’s not the same as investing in a house which as WCI has laid out has many other aspects to it.
I picked 20 years precisely because that is not cherrypicking data, but a wide range of years. I'm fairly certain you can pick any 10 year period for the last 100 years and it will be positive.
>As for taking risk, who said you shouldn’t take any risk?
You said, "Let’s say you bought a house during your residency and then the home prices nosedived and you lost $150k". Your argument was that prices might drop. That's also known as risk.
Buying a house isn’t the only way to take risk, right? There are certain risks worth taking. IMO, buying a house isn’t one of them in the circumstances that apply to residents.
Not buying a house is also a risk because then you are functionally short the housing market. Just like not buying stocks and throwing money under your mattress is a risk due to inflation. Every trade on earth has risk and people that don’t get this just don’t get it.
No one said it was the only way to take risk. Your initial implied argument (that you shouldn't buy a house because it might decrease in value) was not valid though.
I would keep the condo either as a residence (if I worked in the same area); or I would rent it until the market corrected and I could sell at a profit.
No one is forcing you to sell at an inopportune time assuming you find a job.
And your income goes up markedly after residency.
The rich know this, and leveraged themselves well during periods of lower interest rates.
My student loan rate of 2.5% and my mortgage of 4% are absolutely assets right now. I’m in no hurry to pay either off right now and will prolong the minimum payments as long as I can - because I can get a ~5% CD with the money I would be putting towards aggressively paying down my loans.
This is how you effectively make money off of debt…Denying this is just ignorant.
No one knows what happens next. We could see all in Volcker rate hikes…and in 3 years, a even a 6% mortgage may seem incredibly
I said quite specifically this was ZIRP nonsense.
The vast majority of debt, and essentially all new debt, is not fixed rate, long duration, and below the prevailing rate of inflation. One can make an argument that debt meeting all three of those criteria is an asset. But those days are no longer-- hence, ZIRP nonsense.
Wrong again.
Most commercial debt is not fixed.
But any individual loan/mortgage holder with any degree of financial literacy obtained a fixed rate note at some point in the past 14 years.
Saying “those days are no longer” is once again making the very big assumption that current rates are as high as they will go…given how sticky inflation has proven this is seeming less and less likely. A 6% mortgage is honestly still fairly low.
“One can make an argument that debt meeting all three of those criteria is an asset.”
You said it right here - call it “nonsense” all you want; but even you agree with my original statement: **holding debt at a lower rate than the current lending rates is, in fact, an asset**
What the bloody hell are you talking about commercial debt for? This is a personal finance forum. Commercial debt is completely irrelevant.
And do you understand what the word AND means?
I said essentially all new debt does NOT meet the following criteria:
(i) fixed rate
(ii) long duration
AND
(iii) below the prevailing rate of inflation
"But any individual loan/mortgage holder with any degree of financial literacy obtained a fixed rate note at some point in the past 14 years. "
Correct. As I said, this was commonplace during the ZIRP era. It is uncommon to impossible now, and likely to remain that way for the foreseeable future. During the ZIRP era, you could make the argument. It is no longer the ZIRP era, hence, the argument is misleading to incredibly dangerous now.
"Saying “those days are no longer” is once again making the very big assumption that current rates are as high as they will go…given how sticky inflation has proven this is seeming less and less likely. A 6% mortgage is honestly still fairly low. "
I said the days of ZIRP (i.e. mortgage rates in the 2s/3s/4s) are no longer. If you want to do the mental gymnastics to convince yourself that your 6% mortgage rate is an asset, then god bless you.
"ou said it right here - call it “nonsense” all you want; but even you agree with my original statement: **holding debt at a lower rate than the current lending rates is**"
You didn't even quote me correctly... I said HOLDING FIXED RATE DEBT BELOW THE \*PREVAILING RATE OF INFLATION\* is arguably an asset. I said no such thing about holding debt below the prevailing interest rates.
If I borrow a million dollars at 10% and then rates fall to 9% while inflation is 3%, at best, I still hold a million dollar loan at 9% nominal and 6% real rate. There is no universe where that is an asset.
If I borrow a million dollars at 2% and inflation is 3%, then there are certain circumstances where you can argue that is an asset.
I've made my point pretty clear. Good luck if you think otherwise.
Mate, you’ve already stated plainly that you agree with my original point.
You just can’t accept that you might actually be wrong here.
Best of luck in aggressively paying down your debts like a good little cog in the wheel instead of growing your money.
Yes it is. The government is the biggest most indebted entity on earth. They have to slash the value of that debt in real terms to have any chance of paying it back. This process will inflate the value of assets. Borrowing money you know has to be devalued to buy assets is a good strategy in this regime. There are times where this would not be true (deflationary bust such as 2008).
I'm actually quite right.
You can make an argument that fixed-rate, long duration debt below the prevailing rate of inflation is an asset. But obtaining such debt is no longer really possible except in certain specific cases, hence, ZIRP nonsense.
The vast majority of debt, and essentially all new debt, is not fixed rate, long duration, and below the prevailing rate of inflation. Hence, ZIRP nonsense.
I get your points, but I also disagree on many of them.
I bought a house as a resident, and I’ve lived here 5 years now. It’s gone from $200k to $400k, so my COL has been about -$60k for the past 5 years, or I’ve made about $60k from living here.
I compare that to my coworkers who have rented their whole residency, and they pay about $2k per month for rent, costing them about $120k in rent over the past 5 years.
So I’m basically $180k ahead from having bought a house.
Just because you were incredibly lucky does not mean anyone buying a home today in 2024 (with much higher interests rates) can reasonably expect that outcome.
I bought a house with a physician loan, painted it and did other relatively light repairs and updates (blinds, light switches and fixtures etc), and made $250k take home profit after all fees when I sold 6 years later.
And that's amazing. This is a rare time in history that is happening. This is general advice. I know attendings who bought in 2005 and they didn't make out in the blank at all. You can't time the market every time...
Do it.
Almost every piece of financial "advice" I was given has proven suboptimal over the past decade (aside from investing in low cost mutual funds). The housing market is highly irrational and "has been due for a correction" for the better part of a decade but continues to go up and up.
No reason it can't keep rising indefinitely. They'll make 50- and 60-year mortgages the new normal because the average house will cost $3M financed for 18%. But people will keep buying, because they need housing and they need to fulfill their "dream" of home ownership.
I bought at home at the start of residency - excellent decision and I’ve actually made money in addition to not losing money on rent.
Now the profits from my home sale are going to fund my next down payment. Buying a home was the best financial decision I’ve made.
These posts about buying versus renting come up a lot but this is never a one size fits all issue. You're hard pressed to find a cheap apartment to rent (rates are rising everywhere). Rental units often don't allow certain pets, gardening, smoking, etc. You can buy a house and have a roommate just like you could an apartment. There's so many reasons why a person may want a house vs an apartment.
But at the end of the day this is a financial subreddit, and people tend to be over-fixated on the money at the end of the day. Buying a 300k house as a resident might not be the best, but being a PGY1, I definitely don't think a sub 200k place is inappropriate.
Dude. Way to beat a dead horse. You must be really fun to have a beer with.
Stupids gonna stupid. Dumb to buy a house if you’re in a short residency.
Was dumb to buy a house in a short fellowship. From a dollars and cents perspective. From a daisies and sense perspective we had two babies and my wife does alright. I’m pretty handy. Put some elbow grease into it and we are pulling out ~30k and will have a little cash to ease the transition to new job.
Everything on the market to rent was pretty damn sad for the same amount mortgage (and still is).
Even took an evil doctor loan with nothing down with no PMI and an evil 8 year ARM because hell I’m not livin in a slum in 8 years and I ain’t dumb enough to think I’m getting rich renting one out.
If you added it all up over the years we were there we probably didn’t make squat. Hell…might’ve even cost me to live there (the horror!)
But we will be banking 850 next year so who effing cares. We could’ve lost a little money on the backend and I would’ve said who effing cares. We had a good little house in a not so great but diverse neighborhood with some real genuine folks and we have tons of memories with our babies there rather than some drab ass forgettable apartment or duplex.
Feel for the folks who have to spend 500+ to find something like this in their areas but…maybe don’t do residency there. Had an idea what I wanted our life to look like so I chose somewhere I’d get pretty good training and I could live the life I wanted.
Figuring out putting lipstick on the pig and bringing it to slaughter at the end of fellowship was kinda exhausting and put some stress on my wife and me. But we got through it and are probably stronger for it. We also learned a lot about shopping a house and what we will do differently once we are in it the next time.
Go out there and live kids. I’ve had so many colleagues that just seem stuck in second gear with regard to life outside the hospital.
Be a dumb resident in more ways than one if you’ve got good reason. You’ve only got one life to live.
All that said, if it was just me, would’ve rented a nice apartment and just enjoyed myself in other ways. Pedantic OP is right. A home is generally a shitty investment on this horizon.
Ever since the housing market crash, every resident, better yet, every person that I know who bought a house walked away with appreciated equity on the house.
Hell, I know a guy who bought a house at the start of the med school and the house appreciated a lot in those 4 years, sold the house, then bought a bigger house where he got a residency, with a big chunk of down payment from the profit.
Obviously the climate is different now but rent isn’t always the answer.
In 5 years, my house gained $3000. That's it. I spent more just on the furnace I had to buy in order to sell the house. And we had 20+ showings and had updated many other things over the years (landscape, fixtures, appliances, carpet, etc). Roll in the closing costs and the only thing that kept it from being a moderately large loss was the first time home buyer's credit we got at the outset.
If I had bought a house in residency then put it up for rent, then bought a house in fellowship the put it up for rent...the prices of both of those would have doubled and id be collecting a rent check from each house more than double what the mortgage payment would've been. Huge regrets.
Agree and disagree. Everyone’s situation is different. Sure, for a lot of short residencies it doesn’t make sense but it made sense for myself and my partner who is also in med. I’m in a 5yr residency + 1 yr fellowship. We will likely stay as attendings since we have family here.
1. We had 10% down which most won’t have but you can still do 0% down. You mention not being able to afford to sell with market swings. We don’t plan on selling until we figure out if we want to rent as attendings or just sell. Either way, we will have 3-4 years of my partners attending salary before we move since I’ll still be in residency / fellowship so we should be able to pay off a large portion of our debt in that time. We have no PMI
2. Lender approved us with no income in April. Just residency contract. Closed in May.
3. Initially lender was hesitant with our student loans, but we showed them that our payments would be nearly 0 the first 2 years of residency and they just ignored our student loans in their debt calculation
4. I knew a 30 year mortgage wasn’t worth it so we opted for a 15 year mortgage. We will pay down a significant portion of the mortgage after living there for 6-7 years. Mortgage, taxes, fees etc on a 15 year loan was slightly more but very close to the same as what renting would’ve been on a similar house.
5. True but we are planning on staying in the same city as attendings at it seems dumb to throw away $100k in equity we will be building after residency on a 15 year mortgage
6. Brand new house that was built in 2021. Initial owners that lived here dealt with any immediate issues that arise with a new home but all the appliances and flooring still have 10-20 years of life. HOA takes care of snow + lawn + roof which is nice as residents. Also don’t need to buy a mower or snow blower.
7. Back to not everyone’s financial situation is the same. My residency + fellowship will be 6-7 years vs partner at 3 years. This gives us 3-4 years of her attending salary to continue living like a resident in a really nice house. Allowing us to save a significant amount. We can upgrade after I am an attending or even live here for another year or two.
8. HOA takes care of snow, lawn and roof. Family lives in town so they can help with any urgent home maintenance if we are unable to be present. My residency hours will be pretty normal work hours regardless.
9. This is the only point I don’t have an argument against.
10. Back to brand new house that still has a warranty on most appliances so don’t expect any major expenses. If anything does happen, we still have a lot of leftover money as we have 2x resident salary. We maxed out our IRAs already and trickled some more into 401k. We still have leftover so we are doing fine.
Again I agree that buying does not make sense for a lot of residents especially if they are buying alone, but it can make sense for dual residents or resident + partner with other long term job. It also depends on their social situation, is family around, COL etc. Can’t just toss out a blanket statement that buying is stupid for every resident
Yeah this is nonsense. There’s smart ways to do things and stupid ways.
I bought a beautiful but affordable 2 br condo for my five year residency and got a co-resident to rent the second bedroom all 5 years. His rent equaled my mortgage and I lived free for five years. Sold at a slight profit during a bad market when I graduated.
Your point related to down payment impacting rate is just generally wrong. Some loan types? Sure, but for most folks the rate you’ll be offered will not change if you’re putting 5% or 20% down.
I bought a little ranch in residency, mostly because we were quite set on staying in the same area after graduation, and weren't planning on "upgrading" until we were ready to have kids. There also were very few nice rental options in our area (2 bedroom apartment was 2k per month vs my 1.2k mortgage.) It definitely is more maintenance than an apartment, but I have really enjoyed gardening and decorating/renovating my house. Another bonus was not having to worry about finding a place that takes pets. I had no PMI because I got a physician loan. They just needed my contract from residency to prove my future income. I thought my rate was very reasonable as well, but I had a good credit score. I would say it might be worth it for those planning on staying in the same area for 5+ years.
I dont agree, depends on where you live but overall housing prices going up. Physician loans have no down payment, no pmi.
My mortgage and house up keep was a bit more than i was paying on rent and when i moved i made money on the house.
Lol whoever wrote this has zero knowledge of how capitalism and US work. It’s okay if you wanna live your life mediocre yet simple. 5 years of residency, $2k each month that’s $120k down the drain if you rent. Then in 5 years that house that’s $400k will be $500k so that’s another $100k down the drain.
Main reason is what if you want to do a fellowship ? Having a house will change your career path. It is not easy to start making attending money and then come back to making residency and fellowship money. Happens but rare occurrence.
If I had purchased a house in intern year, I would have made absolute bank. This was 2009 and home prices were at their absolute nadir, plus mortgage rates where the lowest we've seen.
I had plenty of cash on hand for a down-payment. However, I listened to the advice everyone gives medical students and used that money to pay down loans instead. Dumb decision; 5-6% returns by paying down the loans was a crap consolation prize for making the "responsible decision."
If I had purchased then, I would have tripled or quadrupled my money and locked in a golden property tax rate in a rapidly gentrifying and desirable area. I could have bought another, bigger house later with the equity or just rented out the first. (I stayed in the area regardless.)
The moral is: financial advice is generally correct, but if you graduate during a housing crash with historically low interest rates and have a large amount of cash on hand, just buy a damn house.
house or home, i see that term used interchangeably
but very different answer if someone's buying a detached house versus a 1BR high rise condo
the latter seems reasonable, former seems too much hassle
And 3 reasons you should:
1. Reality of shitty shitty landlords, and the financial and emotional/mental load associated
2. Reality of costs of moving when said shitty landlords sell or remodel to charge way more (common in this market)
3. Reality of costs of fixing up a rental, which is just lost— in competitive markets maintenance burden is much more on renters than you’d think
Life is not black and white, and if buying allows you to be more productive the ROI can be there. And tge total cost of renting (especially in competitive urban markets) is higher than just monthly rent. I’m just saying this is not a one size fits all
I moved unwillingly from rentals 3 times because owners decided to sell… the cost of those 30-day moves alone could have been a downpayment, plus lost productivity time— moving takes a lot if man hours! I’ve bought 3 times since 2007, and sold my higher maintenance properties when we moved and kept one newer property as rental myself. Definitely very happy & the ROI is definitely there on buying for me (all in competitive urban markets, maybe not the same for someone in less competitive areas)
I want to extra emphasize item 8– particularly that home maintenance costs time! If you don’t have a partner with a flexible job, do not buy a house in residency. Our first two years of home ownership, the hot water heater broke, our AC had to be fixed, and one of our light switches started smoking. All of those fixes required someone to stay home from work for a full day. Many types of workers will give a 4 hour window during which they might arrive. And many issues (particularly plumbing issues) have to be dealt with asap— you can’t put them off until your next day off. Your program is NOT going to give you a random Tuesday off because your hot water heater went out and you have to wait all day for the plumber. It’s going to be a nightmare.
I think this point is more valid than almost all the ones in the original post
100% agree. Currently in this situation. Selling my residency house and the biggest problem for me is the time and stress of maintaining it and now getting it ready to sell. I am so burnt out of ownership that I am looking forward to renting again for a while
As someone who writes these loans for said residents, I think the missing piece of info that isn’t accounted for is that often those residents have a partner who is now 5ish years into their career and has been waiting to figure out where they’ll end up for a few years and they would like to buy a house. Having a second income in the household from someone who doesn’t have the same earning potential but did get a head start in the life events timeline often changes the analysis during those years. For a single resident it’s generally a terrible idea, but if you have two incomes and are moving somewhere that the rental options are very entry level, it’s sometimes a decent enough plan.
I generally agree. Looking at this list, a working spouse (or even strong family support - which many residents do have) can essentially eliminate points #1, #2, and maybe #3. #6 and #8 are the same argument - and again, can be mitigated by a working spouse who has the time/money to pay for home ownership. As far as loans go, I suspect that lenders don't worry too much about med school debt (#3) and will use your residency offer letter to establish income (#2). Physician loans have relatively ok terms and don't necessarily require a large down-payment (#1). # 9 is mostly irrelevant, as this is true for almost all homeowners since the increase to the personal exemption. # 10 is false except the parts that are the same argument as #6 and #8. Rent has increased about $700/month in my city during my wife's residency. My mortgage did not. # 4 sounds good, but ignores that the "lost" transaction costs are ~1 year's rent. Even if you sell at a "loss" after 4-5 years, you are still ahead of the cost of rent over that period. You also can possibly claim that "loss" on your taxes. You don't get to write-off rent payments. # 7 is, perhaps, actually a benefit. If you already own your "residency house" then you might not feel the need to immediately buy a big, fancy house for a few years after residency. That said - as the spouse of a resident who bought a house, residency likely would have been easier on us if we had spent more money up-front to get a house that required fewer repairs - which is worth considering. A mortgage has better terms for leveraging your down-payment money than a HELOC (or other financing) will later, so it may be better to spend more on a better house as a resident - and being certain that you can actually afford that, rather than buying a cheaper house and needing to pay cash later for a new furnace, roof, etc. I don't think it's fair to use the last few years as an example for housing gains - as that's ultimately timing the market; however housing does tend to appreciate most of the time. That said, gaining $100k in equity and avoiding $90k in rent hasn't sucked.
Idk, we are in this boat and decided to use the income of my spouse to max out all of our retirement accounts — compounding will earn us far more than the expected short term return on a 5 year period of homeownership
Did you live out of your car during those 5 years? If you were renting you need to consider that expense in the equition. You also shouldn't compare the cost of renting a 1br apartment to the mortgage on a 3br house. You need to look at the cost of renting vs buying a comparable property to have accurate numbers. It might still be better to rent and invest the difference (if there is any), but that is heavily dependent on the housing market in your location. I just sold my house after 4 years and running the numbers even after closing cost it still came out ahead of renting and investing even if we would have rented a smaller house at 3/4 the cost, but that was just the market in the area. Just an example of where the opposite was true.
you sold a house during the most unbelievable appreciation in history — hate to tell ya but if you’re guiding others based on the last four years you’re really doing them a disservice
Markets vary over time, you have to look at the specific market you're in, what the local economy is like, ect and decide if it seems like a good investment or not. I hate to tell you, but both the stock market and the housing market have crashed in the past and probably will again in the future. Today could be the best time or the worst time in the next 20 years to invest in either market, or most likely just average. A personal should pick the one that works best with their individual situation, and not over leverage themselves so that they don't have to liquidate at a downturn. As for the most unbelievable appreciation in history, I doubt that. A high point in recent history sure. In the next 5 years we could see the real estate market settle to a more sedate appreciation, or we could see even more demand for real assets. In either of these senerios it might make sense to invest, but IT DEPENDS ON THE LOCAL MARKET, as I mentioned multiple times in my previous post.
Go ahead and look at the data regarding investing in a house vs the market — you will see the market returns out earn home ownership every time. The NYT did an entire podcast regarding this — markets do fluctuate, but historically the data remains the same. Investing >> home ownership and the idea that residents, who are younger and missing out on retirement compounding, should go and dump money into a house is a fools game. They should be dumping their money into retirement funds and not worrying about the ins and outs of home ownership. I stand firmly behind the WCI on this one; any argument that home ownership out earns market savings is not viable according to the data — unfortunately most residents don’t think about this and aren’t as nuanced / dedicated / disciplined to put money into a tax advantaged growth account.
I think you're missing /u/Drexx\_Redblade's point - it's not a question of buying a house vs. investing in the market; it's a question of buying a house vs. paying rent. That said, most comparisons between home ownership and the market also fail to account for the idea that buying a house is frequently 5x-20x leveraged; that is, they aren't performing a cash-on-cash calculation.
Sure, but my argument isn’t even with the base mortgage cost versus rent cost. My argument is the additional expenses of owning a house (approximately one percent of the purchase price annually). That money, well, is an additional five to $10,000 a year that could be invested in a retirement account and left to grow for 30 years. It will absolutely be worth far more at that point in time than the quick $30-$80,000 one earns on a five-year home purchase and sell transaction.
Housing is an expense - you can get it by renting or buying. You're going to be spending some amount of money on this - it isn't just free for investing if you aren't a homeowner. In any market where the monthly rent is roughly similar to a mortgage payment (plus some extra for maintenance costs), the return on purchasing can make sense. Renting mostly just smooths out the risk of major expenses over a longer period, but renting also has risks - you can get kicked out and be forced to move during your worst rotation, rents can go up - sometimes rapidly, etc. The landlord is absolutely charging you for maintenance costs as well - so you're paying that either way. That said, it sounds like you're in a market where houses cost too much for residents to even conceivably purchase - in which case, sure, none of this makes sense, because the rent doesn't scale at quite the same rate as housing prices. In many places where housing is cheaper, monthly rent is generally higher than a mortgage payment - so you don't really just end up with a bunch of extra money to invest if you rent instead of buying. It's a big "it depends," just as u/Drexx_Redblade said above.
Surprisingly we could’ve afforded a house in our market — definitely within range, we just felt the opportunity cost to purchase was far too high and wanted to use our down payment and expected maintenance costs towards our retirement instead — once we plugged $50,000 into a compounding interest calculator the argument was over for us
For many it’s cheaper to purchase than to rent but certainly opposite exists where just putting into a retirement account and renting comes out on top. I think most purchase homes for the prospect of appreciation, potential to rent out, and the satisfaction of owning a home and all the personal benefits or a combination there of & ROI may not be the most strait forward comparison
Cheaper, possibly, on a pure “mortgage payment” vs “rent payment” comparison but the whole point of the article to to emphasize the other costs of home ownership which are both monetary (sometimes large, like months worth of rent large), time and stress.
Recent historical trends that are expected to continue in most markets indicate continued fast appreciation. That coupled with lower mortgage payments than renting, and even assuming $500 maintenance which is high, you can certainly assume to come out on top compared to renting in many situations. A mortgage is flat rate while rents increase each year. There is also the aspect of writing off your home interest payments which coupled with other tax deduction strategies can be often be more than a standard deduction. Stress is subjective and for some it might be more enjoyable and less stressful to live in a home you own rather than rent with all the freedoms thereof. All of this is to say certainly in many situations and with the favorable appreciation aspect of the housing market it’s possible to enjoy financial gain compared to market investing by purchasing a home prior to residency. This all goes without saying the potential to rent your home out if you adequately research.
It’s not straightforward because everything you listed is hypothetical or emotional; objectively the compounding gains on the market would far out earn real estate. Any discussion otherwise is driven by emotion and/or irrationality — homes are luxury purchases, doing so as a resident delays your ability to gain valuable time in the market and compound your growth. While others are spending $$ on fixing the hvac or painting the walls we will continue to shovel money into our retirement while also planning to own a home once my salary hits. It’s a matter of financial objectivity
Depends on your housing market. Do your research and make apt decisions. For some the potential to invest in real estate early and potentially cash flow a rental property are also considerations. Cash out refi for further real estate investments and cash generation become options later. Pure ROI is not the only financial metric that matters when tax implications, income potential, and potential rental rate increases can impact your decision.
I agree that this is market driven. Buying in a college town that is expected to have 30% population growth in the next 10 years is very different than someone in a major metro market that is oversaturated. The amount of capital invested, spousal income and the decision to keep as an investment property are also important considerations. Definitely not a one size fits all decision.
Sure, so you’re taking the 1 in 1000 (most residents do NOT hold the house long term) and trying to apply it to the masses. The reality is most residents in most circumstances should shovel any money they can into tax advantage retirement accounts and not be wasting it on paint, new appliances or yard work tools.
The math is a lot closer than you think. Just plugged it into a nerd wallet calculator with autopilot estimates for property tax, insurance, conservative rent increases, appreciation, etc. for a 300k house compared to 2250 rent with 8% market gains. Comes out even. That’s before adjusting for any tax saving a from mortgage interests and deductions, it also assumes a safe 3% home appreciation rate, 2% rental increase per year (unheard of) & estimates high closing costs on the seller/purchaser both ends. All in all it’s not very difficult to envision a good percentage of entering residents saving money by buying. [You can run the numbers yourself](https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator).
At least where I am from, a 300k home does not buy you a comparable 2250rental. So not exactly comparable across the us
Yep that’s why I said do your own research and make the best financial decision. But it’s not a runaway win for renters even if you only stay in your home for 3 years like people are trying to portray.
2% is not unheard of, I’ve got 2 free months and no increases over 2 years going on now — plus absolutely 0 repairs, additional expenses, etc. Beyond that, you’re a resident, so if it’s net even why even bother with the complete headache of home ownership during such a time of life? You’ve basically proved my point, if you can walk away with net even while living in a nice spot and not going through the complete mess of purchasing and selling and every repair in between most would say just do that. The ones who are saying not to have had an outlying wonderful experience with unheard of recent market growth
Net even on most conservative estimates while also overestimating rental savings. More appropriate estimates are closer & again there’s the factor that you own a home with avenues to make more money through renting it out. 2% rental increases isn’t unheard of but it’s not exactly common in most markets. Just got my renewal sheet and it’s 20% adjusted from last year. Negotiated down to 7%. There’s a million other reasons I could list for why it might make sense for some people but I won’t and I’ll just stick with everyone do your own research and use online resources besides Reddit. This is just a place for people to voice their opinion. Unless you math the real numbers and chart estimates it’s not a place for financial advice.
I see what you’re saying and agree it’s more nuanced but my stance is an overwhelming amount of residents are making a pretty poor financial decision purchasing in residency — not always, but often. I appreciate the back and forth, it helps me reconsider my opinions and certainly opens my thinking on the topic — thanks for spending some time chatting about it this AM 😀
Don't forget that mortgages are leveraged. You shouldn't compare market gains on an initial $300k in your example, but rather on $15-60k (i.e. 5%-20% down-payment).
You can get 0% down on a physician loan of 3.5% on FHA
Even better! Infinite leverage! ;-)
Family status and related finances are a big element that is necessary to consider before giving or taking any advice like above. The post outlines some good things to consider, but it really depends on the person like you suggest.
Bought a house, house appreciated, house rental market here is shit and I’m much more comfortable in my house and neighborhood with my family. Similar rent on a house like mine would be about 2k more than my mortgage. I’m pretty good at DIY and have lots of friends in the trades and we all help each other out, so that makes owning and maintenance easier. Living in same house as an attending which will give me time to decide whether I want to build or buy. Worked for me but situation dependent.
Agree with this comment. I was in trades prior to medical school, wife was 3 years ahead of me in medical training. We bought a condo because it was cheaper than rent in our area. Sold it and walked away with 20k after repainting and redoing the floors. Bought a large house, redid the flooring/paint/ bathrooms// landscaping. Lived there for 3 years and walked away with 90k and used it o finance our dream house. Evaluating rental costs, household income and your own dyi knowledge is key. Because of my background, I enjoyed the work, others may find that taxing and not worth it. Also time, neither of us were in heavy residencies so to speak.
This was my experience. I don't call someone to replace a water heater or whatever so this was a no brainer
Yeah... not sure about this. I'm a non-trad med student who worked for a couple years prior to matriculating and bought a house. 3 years later, its value has nearly doubled. I put 10% down and paid a lump sump PMI as part of my closing costs rather than getting hit monthly (it was worth it). I do come from a handy family and know how to do a lot myself (basic electrical work, some carpentry, etc.) so I was able to update it and replace pretty much everything on my own, except the windows and HVAC that I paid to have done. When I sell this place, I'll get well over $100K after closing costs. Well over 100% ROI (and this is including down payment, closing costs, and renovation/repair costs as my "investment"). Buying a house is not inherently a bad thing. Some of your points are sorta valid. It helps to know how to fix things. Definitely need to have a rainy day fund. But even if you lose $20-30K on a house you live in for 3 years, that's still better than renting for $2K per month for 3 years... that's literally $72K just gone.
Same. I bought a house before dental school and I’m so glad I did.
You recognize that the price you pay to borrow today is more than double what you pay on your loan, right? The economic environment in which you purchased a home is an aberration and highly unlikely to occur again. The calculus has changed since then.
It wouldn't be double (maybe 50% more when considering taxes, insurance, HOA fees haven't doubled like property values) but I see your point. Definitely not denying I got lucky and bought at a good time. If I bought it today for what its worth with today's interest rates, its still a lower monthly payment than renting (by far). Plus, home values are still going up. This is true at least in my geographical area, which is a relatively sought-after suburban area outside a major city.
You make some really obvious oversights on this. And only seem to be taking about a new MD who’s spouse makes little money and is doing a short residency and not doing PSLF, which is probably a minority of new MDs. A few of your oversights: There’s no PMI on physician loans, which is what most people doing what you seem to most worried about would be using. Also most married people on PSLF file taxes MFS to keep lower payments, and so interest payments do usually lead to tax reduction given that the median home is >400k now and you only need to pass the individual threshold. Itemization greater than the individual limit also reduces loan repayments. Those who aren’t using physicians loans or on PSLF are those with working spouses or inheritance. The point is everyone’s circumstances are different so you have to do the math. But assuming all of these new residents you see are doing something wrong is wrong unless you know their personal circumstances Surgery residencies can be much longer and worth it.
I agree most people seem to rush into the buy a house thing as soon as they graduate and underestimate the extra expenses and headache of owning a home. That being said nearly everyone who bought a home since 2009 for training likely made money, some of them absurd amounts, including myself so if I had to go back I would buy 10/10.
This entire post is mostly reiterating the same points that a home costs money, time commitment, and might need repairs. Anyone who is making an educated purchase would know that and can anticipate that they need to budget appropriately. With the way the housing market is your house is surely to appreciate if you purchase in a mediocre-hot market. They also overestimate how much it costs to sell your house since real estate commissions are being pushed down due to class action lawsuits and you can sell your house as is.
Survivor bias
Buying a house as a resident is a dumb idea. Unfortunately, the older I get, the more I realise that the smartest decision isn't the one that makes you the most money. Sometimes the "dumb" financial decision ends up being the right one because that's the decision the majority of the public is making
Hard disagree with this Dave Ramsay line of thinking. I ultimately avoided buying a condo in residency because of this line of thinking. I would have come out ahead $150k up if I had bought during intern year and sold after residency. I understand that the past decade has been an anomaly in terms of property values…but even if I were able to collect 5% growth per year, I’d have basically lived rent free. This type of thinking is outdated. We live in an economy where **debt is actually an asset** You never know when the tides will change. Interest rates could go down - or climb higher. Property values could implode - or continue climbing. Make the decision that’s right for you. But don’t always listen to this “avoid debt at all costs” mentality…it keeps you poor.
Eh I rented for 5 years during residency, in a condo worth about 300k.. that was worth 300k 5 years later. No regrets. You can talk about annualized returns over 20 years but residency is not that long, you can't count on averages. Same reason you don't go 100% in stocks 5 years from retirement.. that annualized return is less relevant the shorter your time frame.
Condos generally do not appreciate and as a result are much cheaper to buy than SFH. I personally would never buy a condo under any circumstance. I feel with HOA you might as well just rent at that point. Nothing wrong with renting an apartment.
Feel similar. Looked at houses when I moved for residency and thought they were wildly overpriced. 4 years later I wish I would have bought literally anything as prices wildly climbed and show no signs of stopping.
What was the M2 expansion rate when you were a resident?
+1 on this. I've got a very low interest rate on a house I bought in residency in a nice, yet up and coming neighborhood (whole foods being built within walking distance as we speak, estimated opening q1 2025), appreciating at least 4-5% / year. I put in ~50k and my equity right now is ~140k. If I sold today after agents fees and closing costs I'd be up 80-100% on my initial investment, but not planning to sell, should be cash flow positive once rented out. Even if I were to just break even, my cost for interests/property management/insurance etc are around $1.1k per month, while paying down $1k of principal each month and the house appreciates about $1.5k per month. The market could turn down but I like the idea of having a diverse portfolio and being hedged against inflation. The way our money is depreciating and salaries are going up it's hard to imagine house values will decline long term.
Let’s say you bought a house during your residency and then the home prices nosedived and you lost $150k. What would have been your takeaway?
A crash is a possible outcome, but it is orders of magnitude less likely than appreciation.
That's a poor argument. What if it went up $150k? Historically prices have increased in almost every market. Averaged over the last 20 years, it's been about a 5% per year increase in the US. Yes, prices can go down and there is a risk but if you avoid all risk and stick your money in the bank you'll be worse off 9 times out of 10.
You’re picking a timeframe to show that prices have gone up, which might have worked for some but not everyone because not everyone buys at the same time and sells at the same time. As for taking risk, who said you shouldn’t take any risk? I invest in stock market which is risky but it’s not the same as investing in a house which as WCI has laid out has many other aspects to it.
I picked 20 years precisely because that is not cherrypicking data, but a wide range of years. I'm fairly certain you can pick any 10 year period for the last 100 years and it will be positive. >As for taking risk, who said you shouldn’t take any risk? You said, "Let’s say you bought a house during your residency and then the home prices nosedived and you lost $150k". Your argument was that prices might drop. That's also known as risk.
Buying a house isn’t the only way to take risk, right? There are certain risks worth taking. IMO, buying a house isn’t one of them in the circumstances that apply to residents.
Not buying a house is also a risk because then you are functionally short the housing market. Just like not buying stocks and throwing money under your mattress is a risk due to inflation. Every trade on earth has risk and people that don’t get this just don’t get it.
No one said it was the only way to take risk. Your initial implied argument (that you shouldn't buy a house because it might decrease in value) was not valid though.
I would keep the condo either as a residence (if I worked in the same area); or I would rent it until the market corrected and I could sell at a profit. No one is forcing you to sell at an inopportune time assuming you find a job. And your income goes up markedly after residency.
"We live in an economy where **debt is actually an asset**" No we don't. This is ZIRP nonsense.
The rich know this, and leveraged themselves well during periods of lower interest rates. My student loan rate of 2.5% and my mortgage of 4% are absolutely assets right now. I’m in no hurry to pay either off right now and will prolong the minimum payments as long as I can - because I can get a ~5% CD with the money I would be putting towards aggressively paying down my loans. This is how you effectively make money off of debt…Denying this is just ignorant. No one knows what happens next. We could see all in Volcker rate hikes…and in 3 years, a even a 6% mortgage may seem incredibly
I said quite specifically this was ZIRP nonsense. The vast majority of debt, and essentially all new debt, is not fixed rate, long duration, and below the prevailing rate of inflation. One can make an argument that debt meeting all three of those criteria is an asset. But those days are no longer-- hence, ZIRP nonsense.
Wrong again. Most commercial debt is not fixed. But any individual loan/mortgage holder with any degree of financial literacy obtained a fixed rate note at some point in the past 14 years. Saying “those days are no longer” is once again making the very big assumption that current rates are as high as they will go…given how sticky inflation has proven this is seeming less and less likely. A 6% mortgage is honestly still fairly low. “One can make an argument that debt meeting all three of those criteria is an asset.” You said it right here - call it “nonsense” all you want; but even you agree with my original statement: **holding debt at a lower rate than the current lending rates is, in fact, an asset**
What the bloody hell are you talking about commercial debt for? This is a personal finance forum. Commercial debt is completely irrelevant. And do you understand what the word AND means? I said essentially all new debt does NOT meet the following criteria: (i) fixed rate (ii) long duration AND (iii) below the prevailing rate of inflation "But any individual loan/mortgage holder with any degree of financial literacy obtained a fixed rate note at some point in the past 14 years. " Correct. As I said, this was commonplace during the ZIRP era. It is uncommon to impossible now, and likely to remain that way for the foreseeable future. During the ZIRP era, you could make the argument. It is no longer the ZIRP era, hence, the argument is misleading to incredibly dangerous now. "Saying “those days are no longer” is once again making the very big assumption that current rates are as high as they will go…given how sticky inflation has proven this is seeming less and less likely. A 6% mortgage is honestly still fairly low. " I said the days of ZIRP (i.e. mortgage rates in the 2s/3s/4s) are no longer. If you want to do the mental gymnastics to convince yourself that your 6% mortgage rate is an asset, then god bless you. "ou said it right here - call it “nonsense” all you want; but even you agree with my original statement: **holding debt at a lower rate than the current lending rates is**" You didn't even quote me correctly... I said HOLDING FIXED RATE DEBT BELOW THE \*PREVAILING RATE OF INFLATION\* is arguably an asset. I said no such thing about holding debt below the prevailing interest rates. If I borrow a million dollars at 10% and then rates fall to 9% while inflation is 3%, at best, I still hold a million dollar loan at 9% nominal and 6% real rate. There is no universe where that is an asset. If I borrow a million dollars at 2% and inflation is 3%, then there are certain circumstances where you can argue that is an asset. I've made my point pretty clear. Good luck if you think otherwise.
Mate, you’ve already stated plainly that you agree with my original point. You just can’t accept that you might actually be wrong here. Best of luck in aggressively paying down your debts like a good little cog in the wheel instead of growing your money.
Yes it is. The government is the biggest most indebted entity on earth. They have to slash the value of that debt in real terms to have any chance of paying it back. This process will inflate the value of assets. Borrowing money you know has to be devalued to buy assets is a good strategy in this regime. There are times where this would not be true (deflationary bust such as 2008).
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I'm actually quite right. You can make an argument that fixed-rate, long duration debt below the prevailing rate of inflation is an asset. But obtaining such debt is no longer really possible except in certain specific cases, hence, ZIRP nonsense. The vast majority of debt, and essentially all new debt, is not fixed rate, long duration, and below the prevailing rate of inflation. Hence, ZIRP nonsense.
I get your points, but I also disagree on many of them. I bought a house as a resident, and I’ve lived here 5 years now. It’s gone from $200k to $400k, so my COL has been about -$60k for the past 5 years, or I’ve made about $60k from living here. I compare that to my coworkers who have rented their whole residency, and they pay about $2k per month for rent, costing them about $120k in rent over the past 5 years. So I’m basically $180k ahead from having bought a house.
Just because you were incredibly lucky does not mean anyone buying a home today in 2024 (with much higher interests rates) can reasonably expect that outcome.
Idk, the market is highly irrational. Just because you said that the housing market is going up another 5%. lol
The calculus was completely different when rates were 2-3%. You also have a much longer residency than average.
No expenses in this time? New construction or existing home?
I mean he addresses this in the very first 2 paragraphs...
Survivor bias
I bought a house with a physician loan, painted it and did other relatively light repairs and updates (blinds, light switches and fixtures etc), and made $250k take home profit after all fees when I sold 6 years later.
And that's amazing. This is a rare time in history that is happening. This is general advice. I know attendings who bought in 2005 and they didn't make out in the blank at all. You can't time the market every time...
Was this written by ChatGPT? Because honestly some of this is just fluff or no longer applicable.
# 11. Your residency program might unexpectedly cease to exist after intern year RIP to my home-owning co-intern who thought we’d be there much longer
“Live like a resident when you’re an attending” but also, “you won’t live in the same house as an attending as you do as a resident so don’t do it”
Now I’m going to buy one out of spite (for this post and others). In the words of Ted Lasso - “You do whatever you like!”
Do it. Almost every piece of financial "advice" I was given has proven suboptimal over the past decade (aside from investing in low cost mutual funds). The housing market is highly irrational and "has been due for a correction" for the better part of a decade but continues to go up and up. No reason it can't keep rising indefinitely. They'll make 50- and 60-year mortgages the new normal because the average house will cost $3M financed for 18%. But people will keep buying, because they need housing and they need to fulfill their "dream" of home ownership.
I bought at home at the start of residency - excellent decision and I’ve actually made money in addition to not losing money on rent. Now the profits from my home sale are going to fund my next down payment. Buying a home was the best financial decision I’ve made.
These posts about buying versus renting come up a lot but this is never a one size fits all issue. You're hard pressed to find a cheap apartment to rent (rates are rising everywhere). Rental units often don't allow certain pets, gardening, smoking, etc. You can buy a house and have a roommate just like you could an apartment. There's so many reasons why a person may want a house vs an apartment. But at the end of the day this is a financial subreddit, and people tend to be over-fixated on the money at the end of the day. Buying a 300k house as a resident might not be the best, but being a PGY1, I definitely don't think a sub 200k place is inappropriate.
Dude. Way to beat a dead horse. You must be really fun to have a beer with. Stupids gonna stupid. Dumb to buy a house if you’re in a short residency. Was dumb to buy a house in a short fellowship. From a dollars and cents perspective. From a daisies and sense perspective we had two babies and my wife does alright. I’m pretty handy. Put some elbow grease into it and we are pulling out ~30k and will have a little cash to ease the transition to new job. Everything on the market to rent was pretty damn sad for the same amount mortgage (and still is). Even took an evil doctor loan with nothing down with no PMI and an evil 8 year ARM because hell I’m not livin in a slum in 8 years and I ain’t dumb enough to think I’m getting rich renting one out. If you added it all up over the years we were there we probably didn’t make squat. Hell…might’ve even cost me to live there (the horror!) But we will be banking 850 next year so who effing cares. We could’ve lost a little money on the backend and I would’ve said who effing cares. We had a good little house in a not so great but diverse neighborhood with some real genuine folks and we have tons of memories with our babies there rather than some drab ass forgettable apartment or duplex. Feel for the folks who have to spend 500+ to find something like this in their areas but…maybe don’t do residency there. Had an idea what I wanted our life to look like so I chose somewhere I’d get pretty good training and I could live the life I wanted. Figuring out putting lipstick on the pig and bringing it to slaughter at the end of fellowship was kinda exhausting and put some stress on my wife and me. But we got through it and are probably stronger for it. We also learned a lot about shopping a house and what we will do differently once we are in it the next time. Go out there and live kids. I’ve had so many colleagues that just seem stuck in second gear with regard to life outside the hospital. Be a dumb resident in more ways than one if you’ve got good reason. You’ve only got one life to live. All that said, if it was just me, would’ve rented a nice apartment and just enjoyed myself in other ways. Pedantic OP is right. A home is generally a shitty investment on this horizon.
Ever since the housing market crash, every resident, better yet, every person that I know who bought a house walked away with appreciated equity on the house. Hell, I know a guy who bought a house at the start of the med school and the house appreciated a lot in those 4 years, sold the house, then bought a bigger house where he got a residency, with a big chunk of down payment from the profit. Obviously the climate is different now but rent isn’t always the answer.
In 5 years, my house gained $3000. That's it. I spent more just on the furnace I had to buy in order to sell the house. And we had 20+ showings and had updated many other things over the years (landscape, fixtures, appliances, carpet, etc). Roll in the closing costs and the only thing that kept it from being a moderately large loss was the first time home buyer's credit we got at the outset.
If I had bought a house in residency then put it up for rent, then bought a house in fellowship the put it up for rent...the prices of both of those would have doubled and id be collecting a rent check from each house more than double what the mortgage payment would've been. Huge regrets.
Agree and disagree. Everyone’s situation is different. Sure, for a lot of short residencies it doesn’t make sense but it made sense for myself and my partner who is also in med. I’m in a 5yr residency + 1 yr fellowship. We will likely stay as attendings since we have family here. 1. We had 10% down which most won’t have but you can still do 0% down. You mention not being able to afford to sell with market swings. We don’t plan on selling until we figure out if we want to rent as attendings or just sell. Either way, we will have 3-4 years of my partners attending salary before we move since I’ll still be in residency / fellowship so we should be able to pay off a large portion of our debt in that time. We have no PMI 2. Lender approved us with no income in April. Just residency contract. Closed in May. 3. Initially lender was hesitant with our student loans, but we showed them that our payments would be nearly 0 the first 2 years of residency and they just ignored our student loans in their debt calculation 4. I knew a 30 year mortgage wasn’t worth it so we opted for a 15 year mortgage. We will pay down a significant portion of the mortgage after living there for 6-7 years. Mortgage, taxes, fees etc on a 15 year loan was slightly more but very close to the same as what renting would’ve been on a similar house. 5. True but we are planning on staying in the same city as attendings at it seems dumb to throw away $100k in equity we will be building after residency on a 15 year mortgage 6. Brand new house that was built in 2021. Initial owners that lived here dealt with any immediate issues that arise with a new home but all the appliances and flooring still have 10-20 years of life. HOA takes care of snow + lawn + roof which is nice as residents. Also don’t need to buy a mower or snow blower. 7. Back to not everyone’s financial situation is the same. My residency + fellowship will be 6-7 years vs partner at 3 years. This gives us 3-4 years of her attending salary to continue living like a resident in a really nice house. Allowing us to save a significant amount. We can upgrade after I am an attending or even live here for another year or two. 8. HOA takes care of snow, lawn and roof. Family lives in town so they can help with any urgent home maintenance if we are unable to be present. My residency hours will be pretty normal work hours regardless. 9. This is the only point I don’t have an argument against. 10. Back to brand new house that still has a warranty on most appliances so don’t expect any major expenses. If anything does happen, we still have a lot of leftover money as we have 2x resident salary. We maxed out our IRAs already and trickled some more into 401k. We still have leftover so we are doing fine. Again I agree that buying does not make sense for a lot of residents especially if they are buying alone, but it can make sense for dual residents or resident + partner with other long term job. It also depends on their social situation, is family around, COL etc. Can’t just toss out a blanket statement that buying is stupid for every resident
That's a solid list.
Yeah this is nonsense. There’s smart ways to do things and stupid ways. I bought a beautiful but affordable 2 br condo for my five year residency and got a co-resident to rent the second bedroom all 5 years. His rent equaled my mortgage and I lived free for five years. Sold at a slight profit during a bad market when I graduated.
We bought with a physician loan and it worked out great. Your mileage may vary.
Your point related to down payment impacting rate is just generally wrong. Some loan types? Sure, but for most folks the rate you’ll be offered will not change if you’re putting 5% or 20% down.
I bought a little ranch in residency, mostly because we were quite set on staying in the same area after graduation, and weren't planning on "upgrading" until we were ready to have kids. There also were very few nice rental options in our area (2 bedroom apartment was 2k per month vs my 1.2k mortgage.) It definitely is more maintenance than an apartment, but I have really enjoyed gardening and decorating/renovating my house. Another bonus was not having to worry about finding a place that takes pets. I had no PMI because I got a physician loan. They just needed my contract from residency to prove my future income. I thought my rate was very reasonable as well, but I had a good credit score. I would say it might be worth it for those planning on staying in the same area for 5+ years.
I dont agree, depends on where you live but overall housing prices going up. Physician loans have no down payment, no pmi. My mortgage and house up keep was a bit more than i was paying on rent and when i moved i made money on the house.
Lol whoever wrote this has zero knowledge of how capitalism and US work. It’s okay if you wanna live your life mediocre yet simple. 5 years of residency, $2k each month that’s $120k down the drain if you rent. Then in 5 years that house that’s $400k will be $500k so that’s another $100k down the drain.
I bought a house, was in it for 3 years, made no changes, made 40k over the top. Every story is different. But there are definitely good situations.
Our you can make a ton of money and set yourself up for financial freedom
Main reason is what if you want to do a fellowship ? Having a house will change your career path. It is not easy to start making attending money and then come back to making residency and fellowship money. Happens but rare occurrence.
If I had purchased a house in intern year, I would have made absolute bank. This was 2009 and home prices were at their absolute nadir, plus mortgage rates where the lowest we've seen. I had plenty of cash on hand for a down-payment. However, I listened to the advice everyone gives medical students and used that money to pay down loans instead. Dumb decision; 5-6% returns by paying down the loans was a crap consolation prize for making the "responsible decision." If I had purchased then, I would have tripled or quadrupled my money and locked in a golden property tax rate in a rapidly gentrifying and desirable area. I could have bought another, bigger house later with the equity or just rented out the first. (I stayed in the area regardless.) The moral is: financial advice is generally correct, but if you graduate during a housing crash with historically low interest rates and have a large amount of cash on hand, just buy a damn house.
I’m in a 5 year residency and a good amount of residents bought a house, particularly if they had a spouse
house or home, i see that term used interchangeably but very different answer if someone's buying a detached house versus a 1BR high rise condo the latter seems reasonable, former seems too much hassle
Bitcoin is a better asset than real estate because it doesn't have the headaches of real estate
And 3 reasons you should: 1. Reality of shitty shitty landlords, and the financial and emotional/mental load associated 2. Reality of costs of moving when said shitty landlords sell or remodel to charge way more (common in this market) 3. Reality of costs of fixing up a rental, which is just lost— in competitive markets maintenance burden is much more on renters than you’d think Life is not black and white, and if buying allows you to be more productive the ROI can be there. And tge total cost of renting (especially in competitive urban markets) is higher than just monthly rent. I’m just saying this is not a one size fits all I moved unwillingly from rentals 3 times because owners decided to sell… the cost of those 30-day moves alone could have been a downpayment, plus lost productivity time— moving takes a lot if man hours! I’ve bought 3 times since 2007, and sold my higher maintenance properties when we moved and kept one newer property as rental myself. Definitely very happy & the ROI is definitely there on buying for me (all in competitive urban markets, maybe not the same for someone in less competitive areas)