Buying Houses for Residency

[diggitydot]

We bought during training. It was only 4 years and we STILL own the house 6 months out of training, but I wouldn't have done it differently. It was the best choice for us and our situation.

Do whatever works for you.

[alotofyarn]

Do you have a down payment? That would be my other tip - if you don't have the money to put at least 10% down it won't matter that you're both working, you still won't have any equity built up in 5 years. I worked for the first 4 years of residency but we still didn't have a ton of equity built up because we had a very small down payment.

So, this is part of the reason we're buying - we're being gifted a down payment that will be 15-20%.

[alotofyarn]

We bought. We had a downpayment and got an ARM (7 years) that was insanely low (2.75%). It has us at a lower monthly payment than the rent for a similar place. We love our neighborhood and it's not going anywhere and is full of families (e.g. we didn't buy in an "up and coming" area hoping to make a huge profit). For us, we like owning our own home and not having to move because we're renting. We have a child and hope to have more in residency and owning something was important to us.

That being said, we lost a lot of money on our med school house based on net sales price at buying and selling. That being said, when we added up the rent we would have been "throwing away" for those 4 years and factored in our tax deduction on the interest, we didn't really lose that much money. When people say, "we lost money", they usually don't take into account what they would have spent on rent which is not at all tax deductible.

This is a HUGE reason we'd like to buy - pretty much everything you said. Granted, we don't quite have a kid yet, but I'm still hoping to have one or two, at least, during residency. We also have 2 cats (although I think only one is moving with us), so you have to factor in whether rentals will even let you have a pet. I've looked at some of the rental options that are big enough, and it will cost close to double the monthly amount we'd have to pay on a mortgage. We sucked it up during college, grad school, and med school because we knew we might only be at each place for a few years, and we ended up finding a reasonably priced rental house for med school, paying less than most of our friends in smaller apartments. It's been frustrating though, and we're fortunate that the owners decided to give us an extra year in the house instead of moving back in, like I think they had originally intended.

[GrayMatterWife]

So, this is part of the reason we're buying - we're being gifted a down payment that will be 15-20%.

Is the gift contingent on being used as a DP? If not, I can think of much better investments for a 5 year period for that kind of cash.

[alison]

We rented during residency (4 years), and doing so offered us a ton of flexibility. We up and went for a one-year fellowship and never looked back. We didn't have to tie any loose ends as far as selling and could live in the best neighborhood that our rent money could afford. We didn't have to make any compromises. That meant that we lived in a fantastic neighborhood in the city with a view, close to everything. We toyed around with buying, but I'm so glad we didn't!

I know of 3 of dh's colleague, who, 3.5 years out of residency are still sitting on their condos that they bought during training.

[spotty_dog]

We went house hunting in April of the year we finished med school, realized that prices seemed kind of overblown compared to rents, were skittish anyway with just a three year timeframe ahead of us, and switched gears to choosing rentals. That was in 2006, right before the crash; a lot of the other EM residents bought and were in some financial pain when they sold.

It's never too soon to start reading White Coat Investor's advice for finances. http://whitecoatinvestor.com/ He (and many other financial folks) suggest buying a home for which you have 20% down and can afford the P&I on a 15-year mortgage with just 20% of your income. Also, don't forget to save at least a minimum of 1% the value of the home per year for maintenance and repair.

Just some thoughts while you make your decision...good luck!!! What a fun time in your life, really.

[alotofyarn]

Is the gift contingent on being used as a DP? If not, I can think of much better investments for a 5 year period for that kind of cash.

Well, it's more like my parents have given my brother and sister DPs, so they've offered to give us one too. It doesn't all have to go toward the DP, some of it could go to renovations, but I don't think they'd just hand over the cash.

[alotofyarn]

We went house hunting in April of the year we finished med school, realized that prices seemed kind of overblown compared to rents, were skittish anyway with just a three year timeframe ahead of us, and switched gears to choosing rentals. That was in 2006, right before the crash; a lot of the other EM residents bought and were in some financial pain when they sold.

It's never too soon to start reading White Coat Investor's advice for finances. http://whitecoatinvestor.com/ He (and many other financial folks) suggest buying a home for which you have 20% down and can afford the P&I on a 15-year mortgage with just 20% of your income. Also, don't forget to save at least a minimum of 1% the value of the home per year for maintenance and repair.

Just some thoughts while you make your decision...good luck!!! What a fun time in your life, really.

Thanks - I'll check out that site!

[SoonerTexan]

What do you mean? My parents have lived there for 20 years without any problems. At this point, we know which areas have flooded and which haven't, which is a bonus. And we'll of course have good insurance.

Then maybe you have the knowledge to make a good decision there. It's just that particular city (I'm trying to be vague here because it is a public forum)

My thought process:

Do I know enough about this city to know which areas would be safe in the event of a certain natural disaster? (For me, probably not)
Can I afford anything in those places? How will flood insurance affect my monthly mortgage price?
If something similar happened, how would it affect my husband's program and would I want to have a house to worry about in the middle of it? (Didn't residents get shipped to other programs last time?)

Maybe it is just the weather freak in me, but I worry enough about something happening again, and while it wouldn't be nearly as bad, it still worries me. For me the reasons are enough to say no, it probably wouldn't be worth buying unless it was way way out in the burbs.

[alotofyarn]

My husband worked through one of the natural disasters that hit during his away rotation. Granted, they told him to leave, but they didn't know how bad it would be, he didn't have enough time to actually get back here, and staying in the hospital with a generator was a better option than staying alone at my parents' house (my mom evacuated, my dad stayed at the hospital) without a working generator (my dad breaks them every year).

Anyway, I do appreciate the advice from everybody - I am taking everything into consideration, and it's not an absolute guarantee that we'll buy, it just seems like the best option for our situation, and I'm trying to get prepared for timing in case we do.

[MrsK]

Sounds like you know what you want to do.

[TulipsAndSunscreen]

We flew down in March, closed in June. He started residency 2 weeks later. His school had a late graduation though (very end of May).

[Pollyanna]

Ahhh, now I see your position. If you're going to buy then I would house hunt with investment in mind. Don't make it emotional. You're looking for a house that could be easily rented or sold. Consider resale in everything you do. I know that might not sound as much fun but it may put you in a better position when you have to move for fellowship or the job. Good luck!!!!

[ladymoreta]

If you'll have 20% down and want to buy, you will probably be fine. Just make sure you have a few thousand extra dollars at the end of residency for selling the house. Even with your equity, you will still have to do repairs, and you will probably want to do some staging.

[spotty_dog]

Another data point for timeframes...when training was over and we had a signed contract for the Job, we took a trip in December for me to see the area for the first time. While we were there, we had a realtor take us around so we could see what the market was like, and before that we got prequalified so we'd know a price range to look at. It turned out we really liked a one-of-a-kind house that we saw on that trip, so after we got home and thought about it, we put in an offer around the first of the year. After a lot of negotiation we had a contract in early January and the farthest we could push out the close was mid-February.