65k Cash. 25 y/o. Best place to put this?

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Derivative
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65k Cash. 25 y/o. Best place to put this?

Post by Derivative » Fri Jan 13, 2017 6:20 pm

I currently have 65k cash in a 1% APY savings account. I'm 25 y/o planning to go to medical school within 2 years. Is this the best place to put this cash? I already have maxed out my Vanguard Roth IRA contributions.

I have no house and am currently renting. Not sure if I should try to purchase a house (but I probably can't even buy one -- not sure) with multiple rooms and rent some of them out to invest. I live in Bay Area (Northern California).

Any advice is greatly appreciated!!

Thank you.

123
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Re: 65k Cash. 25 y/o. Best place to put this?

Post by 123 » Fri Jan 13, 2017 6:28 pm

If you're planning to go to medical school so soon your life in obviously in transition, and will be for awhile. I would be content with holding the money in bank accounts as your are, though you might be better off putting may 75% of it in CDs with a higher rate depending on how much you need for an emergency fund.
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Re: 65k Cash. 25 y/o. Best place to put this?

Post by Ace$ » Fri Jan 13, 2017 6:30 pm

Is it safe to assume you have no debt? If that assumption is correct, I'd park that cash right where it is and plan on using it to get through medical school to minimize any potential SL borrowing. Medical school runs $250k+ from what I've heard/read.

pierremonfrere
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Re: 65k Cash. 25 y/o. Best place to put this?

Post by pierremonfrere » Fri Jan 13, 2017 6:38 pm

Keep the money safe.
Go to the cheapest medical school you can.
Pay for as much of it upfront as you can.

Get to know WCI well

Your future self will thank you.

Full disclosure: I'm a pgy2 with a ton of debt.

Edit: It appears you are planning on buying (or bought) a new car. First, if planning on medical school. I wouldn't drop 20k on a new car. More like $5k on something that will get you from point A to point B. Second, if are you set on buying a new car, pay cash. It's best not to finance depreciating assets.

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by Dmanse02 » Fri Jan 13, 2017 6:52 pm

Congrats on getting into medical school. It is a long and exciting road. Also, you did very well to save that much $ prior to medical school - far above majority of your peers. I am a recent graduate myself and wanted to weigh in. If you plan on taking out loans for med school, the federal government has a monopoly on the market and the loans run at 7% (unless this has recently changed). I believe your best bet would be to use that money to pay tuition and living expenses for the first 2-3 years of medical school. The interest from those first years compounds the most. Unless you're lucky, I think the odds are against you to beat that return in the market. You could find a part time gig durig medical achool and still max out your roth IRA - that I believe would be worthwhile vs paying of the loans given the tax benefits and potential for stretch IRA. I would use the rest to stay out of debt as much as possible. You will be far ahead of most when you're done with your training

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by jafcorrea » Fri Jan 13, 2017 9:23 pm

Derivative wrote:I currently have 65k cash in a 1% APY savings account. I'm 25 y/o planning to go to medical school within 2 years. Is this the best place to put this cash? I already have maxed out my Vanguard Roth IRA contributions.

I have no house and am currently renting. Not sure if I should try to purchase a house (but I probably can't even buy one -- not sure) with multiple rooms and rent some of them out to invest. I live in Bay Area (Northern California)

If you do not need this money for 2 + years. I am also in Northern CA and YES you can buy in a Bay Area a house with 65k down payment, rent for $2000
:sharebeer Let me know if you need help

Any advice is greatly appreciated!!

Thank you.
Thanks JC

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by lazylarry » Fri Jan 13, 2017 10:15 pm

I'm not sure if you're planning to work in the next 2 yrs,but if you are, I'd squirrel away 11k for the Roth IRA those two years. Though student loans are high, your tax rate is likely so low now that this will be a magical investment. Apart from that, I'd set up a 2 yr CD with money you don't really plan on using/needing (or longer if you are able to get a student loan with deferment). Could consider CD ladder. Then pay down med school bills as much as possible.

I'd look up white coat investor if you haven't already.
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Derivative
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Re: 65k Cash. 25 y/o. Best place to put this?

Post by Derivative » Fri Jan 13, 2017 10:32 pm

jafcorrea wrote:
Derivative wrote:I currently have 65k cash in a 1% APY savings account. I'm 25 y/o planning to go to medical school within 2 years. Is this the best place to put this cash? I already have maxed out my Vanguard Roth IRA contributions.

I have no house and am currently renting. Not sure if I should try to purchase a house (but I probably can't even buy one -- not sure) with multiple rooms and rent some of them out to invest. I live in Bay Area (Northern California)

If you do not need this money for 2 + years. I am also in Northern CA and YES you can buy in a Bay Area a house with 65k down payment, rent for $2000
:sharebeer Let me know if you need help

Any advice is greatly appreciated!!

Thank you.


How much of a house could I buy if I only make around 30-40k per year since I am still studying?

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jafcorrea
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Re: 65k Cash. 25 y/o. Best place to put this?

Post by jafcorrea » Fri Jan 13, 2017 11:47 pm

Derivative wrote:
jafcorrea wrote:
Derivative wrote:I currently have 65k cash in a 1% APY savings account. I'm 25 y/o planning to go to medical school within 2 years. Is this the best place to put this cash? I already have maxed out my Vanguard Roth IRA contributions.

I have no house and am currently renting. Not sure if I should try to purchase a house (but I probably can't even buy one -- not sure) with multiple rooms and rent some of them out to invest. I live in Bay Area (Northern California)

If you do not need this money for 2 + years. I am also in Northern CA and YES you can buy in a Bay Area a house with 65k down payment, rent for $2000
:sharebeer Let me know if you need help

Any advice is greatly appreciated!!

Thank you.


How much of a house could I buy if I only make around 30-40k per year since I am still studying?

Around SF Bay Area - not SF :mrgreen: ... with a credit score >680 you can get 2 bed 2 bath condo around $300k, rent $2000 ,

65k down ... first time buyer I presume, loan 7 years or 30 years fix 3.5% or 3.75% = mortgage $1050
Thanks JC

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by Chadnudj » Sat Jan 14, 2017 12:15 am

Derivative wrote:I currently have 65k cash in a 1% APY savings account. I'm 25 y/o planning to go to medical school within 2 years. Is this the best place to put this cash? I already have maxed out my Vanguard Roth IRA contributions.

I have no house and am currently renting. Not sure if I should try to purchase a house (but I probably can't even buy one -- not sure) with multiple rooms and rent some of them out to invest. I live in Bay Area (Northern California).

Any advice is greatly appreciated!!

Thank you.


In this rare scenario....have you thought about opening a 529 for yourself with some of the money? It could cut your current state tax bill in California, be used to pay for your medical schooling, and could grow tax free until you use it (although since you're going soon, I'd encourage you to invest it pretty conservatively in the 529).

But having cash available during your future years (when you'll be living like a student for awhile) is pretty nice piece of mind. Maybe set up a CD ladder with some/all of it and have it available for emergencies/quickly paying off student loan debt right when you get out?

Derivative
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Re: 65k Cash. 25 y/o. Best place to put this?

Post by Derivative » Sat Jan 14, 2017 1:00 am

Chadnudj wrote:
Derivative wrote:I currently have 65k cash in a 1% APY savings account. I'm 25 y/o planning to go to medical school within 2 years. Is this the best place to put this cash? I already have maxed out my Vanguard Roth IRA contributions.

I have no house and am currently renting. Not sure if I should try to purchase a house (but I probably can't even buy one -- not sure) with multiple rooms and rent some of them out to invest. I live in Bay Area (Northern California).

Any advice is greatly appreciated!!

Thank you.


In this rare scenario....have you thought about opening a 529 for yourself with some of the money? It could cut your current state tax bill in California, be used to pay for your medical schooling, and could grow tax free until you use it (although since you're going soon, I'd encourage you to invest it pretty conservatively in the 529).

But having cash available during your future years (when you'll be living like a student for awhile) is pretty nice piece of mind. Maybe set up a CD ladder with some/all of it and have it available for emergencies/quickly paying off student loan debt right when you get out?


Can the 529 save me on my income taxes now or will the earnings only be tax free?

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avenger
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Re: 65k Cash. 25 y/o. Best place to put this?

Post by avenger » Sat Jan 14, 2017 7:04 am

Have you been accepted to medical school? It sounds like you haven't even been accepted yet, and you're thinking about buying a house?

I would argue that no medical student should buy a house, let alone a resident. You're entering a period of your life where you might be moving multiple times in a decade (medical school, residency, possible fellowship, then attending). The last thing you need is a another financial albatross around your neck.

Keep the money in a savings account.
Last edited by avenger on Sat Jan 14, 2017 7:23 am, edited 1 time in total.
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Re: 65k Cash. 25 y/o. Best place to put this?

Post by tyrnup13 » Sat Jan 14, 2017 7:17 am

Without a doubt, I would keep the money in a savings account and use it to pay medical school tuition. Not only that, I would try to save as much for the next two years and also apply that towards tuition. I graduated from med school in 2002 and now I lecture to med students. Every year, I ask the class about costs associated with their education, and the amounts are staggering. Graduating with at 250k is the norm, and many have more debt than that. With declining reimbursement, it is becoming more difficult for young physicians to climb out of that hole.

I think buying a house would be the worst idea. Even if you know where you will attend medical school, you have no idea about residency. So, that means you have only six years max to live in the house (2 years until school starts and then 4 years more). If the house goes underwater while you are a student, or if there are major upkeep expenses, you are hosed.

The advice posted above about reading White Coat Investor is right on. You should also read Mr Money Mustache. Forget the car, ride your bike.

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by Chadnudj » Sat Jan 14, 2017 8:00 am

Derivative wrote:Can the 529 save me on my income taxes now or will the earnings only be tax free?


Both. The 529 will be a state (not federal) income tax deduction, and its earnings will be tax free.

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by stoptothink » Sat Jan 14, 2017 8:34 am

Derivative wrote:
jafcorrea wrote:
Derivative wrote:I currently have 65k cash in a 1% APY savings account. I'm 25 y/o planning to go to medical school within 2 years. Is this the best place to put this cash? I already have maxed out my Vanguard Roth IRA contributions.

I have no house and am currently renting. Not sure if I should try to purchase a house (but I probably can't even buy one -- not sure) with multiple rooms and rent some of them out to invest. I live in Bay Area (Northern California)

If you do not need this money for 2 + years. I am also in Northern CA and YES you can buy in a Bay Area a house with 65k down payment, rent for $2000
:sharebeer Let me know if you need help

Any advice is greatly appreciated!!

Thank you.


How much of a house could I buy if I only make around 30-40k per year since I am still studying?


You might qualify for a mortgage up to $150k. Might. Just going to make a wild guess, but $215k (max mortgage plus entire $65k cash reserves) isn't even going to buy you a studio in your area - that's about the range for a nice 2bdr condo here (in Utah County, Utah). Even if you weren't planning to go to medical school, buying a home should be the last thing on your mind.

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by Sandtrap » Sat Jan 14, 2017 9:36 am

Derivative wrote:I currently have 65k cash in a 1% APY savings account. I'm 25 y/o planning to go to medical school within 2 years. Is this the best place to put this cash? I already have maxed out my Vanguard Roth IRA contributions.

I have no house and am currently renting. Not sure if I should try to purchase a house (but I probably can't even buy one -- not sure) with multiple rooms and rent some of them out to invest. I live in Bay Area (Northern California).

Any advice is greatly appreciated!!

Thank you.


MCATs?
Acceptance to med school?
Internship?
Residency?
Boards?
Practice?

It's a long long road with a tremendous "washout" rate. It seems prudent to maintain a singular purpose to achieve each of these steps at the top of the class. Home ownership, etc, should all take a backseat until you have won the prize. The primary investment is in your education. Cash reserves. You will need it.

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by Derivative » Sat Jan 14, 2017 1:29 pm

avenger wrote:Have you been accepted to medical school? It sounds like you haven't even been accepted yet, and you're thinking about buying a house?

I would argue that no medical student should buy a house, let alone a resident. You're entering a period of your life where you might be moving multiple times in a decade (medical school, residency, possible fellowship, then attending). The last thing you need is a another financial albatross around your neck.

Keep the money in a savings account.


I am not thinking about buying a house to live in per se. I would like to start real estate investing. I am not sure if it would be a good idea own a rental property and get a steady cash flow or equity build throughout medical school.

Perhaps I should ask in the original post: would it be wise for me to buy a house to invest in (rent out or re-sell at a later point)?

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by stoptothink » Sat Jan 14, 2017 1:38 pm

Derivative wrote:
avenger wrote:Have you been accepted to medical school? It sounds like you haven't even been accepted yet, and you're thinking about buying a house?

I would argue that no medical student should buy a house, let alone a resident. You're entering a period of your life where you might be moving multiple times in a decade (medical school, residency, possible fellowship, then attending). The last thing you need is a another financial albatross around your neck.

Keep the money in a savings account.


I am not thinking about buying a house to live in per se. I would like to start real estate investing. I am not sure if it would be a good idea own a rental property and get a steady cash flow or equity build throughout medical school.

Perhaps I should ask in the original post: would it be wise for me to buy a house to invest in (rent out or re-sell at a later point)?


With $65k cash and $30k-40K/yr in income, you likely wouldn't qualify for enough to even buy a 2bdr condo in your area. It wouldn't be wise nor would it probably even be possible.

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by Derivative » Sat Jan 14, 2017 1:40 pm

stoptothink wrote:
Derivative wrote:
avenger wrote:Have you been accepted to medical school? It sounds like you haven't even been accepted yet, and you're thinking about buying a house?

I would argue that no medical student should buy a house, let alone a resident. You're entering a period of your life where you might be moving multiple times in a decade (medical school, residency, possible fellowship, then attending). The last thing you need is a another financial albatross around your neck.

Keep the money in a savings account.


I am not thinking about buying a house to live in per se. I would like to start real estate investing. I am not sure if it would be a good idea own a rental property and get a steady cash flow or equity build throughout medical school.

Perhaps I should ask in the original post: would it be wise for me to buy a house to invest in (rent out or re-sell at a later point)?


With $65k cash and $30k-40K/yr in income, you likely wouldn't qualify for enough to even buy a 2bdr condo in your area. It wouldn't be wise nor would it probably even be possible.


Okay darn. :( Thanks for your input.

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by lazylarry » Sat Jan 14, 2017 1:41 pm

Derivative wrote:
avenger wrote:Have you been accepted to medical school? It sounds like you haven't even been accepted yet, and you're thinking about buying a house?

I would argue that no medical student should buy a house, let alone a resident. You're entering a period of your life where you might be moving multiple times in a decade (medical school, residency, possible fellowship, then attending). The last thing you need is a another financial albatross around your neck.

Keep the money in a savings account.


I am not thinking about buying a house to live in per se. I would like to start real estate investing. I am not sure if it would be a good idea own a rental property and get a steady cash flow or equity build throughout medical school.

Perhaps I should ask in the original post: would it be wise for me to buy a house to invest in (rent out or re-sell at a later point)?


Trust me, you will not want to be managing a house while in medical school or residency. It's an unnecessary burden. The breakpoint on whether houses become a wise investment (if you want to live in them) is quoted around 5 yrs.

But this is a more difficult matter if you are talking about investing, as houses have lots of fees that may not be apparent. If you can get the deal of a lifetime on a house, then it might be reasonable, but otherwise, you are in for a lot of pain. I'd look up other forum posts, this is debated often. The biggest missed thing is opportunity cost (you are using the money that you'd have spent investing instead in a house).
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Re: 65k Cash. 25 y/o. Best place to put this?

Post by Derivative » Sat Jan 14, 2017 1:47 pm

lazylarry wrote:
Derivative wrote:
avenger wrote:Have you been accepted to medical school? It sounds like you haven't even been accepted yet, and you're thinking about buying a house?

I would argue that no medical student should buy a house, let alone a resident. You're entering a period of your life where you might be moving multiple times in a decade (medical school, residency, possible fellowship, then attending). The last thing you need is a another financial albatross around your neck.

Keep the money in a savings account.


I am not thinking about buying a house to live in per se. I would like to start real estate investing. I am not sure if it would be a good idea own a rental property and get a steady cash flow or equity build throughout medical school.

Perhaps I should ask in the original post: would it be wise for me to buy a house to invest in (rent out or re-sell at a later point)?


Trust me, you will not want to be managing a house while in medical school or residency. It's an unnecessary burden. The breakpoint on whether houses become a wise investment (if you want to live in them) is quoted around 5 yrs.

But this is a more difficult matter if you are talking about investing, as houses have lots of fees that may not be apparent. If you can get the deal of a lifetime on a house, then it might be reasonable, but otherwise, you are in for a lot of pain. I'd look up other forum posts, this is debated often. The biggest missed thing is opportunity cost (you are using the money that you'd have spent investing instead in a house).


What about people who have a career as a full-time real estate investor? When do they usually start buying properties? I really want to be a real estate investor in the future alongside my medical career.

Also, what about buying a condo/house after I get into medical school and know where the location is and then renting some rooms out?

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by ClaycordJCA » Sat Jan 14, 2017 1:49 pm

Unless the law changed in 2017, which I highly doubt, California does not permit any tax deduction for 529 contributions. Earnings are tax-free if used for qualified expenses.

Have you been accepted to medical school so you know where you will be attending? If not or if it isn't UCSF or Stanford, don't buy property here since you won't have the time or money to be an absentee landlord.

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by avenger » Sat Jan 14, 2017 2:24 pm

Derivative wrote:
avenger wrote:Have you been accepted to medical school? It sounds like you haven't even been accepted yet, and you're thinking about buying a house?

I would argue that no medical student should buy a house, let alone a resident. You're entering a period of your life where you might be moving multiple times in a decade (medical school, residency, possible fellowship, then attending). The last thing you need is a another financial albatross around your neck.

Keep the money in a savings account.


I am not thinking about buying a house to live in per se. I would like to start real estate investing. I am not sure if it would be a good idea own a rental property and get a steady cash flow or equity build throughout medical school.

Perhaps I should ask in the original post: would it be wise for me to buy a house to invest in (rent out or re-sell at a later point)?


Medical training is grueling. And to be honest, as an attending, I am busy enough taking care of patients. I can't imagine being a landlord, let alone if I were a trainee and had absolutely no control over my time.
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [3 fund portfolio: VTI, VXUS, SV fund (yield 3.01%)]

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by Compound » Sat Jan 14, 2017 2:37 pm

Derivative wrote:
avenger wrote:Have you been accepted to medical school? It sounds like you haven't even been accepted yet, and you're thinking about buying a house?

I would argue that no medical student should buy a house, let alone a resident. You're entering a period of your life where you might be moving multiple times in a decade (medical school, residency, possible fellowship, then attending). The last thing you need is a another financial albatross around your neck.

Keep the money in a savings account.


I am not thinking about buying a house to live in per se. I would like to start real estate investing. I am not sure if it would be a good idea own a rental property and get a steady cash flow or equity build throughout medical school.

Perhaps I should ask in the original post: would it be wise for me to buy a house to invest in (rent out or re-sell at a later point)?


How do you plan on paying for school if this money is tied up in real estate? Seems to me that using this money to reduce debt burden would be the wisest.

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by jafcorrea » Sat Jan 14, 2017 2:56 pm

my 2Ā¢ .... i know real estate investing is not for everyone, I have property's in CA outside CA and outside US = a net 15k a month in rent ... easy not really , very hard i don't think so :mrgreen:

i also know with 50k + or 20% down first time buyer can get up 350k loan

headache in life you can get anywhere even drinking a lot

not to many people have 50k+ to invest = they need to rent :greedy

that's why if you do not want to play, options are 1% Ally, Capitolone 360, 1.25 CD no penalty etc
Thanks JC

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Re: 65k Cash. 25 y/o. Best place to put this?

Post by lazylarry » Sat Jan 14, 2017 5:18 pm

Derivative wrote:
lazylarry wrote:
Derivative wrote:
avenger wrote:Have you been accepted to medical school? It sounds like you haven't even been accepted yet, and you're thinking about buying a house?

I would argue that no medical student should buy a house, let alone a resident. You're entering a period of your life where you might be moving multiple times in a decade (medical school, residency, possible fellowship, then attending). The last thing you need is a another financial albatross around your neck.

Keep the money in a savings account.


I am not thinking about buying a house to live in per se. I would like to start real estate investing. I am not sure if it would be a good idea own a rental property and get a steady cash flow or equity build throughout medical school.

Perhaps I should ask in the original post: would it be wise for me to buy a house to invest in (rent out or re-sell at a later point)?


Trust me, you will not want to be managing a house while in medical school or residency. It's an unnecessary burden. The breakpoint on whether houses become a wise investment (if you want to live in them) is quoted around 5 yrs.

But this is a more difficult matter if you are talking about investing, as houses have lots of fees that may not be apparent. If you can get the deal of a lifetime on a house, then it might be reasonable, but otherwise, you are in for a lot of pain. I'd look up other forum posts, this is debated often. The biggest missed thing is opportunity cost (you are using the money that you'd have spent investing instead in a house).


What about people who have a career as a full-time real estate investor? When do they usually start buying properties? I really want to be a real estate investor in the future alongside my medical career.

Also, what about buying a condo/house after I get into medical school and know where the location is and then renting some rooms out?


I think people who have careers as full-time real estate investor started out with a lot of money or somehow earned that capital and then quit their original jobs. Its going to be at least 9 yrs before you're an attending and can even *think* it. My cousin does this - he works a ton, sleeps and eats poorly. He also has a flexible job, which is definitely not true in medicine. If you really have some desire to do this, this would be after you pay off student debt and are making money as an attending.

For the condo option, you can do that. Just be aware that it's likely not going to "make" money for you. Your student loan interest rates are gonna be around 7%. I really doubt you'll be making that amount. My opinion is you need do a lot of research on this before thinking about this. There are things that are gonna diminish your earnings - e.g. rentors don't pay, items get damaged, cleanup costs, house is unrented, hoa fees go up, etc.
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