Is buying a home best for me?

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Topic Author
ERdoc_
Posts: 15
Joined: Sat May 26, 2018 11:34 pm

Is buying a home best for me?

Post by ERdoc_ »

Hey Bogle fam,

I have read and tried learning a bit about renting vs buying online, and suspect that maybe renting would be best and safest, however I wanted to provide you all with my exact situation as it does differ from many of the generalized blog posts regarding the topic, and see what you thought.

- Married, no kids, wife quit her job several months ago
- In my last year of ER residency training.
- Current income overall roughly 80k projected annual. 55k salary (about $4200 monthly) + moonlighting on the side ($2000) additional monthly.
- Projected income Summer 2021 income after graduation can depend on which contract I sign, if I do part time on the side but gross income should range in the $250k-350k to start.
- Father in law offered me $80k-100k for a home down payment (gift)
- Will live where I am currently in residency, on the coast, family around, love our current area

A few things that worry me are 1. home renovation costs, I don't have a lot saved up now, do have about 20k in retirement account and about the same in savings account. One good thing is that all of my family works construction, I uset to build pools and lay tile, so a lot of that I can do its just material cost really. 2. Student federal loan debt from medical school is $220k.

What prompted me to really consider this now was the offer for the down payment by my father in law, as the mortgage would likely be around what I pay now for rent, and because we plan to buy eventually in our current area, I thought, why not start the process earlier to save this rent money I'm giving to our landlord? But not sure if by renting and saving for a larger down payment next year, or saving and investing more now, would be in my BETTER interest.

Just thought you guys may have some input! Always appreciate the advice.
sailaway
Posts: 2223
Joined: Fri May 12, 2017 1:11 pm

Re: Is buying a home best for me?

Post by sailaway »

A rent vs buy calculation is based on how long, if ever, it takes you to come out ahead if you buy. If you are convinced that you will want to be in your current location for a very long time and can find a house (or condo) that will suit your needs through life changes (ie do you plan to have kids or are you intentionally childless/free?), then buying might be a good idea for you. Renting is usually short to medium term savings and flexibility. For example, when I ran my own calculations based on condos in the same development, it would take 4 years before HOA + taxes + interest would be lower than rent. We just passed the two year mark, and the calculations show we are still ahead, taking into account the most recent sales prices in the community. And that is just ahead in housing costs, not accounting for investment gains of the difference.

The above also shows that paying rent isn't necessarily throwing money away. Our landlord makes money because they bought the place at a lower price than we can, so they have a different mortgage. Given local laws, they also have a different tax basis than we would. We save money over buying while getting to be exactly where we want to be.
MJS
Posts: 582
Joined: Sat Aug 05, 2017 10:55 pm

Re: Is buying a home best for me?

Post by MJS »

The time and energy you spend on choosing / decorating / renovating a house (and a front yard and a back yard) will be time and energy you don't spend in your new medical practice. The first year of any job is full of new ideas, new people, new choices. A medical practice is hardly an exception. :wink:

If your wife wants the new house to be her full time job, and understands that you must concentrate on your new position, that could work out. But it will cost more in money.
DarkHelmetII
Posts: 662
Joined: Mon Jul 24, 2017 12:25 pm

Re: Is buying a home best for me?

Post by DarkHelmetII »

Rent!
Olemiss540
Posts: 1498
Joined: Fri Aug 18, 2017 8:46 pm

Re: Is buying a home best for me?

Post by Olemiss540 »

Rent. There is no such thing as "no strings attached". You are a mid to late twenties adult, I strongly suggest you do it on your own. I love my in laws but dont want to be business partners with them.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
Mr.Chlorine
Posts: 154
Joined: Fri Sep 13, 2019 9:17 am

Re: Is buying a home best for me?

Post by Mr.Chlorine »

Rent till the contract is signed in 2021.
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anon_investor
Posts: 3527
Joined: Mon Jun 03, 2019 1:43 pm

Re: Is buying a home best for me?

Post by anon_investor »

ERdoc_ wrote: Wed Aug 26, 2020 10:06 am Hey Bogle fam,

I have read and tried learning a bit about renting vs buying online, and suspect that maybe renting would be best and safest, however I wanted to provide you all with my exact situation as it does differ from many of the generalized blog posts regarding the topic, and see what you thought.

- Married, no kids, wife quit her job several months ago
- In my last year of ER residency training.
- Current income overall roughly 80k projected annual. 55k salary (about $4200 monthly) + moonlighting on the side ($2000) additional monthly.
- Projected income Summer 2021 income after graduation can depend on which contract I sign, if I do part time on the side but gross income should range in the $250k-350k to start.
- Father in law offered me $80k-100k for a home down payment (gift)
- Will live where I am currently in residency, on the coast, family around, love our current area

A few things that worry me are 1. home renovation costs, I don't have a lot saved up now, do have about 20k in retirement account and about the same in savings account. One good thing is that all of my family works construction, I uset to build pools and lay tile, so a lot of that I can do its just material cost really. 2. Student federal loan debt from medical school is $220k.

What prompted me to really consider this now was the offer for the down payment by my father in law, as the mortgage would likely be around what I pay now for rent, and because we plan to buy eventually in our current area, I thought, why not start the process earlier to save this rent money I'm giving to our landlord? But not sure if by renting and saving for a larger down payment next year, or saving and investing more now, would be in my BETTER interest.

Just thought you guys may have some input! Always appreciate the advice.
Does the down payment gift from your father in law have any strings attached? Is this a limited time offer? Assuming you have a good relationship with your in laws, a gift does not necessarily make you beholden to them.

I would be inclined to accept the gift and buy a house, especially if the mortgage payments would be roughly your current rent. What I would do is to make sure you do not buy too much house. You talk about renovations as if you are going to buy a house that needs a lot of work. Is it possible to find a moderately priced house that does not need immediate renovations?
pasadena
Posts: 648
Joined: Sat Jul 02, 2016 1:23 am
Location: Washington State

Re: Is buying a home best for me?

Post by pasadena »

Olemiss540 wrote: Wed Aug 26, 2020 2:16 pm Rent. There is no such thing as "no strings attached". You are a mid to late twenties adult, I strongly suggest you do it on your own. I love my in laws but dont want to be business partners with them.
This x1000.

I will add that if you wait until the end of your residency, you will be in a much better financial position as your future income is so much higher than your current one - in the meantime you can save for that downpayment and house maintenance fund, afford your home on your own (and also maybe afford something better). Right now, you just can't afford it and you'll be house poor until you get that new income. Being house poor is NOT fun.

In addition, you never know what may happen. You want to stay where you are now, but you might change your mind once you start looking for a contract. Don't anchor yourself until you've sailed.
Topic Author
ERdoc_
Posts: 15
Joined: Sat May 26, 2018 11:34 pm

Re: Is buying a home best for me?

Post by ERdoc_ »

Thank you everyone! Ya i keep hearing pros and cons from both sides. Great relationship with in-laws, they didn't know how much we were paying for rent and just want to help us out. Interest free loan essentially. It is so difficult to decide at this point.
1. Best case scenario, get a moderately nice starter home without a lot of expenses and i make mortgage payments (which i can afford) toward owning my first home, and 8 months from now begin upgrades on home, paying off more than monthly payments etc.
2. Worst case scenario, get (as mentioned) too much house, be house poor, cant afford unexpected expenses within these next 8 months (broken water heater etc), and be in worse off debt and in over my head.

I am leaning toward waiting, but my lease is up next month, if we really want to consider buying a home id just go month to month lease, if NOT probably resign the lease for a year and plan really well for then. (but that extra year of rent payment when we could be in a nice little home is what tempts me)
Olemiss540
Posts: 1498
Joined: Fri Aug 18, 2017 8:46 pm

Re: Is buying a home best for me?

Post by Olemiss540 »

Worst case scenario is much worse than that IMO.

You have no idea where you will end up living unless you have already been offered a position at your current facility. Also, do not minimize the relationship impact of a family "loan" between your self and your spouse/family.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
tashnewbie
Posts: 820
Joined: Thu Apr 23, 2020 12:44 pm

Re: Is buying a home best for me?

Post by tashnewbie »

If it's truly a NSA loan (although, is that ever really the case with family?), I'd probably throw the loan toward the student loans!! And continue to rent.
Last edited by tashnewbie on Wed Aug 26, 2020 4:58 pm, edited 1 time in total.
Katietsu
Posts: 3994
Joined: Sun Sep 22, 2013 1:48 am

Re: Is buying a home best for me?

Post by Katietsu »

Do you really know where you will be working and where you will want to live? I mean even if you are committed to a certain metro area, could you end up with a long commute? Or could you end up taking a job with no bargaining power because you have limited yourself to one institution. Will you be happy in 3 years with the house you can afford now? When residents and new attending a buy a house, it can be an anchor as much as a buoy.

However, there is the 1 in a 1000 exception to the rule. Your post implies that you are not the exception but only you and your wife can decide that.
Ani
Posts: 66
Joined: Wed Aug 22, 2018 10:03 pm

Re: Is buying a home best for me?

Post by Ani »

Doc from east coast here-

After finishing residency- I thought of buying a nice home around my 1st job. So glad I ended up not buying a big primary residence home then.

I decided to buy a basic 2b/2ba condo after residency around my 1st job that I am now renting out and it cashflows okay.

Since then, I went back into fellowship and came back to my state and started working again as attending in a different hospital. My wife also changed jobs in the meantime.

Since then, our jobs seem relatively stable and finally we are buying a home now.

In my opinion- the absolute worst thing you could do after finishing residency is buy a 'forever home'.

If you absolutely must buy- buy a small condo/SFH- and see if you will cashflow if you were to rent it out in future after moving out ( that is-- if you are even remotely interested in being a landlord)


My advice-- RENT.
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Watty
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Joined: Wed Oct 10, 2007 3:55 pm

Re: Is buying a home best for me?

Post by Watty »

If you have not seen it yet be sure to check out the White Coat Investor website. It is run by an ER doctor who is a regular poster here. It would be good to also ask your question there.

https://www.whitecoatinvestor.com/
ERdoc_ wrote: Wed Aug 26, 2020 10:06 am Will live where I am currently in residency, on the coast, family around, love our current area
You may very well stay in the same city but I would suspect that you could very well have opportunities that are ten or more miles away that could leave you will a terrible commute. I would not buy a house right now just for that reason.
ERdoc_ wrote: Wed Aug 26, 2020 10:06 am A few things that worry me are 1. home renovation costs, I don't have a lot saved up now, do have about 20k in retirement account and about the same in savings account. One good thing is that all of my family works construction, I used to build pools and lay tile, so a lot of that I can do its just material cost really.
Hummm.... I never did it but I seem to recall hearing a rumor that they kept people in residency pretty busy. :D

Are you sure that you would really have the time to do any big projects?

Once you are out of residency then doing things like your own yard work and home remodeling can be a great hobby and a way to get some physical activity but it may not be cost effective. If you have the opportunity to do some moonlighting instead then it might be better to do that and then hire your relatives or a contractor to do the remodeling for you.

When you are doing construction work there is also some risk that you might do something like get a strained back, or worse, that could impact your income even if you have good disability insurance. With you being an ER doctor I would suspect you have seen plenty of construction injuries.
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