I recently matched into am Emergency Medicine Residency at Henry Ford Hospital in Wyandotte, MI, and getting paid approx $47K/yr. It's cool, I'm excited and down with it, it's 4 years (with yearly raises of ~$2-3K/yr), and it starts in early June. I'm from Michigan, so I'm kind of familiar with the area, but it's like 90 minutes from all my family and whatnot, and I'm currently going to school in Florida, which is kinda far away.
Anyway, so I'm looking at places to live in the area, and I've come to a crossroads of sorts. There are lots of options in where to live in the area of the hospital, but the ones that interest me most are the ones close to downtown, so I can walk to the hospital and downtown area with ease. The question I've come here to ask, as you can probably guess by the title, is whether I should be looking to Rent or to Buy.
Now, a little background on my sources of information and input. As may be well known or not, the real estate market in Michigan sucks. However, my mother is a long time real estate agent/mogul or sorts who made a fair amount of money ($200K+/yr) in the early 2000s, but has since left the business due to lack of, well, business. My older brother is a successful lawyer who got royally screwed to the tune of foreclosure and $80K, by the housing/mortgage ****up of recently. They are my primary sources of information on this conundrum, so I thought I'd come here for more input/info.
Let me preface this by saying that I don't really understand any of the financial stuff as I have been neck deep in Medical stuff for the past 4 years, and I've never had to deal with it before. So, anyways, here's the brief version of what I understand: If I rent a place, and spend approx $800/month on an apartment/rental/flat/whatever, that equates to ~$40K over 4 years, which, while hassle free (i.e. apartment living), is essentially just giving my money to someone else. However, I was looking at Condo's in the area, and there are some in the $100K-120K range which would equate to ~700/month +fees = $1000/mo, and I could purchase them. In fact, they are generally nicer, and in better location than the apartments I was looking at (i.e. more walkable, downtowny). As I understand it, if I put $48K over 4 years into an $100K apartment, , even if were to take a loss on the condo (say sell it for $80K), it would still be as if I had only spend $20K on rent, and come out $20K ahead of if I had rented. And that's only if the market goes down. If the market goes up, and I can sell for $120K or more (keep in mind these are riverfront condos in a downtown area), I make the difference back in cash.
So, to me, it seems buying a condo seems to be the better idea. However, my brother is vehemently against it, due to his getting ****ed over so badly.
So anyway, here's what my brother says:
So, at this point, I'm very confused as to what to do. One family member is in support of it, one against, and they both seem to make good points. So please, tell me, what should I do?
Anyway, so I'm looking at places to live in the area, and I've come to a crossroads of sorts. There are lots of options in where to live in the area of the hospital, but the ones that interest me most are the ones close to downtown, so I can walk to the hospital and downtown area with ease. The question I've come here to ask, as you can probably guess by the title, is whether I should be looking to Rent or to Buy.
Now, a little background on my sources of information and input. As may be well known or not, the real estate market in Michigan sucks. However, my mother is a long time real estate agent/mogul or sorts who made a fair amount of money ($200K+/yr) in the early 2000s, but has since left the business due to lack of, well, business. My older brother is a successful lawyer who got royally screwed to the tune of foreclosure and $80K, by the housing/mortgage ****up of recently. They are my primary sources of information on this conundrum, so I thought I'd come here for more input/info.
Let me preface this by saying that I don't really understand any of the financial stuff as I have been neck deep in Medical stuff for the past 4 years, and I've never had to deal with it before. So, anyways, here's the brief version of what I understand: If I rent a place, and spend approx $800/month on an apartment/rental/flat/whatever, that equates to ~$40K over 4 years, which, while hassle free (i.e. apartment living), is essentially just giving my money to someone else. However, I was looking at Condo's in the area, and there are some in the $100K-120K range which would equate to ~700/month +fees = $1000/mo, and I could purchase them. In fact, they are generally nicer, and in better location than the apartments I was looking at (i.e. more walkable, downtowny). As I understand it, if I put $48K over 4 years into an $100K apartment, , even if were to take a loss on the condo (say sell it for $80K), it would still be as if I had only spend $20K on rent, and come out $20K ahead of if I had rented. And that's only if the market goes down. If the market goes up, and I can sell for $120K or more (keep in mind these are riverfront condos in a downtown area), I make the difference back in cash.
So, to me, it seems buying a condo seems to be the better idea. However, my brother is vehemently against it, due to his getting ****ed over so badly.
So anyway, here's what my brother says:
to which my real estate mother replied:I really, really don't think daveyjwin should be *buying* anything. what are the concrete benefits of buying and then selling in 4 years versus just renting for 4 years? if he's lucky he'll be able to sell something in four years for what he bought it for today. if he's not super lucky, then he gets stuck with a huge pain in the ass. it's not like he'll be able to accumulate any significant equity in four years; the only way he comes out on top here is if the property value goes up in four years, and I don't think anyone's predicting that (it's not like he's going to be wanting to put a bunch of money and effort into big renovation projects or anything). Renting is flexible, cheaper, easier and there's zero risk of being stuck with declining property values, sewer assessments, street assessments, maintenance costs, property taxes, insurances and on and on. there also not really throwing around $0 down home loans like they used to. I don't see the point of owning a house for four years just for sake of owning it.
Here is the scoop .
Ive done the numbers considering the income tax advantages for someone with zero write-offs with Daveyjwin. With the tax schedule buying with a total monthly payment of $1200 equates out to a rent payment of $852 per month. With an income of $47,000 per year and basically no deductions he is better off bottom line financially to purchase. Even if there is little to no appreciation whatsoever in four years, he is still ahead. Renting he would have a higher tax liability, no deductions and be throwing $10,200 per year or $40,800 over four years out the window.
Im recommending a condo purchase, no maintenance and hopefully little to no improvements besides cosmetics. We are looking specifically in town and near the hospital so if he didnt want to sell it in four years, he could keep it as an investment property and lease it. He could depreciate it and write off the expense.
I will have Darlene pull everything in threes building we have identified. Daveyjwin wants me get the lock boxes and you and I can go and look for him. He will have to get a mortgage pre-approval based on his employment contract, hopefully with zero to little down. He plans on coming home end of March to look and will hopefully have his pre-approval. If he closed by end of April, his first payment would be in June and he would also qualify for the 1st Time Homebuyers Credit of $8,000 as well.
There is a method to my madness .
So, at this point, I'm very confused as to what to do. One family member is in support of it, one against, and they both seem to make good points. So please, tell me, what should I do?