Buy or Rent?

[doctorj321]

For those of you who have been accepted to schools that have lower housing costs, do you plan on buying a home/town home/condo or will you rent during school? I'm trying to decide on what is best, feel free to justify your reasoning.

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[Heli-Doctor]

I think every house/area is different depending on the agent or the deal you can find. this has been helpful for me.
http://mortgages.interest.com/content/calculators/rentvsbuy.asp
It has a lot of variables, check it out.

 

[rals]

It depends if you have the money for it.. I would say buy, but buy smart in a researched area, etc.

 

[dddsmack]

I am for sure buying. It is the better financial move and I am up for any challenges it may bring.

 

[johntara04]

I am for sure buying. It is the better financial move and I am up for any challenges it may bring.

With the way the market is going right now, it could very well NOT be the better financial move (especially in areas where the bubble has busted and homes are losing up to 20% a year!). You need to look at where you are looking to buy, look at what the market has done recently, and look at the cost of homes. If you buy a $200,000 home, it appreciates 3-4% a year (which is what looks like will happen except in SLC and New Mexico, and there aren't dental schools in those states) when you look to sell you will sell for $234,000. You have made $34,000. But you subtract your realtor fees, taxes, money you put into the house because something has broken down, insurance, etc, etc, etc and that $34,000 disappears pretty quick. This is also not taking into account the fact that everything in your house goes wrong the night before your biggest test of the semester and you spend all night worrying about that and not your test.

 

[Veneto]

Buy for sure. ddsmack is right it is the better financial move. As far as the real estate bubble being burst alot of that is from our doomsday media. There are a handful of markets where homes in the 200-300k range lost aroung 10% but these figures are just for the past 3/4 of the year. The market now it such a buyer's market that most every house you buy the seller will pay closing costs, reduce their price, or offer some great incentive to buy their home. New homes are even better, most builders are offering 5-10k in upgrades for free. To counter johntara04's comment about the 34,000 dissapating very quickly think about this. My appartment now is a mere 650 per month for about 1000 sq. ft. 650 for four years is 31,000 dollars, that you've spent and will never evn have the potential to see again.

 

[mshheaddoc]

If you look in our finance forum there has been alot of discussion and a thread exactly on this topic. I suggest you post in there for some input.

 

[johntara04]

Buy for sure. ddsmack is right it is the better financial move. As far as the real estate bubble being burst alot of that is from our doomsday media. There are a handful of markets where homes in the 200-300k range lost aroung 10% but these figures are just for the past 3/4 of the year. The market now it such a buyer's market that most every house you buy the seller will pay closing costs, reduce their price, or offer some great incentive to buy their home. New homes are even better, most builders are offering 5-10k in upgrades for free. To counter johntara04's comment about the 34,000 dissapating very quickly think about this. My appartment now is a mere 650 per month for about 1000 sq. ft. 650 for four years is 31,000 dollars, that you've spent and will never evn have the potential to see again.

I understand the "wasting your money on rent" argument, but if you are planning on living off of student loans, then you are borrowing money for the house (your house payment will most likely be more than rent) that will appreciate 3-4%. Your student loans will be around 7-9%. So you are losing the money you make on the house to interest. So buying a house is not a sure thing.

That being said, I bought a house. I love it. I like the quality of life it gives my family. We owned a house before dental school and like the autonomy. My wife does work and we are only borrowing money for tuition. It all comes down to what you want and can afford. Don't just do it on a whim though. If the market continues the way it is going, you will have a real possibility to lose money on your house. There is no way you will make the kind of money off your house today (even if it is a buyer's market and you can buy it at a great price) that people were making a couple of years ago. Those days are gone. It is not such a cut and dry answer anymore.

Make sure you completely think it through before you buy. There could be nothing worse than paying twice as much each month (compared to rent) for a house and strapping yourself financially, combined with the upgrades you will want to do but can't afford them, and then to try to sell your house when you graduate, have it on the market for 1 year (because it is a buyer's market and you put a lot of time and effort into it and it is worth what you are asking) then lower your price and only make a couple thousand bucks off it.

 

[eleminopee]

i haven't decided for sure yet, but i'd think buying would just be adding more to stress over and worry about. Although i have vowed to never live in apartments again, i think renting a house is what i'll end up doing. plus can you borrow money to make a down payment?

 

[RockstarDMD]

Buy for sure. ddsmack is right it is the better financial move. As far as the real estate bubble being burst alot of that is from our doomsday media. There are a handful of markets where homes in the 200-300k range lost aroung 10% but these figures are just for the past 3/4 of the year. The market now it such a buyer's market that most every house you buy the seller will pay closing costs, reduce their price, or offer some great incentive to buy their home. New homes are even better, most builders are offering 5-10k in upgrades for free. To counter johntara04's comment about the 34,000 dissapating very quickly think about this. My appartment now is a mere 650 per month for about 1000 sq. ft. 650 for four years is 31,000 dollars, that you've spent and will never evn have the potential to see again.

No offense but you comment does not make you sound very educated on the actual financial subject of purchasing a home.

I currently own a home and can understand to a certain degree where you are coming from when you say to buy. Realistically it depends on the market in the area you are considering. When and if you are able to figure out the market then you need to ask your self these questions.

1. How is my credit can I qualify for the best current interest rate?
2. Do I have at least 3-5% to put down on a home?
3. On top of money to put down do I have enough for closing costs?

If you can answer yes to all of the above then you can truly decide if you should rent or buy you do this generally the following way.

1. Find out what rent would be a month for a certain area.
2. Look at home prices and determine how much is needed for down payment and closing costs.
3. Find out what realtor fees are in the area you will be buying as in 4 years you will have o pay them to sell your house.
4. Decide how you will be paying for your mortgage. If you have a spouse this can usually help. If you are floating it on your own realize you are being penalized twice because the money you are using is coming from loans which you are already paying to use.

Now lets look at a real example:

Monthly rent of $1000 x 4 years = $48,000

Now to buy a $230,000 house:

1.You will need lets say on average 5% to put down =$11,500
2.About $9,000 in closing costs

Giving you a monthly payment of:
Principal And Interest $1,435
Taxes and insurance $162
Mortgage insurance $107 (you can't avoid this unless you put 20% down)
-------------------------------------------------
Total Payment $1,704

$1,704 a month x 4 years= $81,792

Now look at a 4 year appreciation at 3% annually =$27,600

Cost to sell you home in 4 years using a realtor =$15,456

So cost to a buy a $230,000 home for 4 years is:

4 years of payments $81,792
5% down $11,500
closing costs $9,000
realtor fees to sell + $15,456
-----------------------------------------------
$117,748
minus the appreciation of your home:
-$27,600
-----------------------------------------------
$90,148 = total cost to buy for 4 years


So Rent or Buy? For this scenario because you will only be in the home for 4 years you will not get enough appreciation, or return on your investment to constitute buying.

Buy for 4 years = $90,148
Rent for 4years= - $48,000
-------------------------------------
$42,148 saved from renting

If you have any questions feel free to PM me.

 

[johntara04]

No offense but you comment does not make you sound very educated on the actual financial subject of purchasing a home.

I currently own a home and can understand to a certain degree where you are coming from when you say to buy. Realistically it depends on the market in the area you are considering. When and if you are able to figure out the market then you need to ask your self these questions.

1. How is my credit can I qualify for the best current interest rate?
2. Do I have at least 3-5% to put down on a home?
3. On top of money to put down do I have enough for closing costs?

If you can answer yes to all of the above then you can truly decide if you should rent or buy you do this generally the following way.

1. Find out what rent would be a month for a certain area.
2. Look at home prices and determine how much is needed for down payment and closing costs.
3. Find out what realtor fees are in the area you will be buying as in 4 years you will have o pay them to sell your house.
4. Decide how you will be paying for your mortgage. If you have a spouse this can usually help. If you are floating it on your own realize you are being penalized twice because the money you are using is coming from loans which you are already paying to use.

Now lets look at a real example:

Monthly rent of $1000 x 4 years = $48,000

Now to buy a $230,000 house:

1.You will need lets say on average 5% to put down =$11,500
2.About $9,000 in closing costs

Giving you a monthly payment of:
Principal And Interest $1,435
Taxes and insurance $162
Mortgage insurance $107 (you can't avoid this unless you put 20% down)
-------------------------------------------------
Total Payment $1,704

$1,704 a month x 4 years= $81,792

Now look at a 4 year appreciation at 3% annually =$27,600

Cost to sell you home in 4 years using a realtor =$15,456

So cost to a buy a $230,000 home for 4 years is:

4 years of payments $81,792
5% down $11,500
closing costs $9,000
realtor fees to sell + $15,456
-----------------------------------------------
$117,748
minus the appreciation of your home:
-$27,600
-----------------------------------------------
$90,148 = total cost to buy for 4 years


So Rent or Buy? For this scenario because you will only be in the home for 4 years you will not get enough appreciation, or return on your investment to constitute buying.

Buy for 4 years = $90,148
Rent for 4years= - $48,000
-------------------------------------
$42,148 saved from renting

If you have any questions feel free to PM me.

Excellent post. I love my house and took all the above into account when making my decision. All we are trying to get you to do is make an informed decision so you know what you are getting into. I did and I love my house. Other's have not and have been surprised when they find out the actual cost of a home.

Plus, if you borrow for your down payment you are paying interest on two loans now, your down payment and on your house. So your interest is a lot higher.

 

[jlicious]

I'm pretty sure you can finance 100%, including closing costs nowadays. No down payment necessary. AND I may have heard about a sweet new loan offered by Countrywide where if your credit is good enough, you might not have to pay mortgage insurance- even with no money down.

I'll look into it more and get back

 

[mshheaddoc]

No offense but you comment does not make you sound very educated on the actual financial subject of purchasing a home.

I currently own a home and can understand to a certain degree where you are coming from when you say to buy. Realistically it depends on the market in the area you are considering. When and if you are able to figure out the market then you need to ask your self these questions.

1. How is my credit can I qualify for the best current interest rate?
2. Do I have at least 3-5% to put down on a home?
3. On top of money to put down do I have enough for closing costs?

If you can answer yes to all of the above then you can truly decide if you should rent or buy you do this generally the following way.

1. Find out what rent would be a month for a certain area.
2. Look at home prices and determine how much is needed for down payment and closing costs.
3. Find out what realtor fees are in the area you will be buying as in 4 years you will have o pay them to sell your house.
4. Decide how you will be paying for your mortgage. If you have a spouse this can usually help. If you are floating it on your own realize you are being penalized twice because the money you are using is coming from loans which you are already paying to use.

Now lets look at a real example:

Monthly rent of $1000 x 4 years = $48,000

Now to buy a $230,000 house:

1.You will need lets say on average 5% to put down =$11,500
2.About $9,000 in closing costs

Giving you a monthly payment of:
Principal And Interest $1,435
Taxes and insurance $162
Mortgage insurance $107 (you can't avoid this unless you put 20% down)
-------------------------------------------------
Total Payment $1,704

$1,704 a month x 4 years= $81,792

Now look at a 4 year appreciation at 3% annually =$27,600

Cost to sell you home in 4 years using a realtor =$15,456

So cost to a buy a $230,000 home for 4 years is:

4 years of payments $81,792
5% down $11,500
closing costs $9,000
realtor fees to sell + $15,456
-----------------------------------------------
$117,748
minus the appreciation of your home:
-$27,600
-----------------------------------------------
$90,148 = total cost to buy for 4 years


So Rent or Buy? For this scenario because you will only be in the home for 4 years you will not get enough appreciation, or return on your investment to constitute buying.

Buy for 4 years = $90,148
Rent for 4years= - $48,000
-------------------------------------
$42,148 saved from renting

If you have any questions feel free to PM me.

I agree with the first part of your post but I don't agree with your analysis. You aren't always saving that money when you are flipping the investment to another home so I can't really say I agree with how you were looking from a cost only standpoint. Also a home won't appreciate that much in the average market unless its new construction (most likely). Just how I look at it when we bought our home ...

Your fees are a little high as they are going to vary by areas and any med student that is trying to buy a condo/house for $230K without some help is going to be in trouble.

This particular person mentioned a low-cost housing market which translated to me that housing payments are cheaper than renting (read: not in a big city like NYC, Miami, LA, etc). While doing an analysis like the one above is good, every situation is different which is why you should consult a professional if you are considering.

There are quite a few factors that need to be considered. You no longer need to pay PMI or put the 5% down.

A good sites to visit:
http://www.bankrate.com/brm/mortgage-advisers/rent-vs-buy.asp or anything on bankrate.com

Also here is the rent vs buy thread that was started previously.

If you think you might stay in the area longer than d-school it might be even more advantageous for you to buy. There are a ton of factors to consider when purchasing a home.

 

[tissy]

Buy don't RENT!! There are many options that you can have when buying. There are different plans at an affordable rate. So there's your answer..buy!

For those of you who have been accepted to schools that have lower housing costs, do you plan on buying a home/town home/condo or will you rent during school? I'm trying to decide on what is best, feel free to justify your reasoning.

 

[RockstarDMD]

I agree with the first part of your post but I don't agree with your analysis. You aren't always saving that money when you are flipping the investment to another home so I can't really say I agree with how you were looking from a cost only standpoint. Also a home won't appreciate that much in the average market unless its new construction (most likely). Just how I look at it when we bought our home ...

Your fees are a little high as they are going to vary by areas and any med student that is trying to buy a condo/house for $230K without some help is going to be in trouble.

This particular person mentioned a low-cost housing market which translated to me that housing payments are cheaper than renting (read: not in a big city like NYC, Miami, LA, etc). While doing an analysis like the one above is good, every situation is different which is why you should consult a professional if you are considering.

There are quite a few factors that need to be considered. You no longer need to pay PMI or put the 5% down.

A good sites to visit:
http://www.bankrate.com/brm/mortgage-advisers/rent-vs-buy.asp or anything on bankrate.com

Also here is the rent vs buy thread that was started previously.

If you think you might stay in the area longer than d-school it might be even more advantageous for you to buy. There are a ton of factors to consider when purchasing a home.

Considering that mortgages and real estate are what my family does for a living, let me say that my fees are not off. Bankrate.com does not tell you about the points that may or may not be on the back end.

I currently own property and a house. I think buying is great if it is right. However, if you will only be in the home for 4 years, and unless you are in an aggressive growth market you could be spinning your wheels.

I am sorry you don't agree with my analysis take it to your financial planner or do a rent vs. buy calculator. I think you will find that my calculations are boiler plate wether or not you agree.

As far as putting 5% down you are right you don't have to put 5% down you can put zero down. In order to do this you need good credit or you will be paying a premium as far as interest rate is concerned. Don't be fooled by interest only rates that allow you to get in with a low monthly payment. Remember if it is to good to be true it probably is.

In regards to you stating that a house wont appreciate 2-3% a year unless it is a new build is not exactly accurate. If you currently own a home and you sell for a profit and don't role your earnings into a new home and rent you may find that you will make more money investing your profit in CDs at say 5%.

 

[eleminopee]

My personal finance teacher, who has so many letters after his name that it practically forms a sentence, says that buying a home is not a good idea unless you will live in it for at least 5 years. check out the resources of his website, www.scottmarsh.com. You can find some good information there about tons of financial decisions.

 

[johntara04]

Considering that mortgages and real estate are what my family does for a living, let me say that my fees are not off. Bankrate.com does not tell you about the points that may or may not be on the back end.

I currently own property and a house. I think buying is great if it is right. However, if you will only be in the home for 4 years, and unless you are in an aggressive growth market you could be spinning your wheels.

I am sorry you don't agree with my analysis take it to your financial planner or do a rent vs. buy calculator. I think you will find that my calculations are boiler plate wether or not you agree.

I second (again) what rock just said. Remeber too that if you are using loans to pay for your mortgage, you are paying the interest twice. Buying can be very, very nice and a good lifestyle choice, but for a lot of the dental/medical/professional students it is not a good financial decision.

 

[tissy]

Why wouldn't it be if your equity goes up! I think it depends where your buying. Right now from what I know AZ and some places in CA are the places to buy. You might get 200,000 in equity and can pay your loans off.

I second (again) what rock just said. Remeber too that if you are using loans to pay for your mortgage, you are paying the interest twice. Buying can be very, very nice and a good lifestyle choice, but for a lot of the dental/medical/professional students it is not a good financial decision.

 

[RockstarDMD]

Why wouldn't it be if your equity goes up! I think it depends where your buying. Right now from what I know AZ and some places in CA are the places to buy. You might get 200,000 in equity and can pay your loans off.

Lol. I'm in Arizona. 200k? Lol

 

[mshheaddoc]

Considering I have a background in mortgages and real estate I can tell you that on the average your fees are off for a market that the OP is describing, that's all I can say about that. As well as the rates right now are 0 pts about 6.25% so bankrate isn't far off (and they give you that information as well).

You look at your cost/investment ratio differently than a financial planner would as well ... You are looking at it as a short term investment which for many it might not be ... You can look at buying a house from different perspectives and in different markets. The analysis given above is a good marker but its not the end all for buying. You aren't throwing away that much money in a house but if you don't know what you are doing you can end up losing money. If you look some of the analysis has been done on the web in some of the links I've posted where you can see what I mean.

To any of you who are looking to purchase just make sure you know the costs and understand the pros and cons about buying vs. renting. I listed some links in the thread I linked in one of my posts above which can help you understand the risks. Renting is better for some people and buying is better for others. We can all debate the same points but for each person their own situation will differ. As well as there are some perks for first time homebuyers out there as well (on the mortgage end). If its a low cost housing area I would suggest buying as we bought for well below what it would cost to rent. Now I was in NYC I would be renting right now. COL differs in various areas so know what you're up against and good luck!! There has been alot of good advice from people who obviously know their stuff and are homeowners themselves. No one will agree on all the details as they differ in various regions.

 

[shamrock2006]

Yeah i can't say how strongly I feel about buying...yes you might make a good investment that will pay off for you...but what if the exact opposite happens? then what are you going to do? I'm no real estate mogul nor do I know anything about buying properties...but I can't imagine i'd like going through all the debt of dental school on top of a financial blunder. But if you know its going to work out for you...more power to you and you will be much better off than most of us when its all said and done.

 

[aggie-master]

I've been having the rent vs. buy issue myself lately and after running tons of numbers on it, it looks like, for me, renting will be less expensive even with the appreciation of the house.

The other up side to renting is that my savings would be mostly wiped out by the down payment and closing costs where if I rent I'll have almost a year worth of buffer money.

 

[RockstarDMD]

Considering I have a background in mortgages and real estate I can tell you that on the average your fees are off for a market that the OP is describing, that's all I can say about that. As well as the rates right now are 0 pts about 6.25% so bankrate isn't far off (and they give you that information as well).

You look at your cost/investment ratio differently than a financial planner would as well ... You are looking at it as a short term investment which for many it might not be ... You can look at buying a house from different perspectives and in different markets. The analysis given above is a good marker but its not the end all for buying. You aren't throwing away that much money in a house but if you don't know what you are doing you can end up losing money. If you look some of the analysis has been done on the web in some of the links I've posted where you can see what I mean.

To any of you who are looking to purchase just make sure you know the costs and understand the pros and cons about buying vs. renting. I listed some links in the thread I linked in one of my posts above which can help you understand the risks. Renting is better for some people and buying is better for others. We can all debate the same points but for each person their own situation will differ. As well as there are some perks for first time homebuyers out there as well (on the mortgage end). If its a low cost housing area I would suggest buying as we bought for well below what it would cost to rent. Now I was in NYC I would be renting right now. COL differs in various areas so know what you're up against and good luck!! There has been alot of good advice from people who obviously know their stuff and are homeowners themselves. No one will agree on all the details as they differ in various regions.

Let me just say you must be disregarding my mortgage and real estate background. Some people always feel they are right no matter what, this may be one of those scenarios. I can assure you that my example of a $230,000 home price is not off. I am sorry you disagree. Please realize not everyone on here is a twenty something poster with no life experience.

 

[gryffindor]

There is also this rent vs buy thread from the EM forum:

http://forums.studentdoctor.net/showthread.php?t=52893

 

[johntara04]

Why wouldn't it be if your equity goes up! I think it depends where your buying. Right now from what I know AZ and some places in CA are the places to buy. You might get 200,000 in equity and can pay your loans off.

You mean WERE the places to buy. Arizona has the highest rate of mortgage defaults in the country. You would be insane to buy a home in Arizona, California, or Las Vegas and try to sell it in 4 years. Those are the three worst markets in the country right now.

 

[rals]

You mean WERE the places to buy. Arizona has the highest rate of mortgage defaults in the country. You would be insane to buy a home in Arizona, California, or Las Vegas and try to sell it in 4 years. Those are the three worst markets in the country right now.

I second that. I read about it in the New York Times a few months ago. Specifically about Arizona.

And in Florida, prices are apparently still quite high even though there aren't enough buyers in condo communities anymore. They predict that in about 5 years Florida will level off to being a buyer's market, as they say. So not a good buy now.

 

[tissy]

Well that one wouldn't...lol maybe like 50k..sorry

Lol. I'm in Arizona. 200k? Lol

 

[tissy]

Not if you rent your rooms (roommates)..rent will pay itself..charge like 400 each or more depending where the location is at

No offense but you comment does not make you sound very educated on the actual financial subject of purchasing a home.

I currently own a home and can understand to a certain degree where you are coming from when you say to buy. Realistically it depends on the market in the area you are considering. When and if you are able to figure out the market then you need to ask your self these questions.

1. How is my credit can I qualify for the best current interest rate?
2. Do I have at least 3-5% to put down on a home?
3. On top of money to put down do I have enough for closing costs?

If you can answer yes to all of the above then you can truly decide if you should rent or buy you do this generally the following way.

1. Find out what rent would be a month for a certain area.
2. Look at home prices and determine how much is needed for down payment and closing costs.
3. Find out what realtor fees are in the area you will be buying as in 4 years you will have o pay them to sell your house.
4. Decide how you will be paying for your mortgage. If you have a spouse this can usually help. If you are floating it on your own realize you are being penalized twice because the money you are using is coming from loans which you are already paying to use.

Now lets look at a real example:

Monthly rent of $1000 x 4 years = $48,000

Now to buy a $230,000 house:

1.You will need lets say on average 5% to put down =$11,500
2.About $9,000 in closing costs

Giving you a monthly payment of:
Principal And Interest $1,435
Taxes and insurance $162
Mortgage insurance $107 (you can't avoid this unless you put 20% down)
-------------------------------------------------
Total Payment $1,704

$1,704 a month x 4 years= $81,792

Now look at a 4 year appreciation at 3% annually =$27,600

Cost to sell you home in 4 years using a realtor =$15,456

So cost to a buy a $230,000 home for 4 years is:

4 years of payments $81,792
5% down $11,500
closing costs $9,000
realtor fees to sell + $15,456
-----------------------------------------------
$117,748
minus the appreciation of your home:
-$27,600
-----------------------------------------------
$90,148 = total cost to buy for 4 years


So Rent or Buy? For this scenario because you will only be in the home for 4 years you will not get enough appreciation, or return on your investment to constitute buying.

Buy for 4 years = $90,148
Rent for 4years= - $48,000
-------------------------------------
$42,148 saved from renting

If you have any questions feel free to PM me.

 

[pmantz]

I am lucky I bought a house 5 years ago and will be able to put down a decent % for a down payment.

If you have some money for a down payment and 4 yrs of equity it wouldn't be impossible to sell.

The way I see it I won't make any money from buying, but I might break even and a 1000 $ morgage payment gives me a way better lifestyle then a 1500 rent.

Most people won't be buying 230K homes, 9000 closing cost ???

 

[jorUW]

Let me just say you must be disregarding my mortgage and real estate background. Some people always feel they are right no matter what, this may be one of those scenarios. I can assure you that my example of a $230,000 home price is not off. I am sorry you disagree. Please realize not everyone on here is a twenty something poster with no life experience.

Not that I have any background in home financing (a "20 something" as you would say), but I think the poster you are arguing w/ is refering to markets like Pittsburgh and other places where you can get decent 3/2 homes in the mid to low $100's. Does that make a difference?

For you or others that know... how much of a difference does it make when you analyze the same situation when you're spending half the amount of the above described example by rockstar ($230,000 home compared to <$150,000)?

 

[RockstarDMD]

For you or others that know... how much of a difference does it make when you analyze the same situation when you're spending half the amount of the above described example by rockstar ($230,000 home compared to <$150,000)?

The 230K home was just an example as it would have been even more lengthy to describe a vast array of home prices. To answer your question it can vary greatly, especially if you can find a home under 150K. The variables described above fluctuate depending on the purchase price of a home. So all of the associated costs would obviously be less on a less expensive home. This may answer the question of pmantz that was questioning the figure used for closing costs. I'm not sure what market you were talking about finding a home under 150k if it is not in a volatile market it could be a good investment.

 

[mshheaddoc]

Not that I have any background in home financing (a "20 something" as you would say), but I think the poster you are arguing w/ is refering to markets like Pittsburgh and other places where you can get decent 3/2 homes in the mid to low $100's. Does that make a difference?

For you or others that know... how much of a difference does it make when you analyze the same situation when you're spending half the amount of the above described example by rockstar ($230,000 home compared to <$150,000)?

This was in fact the situation I was originally applying to. In your case, most likely it would be more adventagous to buy in markets where you can purchase a home for under $150-$200K (especially if you have a family, know you will be staying in the area, or want to possibly rent out rooms - but playing landlord while in school can get messy). That was the market we were in and decided to purchase as it was cheaper than renting. But as I said, please do your research to find out if renting vs. buying is right for you!

To RockstarDMD, I did not mean to offend or discount your background. I am only offering advice from the perspective of someone who processed and approved mortgages for a living. Some of the information you gave was inaccurate and I was merely correcting it Not every market has $230K housing and the market that the OP was describing was NOT one of those markets. If my assumption was off from their tone, then that is my bad.

Financial analysis of investments is a tricky profession to be left up to those who are professionals. A house is an investment and to decide if you want that risk I highly suggest you consult someone who has been through the process or a financial professional to guide you through! Best of luck to those of you considering to purchase!

 

[mimsJustin]

what about the rent you collect from roomates? If you buy something at 200K and have two roomates that pay 650 a month... that $1300 going towards your apartment/house

 

[isurus22]

Alot of those figures shouldn't be added into the equation.
-The $11,000 down payment you will get back, it isn't lost like rent.
-$9000 for closing costs on $230,000 house is ridiculusly high. Use a lender like ING and its more like 1,200.
-Interest on a mortgage is tax deductable. I get about $5000 back every year on my house.
-Credit score...buying a house gives you many perks like lower insurance, and better rates when buying things like cars.
-Instant resident...in many states you get instant in-state tuition if you buy a home. You have to wait a year if you rent...what is that worth.

If you can afford it...BUY!

 

[johntara04]

-$9000 for closing costs on $230,000 house is ridiculusly high. Use a lender like ING and its more like 1,200.

Sorry, lender's only have so much control over the closing costs. State taxes play a large part of closing costs. If you move to a state with high taxes (PA for example, we pay 4k a year in property taxes alone) your closing costs will easily be around 9k. It just depends on the situation.

 

[Dauber]

No offense but you comment does not make you sound very educated on the actual financial subject of purchasing a home.

I currently own a home and can understand to a certain degree where you are coming from when you say to buy. Realistically it depends on the market in the area you are considering. When and if you are able to figure out the market then you need to ask your self these questions.

1. How is my credit can I qualify for the best current interest rate?
2. Do I have at least 3-5% to put down on a home?
3. On top of money to put down do I have enough for closing costs?

If you can answer yes to all of the above then you can truly decide if you should rent or buy you do this generally the following way.

1. Find out what rent would be a month for a certain area.
2. Look at home prices and determine how much is needed for down payment and closing costs.
3. Find out what realtor fees are in the area you will be buying as in 4 years you will have o pay them to sell your house.
4. Decide how you will be paying for your mortgage. If you have a spouse this can usually help. If you are floating it on your own realize you are being penalized twice because the money you are using is coming from loans which you are already paying to use.

Now lets look at a real example:

Monthly rent of $1000 x 4 years = $48,000

Now to buy a $230,000 house:

1.You will need lets say on average 5% to put down =$11,500
2.About $9,000 in closing costs

Giving you a monthly payment of:
Principal And Interest $1,435
Taxes and insurance $162
Mortgage insurance $107 (you can't avoid this unless you put 20% down)
-------------------------------------------------
Total Payment $1,704

$1,704 a month x 4 years= $81,792

Now look at a 4 year appreciation at 3% annually =$27,600

Cost to sell you home in 4 years using a realtor =$15,456

So cost to a buy a $230,000 home for 4 years is:

4 years of payments $81,792
5% down $11,500
closing costs $9,000
realtor fees to sell + $15,456
-----------------------------------------------
$117,748
minus the appreciation of your home:
-$27,600
-----------------------------------------------
$90,148 = total cost to buy for 4 years


So Rent or Buy? For this scenario because you will only be in the home for 4 years you will not get enough appreciation, or return on your investment to constitute buying.

Buy for 4 years = $90,148
Rent for 4years= - $48,000
-------------------------------------
$42,148 saved from renting

If you have any questions feel free to PM me.

Excellent post. When I mentioned the possiblity of buying a house to save/make money at dental school to the gen dentist and oral surgeon I've been shadowing, they looked at me like I was high. It sounds like the perfect idea to save/make money but I think when you look into it more and discover that you'll have a lot of hidden costs you didn't consider before it's much less attractive.

Now, if you have a family and/or plan on being in that city for about 10 yrs it would make sense to get started on an inevitability like owning a home. But if those don't apply, then rent; you'll be glad you did.

 

[pmantz]

Excellent post. When I mentioned the possiblity of buying a house to save/make money at dental school to the gen dentist and oral surgeon I've been shadowing, they looked at me like I was high. It sounds like the perfect idea to save/make money but I think when you look into it more and discover that you'll have a lot of hidden costs you didn't consider before it's much less attractive.

Now, if you have a family and/or plan on being in that city for about 10 yrs it would make sense to get started on an inevitability like owning a home. But if those don't apply, then rent; you'll be glad you did.

Good Point. I will be buying a home for the 4 years I will be attending D-School but I have already own one right now and will have a lot of equity. I will be able to put 25%+ down, I probaly won't make any money but at least I will save a little compared to rent and actualy be able to sell in 4.

If you don't already have equity or aren't planing on coming into 10-20% of a down payment, buying would not be the wisest idea.

 

[jlicious]

I know a dentist who was married during his dental school years- he and his wife lived in an RV parked in a trailer court the whole time! He barely had any debt coming out of D-school and he drove the RV away after he was done. How's the cost of doing that compare to renting?

 

[rals]

I know a dentist who was married during his dental school years- he and his wife lived in an RV parked in a trailer court the whole time! He barely had any debt coming out of D-school and he drove the RV away after he was done. How's the cost of doing that compare to renting?

did they stay together?

 

[jlicious]

did they stay together?

Yep happily married, 3 kids, own a general practice, making bank

 

[lillytwig]

!!

 

[pmantz]

My family and I are moving to Milwaukee, which is about 4 hrs away from where we are right now. My wife does a lot of research on the internets and we have made and are going to make another trip just to feel some neiborhoods out. I am a little nervous about the maintance. My home right now is 60+ yrs old and I usualy spend my vacation time fixing stuff/relpacing floors and windows. Putting a lot of Sweat Equity into my house, but D-School is different alot more work and definately going to make sure I am not going to walk into a lot of work. I am considering a condo, or newer construction. New/newer construction is less work but you often take a hit considering charachter and sq. footage. Lots of different factors to consider, and I am already have some experience with purchasing a home. I couldn't imagine going into purchasing a home cold. Buying a home is like being a parent, no matter how prepared you think you may be there is always things you over look, or can't forsee.
Good luck to everyone.

 

[NavyDDS]

Hey pmantz,

I'm in a similar situation. I'm married and I have a daughter & I own a house.
For the past few months I have been scoping the milwaukee area for houses and condos and it seems if you want something <20 yrs old and under $22XK you will have to drive 20-30 minutes to get to school. Even then, you might end up with something that needs work/time/money. Milwaukee suburbs are expensive. Up until a few weeks ago I was dead set on buying a newer condo (because the houses are too high) and then I started looking into nice appartments in wauwatosa/waukesha/pewaukee on rent.com. I found some nice newer apts from $800-1300. Some of these places have tennis courts, fitness centers, indoor pools plus extras. After I ran the expenses for owning vs renting, buying doesnt seem like a wise move. Here's why.


Expenses for owning 4 yrs
(not all inclusive)

~$48000 in mortgage pmts at least
~$12000 in property taxes at least
~$12000 to sell after 4 years
~$1X000 maintenance/upkeep

...so after 4 years of payments if your lucky you'll have about
$15000 off the principle purchase amount. Subtract that off just the
expenses listed above and youve spent/wasted
~$70K on interest+taxes+upkeep+realitor fees.


Expenses for renting 4 yrs
(not all inclusive)
~ $48000 rent
~ $0 taxes
~ $0 to sell
~ $0 upkeep

....so after 4 yrs you've spent/wasted
~$48000 renting, but you don't have to worry about putting
on a new roof or changing a water heater during finals,
and you don't have to sell when D-school is over!

Of course, these are just estimates of $1000/month rent or buy (if you already have equity) which is on the low end, and a house in the range of $175-$225K. And this doesn't cover appreciation, which...who knows how the marquette j/k... I mean how the market will be by that time.

I know buying/owning a house is an investment and can be very rewarding, but along with that it can be very expensive and time consumming.

I don't want all the headaches involved with owning and later on trying to sell
when d-school is finished, I would rather not mow the lawn, shovel, fix crap
considering how busy life will be in d-school with a family. Just my take on things.