Buying a house before you make partner

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gasresident1

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Good, bad, or terrible idea???

If the market totally collapses in 6-12 months, it's just so tempting. Two year partner track. Full disclosure, median desirable house here is like 1-2 million so it's not a small purchase. Open to a starter house for 1.5, but ultimately family home here will be 2.5 to 3. Down payment is currently in stock market, so it's down 15% right now, but have roughly 500-600k in stocks between the two of us for a house.
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gasresident1 said:
Good, bad, or terrible idea???

If the market totally collapses in 6-12 months, it's just so tempting. Two year partner track. Full disclosure, median desirable house here is like 1-2 million so it's not a small purchase. Open to a starter house for 1.5, but ultimately family home here will be 2.5 to 3. Down payment is currently in stock market, so it's down 15% right now, but have roughly 500-600k in stocks between the two of us for a house.
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I think those numbers are very very high - and im in the NYC area.. you must have money from other sources so I do not think the "partner vs non partner" makes any difference at that level of expense... i dont think many of us here live in 3M houses..
 
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600k is 20% down on a 3m house, which assumes a bank would lend you 2.4m, which they probably wouldn’t unless your income is very high. Not exactly the question you asked, but…

I think buying without at least some prospect of a future in the area has risk. If you don’t make partner, is there somewhere else to work nearby so you don’t lose your house? If if the group sells and your pay is cut by 40%? If any of that happens and your home price continues to drop after you buy it and you can’t sell it for what you owe?

But if prices collapse, and you home price is low, the risk is less.
 
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The answer is it’s regional.

As long as you’re not crazily leveraged and willing to work locums if the job falls through AND you believe the specific housing market you’ll be in is going be resilient through the inevitable housing downturn to come (I believe the downturn is going to be highly regional, more thoughts maybe if someone starts a housing market thread), then I see no problem with it.

You have to live somewhere. Rents are going crazy. Stock market is sideways at best over 3 years making that money carry a low opportunity cost.
 
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I’m curious what people on here spend on a house. I make above average in a low cost of living area and I’m still about to drop $1M on a place.
 
cchoukal said:
600k is 20% down on a 3m house, which assumes a bank would lend you 2.4m, which they probably wouldn’t unless your income is very high. Not exactly the question you asked, but…

I think buying without at least some prospect of a future in the area has risk. If you don’t make partner, is there somewhere else to work nearby so you don’t lose your house? If if the group sells and your pay is cut by 40%? If any of that happens and your home price continues to drop after you buy it and you can’t sell it for what you owe?

But if prices collapse, and you home price is low, the risk is less.
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Why would the bank not give him a 2M home loan, income is almost certainly high enough to qualify. Plus he indicated his spouse has income.


I agree it’s risky, you would have to be confident in the real estate market your in, do you really know the area and are confident in what the house is really worth??
 
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You have no idea what's going to happen in the future. My first post- fellowship job ended when the hospital physically closed seven months after I got there. Selling a home less than one year after buying it sucks. If you can stomach it, rent for a bit. I don't know you're area of the country (but I can guess, based on those home prices), but the housing market here has started to drop, and will likely continue to do so in the coming year.
 
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You haven’t provided enough information to evaluate the “goodness” or “badness” of the idea. I’m also curious about your idea of a “starter home.” I live in a HCOL area and $1.5 million gets you a pretty darn nice house…maybe not the biggest, maybe not the most luxurious, or nicest landscaping, but pretty darn nice.
 
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If you want to buy, start with a house that would be easy to unload.
 
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GravelRider said:
You haven’t provided enough information to evaluate the “goodness” or “badness” of the idea. I’m also curious about your idea of a “starter home.” I live in a HCOL area and $1.5 million gets you a pretty darn nice house…maybe not the biggest, maybe not the most luxurious, or nicest landscaping, but pretty darn nice.
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1.5 around were I am which isn’t even that desirable place gets you pretty much what people took for granted 15 years ago….the American dream. Carlin was right
 
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gasresident1 said:
Good, bad, or terrible idea???

If the market totally collapses in 6-12 months, it's just so tempting. Two year partner track. Full disclosure, median desirable house here is like 1-2 million so it's not a small purchase. Open to a starter house for 1.5, but ultimately family home here will be 2.5 to 3. Down payment is currently in stock market, so it's down 15% right now, but have roughly 500-600k in stocks between the two of us for a house.
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I'm generally a proponent of physicians buying their homes and generally dislike renting.

$3 million is a lot to take on for your first home though.

How bad of a home is $1.5 million?

What is your monthly combined net income?

What is the property tax rate? Homeowners insurance rate?

Those will all have a large impact on your total cost of owning this house.

The state you are in is also important. For example, California is a non recourse state and has Prop 13 to keep property tax rates stable for long time homeowners.

Don't forget that you are limited on the amount of mortgage interest you can deduct on your federal taxes as well as the SALT cap.

____________________________

Ultimately, real estate is very local. If the area you are interested in is very desirable, I wouldn't expect a huge decline in values.

For me though, owning a home has been a reasonable way to control my housing costs.

I bought a new construction in a suburb with a good school district in California. Original mortgage rate was 4% with monthly cost at $3551 ( not including taxes and insurance). Because of declining mortgage rates I was able to refinance twice and am sitting at 2.75% with a monthly rate of $2889.

While rents are going up, I am holding steady with a fixed house price and borrowing money at an absurdly low rate

________________________

My advice,

Don't overextend yourself too much buying your first home. You will have much more peace of mind if you can support the mortgage on one income.

Make sure the area is safe and the schools are good. This will help keep property values high and help in resale if needed.

It can be a headache to own but I like it infinitely better than renting.
 
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I think OP’s definition of “desirable” house is subject to opinion.

The rule of thumb is try to not have a mortgage more than 3x your annual income.

So if OP wants a 1.5 million dollar home as a new or newer grad. Even at 500-600k It’s pushing it.

The housing market isn’t gonna to collapse like 2008 cause hardly any banks are doing zero down. Maybe 3% down but a lot more financial research into borrower’s financial status.
 
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It can backfire if you buy before you have a partner contract. I'll share our tale of woe:
My spouse worked 3 years for a single specialty group and contract negotiations (endless, it seemed) were underway.
We had started looking at houses and found "the one" and despite having thought we should wait to buy until we had a signed partnership contract, we put down earnest money. I don't know if earnest money is even a thing anymore?
The partners pulled back the offer, and because of how they acted, staying to work as an employee wasn't going to happen. There was 1-year noncompete clause with a 30 mile radius.
We lost the earnest money & had to move, rent a place, & look for work all at once.
There is a happy ending eventually but that was a miserable time - don't stress yourself out like that!
 
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I’d speak to a realtor or two, and see what the “average days on market” are, for that neighborhood, in that price range. If 30-45 days or less, you’d be pretty safe, if the job falls through, and you have to leave town. If it’s 4-6 months, you could have a real albatross around your neck.

How are property taxes, there?? Here in Texas, there’s no state income tax, but property taxes can be a real bear. A $3 million house could be a $50k-$75k a year tax burden, here. The $30k plus, a year, for a $1.5 million home could EASILY fund contributions to 529’s for 2 kids AND a HSA.

Oh, and take it from someone who’s been there. A “McMansion” seems pretty neat, until you wanna leave town in a hurry, and figure out that there’s a whole other subdivision of NEW McMansions being built a mile up the road, quashing any chance of YOUR home “appreciating” in price, in the near future. Location, location, location....
 
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I've decided it's best to rent for 2 years. Yes, 1.3 mil in this area will get you around 1,000-1,500 sq feet. I anticipate the housing market crashing in 2023. By 2024 we will be in a deep recession. Hopefully my partner and I still have our jobs and our stocks are not 0 by then hahaha. I don't want to fork over a ton of money right now, live beyond our means, and then have tragedy down the road if something goes wrong.

The beginner home will only last two years for us anyways, we will need 2,000+ sq feet and a larger yard with children. Better to just rent for two years and save up more for once I'm hopefully partner. Rents are ~5,000 for what we want right now. So 60,0000 a year in rent isn't too bad when you calculate the 6% seller/buyer fee and potential loss when we move. A $1.2 million dollar house with 0 down (doctor's loan, I don't want to put our trust money into a beginner home right now even though the stock market is crashing too) will be about $8,500 a month including the high tax rate. Which we would flip anyway in two years.

I don't want to be left trying to sell a starter home and having to pay an agent 60k to sell it, and coming out slightly negative.

I figure by 2024 we will have 600-700k for a down payment and monthly take homes after tax in the 30/40k range. That should be sufficient for what we want.

Less footprint, less invested in this area if we have to get up and leave.
 
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gasresident1 said:
I've decided it's best to rent for 2 years. Yes, 1.3 mil in this area will get you around 1,000-1,500 sq feet. I anticipate the housing market crashing in 2023. By 2024 we will be in a deep recession. Hopefully my partner and I still have our jobs and our stocks are not 0 by then hahaha. I don't want to fork over a ton of money right now, live beyond our means, and then have tragedy down the road if something goes wrong.

The beginner home will only last two years for us anyways, we will need 2,000+ sq feet and a larger yard with children. Better to just rent for two years and save up more for once I'm hopefully partner. Rents are ~5,000 for what we want right now. So 60,0000 a year in rent isn't too bad when you calculate the 6% seller/buyer fee and potential loss when we move. A $1.2 million dollar house with 0 down (doctor's loan, I don't want to put our trust money into a beginner home right now even though the stock market is crashing too) will be about $8,500 a month including the high tax rate. Which we would flip anyway in two years.

I don't want to be left trying to sell a starter home and having to pay an agent 60k to sell it, and coming out slightly negative.

I figure by 2024 we will have 600-700k for a down payment and monthly take homes after tax in the 30/40k range. That should be sufficient for what we want.

Less footprint, less invested in this area if we have to get up and leave.
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Bay Area?
 
gasresident1 said:
I anticipate the housing market crashing in 2023. By 2024 we will be in a deep recession.
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I thought that too at the start of covid but we had to buy so we did. Thank goodness i didnt heed my cautious old self... up probably 300k since.

No one knows where the market is going. Ever

Edit. Correction. It always goes up... you just have to wait long enough.

My checkout date is May 2050...
 
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