Buying a house for med school

[Raidernation12]

I will be attending a school where the rotations are located within 30 minutes of each other. I am fortunate that my parents have offered me a 15k gift towards the first year of rent. They also offered me a loan if I wanted to buy a house. It would probably be about 4% interest.

Example: If I get a 250k loan for a house I would pay my parents 10k a year or about $834 a month. It would be my house and I would have to pay the HOA, property taxes, etc. Rent is about $1,500 for a two bedroom apartment. When I sell the home I will just need to pay back the principal.

I would be interested in doing residency where I buy the house, but who knows where I'll match. With closing costs and other fees it might be pretty similiar to rent or buy after four years.

Does anyone have any advice or experience with buying a house for med school?
I am also married so I don't plan on having roomates and renting out the extra rooms.

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[Fluidity of Movement]

Getting a house at 4% interest now is probably the best financial decision anyone in the younger generation can make (no idea where you are at in that regard). The interest rate bubble is likely to crash at some point, but prices will likely stay flat or only have a small dip. (I'm not a real estate investment expert, do your due diligence).

If your sole intent is to sell it in 4-5 years though, that may not be worth it. (I would hold on to it and hire someone to rent it out personally). You should definitely talk to someone who is an expert in the housing market on that regard.

The only big thing I could see would be if something catastrophic happens to your house during med school you wouldn't really have the time (or possibly finances) to deal with it, but perhaps your spouse would.

At the end of the day, renting would be safer and give you more piece of mind, but buying isn't necessarily super risky if all due diligence is done and it's a sound property.

Best of luck!

 

[Raidernation12]

Getting a house at 4% interest now is probably the best financial decision anyone in the younger generation can make (no idea where you are at in that regard). The interest rate bubble is likely to crash at some point, but prices will likely stay flat or only have a small dip. (I'm not a real estate investment expert, do your due diligence).

If your sole intent is to sell it in 4-5 years though, that may not be worth it. (I would hold on to it and hire someone to rent it out personally). You should definitely talk to someone who is an expert in the housing market on that regard.

The only big thing I could see would be if something catastrophic happens to your house during med school you wouldn't really have the time (or possibly finances) to deal with it, but perhaps your spouse would.

At the end of the day, renting would be safer and give you more piece of mind, but buying isn't necessarily super risky if all due diligence is done and it's a sound property.

Best of luck!

Thanks for your advice. We are thinking of getting a new construction townhouse and we wouldn't have to do any yardwork. Any major problems should be covered by the builders warranty.
That's a good idea to rent it out. It would rent for at least 2k right now so after med school we could maybe make around 1k a month depending on how much rent is in the future. It's close to the med school and we could maybe rent it out at a discounted rate to three students in the future. Having a company rent it out for us also sounds appealing. We could sell it when we feel like prices are high.
I am interested in family medicine and think I would have a good chance matching here. (Last year there were open spots in 4 different specialties).
My wife will be in graduate school so we have access to more room and board loans if necessary. We will probably spend about a third of what would be the maximum amount we could borrow for housing. We have family in a neighboring state that could drive out to us in an emergency.

We don't have any debt from undergrad and plan on living frugally. It's a little scary, but I think this offer is too good to pass up unless rent suddenly drops significantly in this area.

 

[Fluidity of Movement]

Thanks for your advice. We are thinking of getting a new construction townhouse and we wouldn't have to do any yardwork. Any major problems should be covered by the builders warranty.
That's a good idea to rent it out. It would rent for at least 2k right now so after med school we could maybe make around 1k a month depending on how much rent is in the future. It's close to the med school and we could maybe rent it out at a discounted rate to three students in the future. Having a company rent it out for us also sounds appealing. We could sell it when we feel like prices are high.
I am interested in family medicine and think I would have a good chance matching here. (Last year there were open spots in 4 different specialties).
My wife will be in graduate school so we have access to more room and board loans if necessary. We will probably spend about a third of what would be the maximum amount we could borrow for housing. We have family in a neighboring state that could drive out to us in an emergency.

We don't have any debt from undergrad and plan on living frugally. It's a little scary, but I think this offer is too good to pass up unless rent suddenly drops significantly in this area.

Ha, you can probably rent each room for 2k if it's close to a school 🙂

Sounds like you have some good ideas. But I think we are well beyond SDN advice territory at this point x)

 

[Angus Avagadro]

The only problem with owning is that you are at the mercy of market forces. So if housing prices decline, as we saw in 2010, then you might have to write a check to sell your home. During the last housing crash, we bought our beach condo in 2012 and paid 40k less than the owner did 10 yrs earlier. Secondly, if you buy a home, generally it takes about 5 yrs for I to appreciate iate enough to recover your closing costs. You don't know where you will match, so it does have some risk if you buy. 4% is a great rate right now, so you and your folks have some decisions to make. It will depend a lot on your risk tolerance. Good luck and nest wishes.

 

[Bluesandstuff]

Yeah, I feel like my classmates with houses felt unduly constrained by their house. OR their spouse worked in tech and basically was already making doctor money and was starting their rental empire.

 

[Bluesandstuff]

In terms of if it’s financially smart talk to a good financial advisor

 

[Raidernation12]

The only problem with owning is that you are at the mercy of market forces. So if housing prices decline, as we saw in 2010, then you might have to write a check to sell your home. During the last housing crash, we bought our beach condo in 2012 and paid 40k less than the owner did 10 yrs earlier. Secondly, if you buy a home, generally it takes about 5 yrs for I to appreciate iate enough to recover your closing costs. You don't know where you will match, so it does have some risk if you buy. 4% is a great rate right now, so you and your folks have some decisions to make. It will depend a lot on your risk tolerance. Good luck and nest wishes.

Thanks for your response. It is a gamble especially how weird the market has been since the pandemic. I've been told that closing costs are significantly lower with a cash offer. That being said, receiving money for the first years rent is a higher than closing costs anyways. I basically need to factor in 15k towards closing costs because I wouldn't receive that gift.

 

[wysdoc]

Thanks for your response. It is a gamble especially how weird the market has been since the pandemic. I've been told that closing costs are significantly lower with a cash offer. That being said, receiving money for the first years rent is a higher than closing costs anyways. I basically need to factor in 15k towards closing costs because I wouldn't receive that gift.

My son had no trouble selling his med school house when he had to move for residency - he had an offer in 1 month.

 

[IAskQuestionsOnly]

This is contextual as HECK

1. Buying in new york vs. in the middle of no where vs. the borders of gentrified areas in urban (or rural areas).
2. Good location vs. Bad location near transportation or services or other jobs!
3. Overall market! Buying in 2002 would be great!, 2007 not so great.
4. Other investments. if you have abilities to outperform the current market.
5. Other needs for the money. You going to be sent to a different location for a fellowship? Or have spouse? Or any other reason you're not going to be exactly where you are
6. etc etc etc

You all above all need to understand OVERALL market trends.
We have been in a stock and housing bull market going almost 15 years now! This is unsustainable for long. At some point, it's going to pop and it pops the year after you buy, then you've wasted 5-10 years before it recovers and it overtakes and you make profit.

 

[wysdoc]

This is contextual as HECK

1. Buying in new york vs. in the middle of no where vs. the borders of gentrified areas in urban (or rural areas).
2. Good location vs. Bad location near transportation or services or other jobs!
3. Overall market! Buying in 2002 would be great!, 2007 not so great.
4. Other investments. if you have abilities to outperform the current market.
5. Other needs for the money. You going to be sent to a different location for a fellowship? Or have spouse? Or any other reason you're not going to be exactly where you are
6. etc etc etc

You all above all need to understand OVERALL market trends.
We have been in a stock and housing bull market going almost 15 years now! This is unsustainable for long. At some point, it's going to pop and it pops the year after you buy, then you've wasted 5-10 years before it recovers and it overtakes and you make profit.

well if anyone wants to ask me where our housing market was they can.
There is NO "one size fits all" financial advice

 

[W1zardDoctor]

I will be attending a school where the rotations are located within 30 minutes of each other. I am fortunate that my parents have offered me a 15k gift towards the first year of rent. They also offered me a loan if I wanted to buy a house. It would probably be about 4% interest.

Example: If I get a 250k loan for a house I would pay my parents 10k a year or about $834 a month. It would be my house and I would have to pay the HOA, property taxes, etc. Rent is about $1,500 for a two bedroom apartment. When I sell the home I will just need to pay back the principal.

I would be interested in doing residency where I buy the house, but who knows where I'll match. With closing costs and other fees it might be pretty similiar to rent or buy after four years.

Does anyone have any advice or experience with buying a house for med school?
I am also married so I don't plan on having roomates and renting out the extra rooms.

My wife is a mortgage loan originator. She asked that I clarify if your parents are going to be your bank with that 4% loan, or if you found a place offering that rate, because most traditional lenders are in the mid 5%s, and that's with paying the maximum allowed (3%) to get the rate down.

She also added that if your parents are offering you a 4% loan, you should ABSOLUTELY do it. You can find Rent vs. Own calculators, and pretty much all of them will likely support purchasing vs. renting.

Below is linked a RvO calculator. You'll have to do some research for the numbers, but when I plugged in some for my area, the break even point was at 3 years.

Rent vs Buy Calculator - NerdWallet

Should you rent or buy a home? Use our rent vs buy calculator to find out which option is best for you.

www.nerdwallet.com

 

[Goro]

I will be attending a school where the rotations are located within 30 minutes of each other. I am fortunate that my parents have offered me a 15k gift towards the first year of rent. They also offered me a loan if I wanted to buy a house. It would probably be about 4% interest.

Example: If I get a 250k loan for a house I would pay my parents 10k a year or about $834 a month. It would be my house and I would have to pay the HOA, property taxes, etc. Rent is about $1,500 for a two bedroom apartment. When I sell the home I will just need to pay back the principal.

I would be interested in doing residency where I buy the house, but who knows where I'll match. With closing costs and other fees it might be pretty similiar to rent or buy after four years.

Does anyone have any advice or experience with buying a house for med school?
I am also married so I don't plan on having roomates and renting out the extra rooms.

Just as an aside, having personal experience with this, do NOT ever buy a house in an HOA.

The house Nazis will torment you over the most stupid things.

 

[Raidernation12]

My wife is a mortgage loan originator. She asked that I clarify if your parents are going to be your bank with that 4% loan, or if you found a place offering that rate, because most traditional lenders are in the mid 5%s, and that's with paying the maximum allowed (3%) to get the rate down.

She also added that if your parents are offering you a 4% loan, you should ABSOLUTELY do it. You can find Rent vs. Own calculators, and pretty much all of them will likely support purchasing vs. renting.

My parents would be the bank. It would be my house, but I would write my parents a promissory note to pay them back. Basically my parents have this retirement money in the bank so they would just charge me what the bank is paying them for interest if it were in a CD (sub 4%). My father is an experienced accountant so he would make sure everything is done correctly.

 

[W1zardDoctor]

Just as an aside, having personal experience with this, do NOT ever buy a house in an HOA.

The house Nazis will torment you over the most stupid things.

I feel like the HOA thing depends. When my wife and I started out, we lived in a condo with an HOA. It was nice to have the yard taken care of, access to a pool, a private park, a dog park, and a tennis court, for only $100. The rules were pretty simple in the community though, so definitely review the CC&Rs before accepting or rejecting based solely on an HOA.

My parents would be the bank. It would be my house, but I would write my parents a promesary note to pay them back. Basically my parents have this retirement money in the bank so they would just charge me what the bank is paying them for interest if it were in a CD (sub 4%). My father is an experienced accountant so he would make sure everything is done correctly.

That's an awesome deal then. We did something similar when my wife and I first got married, and we bought our condo. My grandpa was "the bank". We eventually refinanced, but it was a great option for both of us since he got more from our interest than the bank was giving him at the time, and we were able to qualify easily while my wife was working as a teacher, and I was a full-time student. We had everything in writing as we are firm believers that contracts save relationships...
Another comment from my wife, just as an FYI- If you ever need to refinance out, it may be difficult if you have all your student loan debt, BUT if it's a rental at that point, you could potentially do a DSCR loan (a loan that only looks at the rent you receive from the property to qualify). There are other factors to it, but that's the gist. You can pm me if you have more questions about it, and my wife can fill in the blanks. 🙂

 

[Raidernation12]

Just as an aside, having personal experience with this, do NOT ever buy a house in an HOA.

The house Nazis will torment you over the most stupid things.

My username hints at the location, but sadly an HOA might be a necessary evil. Most houses are in an HOA and the ones that aren't are older. I am worried that if we buy an older home we would run into problems like having to replace or roof or something. New houses can have problems too, but major repairs would make the med school experience even more stressful.

 

[Raidernation12]

I feel like the HOA thing depends. When my wife and I started out, we lived in a condo with an HOA. It was nice to have the yard taken care of, access to a pool, a private park, a dog park, and a tennis court, for only $100. The rules were pretty simple in the community though, so definitely review the CC&Rs before accepting or rejecting based solely on an HOA.

That's an awesome deal then. We did something similar when my wife and I first got married, and we bought our condo. My grandpa was "the bank". We eventually refinanced, but it was a great option for both of us since he got more from our interest than the bank was giving him at the time, and we were able to qualify easily while my wife was working as a teacher, and I was a full-time student. We had everything in writing as we are firm believers that contracts save relationships...
Another comment from my wife, just as an FYI- If you ever need to refinance out, it may be difficult if you have all your student loan debt, BUT if it's a rental at that point, you could potentially do a DSCR loan (a loan that only looks at the rent you receive from the property to qualify). There are other factors to it, but that's the gist. You can pm me if you have more questions about it, and my wife can fill in the blanks. 🙂

Thanks we'll have to look into that. My Dad said 4% is the lowest interest he can give without the IRS considering it a gift.

 

[chilly_md]

My username hints at the location, but sadly an HOA might be a necessary evil. Most houses are in an HOA and the ones that aren't are older. I am worried that if we buy an older home we would run into problems like having to replace or roof or something. New houses can have problems too, but major repairs would make the med school experience even more stressful.

If you must, get one with a lower HOA. You do not want to have to lose extra money every month, especially if you rent it out later on. Future buyers might also not like having a high HOA.

You should see how much property tax and HOA adds to your monthly expense and whether current rent prices can cover or exceed that amount. If you get someone to manage the property when you move out, they take a cut out of the rent, which is something to also consider. The quick math way to see if it is worth it in your general area (as opposed to specific properties) is that you typically want to be able to charge at least 1% of the price you paid for the property as the monthly rent (ie 2k rent for a 200k house).