Debt and Selection of Residency

[Sneezing]

---

Members do not see this ad.

An emerging criteria for me and the ranking of my future residency program is most certainly finances. I have ~195K in principal and maybe ~10K in interest that has accrued. Plus my/our loans are at 6.8% and even the 8.5% in Grad Plus loans. This is only from medical school and I have lived quite frugally.

I am now noting the following:
-Tax structure of the state
-completeness of benefits package to reduce out of pocket expenses
-salary
-cost of living
-housing prices, as I refuse to throw away 4 years worth of rent
-Commute to training sites of the program. Will I be wasting time in traffic or on short term housing or on a lot of gasoline?

I also believe the consistent public apathy towards the issues facing physicians and future physicians is quite concerning.

As a result I think concerns of personal financial solvancy are now real enough that it will be placed above ranking criteria of prestige, location, and even percieved personal fit of a program. Are others feeling the same way?

 

[Sophie]

I'm actually in more debt than you, thanks to our ridiculously high tuition and living in a fairly expensive city. While deciding where to apply for residency I did look at the cost of living in various cities, and considered applying to programs in cheaper areas. I realized, however, that I learn and function best when I'm happy, and the location and fit of a program really matter more to me than anything else.

While it's good to keep finances in mind, I believe that it's totally doable to pay back student loans after residency, so I'm not going to let financial worries keep me from going to whichever program I decide I like best.

 

[Doctor Bagel]

I'm in more debt than you, too, and honestly, no, it's not having a huge impact on my choices. Cost of living is factoring in there somewhere, but that isn't really based on concern about my debt level -- I'd just like to live a somewhat decent life during residency on my salary. But if I find out an LA program is great for me, I'll go to LA and figure it out.

Like Sophie, it's also important to me to be somewhere I like. You don't have a lot of spare time during residency, so being close to things that bring me joy is a priority.

 

[strawberryfield]

happiness is ultimately important, as is good fit, seeing as I've been happy and found a good fit in places much smaller than the places I am applying now, I'm not too worried. But I'd rather have a nice quality of life for my salary rather than just be scraping by, and as most of you have surely noticed, the resident salaries may only slightly (or not at all increase) in large, expensive cities like Chicago, compared to smaller, less expensive places like Kansas City, OKC, ect. Maybe I'm a rare one who actually likes the more "rural" midwest? 😉

 

[RGMSU]

I wouldn't make my decision based on that right now, because who has the first damn clue how the healthcare reforms are going to shake out and what exactly its implication on each specialty's financial viability will be?

 

[Omahadoc]

Just a quick note to the initial poster regarding the "throwing away rent for 4 years comment." You may want to reconsider the rent vs. buy decision if you're definitely planning to move after you complete your residency. Between closings costs, realtor commissions, interest, property taxes and home repairs & maintenance, you'll likely take a bigger financial hit owning a home for only 4 years than renting. That's not to mention the headache of trying to sell the home shortly before or during a relocation. Unless you have a strategy for buying a home that you expect to seriously appreciate over 4 years, renting isn't a bad financial option.

 

[Sneezing]

Rent will be at least $550 dollars a year, and possibly as much as $1100.
550dollars x 12months x 4years = $26,400
1100dollars x 12months x 4years = $52,800
Plus another ~$450 to cover renters insurance over the 4 years.

The way I see it, I am already in the hole by at least $26,400. Even with all those wisely identified expenses, I have a hard time believing I will lose more than $26,400 with a home purchase in the associated expenses. I especially doubt there will be anymore losses in the housing market, because I think things have already bottomed out. It is a buyers market.

Plus to minimize some of those expenses you pointed out, I'm thinking of a downtown condo or loft, which basically every town has, including your small town, Omaha. There are less home repairs and upkeep associated with those, and even at times less property taxes. A realitor may also be circumvented on the onset by looking ones self. Here are two options in Omaha: http://www.dunsanyflats.com/#/floor_plans http://www.omahahomesonline.com/105N31-805/index.htm

My goal isn't necessarily to come out ahead or equal but to just do damage control.

 

[turtle8787]

Rent will be at least $550 dollars a year, and possibly as much as $1100.
550dollars x 12months x 4years = $26,400
1100dollars x 12months x 4years = $52,800
Plus another ~$450 to cover renters insurance over the 4 years.

The way I see it, I am already in the hole by at least $26,400. Even with all those wisely identified expenses, I have a hard time believing I will lose more than $26,400 with a home purchase in the associated expenses. I especially doubt there will be anymore losses in the housing market, because I think things have already bottomed out. It is a buyers market.

Plus to minimize some of those expenses you pointed out, I'm thinking of a downtown condo or loft, which basically every town has, including your small town, Omaha. There are less home repairs and upkeep associated with those, and even at times less property taxes. A realitor may also be circumvented on the onset by looking ones self. Here are two options in Omaha: http://www.dunsanyflats.com/#/floor_plans http://www.omahahomesonline.com/105N31-805/index.htm

My goal isn't necessarily to come out ahead or equal but to just do damage control.

Economics and basic finance need to become pre-reqs or taught in med school. The rent vs buy argument comes down to opportunity cost. You are not throwing money away at rent any more than you are throwing money away at mortgage interest, property taxes, and realestate fees. Sneezing posted links to two "options" at 125000, and 210000. I doubt you have any money for a down payment, but lets assume you do have a lofty 20% for that. Plug in the numbers http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html. This is a pretty amazing calculator that lets you play with the interest rates, appreciation rates, closing costs, tax savings, ect. Using the numbers you provided (assuming 4% appreciation for the home and 4% increases for rent) for renting and the home prices in your area, it will take at least 8 years for buying to be a better investment. If you invest the difference in stocks and make a 8% return (this is a conservative rate in the long run when looking at historical trends) then buying never beats renting.

Buying can be a good financial investment if you hold it for a long time. Often times the opportunity costs of buying outweigh the costs of renting especially in the short term. One of the reason's the economy crashed is because so many people had the misconception that they should buy houses on margin when they shouldn't have.

 

[masterofmonkeys]

I especially doubt there will be anymore losses in the housing market, because I think things have already bottomed out. It is a buyers market.

I felt the opposite, which was part of the reason I decided not to buy (at least for now). The american people still have a gigantismal debt to income ratio, and the housing 'crash' such as it was really hasn't changed that too much.

I do agree with your thoughts on a condo. If I do buy later in residency (i'm in a six-year track so my final decision point, personally is going to be before PGY-4 starts), that's the route I'm going to go.

http://www.businessinsider.com/henr...h-has-already-resumed-2009-10?ref=patrick.net

 

[billypilgrim37]

It's very difficult to argue generally for buying vs selling across different metropolitan areas. I bought a house at the end of PGY-1 because a) I live in an area where there has been zero evidence of either a housing bubble or a collapse bust in the past 20 years, 2) I will be in this town for at least 4 more years at this point, almost certainly for 5-6 more, and a decent chance for longer than that. For 150k, I could get a 3-bedroom recently remodeled house 3 miles from the hospital on a bus route in a safe neighborhood with a local elementary school that wouldn't be horrible to send kids to if my wife and I decide to reproduce sooner than later. AND Mr Obama decided that my situation entitled me to 8K tax rebate just for funsies.

I was paying 900/month in rent last year in a hipster neighborhood, and now I'm paying 1000/month house payment still within walking distance from a hipster neighborhood and about a mile away from Costco, Target, etc. Probably paying an extra 200 a month in utilities.

So for me, it's pretty silly not to buy. But in general Americans ridiculously overvalue ownership, and some of this is due to bad tax policy that encourages ownership for those who would be much better off renting.

And to some degree, the fact that I bought the house increases the chance that I will stick around after residency. It also makes it harder to get divorced (tongue-in-cheek). And it's nice to be able to adopt a dog at a shelter without showing a lease, and being able to paint a wall or knock a hole in your bathroom ceiling to put in a fan without having to ask anybody else.

It's also nice being able to call your landlord to come fix the air conditioner that has stopped working 4 times in the past 3 months.

 

[Doctor Bagel]

I've pretty much decided not to buy anything next year no matter where I go because I think moving, graduating, starting internship and buying a house in a new area all around the same time is too much for me. Actually I'll modify my statement and say that I'll consider buying if I stay at my home program because houses are very cheap here, and I know exactly where I want to live here.

The big thing is that you're not throwing away money by renting! Renting has several advantages including decreased risk, more flexibility if you find you don't like where you are, free maintenance and sometimes the ability to actually live in a nicer area than you could buy in. For example, we're renting a 2 bed/1 bath in a neighborhood where houses go for $200 to $300k, which we couldn't afford right now. When we lived in Portland, we rented in an area in walking distance of virtually everywhere I needed to be where buying would cost $500k to $1 million. To afford to buy there at that time (near the peak of the bubble), we would have been forced to live really far out and decrease our qualify of life in the process.

Now about the down payment issue, are there still physician loans out there that let you get out of that? I haven't researched it, but yeah, I think most of us coming out of med school don't have $20k plus in savings.

 

[Levi]

I was paying 900/month in rent last year in a hipster neighborhood, and now I'm paying 1000/month house payment still within walking distance from a hipster neighborhood and about a mile away from Costco, Target, etc. Probably paying an extra 200 a month in utilities.

I'd love to live in a hipster neighborhood. Are you in williamsburg, ny?

 

[billypilgrim37]

I'd love to live in a hipster neighborhood. Are you in williamsburg, ny?

I do have a friend that lives in Williamsburg, but I think I could rent my bathroom out for 900/month in Williamsburg! 😉

 

[masterofmonkeys]

Now about the down payment issue, are there still physician loans out there that let you get out of that? I haven't researched it, but yeah, I think most of us coming out of med school don't have $20k plus in savings.

Most of us qualify for FHA which only requires 3.5% down. Of course, that and other programs are part of the reason I dont think the housing bubble has finished collapsing.

 

[Omahadoc]

Rent will be at least $550 dollars a year, and possibly as much as $1100.
550dollars x 12months x 4years = $26,400
1100dollars x 12months x 4years = $52,800
Plus another ~$450 to cover renters insurance over the 4 years.

The way I see it, I am already in the hole by at least $26,400. Even with all those wisely identified expenses, I have a hard time believing I will lose more than $26,400 with a home purchase in the associated expenses.

Just as a point of reference, on a $200,000 mortgage at 5.5% you'll have paid $43,000 of interest after 4 years. If you go the FHA loan route, you'll also be paying Private Mortgage insurance ($75-125/month) and if you go the downtown condo route add in another $200+ per month in HOA fees. Add in the expenses I mentioned earlier, including $12,000 in realtor fees when you sell the place, and you start to see the full picture.

I'm not trying to discourage buying, just pointing out that a lot of people take a really unsophisticated approach to the buy vs. rent decision. As a general rule, you're going to be better off renting if you're not going to own the home for 5 or more years.

 

[Sneezing]

Economics and basic finance need to become pre-reqs or taught in med school. The rent vs buy argument comes down to opportunity cost. You are not throwing money away at rent any more than you are throwing money away at mortgage interest, property taxes, and realestate fees. Sneezing posted links to two "options" at 125000, and 210000. I doubt you have any money for a down payment, but lets assume you do have a lofty 20% for that. Plug in the numbers http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html. This is a pretty amazing calculator that lets you play with the interest rates, appreciation rates, closing costs, tax savings, ect. Using the numbers you provided (assuming 4% appreciation for the home and 4% increases for rent) for renting and the home prices in your area, it will take at least 8 years for buying to be a better investment. If you invest the difference in stocks and make a 8% return (this is a conservative rate in the long run when looking at historical trends) then buying never beats renting.

Buying can be a good financial investment if you hold it for a long time. Often times the opportunity costs of buying outweigh the costs of renting especially in the short term. One of the reason's the economy crashed is because so many people had the misconception that they should buy houses on margin when they shouldn't have.

Good stuff. I'm wrong🙁. At least in most of the housing situations I have been envisioning at prospective programs and the duration I would own the place. That is a pretty savy calculator. Thanks for the insight y'all.

But the rest of my OP still holds some weight 😉

 

[masterofmonkeys]

Good stuff. I'm wrong🙁. At least in most of the housing situations I have been envisioning at prospective programs and the duration I would own the place. That is a pretty savy calculator. Thanks for the insight y'all.

But the rest of my OP still holds some weight 😉

Buying isn't always a wrong move. It's the right move in OKC, for instance. Where 700 can get you a 3 bedroom place with a big backyard in a low-crime lower middle class neighborhood. When the cheapest apartments of similar quality are 400 for a single bedroom.

 

[Doctor Bagel]

Buying isn't always a wrong move. It's the right move in OKC, for instance. Where 700 can get you a 3 bedroom place with a big backyard in a low-crime lower middle class neighborhood. When the cheapest apartments of similar quality are 400 for a single bedroom.

But moving to OKC is never the right move. 😉

 

[OldPsychDoc]

But moving to OKC is never the right move. 😉

Depends on where you're coming from I suppose... 😉
(I'm thinking Midland, Lubbock, TX; Ogalala, NB...)

 

[Sneezing]

Depends on where you're coming from I suppose... 😉
(I'm thinking Midland, Lubbock, TX; Ogalala, NB...)

I wouldn't stop there. I would go as far as to say every Texan would be making a life improvement by moving to oklahoma.

 

[OldPsychDoc]

I wouldn't stop there. I would go as far as to say every Texan would be making a life improvement by moving to oklahoma.

I didn't want to enter that particular border conflict.... 😛

 

[trophyhusband]

I wouldn't stop there. I would go as far as to say every Texan would be making a life improvement by moving to oklahoma.

Hey now, my wife and I are looking very hard at some of the Texas residencies. As far as I am concerned the only concern with Texas is all of the Texans who live there... I kid I kid. Some of my best friends are Texans 😉.

 

[masterofmonkeys]

Depends on where you're coming from I suppose... 😉
(I'm thinking Midland, Lubbock, TX; Ogalala, NB...)

Actually untrue. I grew up in Lubbock. And went to med school in OKC. In a lot of ways, LBK is a better city than OKC, despite the size discrepancy.

 

[strawberryfield]

I've pretty much decided not to buy anything next year no matter where I go because I think moving, graduating, starting internship and buying a house in a new area all around the same time is too much for me. Actually I'll modify my statement and say that I'll consider buying if I stay at my home program because houses are very cheap here, and I know exactly where I want to live here.

The big thing is that you're not throwing away money by renting! Renting has several advantages including decreased risk, more flexibility if you find you don't like where you are, free maintenance and sometimes the ability to actually live in a nicer area than you could buy in. For example, we're renting a 2 bed/1 bath in a neighborhood where houses go for $200 to $300k, which we couldn't afford right now. When we lived in Portland, we rented in an area in walking distance of virtually everywhere I needed to be where buying would cost $500k to $1 million. To afford to buy there at that time (near the peak of the bubble), we would have been forced to live really far out and decrease our qualify of life in the process.

Now about the down payment issue, are there still physician loans out there that let you get out of that? I haven't researched it, but yeah, I think most of us coming out of med school don't have $20k plus in savings.

agreed. I'm too indecisive about my own life to commit to anything longer than 4 yrs for now 🙄 renting is just great for me, for now. I'll buy when I can afford something way nicer than I could afford now 😳 The thought of being another 100K+ in debt right now when my annual salary will be under 50K makes me want to vomit.