Housing options... What is reasonable for a resident?

[hoagiedogy]

I'll be starting residency this July and am wondering what is reasonable on a resident's salary. I'll be doing an internship in a different location than my advanced program so I just plan to do an apartment for a year. What do people feel is a reasonable monthly rent on a resident's salary (this is assuming 1 resident paying the total cost with an estimated pre-tax annual income of around $49,000).

Secondly, when I move to the location of my advanced program I will be there for at least 4 years. I could just live in an apartment the whole time but I've heard that many residents buy homes. To me this seems a bit crazy... especially for residents already carrying debt from med school loans. But that aside, what is reasonable as far as the price of a house on a residents salary? I suppose it would boil down to a similar number as apartment rent but instead be mortgage payments.

Maybe those that buy houses and are single rent a portion out to other people? Or those that buy houses have significant others or roommates and have multiple salaries to pay costs? I anticipate still being single a year from now and frankly would prefer to have my own place at this point without a roommate. Should I even consider buying a house/condo?


I know that was long-winded... but any advice would be greatly appreciated. I just can't seem to find a thread on this issue or anything online.


Thanks!

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[J-Rad]

http://forums.studentdoctor.net/showthread.php?t=609023&highlight=rent
(Don't focus on the loan stuff, but rather what he's saying about renting. An aside, I keep meaning to read this dude's blog more: http://whitecoatinvestor.com/, seems like it has good info).

I am no expert, but my impression is that many people say that for buying a house you should be in an area at least for four years, and a minimum of five is even better. Renting is more often a better financial option and, logistically, it is almost always better, especially as you're getting ready to leave your residency.

 

[mlw03]

I can second the advice that from a financial and hassle perspective, renting is better. I bought a house in the midwest for a 3 year residency, and while I loved my little house, it was not a financially prudent decision. If you want a home, it's worth thinking about, but do not do it expecting to walk away making $20K. If I break even, I'll be thrilled.

 

[Law2Doc]

I'll be starting residency this July and am wondering what is reasonable on a resident's salary. I'll be doing an internship in a different location than my advanced program so I just plan to do an apartment for a year. What do people feel is a reasonable monthly rent on a resident's salary (this is assuming 1 resident paying the total cost with an estimated pre-tax annual income of around $49,000).
...

Bear in mind that if you are working 65-85 hours per week, all you really need in an apartment is a bed, a shower, a microwave and a parking space. You may feel like you pretty much live out the week at the hospital, eating most meals there, and just come home to crash. So if you are single, a studio or small one bedroom apartment in a safe part of town is all you are going to need. Check what they go for in your locale (there are enormous geographic variations).

 

[wannabeOBGYN]

On a similar note, I received an email today from the PC with the name and contact info for "their" real estate consultant. Do you generally have to pay someone like this for help finding an apartment? I am capable of doing it myself, but if it's free (or for a nominal fee) it'd be much quicker and easier if this consultant could get a bunch of apartment viewings lined up in one weekend for me. Thanks.

 

[shantster]

On a similar note, I received an email today from the PC with the name and contact info for "their" real estate consultant. Do you generally have to pay someone like this for help finding an apartment? I am capable of doing it myself, but if it's free (or for a nominal fee) it'd be much quicker and easier if this consultant could get a bunch of apartment viewings lined up in one weekend for me. Thanks.

It completely depends. My feeling on apartment consultants is that they are useful for major cities that have a lot of areas with apartment buildings going through brokers. But for smaller cities like mine, the best places are in converted houses or in duplexes where the landlord lives in one of the units and all the rest are in a few major management companies that own tons of buildings (which can be really bad but cheap or expensive and better). Therefore you have no need to get a consultant to do something you can easily do on your own. Also remember that the consultants tend to get money only if a contract is signed so they might be looking out for their financial well-being more than your goals.

The best way to go about it if you are coming from another city to smaller cities like mine is to look on Craigslist for names of companies then search them on google for reviews to weed out the bad companies then call the good companies. And then stalk Craigslist daily to find the good individually owned places. You can still schedule places on your own to be lined up one after the other for a weekend. I'd make sure to ask for recommendations from current/former residents when I make the reservations for viewing to call before you make the trip to the city so that you don't waste time with places that you would not want to live in and then maybe move up the viewing for some places you are really interested in after seeing photos and talking to the references. Good places can go quickly, especially if you are in an area with a major medical center and new residents on the same apartment search and move in schedule. I'd probably start with that strategy for a major city after talking to the current interns on where they live, where to avoid, etc. and then switch to a consultant if necessary.

 

[wannabeOBGYN]

It completely depends. My feeling on apartment consultants is that they are useful for major cities that have a lot of areas with apartment buildings going through brokers. But for smaller cities like mine, the best places are in converted houses or in duplexes where the landlord lives in one of the units and all the rest are in a few major management companies that own tons of buildings (which can be really bad but cheap or expensive and better). Therefore you have no need to get a consultant to do something you can easily do on your own. Also remember that the consultants tend to get money only if a contract is signed so they might be looking out for their financial well-being more than your goals.

The best way to go about it if you are coming from another city to smaller cities like mine is to look on Craigslist for names of companies then search them on google for reviews to weed out the bad companies then call the good companies. And then stalk Craigslist daily to find the good individually owned places. You can still schedule places on your own to be lined up one after the other for a weekend. I'd make sure to ask for recommendations from current/former residents when I make the reservations for viewing to call before you make the trip to the city so that you don't waste time with places that you would not want to live in and then maybe move up the viewing for some places you are really interested in after seeing photos and talking to the references. Good places can go quickly, especially if you are in an area with a major medical center and new residents on the same apartment search and move in schedule. I'd probably start with that strategy for a major city after talking to the current interns on where they live, where to avoid, etc. and then switch to a consultant if necessary.

Thanks for your input! I'm not moving to a big city. It's a good size but not like NYC, Philly, Chicago, etc. I've done some searching on my own and so far it looks like a bunch of the complexes are owned by the same company. I'm definitely going to ask for some resident email addresses though so I can ask where they live.

 

[Bold]

I have heard that rent payments should be no more than 30% of the monthly income, after taxes. That should be a good ballpark number.

 

[deleted103644]

I have heard that rent payments should be no more than 30% of the monthly income, after taxes. That should be a good ballpark number.

That's the general rule, but in some places it's more. In NYC it often approaches 50% unless you get a roommate.

 

[hoagiedogy]

Can anyone offer an estimate on what 30% might be in a non-major city? Not NYC, Chicago etc

 

[Swisych]

Can anyone offer an estimate on what 30% might be in a non-major city? Not NYC, Chicago etc

Let me pull out my calculator for you :

$49,000 * 0.3 /12 = $1225 a month
😉

 

[Dr. USMLE]

Let me pull out my calculator for you :

$49,000 * 0.3 /12 = $1225 a month
😉

Actually, that's pre-tax. After taxes, assuming ~3k/mo. take home, it's $900/mo.

 

[NOsquid]

Make a budget, welcome to adulthood 🙂 ~$3k/mo is correct.

Depends on what's important to you and how suck-tastic your loans are (private loans that can't be deferred must be paid in addition to IBR of ~$450). Also obviously cost of housing where you matched.

For instance, if living in a nice apt is important to you but eating out isn't, you could save hundreds of dollars per month eating strictly groceries vs restaurant food which could then go into rent. How generous is your residency with cafeteria food? How much do you eat? I could feed my girlfriend for half of what it costs to keep me going. How are the benefits eg health/dental/vision? Do you have a reliable car or will you need to buy one and take on a car note? What are car insurance rates like where you matched (you'd be surprised how much they vary)? Need money for frequent travel? Utilities, smartphone, cable, internet, etc.. and how much do you want to be able to put away each month for retirement or whatever else? It all depends on the individual.

 

[turkeyjerky]

Actually, that's pre-tax. After taxes, assuming ~3k/mo. take home, it's $900/mo.

The 30% rule uses gross income. The prior poster was correct.

 

[Dr. USMLE]

The 30% rule uses gross income. The prior poster was correct.

I stand corrected. Or rather, the original poster of the "30% rule after taxes" stands corrected. That said, the whole point of the rule is to allow for enough (fixed and unexpected) non-discretionary spending. If you're paying $1225/mo. + $200 property taxes, HOA, & related fees + ~$500 for IBR + more for any private loans + ~$400 on food/drinks + $250 for "utilities, smartphone, cable, internet" + $150 car insurance + $100 for gas...that's basically your entire paycheck. I.e., using the "30% rule" pre-tax defeats the entire purpose of the rule. And the $900/mo. figure is more consistent with what interns have quoted to me throughout the interview trail.

 

[member0007]

wherever you decide to rent or buy, stay out of the hospital provided housing. i don't see any reason to hand back that 30% of your salary back to your employer.

 

[deleted103644]

wherever you decide to rent or buy, stay out of the hospital provided housing. i don't see any reason to hand back that 30% of your salary back to your employer.

Usually hospital housing is incredibly subsidized (particularly in high cost areas) and some places deduct the rent pretax from your income (additional savings).

If you don't like the hospital housing or it isn't a good deal, fine, but would you really waste money out of spite for your employer? And why are you so angry at your hospital, bad match?

 

[Law2Doc]

I stand corrected. Or rather, the original poster of the "30% rule after taxes" stands corrected. That said, the whole point of the rule is to allow for enough (fixed and unexpected) non-discretionary spending. If you're paying $1225/mo. + $200 property taxes, HOA, & related fees + ~$500 for IBR + more for any private loans + ~$400 on food/drinks + $250 for "utilities, smartphone, cable, internet" + $150 car insurance + $100 for gas...that's basically your entire paycheck. I.e., using the "30% rule" pre-tax defeats the entire purpose of the rule. And the $900/mo. figure is more consistent with what interns have quoted to me throughout the interview trail.

1. Residents spending their entire paycheck each month is very common. It's not a huge amount of money if you have expenses and loans. It's why residents are always broke.

2. Since, as I mentioned above, you aren't actually going to be spending much time in your apartment, given a 65- 80 hour work week, you will often see residents skimping on the 30% rule. It simply doesn't have to be as nice if it's just your place to crash and stow your stuff.

 

[turkeyjerky]

Yeah, I agree with that 100%. My point was just alluding to that often cited rule, and that landlords will use it as a gauge to make sure you can afford the apt.

 

[45408]

http://forums.studentdoctor.net/showthread.php?t=609023&highlight=rent
(Don't focus on the loan stuff, but rather what he's saying about renting. An aside, I keep meaning to read this dude's blog more: http://whitecoatinvestor.com/, seems like it has good info).

I am no expert, but my impression is that many people say that for buying a house you should be in an area at least for four years, and a minimum of five is even better. Renting is more often a better financial option and, logistically, it is almost always better, especially as you're getting ready to leave your residency.

Great link.

These points are critical:

H) They don't realize that interest paid to the bank is exactly the same as rent paid to the landlord
I) They don't realize that unless you have a huge mortgage or A LOT of charitable contributions, that they don't really get a tax break for owning a home.
J) They don't realize that you hardly build any equity in the first 5 years on a 30 year mortgage.
K) They don't realize home prices go down as well as up.
L) They don't realize they would be just as happy renting as buying. From someone who has done both, most landlords don't mind if you want some different paint in your rental or want to fix it up a bit. They'll often pay for materials if you'll do the labor. They are also on the hook when the HVAC or appliances die.
M) They don't realize they can often rent a much bigger place than they can afford to buy (market specific).
N) They don't realize just how much real estate transaction costs are: Realtor fees of 6%, taxes, fees, commissions, marketing costs, loan fees, cost of having the place sit empty for a few months while you try to sell it etc. This can easily be above 10%, especially if you have to lower your price for a quick sale to get to your job in another state.
O) They don't realize that loan interest rates are MUCH higher when you don't put 20% down. You will pay this as PMI, a higher rate on a second mortgage, a higher rate on a single mortgage, or higher fees, but be assured, you WILL PAY IT. No one is going to do you any kind of a favor because "you're a doctor and we know you'll pay us back."

I bought a house, but I'm in general surgery, and I'm here for 5 years. I've also got a wife and children. I would not recommend buying to a single resident.

 

[45408]

wherever you decide to rent or buy, stay out of the hospital provided housing. i don't see any reason to hand back that 30% of your salary back to your employer.

Um, because you're getting something in exchange for your money?

Our hospital-provided housing isn't flashy, but it's really cheap for what you're getting.

 

[member0007]

i think that it was definitely nice to know that i had a place to move into during the first year without making any effort. i did enjoy the place. however, i would not utilize hospital housing again nor live too close to work. commuting/ getting to the job is half the fun.

honestly, i also had some problems with housing, such as them walking in on people that were visiting me. it happened more than once. it just made me realize that i was at my own apt but i had to worry about the hospital having access to my apartment and lack of privacy. my guests were most definitely concerned. other people had experienced similar incidents over the years as well. most of my colleagues moved out of housing sooner than later.

 

[Neuronix]

My hospital provided housing has been decent (comparable stuff for the area) and super cheap. No complaints here.

I agree with Dumb on aim for 30% post-tax income as max rent. 30% pre-tax just leaves you too little money if you're paying off any loans.

As for rent vs. buy, the NYTimes calculator is still where it's at. I think you'll find for most locales that you're not going to make any money if you buy a property for only 3-4 years. http://www.nytimes.com/interactive/business/buy-rent-calculator.html

 

[45408]

My hospital provided housing has been decent (comparable stuff for the area) and super cheap. No complaints here.

I agree with Dumb on aim for 30% post-tax income as max rent. 30% pre-tax just leaves you too little money if you're paying off any loans.

As for rent vs. buy, the NYTimes calculator is still where it's at. I think you'll find for most locales that you're not going to make any money if you buy a property for only 3-4 years. http://www.nytimes.com/interactive/business/buy-rent-calculator.html

The calculator is pretty accurate compared to the conclusion I had come to on my own, with the only exception that I made it under the wire for the $8000 first-time home buyer's credit, which shifted it a bit.

 

[HondoCrouch]

Rent. Do not buy.

Do not fall into the "rent is throwing money away, you should be building equity" trap. That is a line put out by realtors for suckers that are bad at math.

Nearly all of your house payments go to interest early in the loan and you will find that you have minimal/no equity in a house after only 4-5 years.

 

[TexasPhysician]

Rent. Do not buy.

Do not fall into the "rent is throwing money away, you should be building equity" trap. That is a line put out by realtors for suckers that are bad at math.

Nearly all of your house payments go to interest early in the loan and you will find that you have minimal/no equity in a house after only 4-5 years.

Disagree, but it depends on the market. Where I live, $1150/month pays all housing expenses (mortgage, insurance, taxes, etc) for a 2200 sq ft house in excellent condition. I'm proof.

To rent in my neighborhood, it is $1500/month minimum. If I stay in my house for five years, I have $21000 to throw into renovations and realtor fees upon selling. Even spending $21000, I still recoup equity if I sell without a profit.

Also I get bigger tax deductions from buying.

Where I am, buying is a no-brainer. In other places, I would never buy though.

 

[deleted103644]

Rent. Do not buy.

Do not fall into the "rent is throwing money away, you should be building equity" trap. That is a line put out by realtors for suckers that are bad at math.

Nearly all of your house payments go to interest early in the loan and you will find that you have minimal/no equity in a house after only 4-5 years.

It all depends on your situation. There's no single answer for everyone.

Use the NYTimes calculator to figure out what's best for you. In some markets, buying will be better if you will remain in the same residence > x years.

 

[ASA6]

Disagree, but it depends on the market. Where I live, $1150/month pays all housing expenses (mortgage, insurance, taxes, etc) for a 2200 sq ft house in excellent condition. I'm proof.

To rent in my neighborhood, it is $1500/month minimum. If I stay in my house for five years, I have $21000 to throw into renovations and realtor fees upon selling. Even spending $21000, I still recoup equity if I sell without a profit.

Also I get bigger tax deductions from buying.

Where I am, buying is a no-brainer. In other places, I would never buy though.

and how much did you have to put as a down payment?

 

[dragonfly99]

IMHO usually better to rent than buy for a single resident, particularly if you are not in an extremely long residency (like 5-7 years at least). Also, if you buy a house remember YOU have to deal with it if something breaks, you need a plumber, etc. You probably won't have time to deal with that as a surgical or OB/gyn resident unless you have a spouse or live in girlfriend or boyfriend who is going to deal with that stuff.
If you have kids you might want a house for that reason, but even then you can often rent a house or something.
Rent for an intern? When I was an intern my apartment rent was $710 a month I think but that was 6 years ago and in a relatively cheap city. Now my rent is $1400/month for a much fancier apartment as a fellow. I do find that it strains my monthly finances from time to time (like when I had to fork over >1500 for a board exam one month, etc.). Part of this depends on how much your monthly student loan payments are going to be. If you don't have any, by some luck, then I think you can live in a $1300 apartment, no problem. If you have big student loans or a big car payment then you need a cheaper apartment or a roommate. I think $800-1100 is probably reasonable for most people.

p.s. What is the typical student loan payment for people now that they have this income based repayment? Can you not "defer" all your loans during residency any more? Personally I never thought that was a good idea but I know a lot of ppl used to do it...

 

[45408]

p.s. What is the typical student loan payment for people now that they have this income based repayment? Can you not "defer" all your loans during residency any more? Personally I never thought that was a good idea but I know a lot of ppl used to do it...

You can forbear your loans. I'm doing it, because I've got a family.

 

[TexasPhysician]

and how much did you have to put as a down payment?

3.5%

 

[Tweetie pie]

You can forbear your loans. I'm doing it, because I've got a family.

If the residency is associated with a learning institution, then they might let you defer the loans, which is the best option. You have to talk to lender and request for deferrment. They will provide you with a form that if your employer agrees to sign, then a resident might be eligible for defferment. Try to still pay off the interest if possible.

Other option is Forbearance. The only disadvantage is that if you have any subsidized loans that usually does not incure interest, will start incurring interest under forbearance but not under deferrment.

Also, renting is a great option over buying if you are single and will be staying there for a short amount of time.

 

[gutonc]

If the residency is associated with a learning institution, then they might let you defer the loans, which is the best option. You have to talk to lender and request for deferrment. They will provide you with a form that if your employer agrees to sign, then a resident might be eligible for defferment. Try to still pay off the interest if possible.

Other option is Forbearance. The only disadvantage is that if you have any subsidized loans that usually does not incure interest, will start incurring interest under forbearance but not under deferrment.

Residents can not defer loans, only forbear. Fellows can defer. The rules may be changing soon but since I'm done training in 3 weeks I didn't bother to look it up.