How much do you make in a year as a psychiatrist?

[jbomba]

great. you'll need it for how much housing is over there. 2m for a starter house?

Not necessarily a starter house. But yes 2m for a nice, but not huge house, is the norm. But even after that mortgage I'm still with 32K a month left over. So the ability to earn this type of income definitely makes the increased housing costs worth it.

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[jbomba]

Those CoL breakdowns are actually exactly what I'm pointing to, they just don't hold up at the higher salaries. Outside of state income tax, things like utilities/gasoline/grocery costs just do not scale at incomes of near 1 million year. They are a good approximation for people with average salaries but I would not rely on them at all for most doctors, particularly high earning ones. You would actually need to get some data on what your take home salary is and that add on the expected extra CoL.

Example
$925k CA is 814k after 12% state income tax vs $380k in a state without state income tax.
Add-on 30k for extra utilites/gas/grocery and other necessary costs as a rough approximation 784k vcs 380k
Add on 200k/year for extra housing expense (you'll get a good chunk back when you sell, but will drop your cashflow)
You are still left 200k up after generous allotments for extra day to day prices and housing and state income tax

And in reality I run things through an s corp, so my taxes are more favorable. I also write off things like a car, etc.

So yes things cost more in CA. But the increased ability to earn more than makes up for those increased costs. And as you pointed out, housing is an asset. So it's not exactly money being thrown out the window.

 

[jbomba]

2M would get you a pretty nice house for a family (1-2 kids). Wouldn’t need to be starter. I will say probably need 1.5 M HHI to comfortably raise a family in Southern California though. That will get you a decent house in a nice neighborhood with good schools, travel without penny pinching, date nights, good retirement contribution, etc.

1.5m HHI to raise a family in socal? Maybe we grew up in vastly different socioeconomic environments but this is crazy to me. I've got friends in Socal with HHI between 250-600k..all live in nice areas and doing fine.

 

[finalpsychyear]

1.5m HHI to raise a family in socal? Maybe we grew up in vastly different socioeconomic environments but this is crazy to me. I've got friends in Socal with HHI between 250-600k..all live in nice areas and doing fine.

Maybe for someone trying to live there today i would think close to 1m? I bet your friends have been there for a few years maybe and have lower rates and housing costs then right now. Look your doing great and i get your paying a premium to live in a great state with great weather. Others who make slightly less and live in the midwest and save heavy will probably be able to retire in 10-12 years of making bank and super saving but you probably could to esp if your 2-3m house is 4-6m since that's where your extra $ is going into largely each month.

Good luck.

 

[sloh]

1.5m HHI to raise a family in socal? Maybe we grew up in vastly different socioeconomic environments but this is crazy to me. I've got friends in Socal with HHI between 250-600k..all live in nice areas and doing fine.

I grew up more inland, raised by a single parent. So no. Irvine is a pretty desirable place to raise a family. Great public schools. Safe. Good houses are around 2 million. House probably shouldn’t be over 2x HHI. Very few of my physician colleagues can afford houses there. My gf is anesthesia. Anesthesiologists she know in LA that have around 600-800k HHI (anesthesiologist with lower earning partner) can’t really afford houses they want in the neighborhoods they want.

 

[Merovinge]

I grew up more inland, raised by a single parent. So no. Irvine is a pretty desirable place to raise a family. Great public schools. Safe. Good houses are around 2 million. House probably shouldn’t be over 2x HHI. Very few of my physician colleagues can afford houses there. My gf is anesthesia. Anesthesiologists she know in LA that have around 600-800k HHI (anesthesiologist with lower earning partner) can’t really afford houses they want in the neighborhoods they want.

The rule of thumb is mortgage should be 2x HHI, $2mill house is 400k down, $1.6mil mortgage so HHI of 800k. That said, that rule of thumb is just that, a rule of thumb and higher RE priced areas push almost everyone above that HHI x2 for mortgage value.

Also, this is not a unique thing to cali, NYC, or DC. I assure you doctors in London, Paris, Honk Kong, Tokyo, etc are not able to afford a house in whatever neighborhood they want. There is nothing about being a doctor that guarantee's you a house in the best (or very good) neighborhood of the most desirable places on earth to live.

As a doctor in the US you can have almost anything you want, but you can't have everything you want. You want a yacht? Doable in a medium to low CoL area. Want to drive the newest Ferrari every 5 years? Doable. Want to live in a giant house? Want to live on the beach? Want to live in SoCal or Manhattan? Any 1 thing is doable but it comes with tradeoffs. We are not billionaires, we do honorable work and get paid really well for it, enough to make a priority list and achieve the top of it.

 

[sloh]

The rule of thumb is mortgage should be 2x HHI, $2mill house is 400k down, $1.6mil mortgage so HHI of 800k. That said, that rule of thumb is just that, a rule of thumb and higher RE priced areas push almost everyone above that HHI x2 for mortgage value.

Also, this is not a unique thing to cali, NYC, or DC. I assure you doctors in London, Paris, Honk Kong, Tokyo, etc are not able to afford a house in whatever neighborhood they want. There is nothing about being a doctor that guarantee's you a house in the best (or very good) neighborhood of the most desirable places on earth to live.

As a doctor in the US you can have almost anything you want, but you can't have everything you want. You want a yacht? Doable in a medium to low CoL area. Want to drive the newest Ferrari every 5 years? Doable. Want to live in a giant house? Want to live on the beach? Want to live in SoCal or Manhattan? Any 1 thing is doable but it comes with tradeoffs. We are not billionaires, we do honorable work and get paid really well for it, enough to make a priority list and achieve the top of it.

Ya but Irvine isn’t Beverly Hills, Newport Beach, or Santa Monica.

 

[Merovinge]

Ya but Irvine isn’t Beverly Hills, Newport Beach, or Santa Monica.

It's not, but it's also still nicer than 99% of the country at a minimum, even if I would rather be in Santa Monica.

 

[finalpsychyear]

The rule of thumb is mortgage should be 2x HHI, $2mill house is 400k down, $1.6mil mortgage so HHI of 800k. That said, that rule of thumb is just that, a rule of thumb and higher RE priced areas push almost everyone above that HHI x2 for mortgage value.

Also, this is not a unique thing to cali, NYC, or DC. I assure you doctors in London, Paris, Honk Kong, Tokyo, etc are not able to afford a house in whatever neighborhood they want. There is nothing about being a doctor that guarantee's you a house in the best (or very good) neighborhood of the most desirable places on earth to live.

As a doctor in the US you can have almost anything you want, but you can't have everything you want. You want a yacht? Doable in a medium to low CoL area. Want to drive the newest Ferrari every 5 years? Doable. Want to live in a giant house? Want to live on the beach? Want to live in SoCal or Manhattan? Any 1 thing is doable but it comes with tradeoffs. We are not billionaires, we do honorable work and get paid really well for it, enough to make a priority list and achieve the top of it.

attaining large house in midwest, plus renting a boat few times a year, plus occasional month long trips to coastal/international cities via air bnb, and highest quality meals are my future vices. Glad I never was that into cars really or wanting to live in VHCOL. Will def expedite my path to FI.

 

[Merovinge]

attaining large house in midwest, plus renting a boat few times a year, plus occasional month long trips to coastal/international cities via air bnb, and highest quality meals are my future vices. Glad I never was that into cars really or wanting to live in VHCOL. Will def expedite my path to FI.

Haha welcome to the club. Love my house, a few boating trips, and a few Michelin stared meals. I'm plenty happy with a 40-50k car that lasts for at least 7 years. All my trips are 1 week long (well 9 days), longest I can get family to watch progeny or longest I want to be on vacation with progeny. I'm coming around to the value of low end or discounted high tier resorts, lets see how corrupted Nayara makes me feel towards future resorts. FI will definitely be before I want to stop working and certainly by 50.

 

[Stagg737]

The rule of thumb is mortgage should be 2x HHI, $2mill house is 400k down, $1.6mil mortgage so HHI of 800k. That said, that rule of thumb is just that, a rule of thumb and higher RE priced areas push almost everyone above that HHI x2 for mortgage value.

Also, this is not a unique thing to cali, NYC, or DC. I assure you doctors in London, Paris, Honk Kong, Tokyo, etc are not able to afford a house in whatever neighborhood they want. There is nothing about being a doctor that guarantee's you a house in the best (or very good) neighborhood of the most desirable places on earth to live.

As a doctor in the US you can have almost anything you want, but you can't have everything you want. You want a yacht? Doable in a medium to low CoL area. Want to drive the newest Ferrari every 5 years? Doable. Want to live in a giant house? Want to live on the beach? Want to live in SoCal or Manhattan? Any 1 thing is doable but it comes with tradeoffs. We are not billionaires, we do honorable work and get paid really well for it, enough to make a priority list and achieve the top of it.

This is true, but your point about the down payment brings up some other thoughts that are important for context. Most fresh grads or early career docs are not going to have anywhere close to $400k for a down payment and for many docs it can take 10+ years to get to that point unless they're pulling from investments. Some of these lifestyles, locations, etc are not going to be obtainable for early career docs and will take a significant amount of time to obtain. My total HHI is going to be right around $300k for this year including all our benefits. We put no down payment on our house. Zero chance we could have afforded to live in a place where a 2,000sq ft house in a decent area with good schools is 7 figures, especially with trying to catch up on retirement/invest early.

Expenses vary a ton too. Average debt for graduating medical students is also $250k. After interest that's going to end up being $300-400k getting paid back unless they take PSLF, which will likely mean lower paying salary. We often get started on investing later and have to catch up for retirement, so imo the 50/30/20 rule shouldn't apply early on. Kids can also make a huge difference, especially if you send them to private school or have them in a ton of programs/activities. I don't even want to imagine how much college is going to cost in 15 years. Lifestyle and necessities changes dramatically for couples without kids vs even having 1 kid. Things look very different for people who come out of residency with physician partners and no kids vs people who finish residency who already have a family and have a ton of expenses to cover. And the timeline of when you can achieve the things you mention is dramatically different.

 

[jbomba]

I grew up more inland, raised by a single parent. So no. Irvine is a pretty desirable place to raise a family. Great public schools. Safe. Good houses are around 2 million. House probably shouldn’t be over 2x HHI. Very few of my physician colleagues can afford houses there. My gf is anesthesia. Anesthesiologists she know in LA that have around 600-800k HHI (anesthesiologist with lower earning partner) can’t really afford houses they want in the neighborhoods they want.

The guideline of house no more than 2x HHI isnt relevant at high income. My house is nearly 3x my household income and I'm still saving >20k a month.

 

[finalpsychyear]

The guideline of house no more than 2x HHI isnt relevant at high income. My house is nearly 3x my household income and I'm still saving >20k a month.

True. I would also be living it up to a way higher degree if i wasnt planning a possible exit from medicine by age 45. Or if i am working i will hope to be eligible for burn fire where u have to spend ur entire income minus the tax deductions if u have already reached fat fire status.

 

[Merovinge]

This is true, but your point about the down payment brings up some other thoughts that are important for context. Most fresh grads or early career docs are not going to have anywhere close to $400k for a down payment and for many docs it can take 10+ years to get to that point unless they're pulling from investments. Some of these lifestyles, locations, etc are not going to be obtainable for early career docs and will take a significant amount of time to obtain. My total HHI is going to be right around $300k for this year including all our benefits. We put no down payment on our house. Zero chance we could have afforded to live in a place where a 2,000sq ft house in a decent area with good schools is 7 figures, especially with trying to catch up on retirement/invest early.

Expenses vary a ton too. Average debt for graduating medical students is also $250k. After interest that's going to end up being $300-400k getting paid back unless they take PSLF, which will likely mean lower paying salary. We often get started on investing later and have to catch up for retirement, so imo the 50/30/20 rule shouldn't apply early on. Kids can also make a huge difference, especially if you send them to private school or have them in a ton of programs/activities. I don't even want to imagine how much college is going to cost in 15 years. Lifestyle and necessities changes dramatically for couples without kids vs even having 1 kid. Things look very different for people who come out of residency with physician partners and no kids vs people who finish residency who already have a family and have a ton of expenses to cover. And the timeline of when you can achieve the things you mention is dramatically different.

Yes you are not graduating training with 400k AND expecting a 2million dollar house AND having loans AND having a SAH spouse. I agree that everything you say is true, but is largely summed up as personal finance is very personal. Some people have no debt, I paid back around 300k so that person and I will have a very different idea of how to spend/save our first years of attendinghood.

Who you marry, how many kids you have, what family you were born to, and were you live all have huge implications to your financial journey. Of course 3 of those 4 are in your control. Is this is not clear to any trainees, you heard it here first! The key to this whole journey is introspection, determining your real priorities, and then it is relatively easy to setup your finances to achieve these.

 

[sloh]

Haha welcome to the club. Love my house, a few boating trips, and a few Michelin stared meals. I'm plenty happy with a 40-50k car that lasts for at least 7 years. All my trips are 1 week long (well 9 days), longest I can get family to watch progeny or longest I want to be on vacation with progeny. I'm coming around to the value of low end or discounted high tier resorts, lets see how corrupted Nayara makes me feel towards future resorts. FI will definitely be before I want to stop working and certainly by 50.

I like nice cars and Michelin starred meals but just can’t come around to resorts, period. Haha. Seems like my mind would rot from boredom. Gf and I just got back from Japan (had a blast) and were entertaining a weekend at Hotel del Coronado in SD or The Montage in LB. We decided against it bc we’d be bored just staring at the sand and water.

 

[icysky]

Just chiming in to say SoCal has other intangibles that are highly desirable then just weather and why a majority of the places surrounding the area costs so much more as well. West coast is generally more relaxed and liberal. There is large diversity there so you get to experience a lot of different cultures without having to travel too far and learn lot of different ways of thinking or doing things. Food quality can be really high because of competition not to mention diversity in the types of food you can eat. Fusion food can easily be found and introduce you to new experiences you won’t get elsewhere. Standards for things like water are higher. You can go to any water fountain and the water will be filtered and cleaner than the majority of the United States. Tons of activities located within a half days drive. Used to be able to ski, surf, and hike a mountain all in one day (due to traffic no longer doable but can do all those in 1-2 days). Disneyland, legoland, universal, and other themes parks situated all close to one another. California essentially guarantees college admission to high schoolers to the top 10% of each high school class (so even if you grew up in a more socially disadvantaged neighborhood, you can still go to a Cal State or UC if you made the top 10% of your class). There’s a lot more but this is the gist of why so many of us go back

 

[mistafab]

Just chiming in to say SoCal has other intangibles that are highly desirable then just weather and why a majority of the places surrounding the area costs so much more as well. West coast is generally more relaxed and liberal. There is large diversity there so you get to experience a lot of different cultures without having to travel too far and learn lot of different ways of thinking or doing things. Food quality can be really high because of competition not to mention diversity in the types of food you can eat. Fusion food can easily be found and introduce you to new experiences you won’t get elsewhere. Standards for things like water are higher. You can go to any water fountain and the water will be filtered and cleaner than the majority of the United States. Tons of activities located within a half days drive. Used to be able to ski, surf, and hike a mountain all in one day (due to traffic no longer doable but can do all those in 1-2 days). Disneyland, legoland, universal, and other themes parks situated all close to one another. California essentially guarantees college admission to high schoolers to the top 10% of each high school class (so even if you grew up in a more socially disadvantaged neighborhood, you can still go to a Cal State or UC if you made the top 10% of your class). There’s a lot more but this is the gist of why so many of us go back

Wow, you really drank the koolaid on this one. The water is better?

Not trying to bring you down, for many people socal is undesirable. What you left out is the rampant homelessness, fighting for parking everywhere, small houses and yards, traffic makes everything 45 minutes away, zero hygienic/accesible public transportation. In addition, the wacky laws and taxes get worse every year.

There’s a reason California is the state with biggest expats in 2023/2024. At some point people realize that living in a 1M, 2 bedroom house isn’t worth it if they worry more about stepping in human feces than dog feces when they leave the house.

I end up having this same convo with my brother in SoCal at least a few times a year. He can’t imagine why the family doesn’t want to move there. SoCal must have the best koolaid.

 

[finalpsychyear]

Wow, you really drank the koolaid on this one. The water is better?

Not trying to bring you down, for many people socal is undesirable. What you left out is the rampant homelessness, fighting for parking everywhere, small houses and yards, traffic makes everything 45 minutes away, zero hygienic/accesible public transportation. In addition, the wacky laws and taxes get worse every year.

There’s a reason California is the state with biggest expats in 2023/2024. At some point people realize that living in a 1M, 2 bedroom house isn’t worth it if they worry more about stepping in human feces than dog feces when they leave the house.

I end up having this same convo with my brother in SoCal at least a few times a year. He can’t imagine why the family doesn’t want to move there. SoCal must have the best koolaid.

Not here to crap on socal. In the neighborhood i am renting a house and prices for 3000-3500 sq foot houses are 750-900. A house that's almost 8k sq ft popped up for 1.3m.

I think you'd be lucky to find anything in the 1.3m price range there and also i have experience la traffic turning a 3 hr drive into 6 last year so yeah that's insane. For my possible early retirement (2030) purposes i don't count primary residence. I also find it difficult to believe someone living in so cal for 20 years is suddenly going to move out of state and take advantage of geo arbit. Heck if your living in 1-1.5m house in so cal whatever you sell it for in 20 years yeah it may be 2x-3x but if your sticking around the area you're just going to throw it back more or less in your next place.

So if your goal is early retirement like me, VHCOL areas are going to slow you down. Now if you are planning to work a full 25-30 year career and have a high earning working partner with a HHI near 1m they can do whatever they want and live where they want they will be more than fine if they are saving/investing the whole time but a little more easier to get caught up with the whole keeping up with the jones over there.

 

[Splenda88]

Wow, you really drank the koolaid on this one. The water is better?

Not trying to bring you down, for many people socal is undesirable. What you left out is the rampant homelessness, fighting for parking everywhere, small houses and yards, traffic makes everything 45 minutes away, zero hygienic/accesible public transportation. In addition, the wacky laws and taxes get worse every year.

There’s a reason California is the state with biggest expats in 2023/2024. At some point people realize that living in a 1M, 2 bedroom house isn’t worth it if they worry more about stepping in human feces than dog feces when they leave the house.

I end up having this same convo with my brother in SoCal at least a few times a year. He can’t imagine why the family doesn’t want to move there. SoCal must have the best koolaid.

I was in LA in June/July last year. I thought I was gonna see homeless people in every street corner, but that was not the case. Housing is expensive from what I heard, but I found southern California very beautiful.

I would not listen to what people on the right are spewing when none of them are talking about the overall living condition of some southern states (eg., West Virginia, Mississippi, Alabama etc...)

 

[splik]

There’s a reason California is the state with biggest expats in 2023/2024. At some point people realize that living in a 1M, 2 bedroom house isn’t worth it if the worry more about stepping in human feces than dog feces when they leave the house.

The vast majority of people leaving California cite housing (or inability to buy a home) as the primary reason for leaving. That is a proxy of how popular a place California is to live. Most people leaving california are low and middle income, and more likely not to have a college degree. A smaller number cite jobs and family as reasons for leaving. During the pandemic, there were also more professionals with graduate degrees leaving the state than entering (likely due to the growth of remote work) but that is no longer the case.

 

[sloh]

I was in LA in June/July last year. I thought I was gonna see homeless people in every street corner, but that was not the case. Housing is expensive from what I heard, but I found southern California very beautiful.

I would not listen to what people on the right are spewing when none of them are talking about the overall living condition of some southern states (eg., West Virginia, Mississippi, Alabama etc...)

Yeah the homelessness issue is more so if you live in LA proper. You can easily live in a more suburban and cloistered community where you will rarely ever see any homeless. Weather, diversity of culture and food, pretty easy access to just about anything.

 

[icysky]

Wow, you really drank the koolaid on this one. The water is better?

Not trying to bring you down, for many people socal is undesirable. What you left out is the rampant homelessness, fighting for parking everywhere, small houses and yards, traffic makes everything 45 minutes away, zero hygienic/accesible public transportation. In addition, the wacky laws and taxes get worse every year.

There’s a reason California is the state with biggest expats in 2023/2024. At some point people realize that living in a 1M, 2 bedroom house isn’t worth it if they worry more about stepping in human feces than dog feces when they leave the house.

I end up having this same convo with my brother in SoCal at least a few times a year. He can’t imagine why the family doesn’t want to move there. SoCal must have the best koolaid.

It’s not koolaid. SoCal is not perfect and not for everyone by any means. I definitely have a bias since I grew up there. I find it interesting you seemed to get upset about it enough to point out all the cons.

I will concede the water comment. I realized it was just the county I was in that the water quality is higher, but not all parts of SoCal or even all of California. They seem to be 27th in quality according to EPA.

Homelessness is an issue, but worst in some areas more than others. Definitely do not see it walking outside my doorstep which is in the suburbs. All of my HOA neighbors would throw a fit lol. Homelessness is a major issue in most metropolitan areas, even places in the Midwest and southwest where I trained (except the winters lol).

Hygiene is a challenge for public transportation for any city that sees thousands of people use it everyday. Public transportation is an issue for a majority of of the United States lol. Don’t know a lot of places besides Chicago, New York, and Boston that public transportation and transit times are reasonable. I remember trying to get a bus to travel from one place to another in a medium sized city and it was longer than driving in traffic (not in SoCal).

Parking is a challenge just due to sheer amount of people. And besides holidays, never had an issue with parking most places I go to. Houses are small but not that much smaller. Range is big but average is around 1600 sq which is adequate and not too far from the national average.

What taxes? Income tax? Probably about it. Taxes by county are different too. LA sales taxes are high but other places they are 7-8%. Not much different from other places in the United States I’ve visited or lived at. Property taxes are 1% and it never changes once you buy a house. They don’t reassess property values once you buy. Your property taxes will beat out inflation in the long run.

People are leaving California probably for the reasons you listed and I don’t blame them, if they don’t find the cost to benefit ratio worth it to them. I’m not arguing that. Just stating reason why cost in CA is so high and they just continue to get higher and the economy continues to grow, which means there’s definitely more reasons than simply just weather people choose to stay or come back.

 

[clausewitz2]

I was in LA in June/July last year. I thought I was gonna see homeless people in every street corner, but that was not the case. Housing is expensive from what I heard, but I found southern California very beautiful.

I would not listen to what people on the right are spewing when none of them are talking about the overall living condition of some southern states (eg., West Virginia, Mississippi, Alabama etc...)

The idea that West Virginia is Southern , given that it is a state whose entire existence is because it specifically did not want to be part of the Confederacy, is very odd.

 

[Splenda88]

The idea that West Virginia is Southern , given that it is a state whose entire existence is because it specifically did not want to be part of the Confederacy, is very odd.

I am not a student of US history. I was talking about what are considered southern states.

I have only lived in southern states and spent time in WV, I can say West Virginians act like southerners.

 

[Splenda88]

Yeah the homelessness issue is more so if you live in LA proper. You can easily live in a more suburban and cloistered community where you will rarely ever see any homeless. Weather, diversity of culture and food, pretty easy access to just about anything.

It's the same in big populated cities. I guess things are probably worse in LA, San Francisco but I did not notice it.

I admittedly fell for what I saw and heard on the media (mostly conservative) because thought I was going to see homeless people everywhere, but I was somewhat surprised to see how ok LA was.

 

[clozareal]

Just chiming in to say SoCal has other intangibles that are highly desirable then just weather and why a majority of the places surrounding the area costs so much more as well. West coast is generally more relaxed and liberal. There is large diversity there so you get to experience a lot of different cultures without having to travel too far and learn lot of different ways of thinking or doing things. Food quality can be really high because of competition not to mention diversity in the types of food you can eat. Fusion food can easily be found and introduce you to new experiences you won’t get elsewhere. Standards for things like water are higher. You can go to any water fountain and the water will be filtered and cleaner than the majority of the United States. Tons of activities located within a half days drive. Used to be able to ski, surf, and hike a mountain all in one day (due to traffic no longer doable but can do all those in 1-2 days). Disneyland, legoland, universal, and other themes parks situated all close to one another. California essentially guarantees college admission to high schoolers to the top 10% of each high school class (so even if you grew up in a more socially disadvantaged neighborhood, you can still go to a Cal State or UC if you made the top 10% of your class). There’s a lot more but this is the gist of why so many of us go back

Counterpoint just to play devil's advocate.

There's lots of places that are relaxed and liberal that's not in California. Portland, Seattle, Twin Cities, Boulder, Ann Arbor, Ashville, Raleigh, Pittsburg, Austin, Chicago, etc... All of those will be cheaper and some don't even have state income tax, which would be an automatic 9% raise per year.

Food quality is going up all around the country, especially in the bigger cities. Just look at the James Beard finalists/semifinalists for each year and see how many are outside of CA/NY. You might not get as many diverse options though, but there will still be options.

Those activities are also very expensive. Have you seen how much a park hopper costs at Disneyland nowadays let a lone a season pass? I know people who don't live in CA who take their kids to Disneyland more than the SoCal locals do.

Lots of states guarantee admission to colleges or have high percentage rates of admission for residents.

Much of CA is not a financially wise choice for doctors for the most part although there are parts of CA that are cheaper than places that we typically think are lower COL. Now if you were in tech getting hundreds of thousands to millions of dollars in RSU refreshers per year where you cannot get that elsewhere or with remote work, that's a different story.

 

[Stagg737]

Parking is a challenge just due to sheer amount of people. And besides holidays, never had an issue with parking most places I go to. Houses are small but not that much smaller. Range is big but average is around 1600 sq which is adequate and not too far from the national average.

Imo general cost of housing is one of the biggest turn-offs which is probably obvious from my posts. It's absolutely insane to me that the median cost of a 3-bed, 2-bathroom house in LA county is $1.25mil. I don't care how "desirable" any area is, that cost is ridiculous. And 1600 sq ft is "adequate" for a family in the sense that it keeps a roof over their head, but doesn't really provide any space for anyone outside of their rooms. I say this as someone who grew up in a 1400 sq ft house with only 3 people living there. The idea that many physicians couldn't even afford that in some places and would still want to live there is crazy to me.

Homelessness is an issue, but worst in some areas more than others. Definitely do not see it walking outside my doorstep which is in the suburbs. All of my HOA neighbors would throw a fit lol. Homelessness is a major issue in most metropolitan areas, even places in the Midwest and southwest where I trained (except the winters lol).

It's an issue in plenty of places, even in the winter (lots of homeless in Chicago year-round). That being said, the extent and policies surrounding them aren't the same. My wife was in SF last summer (I know that's not SoCal), loved it and said she didn't see any homeless issues. One of my co-workers visited SF for a week that same month and said they actually had a homeless person take dump on the sidewalk outside the window of the restaurant they were eating at twice. Plenty of HOAs get upset, but that still won't stop the tents from lining up on sidewalks. Legislation hasn't worked and the homeless population in CA are the highest in both total volume and growth with most being CA natives. The problem is the trend. CA is the epitome of wealth disparity in the US. That's a bit tangential, but >30% of all homeless people in the US are in CA and most are in large cities.

What taxes? Income tax? Probably about it. Taxes by county are different too. LA sales taxes are high but other places they are 7-8%. Not much different from other places in the United States I’ve visited or lived at. Property taxes are 1% and it never changes once you buy a house. They don’t reassess property values once you buy. Your property taxes will beat out inflation in the long run.

I've never heard of the bolded, but that certainly does make housing as an investment more enticing on that front assuming you're planning on staying in one house long-term. Most people I know don't buy their "forever home" as their first purchase though, which would certainly make property there less enticing.

 

[clausewitz2]

I am not a student of US history. I was talking about what are considered southern states.

I have only lived in southern states and spent time in WV, I can say West Virginians act like southerners.

It's Appalachian. That's it's own thing. The fact that chart also puts Maryland and Delaware firmly in the south should be the tip-off that it is not to be trusted.

 

[sloh]

Counterpoint just to play devil's advocate.

There's lots of places that are relaxed and liberal that's not in California. Portland, Seattle, Twin Cities, Boulder, Ann Arbor, Ashville, Raleigh, Pittsburg, Austin, Chicago, etc... All of those will be cheaper and some don't even have state income tax, which would be an automatic 9% raise per year.

Food quality is going up all around the country, especially in the bigger cities. Just look at the James Beard finalists/semifinalists for each year and see how many are outside of CA/NY. You might not get as many diverse options though, but there will still be options.

Those activities are also very expensive. Have you seen how much a park hopper costs at Disneyland nowadays let a lone a season pass? I know people who don't live in CA who take their kids to Disneyland more than the SoCal locals do.

Lots of states guarantee admission to colleges or have high percentage rates of admission for residents.

Much of CA is not a financially wise choice for doctors for the most part although there are parts of CA that are cheaper than places that we typically think are lower COL. Now if you were in tech getting hundreds of thousands to millions of dollars in RSU refreshers per year where you cannot get that elsewhere or with remote work, that's a different story.

Disneyland is not for the middle class anymore, like it was when I was growing up. It’s for the truly wealthy who can not only afford tickets but also the passes that let you skip the line. You will also be glued to your phone if you go to Disneyland these days bc it takes a lot of coordination to experience the rides and restaurants you want.

 

[Merovinge]

I like nice cars and Michelin starred meals but just can’t come around to resorts, period. Haha. Seems like my mind would rot from boredom. Gf and I just got back from Japan (had a blast) and were entertaining a weekend at Hotel del Coronado in SD or The Montage in LB. We decided against it bc we’d be bored just staring at the sand and water.

You don't need to spend the whole time at the resort to make it worth while. I'll be going to Nayara in Costa Rica for the next trip which is in a rainforest/jungle national park with a view of their volcano for example. After hiking/rafting/zip lining/etc all day in the heat, rain, humidity, etc I anticipate coming back to nice digs will make me feel it's worth it, we'ill see!

 

[finalpsychyear]

Disneyland is not for the middle class anymore, like it was when I was growing up. It’s for the truly wealthy who can not only afford tickets but also the passes that let you skip the line. You will also be glued to your phone if you go to Disneyland these days bc it takes a lot of coordination to experience the rides and restaurants you want.

In the future when kids are in the picture the way to go is stay at some premium place within disney and get access to the place 1 hr before opening and 1 hr post or something like that. ain't no buddy got time for 1-2 hr lines in 90 deg sun.

 

[sloh]

In the future when kids are in the picture the way to go is stay at some premium place within disney and get access to the place 1 hr before opening and 1 hr post or something like that. ain't no buddy got time for 1-2 hr lines in 90 deg sun.

Definitely. In order to actually enjoy Disneyland these days you should probably stay at one of their hotels and make it a 2-3 day experience. Of course that’s all part of Disney’s master plan haha. Probably looking at 4-5k minimum for a family of 4.

Disneyland guests clap back at sky-high ticket prices

Disneyland guests have lashed out at the popular theme park for its exorbitant ticket prices and long ride lines, with some claiming it’s not worth visiting.

nypost.com

 

[finalpsychyear]

Definitely. In order to actually enjoy Disneyland these days you should probably stay at one of their hotels and make it a 2-3 day experience. Of course that’s all part of Disney’s master plan haha. Probably looking at 4-5k minimum for a family of 4.

Disneyland guests clap back at sky-high ticket prices

Disneyland guests have lashed out at the popular theme park for its exorbitant ticket prices and long ride lines, with some claiming it’s not worth visiting.

nypost.com

Yeah i'd make it 5 days. 1 day for each of the attractions and maybe hit universal studios. that's an easy 10k trip.

 

[icysky]

Counterpoint just to play devil's advocate.

There's lots of places that are relaxed and liberal that's not in California. Portland, Seattle, Twin Cities, Boulder, Ann Arbor, Ashville, Raleigh, Pittsburg, Austin, Chicago, etc... All of those will be cheaper and some don't even have state income tax, which would be an automatic 9% raise per year.

Food quality is going up all around the country, especially in the bigger cities. Just look at the James Beard finalists/semifinalists for each year and see how many are outside of CA/NY. You might not get as many diverse options though, but there will still be options.

Those activities are also very expensive. Have you seen how much a park hopper costs at Disneyland nowadays let a lone a season pass? I know people who don't live in CA who take their kids to Disneyland more than the SoCal locals do.

Lots of states guarantee admission to colleges or have high percentage rates of admission for residents.

Much of CA is not a financially wise choice for doctors for the most part although there are parts of CA that are cheaper than places that we typically think are lower COL. Now if you were in tech getting hundreds of thousands to millions of dollars in RSU refreshers per year where you cannot get that elsewhere or with remote work, that's a different story.

Totally fine to have counter points! I like a good discussion/debate, don’t mind being shown a different point of view. It’s how we learn.

I was going to discuss all these points but at the end of the day it’s what people prefer and people are going to praise/bash whatever place they like. People want to bash SoCal and don’t want to come here, fine with me.

I think your last point is what it also really boils down to, in terms of the financial aspects. People care a lot about how far their money will go, and it definitely doesn’t go far in SoCal compared to a lot of places.

Imo general cost of housing is one of the biggest turn-offs which is probably obvious from my posts. It's absolutely insane to me that the median cost of a 3-bed, 2-bathroom house in LA county is $1.25mil. I don't care how "desirable" any area is, that cost is ridiculous. And 1600 sq ft is "adequate" for a family in the sense that it keeps a roof over their head, but doesn't really provide any space for anyone outside of their rooms. I say this as someone who grew up in a 1400 sq ft house with only 3 people living there. The idea that many physicians couldn't even afford that in some places and would still want to live there is crazy to me.


It's an issue in plenty of places, even in the winter (lots of homeless in Chicago year-round). That being said, the extent and policies surrounding them aren't the same. My wife was in SF last summer (I know that's not SoCal), loved it and said she didn't see any homeless issues. One of my co-workers visited SF for a week that same month and said they actually had a homeless person take dump on the sidewalk outside the window of the restaurant they were eating at twice. Plenty of HOAs get upset, but that still won't stop the tents from lining up on sidewalks. Legislation hasn't worked and the homeless population in CA are the highest in both total volume and growth with most being CA natives. The problem is the trend. CA is the epitome of wealth disparity in the US. That's a bit tangential, but >30% of all homeless people in the US are in CA and most are in large cities.


I've never heard of the bolded, but that certainly does make housing as an investment more enticing on that front assuming you're planning on staying in one house long-term. Most people I know don't buy their "forever home" as their first purchase though, which would certainly make property there less enticing.

That’s what was told to me by my in laws and parents confirmed. They’ve been paying the same property taxes for years essentially. It’s how people who bought a long time ago are able to keep their house and not foreclosed due to increased property values.

This detracted, just wanted to point out people like to live and continue to want to live in SoCal for other reasons than just weather although it definitely plays a factor.

 

[jbomba]

Totally fine to have counter points! I like a good discussion/debate, don’t mind being shown a different point of view. It’s how we learn.

I was going to discuss all these points but at the end of the day it’s what people prefer and people are going to praise/bash whatever place they like. People want to bash SoCal and don’t want to come here, fine with me.

I think your last point is what it also really boils down to, in terms of the financial aspects. People care a lot about how far their money will go, and it definitely doesn’t go far in SoCal compared to a lot of places.



That’s what was told to me by my in laws and parents confirmed. They’ve been paying the same property taxes for years essentially. It’s how people who bought a long time ago are able to keep their house and not foreclosed due to increased property values.

This detracted, just wanted to point out people like to live and continue to want to live in SoCal for other reasons than just weather although it definitely plays a factor.

Yes, the property tax thing is true thanks to prop 13.

 

[psychmd03]

On pace to make 925k this year.

Fantastic that takes some hustle

On the housing front many really should rationally look at what it means to buy. It’s a math problem that for many given the interest rates will cause it to be a poor financial choice v renting. The amortization schedule for lost loans will have you barely breaking even until year 8-10 on gaining any equity and until year 20 or so until your interest payments finally start to be equal or less than principal. The BH&J buy to rent index is a good tracker for this plus running the numbers. If you want the house to want the house that’s fine but realize generally buying will not be the smarter financial option In many cases. Just an example for me to buy my equivalent apartment right now would be 2x-2.5x my rent (just for the mortgage and taxes the interest payments for the first 15 years equals my rent). I’ll take that extra money gladly and stick into investments and it will grow quicker than any equity and appreciation would

 

[psychmd03]

attaining large house in midwest, plus renting a boat few times a year, plus occasional month long trips to coastal/international cities via air bnb, and highest quality meals are my future vices. Glad I never was that into cars really or wanting to live in VHCOL. Will def expedite my path to FI.

Haha welcome to the club. Love my house, a few boating trips, and a few Michelin stared meals. I'm plenty happy with a 40-50k car that lasts for at least 7 years. All my trips are 1 week long (well 9 days), longest I can get family to watch progeny or longest I want to be on vacation with progeny. I'm coming around to the value of low end or discounted high tier resorts, lets see how corrupted Nayara makes me feel towards future resorts. FI will definitely be before I want to stop working and certainly by 50.

Love all this minus the large house. I’ll stick to my apartment in a city. But the nice meals Michelin restaurants every other month, lots of social time out, some international trips and some inter US trips each year plus other random experiences are where I will dump my money and save 50%-70% of my after tax money so FI will hit in another 1.5-2years while still enjoying life.

 

[finalpsychyear]

Love all this minus the large house. I’ll stick to my apartment in a city. But the nice meals Michelin restaurants every other month, lots of social time out, some international trips and some inter US trips each year plus other random experiences are where I will dump my money and save 50%-70% of my after tax money so FI will hit in another 1.5-2years while still enjoying life.

Great your nearly there. How many years have you been practicing again?

 

[Merovinge]

Fantastic that takes some hustle

On the housing front many really should rationally look at what it means to buy. It’s a math problem that for many given the interest rates will cause it to be a poor financial choice v renting. The amortization schedule for lost loans will have you barely breaking even until year 8-10 on gaining any equity and until year 20 or so until your interest payments finally start to be equal or less than principal. The BH&J buy to rent index is a good tracker for this plus running the numbers. If you want the house to want the house that’s fine but realize generally buying will not be the smarter financial option In many cases. Just an example for me to buy my equivalent apartment right now would be 2x-2.5x my rent (just for the mortgage and taxes the interest payments for the first 15 years equals my rent). I’ll take that extra money gladly and stick into investments and it will grow quicker than any equity and appreciation would

Absolutely agree that in many locations renting is better than buying financially. That said once you factor in children, school districts, yards, neighbors, etc make a big difference in lifestyle. I thought cul du secs were the dumbest thing on Earth and then after having a child have the exact opposite opinion.

At the empty nest stage I find it hard to imagine wanting a single family home over condo/apartment, but with children I definitely see why so many people buy.

 

[Stagg737]

Absolutely agree that in many locations renting is better than buying financially. That said once you factor in children, school districts, yards, neighbors, etc make a big difference in lifestyle. I thought cul du secs were the dumbest thing on Earth and then after having a child have the exact opposite opinion.

At the empty nest stage I find it hard to imagine wanting a single family home over condo/apartment, but with children I definitely see why so many people buy.

The problem with apartments and renting in general is that it’s a sunk cost that never builds equity. It makes sense short term or if someone is constantly moving like with locums, but if someone is staying in the same place it’s almost certainly going to make sense to buy, whether it’s a house or condo. Plus there's never true security with renting, landlords can file for eviction or not renew a lease for whatever reason they feel. I also was never a huge fan of cul-de-sacs until having a kid, but I love ours now.

That’s what was told to me by my in laws and parents confirmed. They’ve been paying the same property taxes for years essentially. It’s how people who bought a long time ago are able to keep their house and not foreclosed due to increased property values.

This detracted, just wanted to point out people like to live and continue to want to live in SoCal for other reasons than just weather although it definitely plays a factor.

Interesting. Is that a county thing or a state regulation? I'm sure it helps with retention, but makes me wonder even more why so many homeless people in CA are individuals who were displaced from their homes seeing as something like 75% of homeless individuals there are residents for 5+ years and 50% were residents for 10+ years...

I'm sure there's plenty of other reasons that appeal to people, I've heard many of them. I've just never found many of those reasons to be particularly unique to SoCal. Plenty of things that make where I live in the midwest appealing are easily obtainable many places, but I like it because of everything available combined with how affordable it is.

 

[sloh]

The problem with apartments and renting in general is that it’s a sunk cost that never builds equity. It makes sense short term or if someone is constantly moving like with locums, but if someone is staying in the same place it’s almost certainly going to make sense to buy, whether it’s a house or condo. Plus there's never true security with renting, landlords can file for eviction or not renew a lease for whatever reason they feel. I also was never a huge fan of cul-de-sacs until having a kid, but I love ours now.

I’m all for suburbs and will be buying a house in the suburbs in the next 1-2 years but the fear of landlords filing for eviction or not renewing a lease is a trivial concern for physicians unless they rented a terrible apartment to begin with. And usually people who get evicted either aren’t paying their rent or have other personality flaws that make them unwelcome.

 

[clozareal]

The problem with apartments and renting in general is that it’s a sunk cost that never builds equity. It makes sense short term or if someone is constantly moving like with locums, but if someone is staying in the same place it’s almost certainly going to make sense to buy, whether it’s a house or condo. Plus there's never true security with renting, landlords can file for eviction or not renew a lease for whatever reason they feel. I also was never a huge fan of cul-de-sacs until having a kid, but I love ours now.

You know what else is a sunk cost that never builds equity? That 6% real estate agent commission fee and closing costs, that 1-2% maintenance cost for the home, the property tax, and the time it takes to call contractors, take off of work to wait for them to come only for them not to show up, and the cost of that labor. This idea that renting is "throwing away money" doesn't take into account the transaction costs to buying and owning a home.

You can be better off financially renting but each personal financial situation and goal is different, so for the most part if the rent:buy ratio is favorable enough (NY times estimates this to be 20) to rent, then you probably will come out numerically ahead by renting. Although in these high cost of living places, appreciation tends to be higher than the places where the rent:buy ratio is higher.

The reality stands though that the landlord can kick you out at any time with little notice except in certain states that have favorable tenant protections. That is emotionally tough to have to live with every day and why I think buying is probably better overall even if it isn't better financially. Although if you don't pay your mortgage, you know pretty quickly who truly owns that home and that you can also get kicked out...

 

[Stagg737]

I’m all for suburbs and will be buying a house in the suburbs in the next 1-2 years but the fear of landlords filing for eviction or not renewing a lease is a trivial concern for physicians unless they rented a terrible apartment to begin with. And usually people who get evicted either aren’t paying their rent or have other personality flaws that make them unwelcome.

It may be mostly trivial and uncommon but it still happens. Had a friend in grad school who got "evicted" from their duplex because the landlord was moving and decided to sell the property to a family instead of continue renting. They were pretty upset about having to move since they'd been there for years, but didn't want to buy. Obviously that's more of an issue with renting a house than an apartment but the point is that this isn't something that one needs to worry about if they buy. For those who prefer a downtown/apartment-like lifestyle plenty of places have condos available to purchase.

You know what else is a sunk cost that never builds equity? That 6% real estate agent commission fee and closing costs, that 1-2% maintenance cost for the home, the property tax, and the time it takes to call contractors, take off of work to wait for them to come only for them not to show up, and the cost of that labor. This idea that renting is "throwing away money" doesn't take into account the transaction costs to buying and owning a home.

You can be better off financially renting but each personal financial situation and goal is different, so for the most part if the rent:buy ratio is favorable enough (NY times estimates this to be 20) to rent, then you probably will come out numerically ahead by renting. Although in these high cost of living places, appreciation tends to be higher than the places where the rent:buy ratio is higher.

The reality stands though that the landlord can kick you out at any time with little notice except in certain states that have favorable tenant protections. That is emotionally tough to have to live with every day and why I think buying is probably better overall even if it isn't better financially. Although if you don't pay your mortgage, you know pretty quickly who truly owns that home and that you can also get kicked out...

Eh, some of this is fair but some of it doesn't apply to physicians. Down payments aren't necessary and physician loans often come at a lower interest rate than standard loans (ours was about 0.6-0.8% lower than the standard 30 year fixed at the time). The point of sunk costs with interest payments is fair, but if you live somewhere with lower COL or get a cheaper home you can overpay and dramatically cut down those costs. I did the math for our own mortgage at one point and by paying an extra $500/mo on a ~3k/mo mortgage for 10 years it'll directly save us ~350k in interest on a ~$550k home (gross payment over the course of the loan would drop by about 25%). Sure, we could have done a down payment, but instead have invested what would have been that down payment. So after 30 years we'll have our house + the earnings from investing the down payment - the interest payments instead of just having paid $1.08mil over 30 years into renting. As physicians we get a huge leg up here compared to the average buyer like the article talks about.

Yes, there are costs to maintaining a home, and if you buy an older home or "fixer upper" then the costs can be far more significant. That's part of being an educated buyer though and some of those can be negated through the buying process. We got a new roof put on our house at no cost to us before purchasing through some negotiations. That's a cost we shouldn't have to worry about for 20+ years unless there's damage.

On the flip side, you may not have to pay for major maintenance or some upkeep with renting, but there's still hidden costs. We bought our house during an October and our lease on our rental went through the following April. Sounds dumb, but we were showing the rental to get out early. We left for holiday in December and came back to a burst line in the freezer that leaked for likely most of the week and destroyed 2 floors. House was unlivable and the rental company/landlords who had previously been great were suddenly terrible. We dealt with them for literally 2+ months trying to get everything straightened out before we threatened to get lawyers involved and they retroactively cancelled our for January onward. If we had still been living there it would have been a nightmare living out of a hotel and probably putting it all on our credit cards and paying while trying to get an unresponsive rental company to work with us. Yes, the same can happen when you buy, but I've found homeowners insurance to be far more reliable and responsive than landlords and rental companies (I had also previously had to sue a prior landlord in grad school for breach of contract). When you own you also don't have to worry about landlords or agencies coming into your dwelling while you're away, which is another issue I've dealt with despite the lease saying landlord would not enter premises without 24 hour notice.

Regardless, renting is "throwing away money" either way. Money is also "thrown away" when owning a home, but at least you're also building equity. People buying homes just don't always understand full costs or what to look for and can end up "throwing away" more than if they'd just rented. Sure, sometimes renting is the right option, I won't argue that at all. But there's a huge difference between physicians and average homebuyers as well as right and very wrong ways to become a homeowner.

TL;DR Renting isn't always bad, but it is 100% sunk money. At least with buying you get equity out of it, you just have to be educated and thoughtful about purchasing and being a homeowner.

 

[brainmedicine]

The IRS is watching this discussion

 

[finalpsychyear]

Absolutely agree that in many locations renting is better than buying financially. That said once you factor in children, school districts, yards, neighbors, etc make a big difference in lifestyle. I thought cul du secs were the dumbest thing on Earth and then after having a child have the exact opposite opinion.

At the empty nest stage I find it hard to imagine wanting a single family home over condo/apartment, but with children I definitely see why so many people buy.

So in my situation i am renting a house that i probably got luckily under what rents are going for in the last 6 mo. Now the house price range that I will hope to buy at some point (12 mo) I just looked it up just the interest on that house is more than my current rent. I'm not considering taxes, insurances and maintenance. Aren't I technically ahead in a way renting until that house becomes available? It doesn't hurt that my landlords allow me to go month to month for the same price in a few months once i hit the 1 year mark.

 

[Stagg737]

So in my situation i am renting a house that i probably got luckily under what rents are going for in the last 6 mo. Now the house price range that I will hope to buy at some point (12 mo) I just looked it up just the interest on that house is more than my current rent. I'm not considering taxes, insurances and maintenance. Aren't I technically ahead in a way renting until that house becomes available? It doesn't hurt that my landlords allow me to go month to month for the same price in a few months once i hit the 1 year mark.

You certainly could be, especially if you're investing what would be a down payment. Plus mortgage rates make a huge difference. Buying when rates were <4% is very different from the 7.5%+ it is now. Just another part of what's necessary to be an informed buyer and digging into the math before

 

[Bartelby]

Renting v owning is, financially, just a math problem.

You can run the numbers with a calculator like this one: https://www.google.com/url?sa=t&sou...CBcQAQ&sqi=2&usg=AOvVaw07XWlRQ75p4zrbCdvjfE5j

When you rent your monthly rent disappears, but that is the total cost of housing for you.

When you buy, the down payment money has been spent and cannot be invested (you can probably get 7% returns annually with an index fund). You have to pay taxes and maintenance costs. The interest, which is currently around 7%, is also thrown away money. We will have to see how real estate transaction fees pan out after the recent decision against the standard 6% fee, but historically when you sell you have to pay a 6% real estate agent fee plus various other costs such as fixing the home up for sale.

Overall if you are not staying more than 5 years, renting may very well be a financially better deal. If you are staying for many decades, buying is likely to come out ahead (though that is not necessarily a guarantee). Luck is also involved because you have to make your best guess about really important stuff like how quickly houses will increase in value and what the returns on your investments would look like otherwise.

For me even though renting would probably be a better deal financially, I don't love the idea of having a landlord who can prevent me from modifying the property and who can boot me and my family out of our home/ neighborhood/ school zone. Buying has been worth it even though I'm not convinced it was a good deal financially (HCOL area).

 

[TexasPhysician]

So in my situation i am renting a house that i probably got luckily under what rents are going for in the last 6 mo. Now the house price range that I will hope to buy at some point (12 mo) I just looked it up just the interest on that house is more than my current rent. I'm not considering taxes, insurances and maintenance. Aren't I technically ahead in a way renting until that house becomes available? It doesn't hurt that my landlords allow me to go month to month for the same price in a few months once i hit the 1 year mark.

Renting vs owning is an individualized financial decision. If you are going to live somewhere for just a few years, it is often cheaper to rent. Selling a home incurs costs. Maintaining a home incurs costs. That said, owning results in fixed payments over 30 years. When I refinanced before rates shot up, my monthly payment for 3500+ sq ft became relatively small. Now my friend pays the same amount to rent a 2 bedroom apartment as I pay monthly. His costs will likely escalate over the next 30 years. Mine won’t. Including maintenance costs, I do still pay more monthly than him. His renting costs will eventually become more than my mortgage + maintenance. Appreciation has helped me over the last 5 years - roughly $300k up.

Financially, he did better than me for the first 3 years. Since Ive quickly caught up and have now made the better decision.

Different geography could change the math. In some HCOL areas, it is probably a better idea to rent until the next housing bust. That’s my hypothesis, not fact.

 

[jbomba]

Fantastic that takes some hustle

On the housing front many really should rationally look at what it means to buy. It’s a math problem that for many given the interest rates will cause it to be a poor financial choice v renting. The amortization schedule for lost loans will have you barely breaking even until year 8-10 on gaining any equity and until year 20 or so until your interest payments finally start to be equal or less than principal. The BH&J buy to rent index is a good tracker for this plus running the numbers. If you want the house to want the house that’s fine but realize generally buying will not be the smarter financial option In many cases. Just an example for me to buy my equivalent apartment right now would be 2x-2.5x my rent (just for the mortgage and taxes the interest payments for the first 15 years equals my rent). I’ll take that extra money gladly and stick into investments and it will grow quicker than any equity and appreciation would

Yes I could rent a comparable place for 6-7k/month. My piti is around 19k. But for me, I prefer the stability of knowing my child will stay in one (fantastic) school system through high school, be close to their friends in the neighborhood, and we'll get to live amongst educated, friendly people we've already been able to make friends with for the next 10-12 years. I don't have to worry about hearing from the landlord that they are selling the house or that rent is going up year over year. My mortgage gets cheaper every year thanks to inflation and prop 13 in California. Not the case for rent which gets more expensive each year. I'm also still saving a bunch of money...so whether I end up with a NW of 13M or 8.5M at retirement, the difference isn't going to make a huge difference in my everyday life. But the things I noted above sure will. It's a personal decision and if I didn't have kids/was single you're damn sure I'd be renting and saving the difference. Or driving a 911 turbo. But I digress.

 

[jbomba]

Renting v owning is, financially, just a math problem.

You can run the numbers with a calculator like this one: https://www.google.com/url?sa=t&sou...CBcQAQ&sqi=2&usg=AOvVaw07XWlRQ75p4zrbCdvjfE5j

When you rent your monthly rent disappears, but that is the total cost of housing for you.

When you buy, the down payment money has been spent and cannot be invested (you can probably get 7% returns annually with an index fund). You have to pay taxes and maintenance costs. The interest, which is currently around 7%, is also thrown away money. We will have to see how real estate transaction fees pan out after the recent decision against the standard 6% fee, but historically when you sell you have to pay a 6% real estate agent fee plus various other costs such as fixing the home up for sale.

Overall if you are not staying more than 5 years, renting may very well be a financially better deal. If you are staying for many decades, buying is likely to come out ahead (though that is not necessarily a guarantee). Luck is also involved because you have to make your best guess about really important stuff like how quickly houses will increase in value and what the returns on your investments would look like otherwise.

For me even though renting would probably be a better deal financially, I don't love the idea of having a landlord who can prevent me from modifying the property and who can boot me and my family out of our home/ neighborhood/ school zone. Buying has been worth it even though I'm not convinced it was a good deal financially (HCOL area).

I think a lot of people get this wrong. Everything is negotiable. You do not have to automatically give your agent 3% to sell your home. Have a multi million dollar home in a nice area? You think you can't tell your agent to take a hike and then find someone else willing to sell your home for 2 percent? Happens all the time around here.