Serious question: how much house can a successful dentist afford once he is financially secure?
How much house
- Thread starter Ellatha
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According to the bureau of labor and statistics:
The median annual wage of dentists was $146,920 in May 2010. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $71,210, and the top 10 percent earned $166,400 or more. Earnings vary according to number of years in practice, location, hours worked, and specialty.
Too many variables to provide one answer for your question however you can plug the numbers into http://www.zillow.com/mortgage-calculator/house-affordability/ and play.
The median annual wage of dentists was $146,920 in May 2010. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $71,210, and the top 10 percent earned $166,400 or more. Earnings vary according to number of years in practice, location, hours worked, and specialty.
Too many variables to provide one answer for your question however you can plug the numbers into http://www.zillow.com/mortgage-calculator/house-affordability/ and play.
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Somewhere between a little and a ton of house.
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BLS (average salary of $146,920) is biased towards corporate dentistry chains. However the ADA (average salary of $192,680) is biased towards private practice owners. The actual average salary of a dentist is somewhere in between those two values. So it depends on whether or not you would want your own practice or not and your demographics. To have a lot of house, you should move to a rural area and open your own practice. If you want a little bit of house, practice in California.
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I'm going to guess anywhere from tenement housing to the Biltmore house.
Depending on how many loans you have, what kind of dentistry you do, where you work or private practice, what state you live in, etc...
Depending on how many loans you have, what kind of dentistry you do, where you work or private practice, what state you live in, etc...
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I think this is highly dependent on how you manage your money.
Don't rack up a lot of debt early on. You're going into a lucrative career and if you're smart, you should be able to buy a pretty darn nice house. I'm guessing you will eventually (or already) have a spouse that will be drawing in an income, too--and that will only help.
Don't rack up a lot of debt early on. You're going into a lucrative career and if you're smart, you should be able to buy a pretty darn nice house. I'm guessing you will eventually (or already) have a spouse that will be drawing in an income, too--and that will only help.
I would imagine there is a huge range from anything like 200k to 1.5 mil plus. Of course it is highly dependent on the dentist's situation. Whether he is an associate to the owner of a large successful practice or practices.
I've heard a general rule that housing costs should not consume more than 25-33% of your pre-tax monthly income. Although, IMO this rule becomes a lot less important once someone starts earning high wages; because, all other costs do not automatically inflate too.
Like other people have said it depends on someones total financial situation and your desire for an expensive home. I think it is possible to "afford" more home at any income level if you acknowledge, and are comfortable, with the opportunity costs.
I think many practice owners can live in upper-middle-class neighborhoods like other professionals at some point in their career.
Like other people have said it depends on someones total financial situation and your desire for an expensive home. I think it is possible to "afford" more home at any income level if you acknowledge, and are comfortable, with the opportunity costs.
I think many practice owners can live in upper-middle-class neighborhoods like other professionals at some point in their career.
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I think the better question is how much house *could* your afford? vs How much house *should* you get?
If one isn't careful and prudent with their finances, then they could very easily end up with bankruptcy issues all the while making an annual income that puts them ahead of the vast majority of the population.
I'll use myself as an example. My wife and I have our primary home and a vacation home. Neither are "small" or "mansion like" but they each have plenty of space and ammenities for our family. Our monthly COMBINED mortgage payments are less than 1/2 of what various lending agencies say we could afford. I'd much rather have the extra $$ to do with what I want to do rather than have more square footage above and beyond what is already plenty for us. Check your ego when considering investments is a solid strategy for sure
If one isn't careful and prudent with their finances, then they could very easily end up with bankruptcy issues all the while making an annual income that puts them ahead of the vast majority of the population.
I'll use myself as an example. My wife and I have our primary home and a vacation home. Neither are "small" or "mansion like" but they each have plenty of space and ammenities for our family. Our monthly COMBINED mortgage payments are less than 1/2 of what various lending agencies say we could afford. I'd much rather have the extra $$ to do with what I want to do rather than have more square footage above and beyond what is already plenty for us. Check your ego when considering investments is a solid strategy for sure
+1 this is the best comment yet. Make buying anything of major value an economic decision. Just because you "can" doesn't mean you "should."
The housing market struggles that we have seen in the last decade started with families buying homes that they MAX could afford. Then something
small changes there monthly income and it greatly impacts their ability to make simple payments...
Read the book Millionaire Next Door. It's an older book, and a quick read that talks about sound financial principles.
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One thing I am afraid the most is the inability to practice dentistry due to an illness, old age, or death. I know I can't practice dentistry forever. The disability insurance is not enough to cover our living expenses. Therefore, I have to protect my family by investing in rental properties.
When I buy houses, I want to make sure that I can easily sell them in the future. When I buy investment homes, I want to make sure that I can easily find the tenants to help pay for the mortgages. For this reason, I'd never buy houses in small rural areas where no one wants to live. All of my houses are in the heart of Orange County, CA. The smallest one is a tiny ugly 1100 sf house that has 3 bed 1 bath. I have no problem finding the tenants who are willing to pay $1800/month in rent for this house.
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6000sqft
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If you buy single family homes and 4 (or less)-unit apartments, your loan term will be just like any other residential loans...15, 20, 30 years fixed, whatever you prefer.
I also have a 5-unit apartment and this is considered a commercial property; therefore, I had to borrow a commercial loan, which is harder to obtain, higher interest rate, and required more down payment. My commercial loan term is 7 year fixed. After 7 years of payments, there will still be a large balance....I either have to refinance for another 7 year term or pay it off.
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i understand how it works, what i was asking is how long you choose to finance your non-commercial properties for.
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I chose 30 years because my cpa advised me not to pay off these debts too fast.
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Don't a lot of orthodontists practice until they are 80?
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that's interesting, is it because of a mortgage interest deduction on the investment property?
part of me would opt to put my IPs on 15yr notes just to build the equity that much faster and increase profit should i choose to unload them. then again, i'm no cpa...and i'll hire one just as you have to advise me.
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I'm like you. My investment property is currently a 30yrs 6.5% loan that I'm doing refi to 15yrs 3.5% loan. The monthly payment is exactly the same but I pay off the property many years earlier thus saving $100K+ in interest. Now if they reject my refi, then I'd pull out cash to completely pay off the house, which at 6.5% interest if paid off is a like a guaranteed 10% stock market return for many years. It looks like Obama want and eventually will limit all deduction (including mortgage) for higher income earners anyway... the sooner you pay it off the better.
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My cpa advised me that I should pay off the mortgage on the primary home first. According to him, if I pay off the mortgage on the rental properties first, then I will have no deductions and this will result in a higher capital gain tax. My cpa also advised me to take out the home equity loan from my primary house to buy more investment properties but I decide not to take the additional risk because I don't want to work forever to pay down the debts.
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technically you may have an idea how much you want to work, if you reach 10 paid properties it doesn't matter how bad the economy or inflation is rent will always pay you back and will replace your salary without lifting a finger. 10 properties lets say they are worth less than 150k each they rent for 1300 to 1600 and if you imagine them paid off you only have to pay taxes and insurance which will be less than $500 a month. You will average out 10 to 12k a month clean and that money is investable more profitable since you only have to pay half the taxes than you would on your salary, there are even loop holes if you put all those houses in a corporation and before each year's end you add another property into your portfolio you will end paying nothing or almost nothing since you are putting that money towards another investment within the year, if you don't then you pay taxes on your earnings. Talk to an accountant. Yea, I wouldn't take loan on my primary house, that should be paid off not getting loans from! specially if you are making a lot of money. If don't make a lot of money say $50k a year then you can do it and you risk less than someone having a million dollar that could be lost in a blink of an eye.
