PhD/PsyD Is it wise to buy a condo for my PhD program instead of Rent?

[ThatPsyGuy]

I'm going to be completely honest, I hate renting. I hate giving my money to others that I can be spending on myself and growing my investments (of which I have little), and having roommates is losing it's charm.

In my area, getting a 1 bed condo could be just the same, if not cheaper, as renting a 1 bed apartment. I've been told that if you plan to buy a condo, you want to plan to live in it for at least 5 years. Guess how long PhD programs typically are?

For the most part, I have the finances to pay for the monthly costs of a condo (may need co-sign, as my stipend of $25k+ will be going into that monthly cost). First time homeowner help is a bonus, and I could get a condo for a great price if I'm eligible for a local Trust. I also plan on staying in the area that I want to buy post graduation.

My main concerns are about internship placements (I live in an area with a plethora of internship sites thankfully, so hopefully I'll match with one in the area when the time comes) and the feasibility of reselling if I want to leave, which I doubt I'll want to but it's good to plan. And HOA fees are atrocious at some of these places. Imagine paying a $800 monthly HOA fee. Come on...

I've done some research, asked friends and family, tried my best to understand the housing market (unsuccessful), and scoured Google for relevant discussions. So I bring my sleep deprived rantings and questions to you all:

Is it wise to buy a condo to live in for your PhD program instead of renting? Has anyone else done this? Any recommendations? Any more information you want to know?

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[summerbabe]

Big questions are:
A) how much of a down payment do you currently have saved?
B) what type of mortgage terms could/would you qualify for? Your anticipated grad school stipend isn’t exactly appealing from a mortgage underwriting perspective.
C) how would you manage unexpected expenses such as major repairs?
D) do you anticipate living in condos/apts for a while, even post grad school?

 

[ThatPsyGuy]

Big questions are:
A) how much of a down payment do you currently have saved?
B) what type of mortgage terms could/would you qualify for? Your anticipated grad school stipend isn’t exactly appealing from a mortgage underwriting perspective.
C) how would you manage unexpected expenses such as major repairs?
D) do you anticipate living in condos/apts for a while, even post grad school?

A.) I have about enough to dedicate to a 10% minimum down payment. With additional grants/first time homeowner assistance programs, I believe that I can raise that up to 20-25k. But 15k guaranteed at the moment.

B.) Yeah, that's my worry as well. Still trying to figure that out. I'm waiting to take this homeowner counseling program near me so that I can get specific questions answered about mortgages. I honestly can't give you a solid answer. One thing I know is that I may have to get a cosigner.

C. By major repairs, do you mean like plumbing, leaks, HVAC issues? I believe that the HOA fees covers or at least assists in these costs. For things like major appliance repairs or replacement, I'd have to plunge into the savings or ask for some help primarily.

D.) I don't really want to own a house for a while. I like being in the city and they are primarily condos/apts. Keeps me close to my University, prac/internship sites, friends/fam, etc. I imagine post grad, I'd still be living in a condo for at least 5+ years.

Hope these answers clear up anything

 

[calimich]

might be very wise if you have the means and it's a good spot. We bought a modest home during my phd years, spent 5/6 years in it, and continue to rent it out today. We've owned it 10+ years now. Always remember the first three rules of real estate.
Location. Location. Location.

Going in we always figured we'd hold on to it and rent it out. Not everyone will want to do this, but it made sense for us and we had prior experience. Check the water pressure before you buy. All the faucets. Check the home/location at different times of day, different days of the week if possible. Be sure that quiet weekday afternoons don't turn into raging weekend parties...unless that's what you're looking for. Mortgage insurance can add lots to a monthly payment; use a cosigner if needed. Very exciting, good luck!

 

[wysdoc]

I think you will have no trouble selling it when you are ready to move, especially if it is close to a university where anyone from parents of college kids, other grad students, profs, to alumni might want that location. If you keep your down payment low and the mortgage payments are less than rent, sounds like a reasonable plan.

 

[Sanman]

A.) I have about enough to dedicate to a 10% minimum down payment. With additional grants/first time homeowner assistance programs, I believe that I can raise that up to 20-25k. But 15k guaranteed at the moment.

B.) Yeah, that's my worry as well. Still trying to figure that out. I'm waiting to take this homeowner counseling program near me so that I can get specific questions answered about mortgages. I honestly can't give you a solid answer. One thing I know is that I may have to get a cosigner.

C. By major repairs, do you mean like plumbing, leaks, HVAC issues? I believe that the HOA fees covers or at least assists in these costs. For things like major appliance repairs or replacement, I'd have to plunge into the savings or ask for some help primarily.

D.) I don't really want to own a house for a while. I like being in the city and they are primarily condos/apts. Keeps me close to my University, prac/internship sites, friends/fam, etc. I imagine post grad, I'd still be living in a condo for at least 5+ years.

Hope these answers clear up anything

I think this covered the major questions, but if you are looking at condos I would see what their policies are on renting/subletting. I would also looks at any hikes in HOAs. I know of places where HOA fees jumped dramatically. The biggest question for me with regard to real estate is liquidity and that goes directly to question C. I have a colleague that lives in a condo now and has major bathroom bills as they had to rip up a wall and bathroom vanity to address a leak coming from the upstairs unit. Guess who is on the hook for the vanity, wall, etc?!?

 

[WisNeuro]

Yeah, just chiming in on others with HOAs, read everything in the HOA docs before putting a bid into anything. The rules on these vary incredibly. Things to consider, can you weather a large repair that is not covered by the HOA? For a traditional home, this would be something like a furnace, roof, plumbing issue, etc. For an HOA, all depends on what falls under your umbrella vs the HOA. Are you at least moderately handy, as in, can you do minor repairs and such on your own?

Owning during grad school/training can be a good or bad thing, depending on your situation. I owned during grad school and later rented it out after moving for internship and fellowship. Kept it as a rental for a time after. But, I could do many repairs myself, and leveraged some of the advantages of business expenses. Going to see family back home, which happens to be close to your rental? Spend some time doing repairs and you can deduct much, if not all of your travel as a business expense. Need to replace something (e.g. water heater), if it's a rental property vs. you own/occupy, it becomes a depreciable asset vs an expense of home ownership.

 

[ThatPsyGuy]

Thanks for all the replies.
To answer a couple answers, renting out the unit when I want to move somewhere else was always in the cards. I'm not sure how I feel about selling immediately, but renting is definitely in the cards. If my research is correct, the city I'm thinking of buying in always seems to have units propping up and being bought (seeing as all the units I like end up getting sold).

The location I'm looking in is right in/near the downtown area and the local transit system. Near all the entertainment, shopping districts, bars/restaurants, etc, which is great. Not sure if the building being a high/low-rise with amenities (gym, rooftop terrace, bike storage, doorman, etc) helps with reselling or not, but that's where most of the affordable condo's I'm interested are in.

I'll make sure to read closely into HOA terms from here on out though. Didn't know they could hike up like that. As for handiness? I've got YouTube DIY tutorials, inherited tools, and stubbornness. If that doesn't work, then I got a couple handy friends & family within close distance that I can bug.

I really just want to try building my equity with things that I'm putting a lot of money into, you know? Why use that $1500+ *12 a year for someone else's profit when I can use it for myself.

 

[R. Matey]

I rented during grad school at a really affordable rate, right next to campus. The money I didn't pay in transportation costs, closing costs, property taxes, mortgage insurance, homeowners insurance, repairs, HOA fees, etc. was invested in things like index funds, specific stocks I keep track of--just another perspective.

 

[CheetahGirl]

I'm going to be completely honest, I hate renting. I hate giving my money to others that I can be spending on myself and growing my investments (of which I have little), and having roommates is losing it's charm.

In my area, getting a 1 bed condo could be just the same, if not cheaper, as renting a 1 bed apartment. I've been told that if you plan to buy a condo, you want to plan to live in it for at least 5 years. Guess how long PhD programs typically are?

For the most part, I have the finances to pay for the monthly costs of a condo (may need co-sign, as my stipend of $25k+ will be going into that monthly cost). First time homeowner help is a bonus, and I could get a condo for a great price if I'm eligible for a local Trust. I also plan on staying in the area that I want to buy post graduation.

My main concerns are about internship placements (I live in an area with a plethora of internship sites thankfully, so hopefully I'll match with one in the area when the time comes) and the feasibility of reselling if I want to leave, which I doubt I'll want to but it's good to plan. And HOA fees are atrocious at some of these places. Imagine paying a $800 monthly HOA fee. Come on...

I've done some research, asked friends and family, tried my best to understand the housing market (unsuccessful), and scoured Google for relevant discussions. So I bring my sleep deprived rantings and questions to you all:

Is it wise to buy a condo to live in for your PhD program instead of renting? Has anyone else done this? Any recommendations? Any more information you want to know?

I would buy, if you could (disclosure: coming to you from a place of privilege). Also, if you live in an area with a plethora of internship sites, you may limit your area of training/research focus, but you'll accomplish the goal of finishing to licensure.

My SO is a real estate developer, and he (out of his own principle or principal, pun intended ) could not pay rent to someone else, so we always made it work. I also live and went through all my training in NYC, so we have plenty of options here for both training (in professional psych) and real estate development. Heck, who knows, maybe that condo will be a great return on investment for new place in your postdoc local!

 

[AcronymAllergy]

I would agree with the others that if you're able to buy, it can make (financial) sense. It's really just a matter of whether you have the ability to foot the home ownership costs that can arise (and have the patience to do so), as was mentioned above. And if you could potentially handle paying multiple rents/mortgages simultaneously when moving if you aren't able to rent the unit out or sell it right away. Also, selling/renting takes time and energy, which you may or may not have much of when preparing for internship or fellowship.

Personally, if I'd had the ability to buy rather than rent for grad school, I probably would've done it. But it would've taken a lot more legwork prior to my move there, rather than the site-unseen approach I took to renting my first apartment. And I also had multiple friends in the area after I moved away for internship who could've potentially helped out with any renter-related issues, if I'd gone that route instead of selling.

Edit to re-iterate the importance of reading the HOA bylaws/agreement. I've known of condos where the HOA fees are similar to or higher than the mortgage payment.

 

[PsyDr]

What happens when your condo gets a special assessments during grad school? Do you have cash reserves to cover such an occurrence?

 

[Sanman]

I rented during grad school at a really affordable rate, right next to campus. The money I didn't pay in transportation costs, closing costs, property taxes, mortgage insurance, homeowners insurance, repairs, HOA fees, etc. was invested in things like index funds, specific stocks I keep track of--just another perspective.

Agreed, I did this as well and it is another way to go. During post-doc, I took a portion of my investment funds, bought a company called Facebook for $24/share shortly after its IPO. Then I forgot about that investment account for a few years as I got licensed, got married, moved, changed jobs. Logged into the account a few years later when life slowed down again and I can't say I regret that decision. Try doing that with a condo.

 

[CheetahGirl]

Try doing that with a condo.

This would be a fair statement, if you find us another budding Facebook. You lucked out.

So we end on a postivie real estate note: My spouse bought into a little Seattle company called Starbucks, within the first few years of their IPO. He sold around $20K to invest in real estate (midtown Manhattan condo)....he regrets, not holding that one a bit longer. When we sold, we doubled our investment 100% (within 10 years) in an amazing sellers market. It's all about location, location, location.

 

[Sanman]

This would be a fair statement, if you find us another budding Facebook. You lucked out.

So we end on a postivie real estate note: My spouse bought into a little Seattle company called Starbucks, within the first few years of their IPO. He sold around $20K to invest in real estate (midtown Manhattan condo)....he regrets, not holding that one a bit longer. When we sold, we doubled our investment 100% (within 10 years) in an amazing sellers market.

Yes and no. Facebook was not a guess and was very well regarded prior to the IPO, similar to Google before it. My point was try forgetting you own real estate for several years. Even if you choose index funds, I would argue that stocks are a better choice for growth of your money and real estate is a better option for preserving it and producing income (leverage issues aside).

The previous owner of my home was a cop who bought it and tried to house hack. It was not a great investment for him. It has been a better investment for me after I bought it as a foreclosure from the bank for a song. However, I have liquidity that cop did not after his friends moved out and left him without the extra income.

 

[cara susanna]

I know people who owned houses during grad school and sold them when they moved for internship etc. It seemed fairly stressful. Then again, the housing market seems pretty high demand lately.

 

[ThatPsyGuy]

What happens when your condo gets a special assessments during grad school? Do you have cash reserves to cover such an occurrence?

Never heard of that until now. Searched it up and frankly that sounds awful. I'm not sure how much that would increase monthly costs, but I'd most likely have to dip into my already dwindling savings and/or get a part time job to cover.
Thanks for bringing it to my attention

 

[WisNeuro]

Never heard of that until now. Searched it up and frankly that sounds awful. I'm not sure how much that would increase monthly costs, but I'd most likely have to dip into my already dwindling savings and/or get a part time job to cover.
Thanks for bringing it to my attention

Cash reserves is a big part of the equation, and how much you can weather changes in monthly costs, or one time BIG expenses. Honestly, if the decision is between renting during grad school, and having to get an extra job to cover a modest increase in living expenses, I'd choose renting.

 

[ThatPsyGuy]

Cash reserves is a big part of the equation, and how much you can weather changes in monthly costs, or one time BIG expenses. Honestly, if the decision is between renting during grad school, and having to get an extra job to cover a modest increase in living expenses, I'd choose renting.

Well once again that depends on how much it changes my living expenses right? If special assessments increase my costs an extra $50/mo., I can easily get by with my already available funds. If we're talking about tacking on an extra $500/mo.? Yeah that's stretching.

I gotta admit, renting is looking a little more tempting now. Less "what-if's" to account for. I'd most likely have to rock a studio apartment for grad school primarily, which I don't mind really.

EDIT: Briefly looked at studio apartments. I mind it a lot as a matter of fact.

 

[WisNeuro]

Well once again that depends on how much it changes my living expenses right? If special assessments increase my costs an extra $50/mo., I can easily get by with my already available funds. If we're talking about tacking on an extra $500/mo.? Yeah that's stretching.

I gotta admit, renting is looking a little more tempting now. Less "what-if's" to account for. I'd most likely have to rock a studio apartment for grad school primarily, which I don't mind really.

Yeah, you got to do what's right for you. Ultimately, I look at it in terms of how much extraneous things can impact your ability to succeed in grad school? If you're very good at managing stress and can manage occasional 70-80 hour weeks if **** hits the fan at your house with something, may not be a terrible idea. However, if other stressors make it hard for you to put what you need into a practicum site, which you need for a good letter, probably not a good idea. So, finances is one thing, stress management and ability to compartmentalize is another.

 

[Sanman]

Well once again that depends on how much it changes my living expenses right? If special assessments increase my costs an extra $50/mo., I can easily get by with my already available funds. If we're talking about tacking on an extra $500/mo.? Yeah that's stretching.

I gotta admit, renting is looking a little more tempting now. Less "what-if's" to account for. I'd most likely have to rock a studio apartment for grad school primarily, which I don't mind really.

I would bet more on $500 or more than I would $50. Property maintenance/repair bills tend to come in $1000 increments not $10 increments. Communal structure bills are often in $10,000 increments.

 

[borne_before]

buy a trailer or van life

 

[Marissa4usa]

If you have the means, I would highly recommend buying! I recommend against a condo, but that's just a personal preference (I hate HOAs). I went to grad school in a low cost area (i.e., Midwest), and purchased a starter home (3 bed/1 bath) with 10% down. I rented out the other two bedrooms, with one (!) roommate covering the entirety of my mortgage. I moved after 5 years, first did long-term renting, then AirBnB; and 9 years later, the home is paid off, the value of my home has almost doubled, and I'm getting ready to sell.

Yes, I did have expenses I wouldn't have had as a renter, and yes, maintenance and what-have-you does take up a chunk of your time (which was stressful during my second and third year). On the other hand I am only three years out of grad school, single, and have decent net worth. More importantly, once I sell I will have a nice down payment for my next home.

 

[CheetahGirl]

If you have the means, I would highly recommend buying! I recommend against a condo, but that's just a personal preference (I hate HOAs). I went to grad school in a low cost area (i.e., Midwest), and purchased a starter home (3 bed/1 bath) with 10% down. I rented out the other two bedrooms, with one (!) roommate covering the entirety of my mortgage. I moved after 5 years, first did long-term renting, then AirBnB; and 9 years later, the home is paid off, the value of my home has almost doubled, and I'm getting ready to sell.

Yes, I did have expenses I wouldn't have had as a renter, and yes, maintenance and what-have-you does take up a chunk of your time (which was stressful during my second and third year). On the other hand I am only three years out of grad school, single, and have decent net worth. More importantly, once I sell I will have a nice down payment for my next home.

Super smart to get a roommate to offset costs!

And this is what I'm taking about...rent doesn't go to another source's revenue, but back into your future.

A lot to think about and @Marissa4usa is not the average bear, but this is an exceptionally great scenario (if you can hack it).

 

[MAClinician]

As someone who owns a condo I’ll share my experiences which are of course specific to my location and YMMV:

1. In my area 1 BR condos are harder to resell. Maybe easier to rent. But find out how frequently condos are bought and sold in your area. And what does the HOA say about renting out? Keep in mind if you rent it after you leave, as the condo owner you may be responsible for any fines earned by your tenants.

2. HOA fees can (and will) increase depending on how the HOA is set up and what it covers. My fee covers the master insurance for the building structure but not what is inside, landscaping, snow removal, water/sewer, electricity for the outdoor streetlights and other common areas, and trash and recycling. I’ve had my monthly fee both increase and decrease over the years based on community wide improvements (or my first winter, unexpected snowfall that resulted in spending twice the allocation of snow removal budget).

3. Special assessments can vary. Some places might require the payment be made in one payment or they might let it be split up. When researching community to purchase in, ask if there are any upcoming projects or assessments, the last ones completed, and how much is in reserves?

4. In my condo I’m responsible for anything that breaks inside. Had to replace my furnace 3 years in. My water heater 2 months ago. The HOA didn’t replace it. But all HOAS are different.

5. If you obtain an FHA loan, anything less than 20% down will require PMI (mortgage insurance) which is in addition to your mortgage payment and HOA fee. And plan for RE taxes to increase every year which will result in an increase in your mortgage payment each year. Just like a house. Also some FHA or other loans will not approve a mortgage in communities where the rental percentage is high compared to owner occupied units. I don’t remember the exact number but for example if >30% are rented out the bank may not approve the loan.

 

[housestaffhustle]

You may have seen this already but the New York Times has a nifty calculator to help you decide whether to rent vs buy. Nice as a guideline. You can find it here

I recently moved to a lower cost of living area and was contemplating buying, but my training here won't be long enough to make it worth it.

If you do end up renting there are some things you can do to mitigate costs that haven't been mentioned yet:

1. Bilt Rewards - Use this to pay rent and earn rewards. You'll have to make 5 purchases a month to qualify to earn rewards on rent but you can just reload your amazon account with $1 x5. They allow you to pay rent via ACH or by mailing a check.
2. Enzo checking account - Use this to pay rent and earn 2% cash back. Unfortunately they're reducing how much cash back they're providing (capped at $150 per year) and adding a minimum balance ($1500 direct deposit or $2000 minimum balance) requirement come May 1, but it's better than nothing. You can combine this with Bilt and pay rent using ACH from two different accounts.
3. If your apartment lets you pay rent with a credit card without a fee or with a minimal fee you can sign up for new credit cards periodically and use them to pay rent and earn the sign up bonuses.

 

[ThatPsyGuy]

You may have seen this already but the New York Times has a nifty calculator to help you decide whether to rent vs buy. Nice as a guideline. You can find it here

I recently moved to a lower cost of living area and was contemplating buying, but my training here won't be long enough to make it worth it.

If you do end up renting there are some things you can do to mitigate costs that haven't been mentioned yet:

1. Bilt Rewards - Use this to pay rent and earn rewards. You'll have to make 5 purchases a month to qualify to earn rewards on rent but you can just reload your amazon account with $1 x5. They allow you to pay rent via ACH or by mailing a check.
2. Enzo checking account - Use this to pay rent and earn 2% cash back. Unfortunately they're reducing how much cash back they're providing (capped at $150 per year) and adding a minimum balance ($1500 direct deposit or $2000 minimum balance) requirement come May 1, but it's better than nothing. You can combine this with Bilt and pay rent using ACH from two different accounts.
3. If your apartment lets you pay rent with a credit card without a fee or with a minimal fee you can sign up for new credit cards periodically and use them to pay rent and earn the sign up bonuses.

Now that's a cool little calculator.

Just wanted to say thanks to everyone for all the great responses. I'm sure many others have similar thoughts, so I hope this thread can be useful to them too.

 

[jdawg2017]

As someone who owns a condo I’ll share my experiences which are of course specific to my location and YMMV:

1. In my area 1 BR condos are harder to resell. Maybe easier to rent. But find out how frequently condos are bought and sold in your area. And what does the HOA say about renting out? Keep in mind if you rent it after you leave, as the condo owner you may be responsible for any fines earned by your tenants.

2. HOA fees can (and will) increase depending on how the HOA is set up and what it covers. My fee covers the master insurance for the building structure but not what is inside, landscaping, snow removal, water/sewer, electricity for the outdoor streetlights and other common areas, and trash and recycling. I’ve had my monthly fee both increase and decrease over the years based on community wide improvements (or my first winter, unexpected snowfall that resulted in spending twice the allocation of snow removal budget).

3. Special assessments can vary. Some places might require the payment be made in one payment or they might let it be split up. When researching community to purchase in, ask if there are any upcoming projects or assessments, the last ones completed, and how much is in reserves?

4. In my condo I’m responsible for anything that breaks inside. Had to replace my furnace 3 years in. My water heater 2 months ago. The HOA didn’t replace it. But all HOAS are different.

5. If you obtain an FHA loan, anything less than 20% down will require PMI (mortgage insurance) which is in addition to your mortgage payment and HOA fee. And plan for RE taxes to increase every year which will result in an increase in your mortgage payment each year. Just like a house. Also some FHA or other loans will not approve a mortgage in communities where the rental percentage is high compared to owner occupied units. I don’t remember the exact number but for example if >30% are rented out the bank may not approve the loan.

I also have owned a condo during most of grad school thanks to some investing I had done and some family help (also helps I have a partner, and her non-academic job helps us make ends meet without stress). We just went to sell in a high COL hot-market and have accepted an offer 33% more than what we purchased it for 4 years. We remodeled a lot of the condo prior to moving in, which is probably about half the increase in the selling cost, but we are also going to make a sizable profit that will making moving for internship a lot less painful financially.

I strongly advise against getting a 1 BR condo unless you are okay with renting for a long time if the market for sellers is bad. Resale value with 2BR will be a lot greater than 1 BR. I had a roommate at my current place for 1 year before my partner and I got married (no issue with my HOA - we just don't allow short-term rentals like Air BNB). You are boxing yourself out of a lot of potential future buyers who might have kids or want a second room for an office if you buy a 1 BR. If the price difference isn't huge and you're open to roommate, I would strongly consider 2BR options. In my city, the price difference is probably around 30-50k difference, which may or may not make a huge difference in your payment depending on interest and other terms.

The HOA rules are super critical. We had to replace our AC unit which died a couple of years ago... a hefty expense, but thankfully they had 0% APR financing for 18 months so we adjusted our budget and paid that off slowly. 10000% make sure there are no special assessments on the horizon. We just had one a few years before we moved in to prepare for a roof replacement and other updates to the building, and the HOA fee jumped by nearly 50% which I am sure would shock some owners.

Long-story short - I think it can be a good idea like others have stated. It's also good to look into trends and maybe watch the market for a year and rent (assuming students are in your program for 5 years pre-internship). Interest rates are high and some people are concerned about a recession. For context, in my major city during 2008 property appreciation went from >10% per year to still appreciating at around 3-5% per year because the market here almost always favors sellers.

Good luck with your choice! 🙂