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Can we just make this a sticky post everywhere that pre-meds lurk/post?
Military doctor salary vs civilian?
- Thread starter Septimusseverus
- Start date
Can we just make this a sticky post everywhere that pre-meds lurk/post?
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Wouldn't do any good.
Exhibit A: http://forums.studentdoctor.net/thr...n-admission-to-your-first-choice-school.1007/
That thread started in 2002, last post was yesterday. Pre-meds think ... differently.
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So does USUHS have financial planners on base to help out with starting these accounts or is it mostly just this forum and the internet?
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No, they don't have financial planners. Your best bet is to read up on this kind of thing yourself (bogleheads wiki and whitecoatinvestor.com are the two best places I think) and get it done. You can talk to some of the priors, but there is no guarantee they are going to be smart on investing. Investing really isn't all that hard when you learn the basics (avoid salesman, don't pay high fees, buy index funds and invest every month like it is a bill) just like budgeting isn't all that hard (spend less money than you make). It is resisting the daily temptations to spend that money that ruin most people.
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I have a financial planner. There are some out there that aren't solely out there to get your money. I would ask around when you get to USUHS. I have learned considerably about finances from my advisor. Yes...you have to be careful, but if you can get a trusted one it is not a bad idea when you are just starting out and have no clue about money.
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Speaking of financial planners and whatnot, would it be good to simply go to a USAA bank and speak to one of their representatives regarding financial investment/retirement for active duty personnel? I've heard rave reviews regarding USAA, most notably its great insurance offerings.
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Most people who are starting out without significant assets (< 7 figure assets) should really stay away from financial advisors. They do not work for charity. Rather, they are in the sole business of taking your money (selling bad insurance policies, investing your assets in tax-inefficient and high-fee actively managed funds, and skimming off 1-2% from your balances annually).
You would be much better off educating yourself via whitecoatinvestor.com, bogleheads.org, etc and sticking to the basics. Spend less than what you make. Keep the same spouse. Don't borrow money for automobiles. Rent while you're in the military, or if you have to buy, don't buy too big of a house. Stay out of credit card debt. Build an emergency fund (20-50k). Max your TSP and Roth IRAs (for you and your spouse). Put all your retirement investments in target-retirement funds or a combination of low cost total domestic/international/bond index funds (ie vanguard). Do well in school to get the high-paying specialty of your choice.
You would be much better off educating yourself via whitecoatinvestor.com, bogleheads.org, etc and sticking to the basics. Spend less than what you make. Keep the same spouse. Don't borrow money for automobiles. Rent while you're in the military, or if you have to buy, don't buy too big of a house. Stay out of credit card debt. Build an emergency fund (20-50k). Max your TSP and Roth IRAs (for you and your spouse). Put all your retirement investments in target-retirement funds or a combination of low cost total domestic/international/bond index funds (ie vanguard). Do well in school to get the high-paying specialty of your choice.
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No, do not use USAA for financial planning. They are great for insurance, decent for banking (NFCU is better), but not your best option for investing. In general when looking for a financial advisor you want one who is fee only and holds you as his fiduciary responsibility. It really is as easy as dwb8p and I are saying, but sometimes it is hard to remember what it was like back when all of this was brand new to me as well.
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If I end up doing residency in a low cost of living area such as Texas, would it be wise to purchase a small and cheap home (under $150,000) during residency? I can either sell or rent out the place when I move to another area.
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Texas property taxes ain't cheap:
Worst States for Property Taxes
The Tax Foundation found that homeowners in these states paid the most in property taxes compared to home value. The percentages represent the percentage of home value that homeowners pay in property taxes.
The Tax Foundation found that homeowners in these states paid the most in property taxes compared to home value. The percentages represent the percentage of home value that homeowners pay in property taxes.
- New Jersey - 1.89%
- New Hampshire - 1.86%
- Texas - 1.81%
- Wisconsin - 1.76%
- Nebraska - 1.70%
- Illinois - 1.73%
- Connecticut - 1.63%
- Michigan - 1.62%
- Vermont - 1.59%
- North Dakota - 1.42%
And the consensus amongst my homeowner colleagues is that the assessed value tends to run 5-8% over market.
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I wouldn't let the property taxes scare you away from real estate in Texas. You're paying for the property taxes irrespective of whether you're renting or buying; it's just a matter of how direct the payment is. That's not to say that buying a home during residency or while in the military is the right call.
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But here is the thing. If I put down a decent 20% down payment on a $130k home, my monthly mortgage (around 600) will be much lower than the typical monthly rent of the area (close to 1000). I can save even more of my monthly BAH if I pay mortgage vs. pay rent.
But I guess finding a tenant or selling the place at the end of residency will probably bring a lot of hassle...
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Your comparison of mortgage to rent illustrates that you have fallen into the mental trap that nearly all people do when buying a home. Again, read the article I linked above for an in depth explanation.
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Have you ever owned a home? It's looks great, and simple, when using an online calculator or sitting in realtor/mortgage broker's office. It gets just a tad bit more complicated in the real world. You have to factor in home repairs, insurance, taxes, school systems, and resale, just to name a few. Again, I'm not saying that buying is the wrong choice for you or for anyone else, but you're taking a very naive and simplistic approach to this.
Edit: Intended for ProudMD.
Edit: Intended for ProudMD.
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Aren't you at least 4.5 years from even starting residency?? Maybe you should just offing wait and decide then. 4.5 years ago real estate was completely different than it is today and then it was 4.5years before that.
please stop being a stereotypical know-it-all premed. Well, I guess you'll make a good know-it-all USUHS med student. I had plenty rotate with me. They didn't all suck, but there were some doozies...
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I don't know everything, and I am not pretending to be a know-it-all premed.
I just worked through some numbers and listed some of the pros/cons of home ownership during residency. I am well aware that the housing market tends to fluctuate, but it doesn't hurt to start thinking about these things.
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One of the decisions I can say I am happy about during my military experience is that I never fell into that mentality that seems to afflict many in the military of buying where ever they PCS to. I guess people are still buying the "ownership" mantra pushed by real-estate industry. I did my residency in San Antonio and finished in 2008. I still have friends who cannot unload their property to this day long after they've PCSed elsewhere. They also bought "cheap" $120-150K homes. They are stuck playing landlord or just carrying the cost of an extra home and ruing the day they bought. My wife (also active duty) has a friend who has a home in two different places accumulated while in the military which cannot be sold. Like others have said, the cost of a home is much more than the mortgage. Repairs, utility, water taxes can add considerably and make it a losing proposition compared just renting. Selling in San Antonio is not easy especially if one buys one of these cookie cutter homes outside of the loop.
Once we are both shortly out of the military we will buy. To me a home is a place where I can lay my head at night and hopefully lay roots. It's icing on the cake if appreciates and I get some equity out of it in the long run. Too many people look at buying a house as some sort of investment tool which they can flip and make $25-50K in profit after selling in 3-5 years when they are ready to PCS. Just my $0.02.
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In general I do not consider a house to be an investment. An investment is something that you hope will provide a return on your initial capital. Shelter is one of three requirements of life - food, water, shelter. You need it. If you get rid of one type of shelter you MUST find another. You are always paying for shelter in some form or another. Something that always costs money is a liability. "Look how much my house has appreciate!!!" Great, but if you sell then you have to buy something else, which has also appreciated similarly. Rarely can someone just sell a house, take the profit and just have the money without having to use it for another type of shelter. Even if your house is paid off there is still maintenance, taxes, etc. People who buy rental property on purpose are buying a business - shelter for someone else who pays them. People who buy a house for themselves are just getting a liability. Some of them can turn it into a business later or be fortunate enough to sell it at a profit and move to a smaller or cheaper place and thus, make a profit. Most of the people I know who "made" money on houses they lived in ended up putting all the money into a BIGGER house so did they really end up with more money?
When you factor in property taxes, transaction fees such as closing costs, agent commission at sale, etc your house needs to significantly appreciate in order to turn around 3-4 years later with a profit. Buying with the intent of renting later is not a bad idea if you go into it as a goal and eye everything financially from that perspective. The article linked by dwb8p highlights my own experience I have seen with friends - many find that they can't sell and become long distance landlords against their will. For some it works, for some it does not and becomes a giant money and time suck hole.
You mentioned that if you put $26k down then mortgage would be cheaper than rent so you think it is cheaper. Let's take a super simple look at it:
Your example house: $130,000
Down payment of 20%: $26,000 (original loan balance of $104,000)
Purchase fees (points, origination fees, title inspection, home inspection); call it 2% on the LOW end: $2600
Property taxes annually, underestimate at 1.5%: $165 per month
Mortgage; we'll take your number which has a loan interest rate of 5.64%: $600
Total monthly cost of the house in our super simple example: $765.
Assumed rent for similar house: $1000
Difference: $235
3 years later you want to sell your house. Assume it has had traditional long term appreciation of 2.5% per year.
Value of house at time of sale: $140,000
Loan balance at time of sale: $99,600
Difference in sale price and loan balance: $40,400
Real estate commission of 3% sale price: $4200
Total profit from house sale (Difference in sale price - loan balance - purchase fees - real estate commission): $33,600
There are a couple of ways to analyze this.
1. You "invested" $26,000+2,600 = $28,600 (transaction fees always need to be included, just like they are in mutual funds, etc) to end up with $33,600 three years later. A total profit of $5,000. What is the annual rate of return on that? It is 5.38%; actually not terrible, but not spectacular either.
2. You saved $235 per month versus renting. That is a total savings of buying instead of renting over 3 years is $8,460. Hey so it looks like buying and coming out $5,000 ahead versus $8,460 in the whole is a big swing of $13,460! Except that your $26,000 that you had in a mutual fund was tied up in the house the whole time. If you left that in your mutual fund and, for simplicity sake, it made the same 5.38% it would be $30,500 (a $4,500 earnings) after 3 years.
So the real difference is that buying may have made you $500 on your initial investment plus the $8,460 you saved on rent for a grand total of $8,960 saved over three years. That is a net savings of about $248 per month. Keep in mind that people never truly understand is how much money you will spend on a house you OWN versus a place you RENT on things like yard work, blinds, furnishings. You will probably spend far more than that $248 per month on your home than you would have if you rented. I bet as a renter you could easily save an extra $248 or more per month than if you were a home owner. Besides, what if your mutual fund was in a bull market and made 8%, or 15% or 25%? What if it lost 7%? What if the house went down in value because the school districts were rezoned and now your house is in the crappy school district instead of the super awesome one? What if, what if, what if? The point is, it can be very complicated and that 3 years in the real estate market is a gamble and not an investment. And don't underestimate the time, emotion, energy etc involved in buying, owning, and selling a home versus renting.
Renting allows for a lot of freedom. "Well, I wanted to stay here after residency, but I actually don't like it here as much as I thought." "Wow, this neighborhood is not as good as it was when I first moved in." "Wow, the traffic from this part of the city is much worse than where my buddy lives." There are lots of "wow's" in life when you move to a brand new area. Always better to rent for a little while before committing to buy so you can really get a feel for a place.
When you factor in property taxes, transaction fees such as closing costs, agent commission at sale, etc your house needs to significantly appreciate in order to turn around 3-4 years later with a profit. Buying with the intent of renting later is not a bad idea if you go into it as a goal and eye everything financially from that perspective. The article linked by dwb8p highlights my own experience I have seen with friends - many find that they can't sell and become long distance landlords against their will. For some it works, for some it does not and becomes a giant money and time suck hole.
You mentioned that if you put $26k down then mortgage would be cheaper than rent so you think it is cheaper. Let's take a super simple look at it:
Your example house: $130,000
Down payment of 20%: $26,000 (original loan balance of $104,000)
Purchase fees (points, origination fees, title inspection, home inspection); call it 2% on the LOW end: $2600
Property taxes annually, underestimate at 1.5%: $165 per month
Mortgage; we'll take your number which has a loan interest rate of 5.64%: $600
Total monthly cost of the house in our super simple example: $765.
Assumed rent for similar house: $1000
Difference: $235
3 years later you want to sell your house. Assume it has had traditional long term appreciation of 2.5% per year.
Value of house at time of sale: $140,000
Loan balance at time of sale: $99,600
Difference in sale price and loan balance: $40,400
Real estate commission of 3% sale price: $4200
Total profit from house sale (Difference in sale price - loan balance - purchase fees - real estate commission): $33,600
There are a couple of ways to analyze this.
1. You "invested" $26,000+2,600 = $28,600 (transaction fees always need to be included, just like they are in mutual funds, etc) to end up with $33,600 three years later. A total profit of $5,000. What is the annual rate of return on that? It is 5.38%; actually not terrible, but not spectacular either.
2. You saved $235 per month versus renting. That is a total savings of buying instead of renting over 3 years is $8,460. Hey so it looks like buying and coming out $5,000 ahead versus $8,460 in the whole is a big swing of $13,460! Except that your $26,000 that you had in a mutual fund was tied up in the house the whole time. If you left that in your mutual fund and, for simplicity sake, it made the same 5.38% it would be $30,500 (a $4,500 earnings) after 3 years.
So the real difference is that buying may have made you $500 on your initial investment plus the $8,460 you saved on rent for a grand total of $8,960 saved over three years. That is a net savings of about $248 per month. Keep in mind that people never truly understand is how much money you will spend on a house you OWN versus a place you RENT on things like yard work, blinds, furnishings. You will probably spend far more than that $248 per month on your home than you would have if you rented. I bet as a renter you could easily save an extra $248 or more per month than if you were a home owner. Besides, what if your mutual fund was in a bull market and made 8%, or 15% or 25%? What if it lost 7%? What if the house went down in value because the school districts were rezoned and now your house is in the crappy school district instead of the super awesome one? What if, what if, what if? The point is, it can be very complicated and that 3 years in the real estate market is a gamble and not an investment. And don't underestimate the time, emotion, energy etc involved in buying, owning, and selling a home versus renting.
Renting allows for a lot of freedom. "Well, I wanted to stay here after residency, but I actually don't like it here as much as I thought." "Wow, this neighborhood is not as good as it was when I first moved in." "Wow, the traffic from this part of the city is much worse than where my buddy lives." There are lots of "wow's" in life when you move to a brand new area. Always better to rent for a little while before committing to buy so you can really get a feel for a place.
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I don't disagree with anything posted about buying houses every time you PCS.
We own two houses. Bought the one we're living in now in 2006 when I started residency, and the other in 2009 at the start of my first staff tour. Both with very low interest rates below with 15 year terms.
Owning a rental property is part of our overall retirement savings planning, in addition to other asset classes (equity and bond index funds, including international, REITs).
I don't expect the 2nd house to outperform my emerging market equity index fund, but then again I don't expect my bond funds to do that, either. I accept that because of the diversification value they offer.
I'm just saying there's more to rental ownership than just direct comparisons to other asset classes.
We own two houses. Bought the one we're living in now in 2006 when I started residency, and the other in 2009 at the start of my first staff tour. Both with very low interest rates below with 15 year terms.
Owning a rental property is part of our overall retirement savings planning, in addition to other asset classes (equity and bond index funds, including international, REITs).
I don't expect the 2nd house to outperform my emerging market equity index fund, but then again I don't expect my bond funds to do that, either. I accept that because of the diversification value they offer.
I'm just saying there's more to rental ownership than just direct comparisons to other asset classes.
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I agree pgg, but you seem to be the rare type of person who is actually looking at it from a full business/asset class perspective vice the whimsical "I think I can buy cheaper than rent and I'll just sell three years later, but if I can't I'll just rent it out."
Do it like pgg does or rent, which is exactly the point of the article referenced on the military guide to retirement article.
Do it like pgg does or rent, which is exactly the point of the article referenced on the military guide to retirement article.
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I agree with this precept. Real estate doesn't always compare favorably with other asset classes year to year, but in an overall portfolio, it's advantageous to have diversification.
We have three properties, two of which are well situated in a major metropolitan area where I did residency and have been easy to rent. My wife manages our rental property. So far I think those two homes have been wise investments. The rent we collect more than covers the costs of the mortgage, taxes, repairs, etc. Would we be doing better if we had the value of that equity in something else like an index fund? Maybe. But I like the fact that our mortgage is fixed, and the rent in this market is very stable and likely to go up steadily over the years. I feel it's a nice steady income stream that will continue to increase over the years. It's not as subject to large swings like that of the stock market (the house value may fluctuate, but the rents are generally stable).
However, our third home, where we live now, is in a semi-rural area. I was tempted to buy at the time by the lower cost of homes here and the amazing mortgage rates in 2012. However, this property may not turn out so well. I'll find out next year when I either PCS or separate. I might take a loss on this one.
I think the important thing is to try to anticipate the finances of the property down the road, when you anticipate moving. Too many of my military friends that have lost money in real estate made the mistake of buying a home that was cheap but not necessarily well located and therefore with unstable market value (like those cookie-cutter homes in the outskirts of the city), or they didn't put enough money down and ended up under water on their loans (sometimes choosing to rent their homes at a net negative every month, clinging to the hope that the value will go up and then they can unload the place ASAP and stop the hemorrhaging).
If you know you're going to be moving in 3-4 years and you're thinking of holding onto the home as an investment, you need to have a firm understanding what the rent would be for that property and see if it will exceed the cumulative expenses from buying it. I would not tie myself to an investment where I have a negative income stream every month. If you're uncertain about these finances, it's much less risky to rent a home and most likely the wiser choice. If from the outset, you know you'll move in 3-4 years, and you're not interested in managing a rental property, I would definitely choose to rent and not buy.
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Nope.
... said no attending ever
Was the last time you checked in the 1980's? Depending on specialty, docs can make over $500,000. My specialty's median is 300k.
Where in the world did you hear that? I thought that Vanderbilt and Yale students were the happiest.
Recently heard at a civilian medical school: "I can't study tonight. I have to fret over my loans."
It's not THE issue, but it's certainly a problem.
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I used to think 120-150k was plenty......now i make that much and realize its not really that much money. I still drive my crappy car (not the attendingmobile of my dreams), have relatively the same standard of living, and I still shop for my kids cloths at Walmart.
Wondering where it all goes.......sigh
Wondering where it all goes.......sigh
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You aren't getting a good house for $130,000 in the DC area.
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I know. I was talking about San Antonio, Texas.
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I would only own a rental property in the town where I live. Property managers are death to profit.
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People do stay for the $$. The golden handcuffs of military retirement are tough to forgo.
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Personal experience, buying a house and keeping it was pretty easy. But when I've had to move away it was pretty easy to get a Realtor/company to manage the property for me at a 10% fee of the monthly rent. They would market, screen and take care of the property for me. Repairs and insurance were on me. I adjusted the rental income to pay for the mortgage and Realtor with a few extra dollars for beer money at the end of the month. The house itself is the investment towards retirement.
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.
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Complete opposite of my experience. We bought when it looked like the recession was ending, but then turned into a double dip (Early 2011). I wanted to sell, but we were just A LITTLE upside down and a short sale would've wreckedm y credit (even though we had the money). When time came to rent, my mortgage payment greatly exceeded the competitive rent rate for this house. Currently, I'm losing $200/month, managing the property from 100miles away.
As a side note, if anybody wants to buy a cute house in Oak Harbor, WA, let me know, I'll sell it to you for ZERO profit.
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Short term market timing is gambling. Sometimes you get blackjack and those are the stories that people remember and share.
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Sorry that this has been your experience. I do hope you'll be able to get a better deal on the rent in the future.
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I just want to sell the damn thing.
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BPD, If you can hang onto it for a few more years with a dependable renter, Seattle will grow and cause property prices to go up. It's a waiting game from that point forward.
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Oak Harbor is to Seattle as crap town 2hrs from civilization is to big city. okay, not really that bad
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Oak Harbor is to Seattle as crap town 2hrs from civilization is to big city. okay, not really that bad
Could always be Tacoma or Federal Way!
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To be fair, I think a lot of the people at USUHS are very happy. I have never heard what school has the "happiest" students, though.
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Also to be fair, being "happy" in medical school is like being happy with a *****...both experiences are brief and fleeting in the grand scheme of things.
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Medical school is remembered less fondly.
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Gastrapathy hit it on the head - buying a house in the military is gambling. My anecdotal experience was that we made $130K PROFIT on our house in Puyallup, WA when I was in residency from '02-'07 doing absolutely nothing to it. Right after we sold it, the bottom dropped out of the market. We just sold our house in Fayetteville, NC for a 75K LOSS after living there from '07-'14.
I would be extremely reticent to buy a house while on active duty at this point, especially in military-heavy towns (large cities like DC, San Diego, San Antonio might be OK). With the current drawdown (army is down from a high of 570k active-duty troops to its' current 490k which may decrease to 420k by '19 depending on sequestration), the real estate markets will collapse in these towns. This has already happened in Fayetteville, NC.
