Poll: Buying or Renting?

[Fabio]

Just curious . . .

Wondering how many new incoming interns are buying a house or condo or just renting at the location of their new residencies.

And why? Family, staying on for fellowship, cost of living . . . ???

Thanks.

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[carolyn]

I put myself down as "buying"...

But I'm actually going to rent for the first 3-6 months while looking for a house to buy. The real estate market is ridiculous these days...

Reasons: family lives close by and I hope to do a 2 year fellowship there after my residency.

 

[Seaglass]

Buying for family reasons, dog, want to live "rent free."

C

 

[dr.smurf]

is it worth buying if your only going to be there 3 yrs?? i dont want to waste money on rent, but i also dont want to mess with the whole buying thing, taxes, etc. if im only going to be here 3 yrs. but then again the market is in favor of buying..any thoughts??

 

[mediocre]

buying.

1. because I can
2. tax benefits.

 

[Skrubz]

renting. i don't have deep enough pockets to afford a house in northern california. also, i'm looking at places 10 min from my prelim year, which end up being 20 min from my anesthesia years and i may end up deciding i don't want to commute that far.

my roommate is going to mayo-rochester for medicine and has already bought a house (using his parents' funds)... but he's hoping to stay for fellowship as well.

 

[Fermi]

If you can afford it, buy. As a resident, you know you will have a stable job and income in the same city for the next 3-6 years, depending on your specialty. They say the minimum is 3 years if you want to break even, but with today's super-low interest rates and high appreciation rates, I think 3 years is a fairly safe bet in most major cities. True, there are additional costs and hassles with home ownership, but then you don't have to worry about your rent getting jacked up every year, and you will be building equity and a solid credit rating.

 

[The White Coat Investor]

Top 10 reasons I rent:

1) Couldn't afford a place as close to the hospital as I could afford to rent.
2) Lost 4 grand "buying" during medical school. (You don't always make money folks.)
3) So far I've gotten a paint job, carpet cleaning, new refrigerator, new water heater, roof fixed, new dishwasher, and new faucet from the landlord, all for free.
4) I can leave at any time.
5) No hassle trying to sell the place when residency ends. (If you don't know what I'm talking about, you've never sold a place.)
6) Come to think of it, no hassle buying the place. I showed up in town 48 hours before residency started, and had plenty of time to get a place. More vacation for me before internship.
7) The tax benefits aren't that much on a resident salary.
8) Itemizing is a pain in the ass.
9) Landlords drool over the prospect of having a responsible person who pays rent every month living in their place. They'll bend over backwards to keep you happy for 3 years.
10) I'll only be here for 3 years. Most financial advisers consider 4 years the "break even" point for home ownership. Remember, the house has to appreciate enough to make up for inflation, realtor fees, and additional expenses you pour into the house. It takes time to do that unless you are in a very hot market.

 

[The White Coat Investor]

Buying for family reasons, dog, want to live "rent free."

C

You still pay rent, its called a mortgage. It feels remarkably similar to writing a rent check every month. And in the first 3-4 years, only a few bucks a month go toward principle.

 

[The White Coat Investor]

then you don't have to worry about your rent getting jacked up every year, and you will be building equity and a solid credit rating.

1) Rent only gets jacked up each year if you don't know how to use the fact that you are a "responsible person that they want living in their place cause you take care of it, don't use drugs, pay your rent etc."

2) Equity is overrated. Remember, its not just equity you need, its equity above and beyond the expenses of buying, selling, and maintaining your home that you need. Not to mention that extra few bucks a mortage usually costs over rent. In my last place, I made 2 grand in equity over 4 years, then turned around and paid 5 grand in closing costs to sell. (Plus two months "rent" when I wasn't living there. Those things don't sell in a day pal.)

3) If you don't have enough loans to have a solid credit rating you would be an unusual resident.

 

[Fermi]

Desperado, I think some of your points don't necessarily apply to a lot of real estate markets. For example:

4) I can leave at any time.
​

I've signed many, many leases and they all said a minimum of 60 days notice was necessary, and even then, they could still collect rent from you until your lease was up unless they could rent your apartment right away. I don't consider that being able to leave at any time.

no hassle buying the place. I showed up in town 48 hours before residency started, and had plenty of time to get a place.​

In most in-demand markets, you would be extremely hard pressed to find a decent place where you can move in within 48 hours.

7) The tax benefits aren't that much on a resident salary.
​

This is true, but on a resident's salary even a little bit helps. Although I agree that the tax benefit is disappearing since the standard deduction is going way up.

8) Itemizing is a pain in the ass.
​

I don't find itemizing to be difficult at all. It's like two lines on your 1040 Schedule A.

9) Landlords drool over the prospect of having a responsible person who pays rent every month living in their place. They'll bend over backwards to keep you happy for 3 years....Rent only gets jacked up each year if you don't know how to use the fact that you are a "responsible person that they want living in their place cause you take care of it, don't use drugs, pay your rent etc."
​

Again, in an in-demand market, many landlords could care less as long as you pass a credit check. They won't care about signing 2-3 year leases since they can easily jack up the rent and turn the place around quickly.

Remember, the house has to appreciate enough to make up for inflation, realtor fees, and additional expenses you pour into the house. It takes time to do that unless you are in a very hot market.​

I am in by no means a "very hot" market or neigborhood, but judging by houses that have sold nearby, I think could about break even now after owning the house only 1 year.

2) Equity is overrated...Not to mention that extra few bucks a mortage usually costs over rent.​

Depends on the market again. In my case, rent for my 1 BR apartment was virtually identical to the mortgage for my 4 BR house. Of course utilities and upkeep cost more, but you're comparing 1BR to 4 BR here. And like I said previously, with rock-bottom interest rates, your equity accrues much faster from day 1.

If you don't have enough loans to have a solid credit rating you would be an unusual resident​

They look at all loans differently--mortgages, student loans, car loans, credit cards, etc. so I wouldn't be sure of this.

Bottom line is, we have different experiences so we have different perspectives. You lost money owning a house, so you had a really bad experience and are hesitant to go through it again. I've had a good experience renting and owning, but there's no way around the fact that renting is a losing proposition in the end. The only thing I can say is that it allows you to live in a better neighborhood than you could normally buy into, and is obviously the best choice if you think you will be moving in a short period of time.

 

[ortho2003]

You still pay rent, its called a mortgage. It feels remarkably similar to writing a rent check every month. And in the first 3-4 years, only a few bucks a month go toward principle.

But your rent payment is not a tax deduction, while everything that does not go to principle is a tax deduction with a mortgage. Not to mention, over the course of five years, you will probably earn an additional $5000 in equity with your mortgages payments in adition to 3-5% appreciation per year. With rent, you end up with no tax breaks and no equity.

 

[prwunecom]

having owned and sold two houses in my lifetime, it can be a boon or a pain. One I sold and made about $20000 on the deal, but the other I ended up losing about $10000 due to repairs that had to be made to close and closing costs. While I know the tax bennies of owning vs renting, I am choosing to rent because I have no idea if the place I will spend the next four years is going to be the place that I want to practice post-residency. Even with the market the way it is now, it will be hard to break even on a house if I stay in it only through residency. Just my $.02

 

[DR]

I'm renting. Who the heck can afford to buy? I mean, I guess if either you have someone you know who can lend you the money for the down payment, you have a spouse who is working full time, or if you had lots of money before going into residency. I have no money to put down, so I basically rent. I know it's not an investment...basically money permanently lost, but without money down, I gotta rent.

 

[The White Coat Investor]

Desperado, I think some of your points don't necessarily apply to a lot of real estate markets.

All good points. I just wanted all reading the discussion to see both sides. The problem a lot of residents have is they just got out of medical school, have a paycheck for the first time in eight years, hear all kinds of great things about owning, and never hear the bad things. It certainly is the way to go long term, and with interest rates where they are now it is hard to lose much, but like any good procedure, there are risks.

 

[The White Coat Investor]

I'm renting. Who the heck can afford to buy? I mean, I guess if either you have someone you know who can lend you the money for the down payment, you have a spouse who is working full time, or if you had lots of money before going into residency. I have no money to put down, so I basically rent. I know it's not an investment...basically money permanently lost, but without money down, I gotta rent.

In most cities you can now get a loan to cover down payment. If not a formal one, you can always do the Bank of America doctor's loan. That shouldn't be the only reason you're not owning.

 

[Fermi]

All good points. I just wanted all reading the discussion to see both sides. The problem a lot of residents have is they just got out of medical school, have a paycheck for the first time in eight years, hear all kinds of great things about owning, and never hear the bad things. It certainly is the way to go long term, and with interest rates where they are now it is hard to lose much, but like any good procedure, there are risks.

Agreed. I'm glad that both viewpoints are represented here. Homeownership is great but can be a hassle at times. When things break or when you have to learn how to do your own maintenance, it takes up a lot of money and time, two things in short supply for a medical student or resident. I sometimes miss the "turn-key" simplicity of renting, where I didn't have to worry about the heat, A/C, water, roof, gutters, etc. and having to maintain them. However, you do have to learn these things sometime, unless you're going to rent and/or buy condos for the rest of your life.

 

[Weil-Felix]

We're buying for the following reasons:
1) Sick of living in a place where we are at the mercy of our neighbors. When you share walls with a multitude of people, you never know what lovely sounds/smells/sights you will be treated to on a daily basis. Here are just a few of the joys of apartment living we have had to put up with in the last 8 months:
-Being awakened DAILY at 5 am with blaring rap and christian music.
-Hearing porno movies through the walls including all the pertinent sound
effects like moans and shouts of "Spank my as* baby!".
-Hearing the "real deal" through the walls including all the pertinent sound
effects such as moaning and bed banging against the wall.
-The police pounding on our neighbor's door at 4am with guns drawn.
-Large groups of our neighbors' dogs fighting in the courtyard of our
complex. The owners just let them run free in the fenced in courtyard
area. They remain completely unsupervised for hours, and look/sound as if
they are trying to tear each other to shreds. This occurs all hours of the
day and night.
-People get evicted on a weekly basis, and the management just dumps all
of their stuff in the parking lot, and leaves it there for several days, or as
long as it takes the looters to clear all of it away.
-Neighbors leave their trash bags in front of their door because I suppose
they are too lazy to walk a few feet to the dumpster. They generally
remain there for several days at a time.

I realize not every apartment complex is as bad as ours, but I have always had at least one or two of these complaints in every apartment I have ever lived in, even the moderately expensive ones. We are sooo tired of sharing walls with other people!!

2) The interest rates are incredibly low. (Although they are going up even as I type!) We got one that is very reasonable, and we don't have to pay extra for mortgage insurance.

3) Many new graduates qualify for a loan which covers 100% of your mortgage, with NO down payment. That's what we did.

4) When you own, you are free to do anything you please to the place, because IT'S ALL YOURS! No more getting annoyed at cheap cabinet doors that fall off when you try to open them (and maintenance people that insist there's nothing wrong with the way they are, or do a half-assed job when they finally do fix something). If fixtures are cheap, I can replace them. I can paint the walls. I can wallpaper. I can knock out a wall if I dang well please. These are all extremes, and many are expensive, but the point is I can do anything I WANT with it.



I can understand the arguments against owning, though. It's true that having to take care of a yard, being responsible for all of the maintenance issues, etc.. can be a real drawback sometimes. And I can certainly see the appeal of not wanting to be "tied down" to a mortgage. When we put the official offer in on our house, I started to get nervous and thought "Oh my gosh. This is it! We're really stuck now!" We had a terrible experience selling our last home that we owned, and there was a lot of hesitation to go through all that heartache again. (It was on the market for nine months, and we wound up selling it for much less than it was purchased for.) But I realized that since the house we are now buying is a newer home in a quickly growing neighborhood, we should have no problem reselling.

I think the key to buying smart is to make sure the house is a really, really good investment. If you are thinking of buying a house in a sketchy neighborhood, or one that is not very aesthetically appealing, you might want to be careful. In that case, definitely don't buy just for the sake of buying, as it could come back to bite you in the butt later when you try to resell. That's what happened to us. Nice place on the inside, but it was kind of unattractive on the outside, and in a neighborhood where other folks did not keep up their yards, didn't take care of their paint jobs. Consequently, no one wanted to buy it from us, and it wound up being a frustrating lesson learned. By the way....we DID wind up saving several thousand on taxes, and even though we lost a little on the actual closing, we actually wound up coming out at least even, if not a little ahead. So it wasn't a total loss.

Also, I have less hesitation buying than a lot of people who have posted because my residency is four years, as opposed to three. That extra year can make a big difference in determining whether it is a smart move or not to buy. Although I will say this...if you only are planning on staying in a place for three years, you might do really, really well to get a three year adjustable rate mortgage. The rates are incredibly low (at least they were a few weeks ago...some in the range of 5%), and you might find it way easier to save money if you buy vs. rent.

Good discussion. Lots of good points to consider.

 

[chef]

dayum weilfelix, where do u live? LA??

 

[Weil-Felix]

dayum weilfelix, where do u live? LA??

Actually, no. Denver. And it's not the worst part of town, either. Sigh. Counting down the hours until we move.

 

[Fabio]

And thanks to all who posted here. I'm glad I posed the question; I definitely learned a lot from reading your posts and your experiences. It will help as I look for a place soon.

 

[The White Coat Investor]

We're buying for the following reasons:
1) Sick of living in a place where we are at the mercy of our neighbors. When you share walls with a multitude of people, you never know what lovely sounds/smells/sights you will be treated to on a daily basis.

Don't forget you can rent without living in an apartment people.