Should I buy a 500k home?

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Stay away from financial advisers unless you know one that is particularly good. If you can get through medical school, you can take the time to read the pertinent info for yourself. Many links have already been provided.

These things may seem difficult initially. However, stick with it and you will find that it will serve you well to have invested the time to learn.
 
hockeyMD03 said:
Buying a house that high is doubtful to be cheaper than renting anytime in the near future

https://web.archive.org/web/2014031...interactive/business/buy-rent-calculator.html
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every area is different I guess.....here a 210k house in most areas will rent for 2000 a month. And with current interest rates you can get a 300k+ house for about that(including escrow). That's not even counting the mortgage interest deduction which could be worth a few thousand a year
 
vistaril said:
every area is different I guess.....here a 210k house in most areas will rent for 2000 a month. And with current interest rates you can get a 300k+ house for about that(including escrow). That's not even counting the mortgage interest deduction which could be worth a few thousand a year
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Yeah, every area is different. But you should have already known that if you were planning on making money doing real estate -- weren't you?
My parents' house was like $565,000 and they're renting it for $2500.
 
hamstergang said:
Yeah, every area is different. But you should have already known that if you were planning on making money doing real estate -- weren't you?
My parents' house was like $565,000 and they're renting it for $2500.
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huh...where did I imply that I didn't already know that? just because I acknowledged it, doesn't mean I wasn't aware of it previously.

That said, there is obviously not a linear curve in terms of mortgage vs rental properties. for example, because your parents 565k house rents for 2500 does not mean a 280k house in that area would rent for 1250. Up until about 1800 or so rent prices go up fairly linearly, but then around home values of 300k fall off pretty precipit.

I've seen 250k houses rent for 2400 and 500k houses rent for 3k in the same zip code.
 
Pay off your loans first.

Also, Homes are GREAT investments. The problem is people talk about them being investments when the market is rising, then end up upside down. You buy at the friggin bottom and inflation keeps you from ever truly losing. Also what makes a home a great investment is a little different than what makes it a great residence. There is overlap, but there are some important differences as well. Rentability and the resistance of a community itself (as opposed to the house) to aging and demographic drift are important.

But, umm, with rent that high, you need to be in a house instead.
 
vistaril said:
every area is different I guess.....here a 210k house in most areas will rent for 2000 a month. And with current interest rates you can get a 300k+ house for about that(including escrow). That's not even counting the mortgage interest deduction which could be worth a few thousand a year
Click to expand...

The article was showing buying vs renting an apartment not renting your house out. IE buying a 500k house vs renting for some period of time years at 1200 a month. Showing you how long you need to live in a house to break even vs renting an apartment.
 
Being house poor sucks -- you end up giving up lots of other opportunities and interests because all your money and time is going to feed the ever-hungry mortgage. If you buy a house, you'll have two sets of inflexible monthly debts weighing you down and if you suddenly want to move, change jobs, or go back for additional training, you won't be able to because you've got to make both sets of payments every month or your world will explode.

When you're considering places to put your money and looking at ROI, remember that the ROI on buying a house or buying stocks needs to be REALLY GOOD, because you need to make a good profit on top of paying for the opportunity cost of not paying down that 6.8% debt.

My recommendation is therefore clear -- free yourself from debt slavery, then do whatever you like with your money. I think you are much better off with minimal savings and no debts than any other option.
 
That's about $3,500 monthly payment with tax/insurance/HOA included. That is a heck of a lot money even with psychiatrist salary... Anyway, good luck!
 
W19 said:
That's about $3,500 monthly payment with tax/insurance/HOA included. That is a heck of a lot money even with psychiatrist salary... Anyway, good luck!
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Not sure if you're familiar with affordability determinations...
But a 450k house (minus 90k down), leading to your numbers ("$3,500 monthly payment with tax/insurance/HOA included") is beyond conservative for a physician salary... let alone a dual-physician household. (assuming everyone isn't 300k+ in student loan debt.)

Hell that's with me penciling in his entire household gross @ 200k total.

Here play with this calculator:
http://www.realtor.com/mortgage/tools/affordability-calculator/
 
Frazier said:
Not sure if you're familiar with affordability determinations...
But a 450k house (minus 90k down), leading to your numbers ("$3,500 monthly payment with tax/insurance/HOA included") is beyond conservative for a physician salary... let alone a dual-physician household. (assuming everyone isn't 300k+ in student loan debt.)

Hell that's with me penciling in his entire household gross @ 200k total.

Here play with this calculator:
http://www.realtor.com/mortgage/tools/affordability-calculator/
Click to expand...
If it a dual-physician household, it's not bad. I thought it was a one person's income...
 
F0nzie said:
Bidding 450k on a home tomorrow. Asking price is 500k. Going to try to get around 3% on a 15 year mortgage. Withdrew a stack of cash from the business for 20% down. Still maxing out the 401k/profit sharing and aggressively paying down the 6.8% loans. Wish me luck! 😳.
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Good luck but realize that's a very low ball offer in most markets. In many markets houses sell at list price and some receive multiple bids over list. In a healthy buyers market 3% off list would be reasonable. I.e., don't be surprised or angry if they come back at you with 495k.

W19 said:
That's about $3,500 monthly payment with tax/insurance/HOA included. That is a heck of a lot money even with psychiatrist salary... Anyway, good luck!
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No it's not that high. With 20% down, more like low 2s all in. Even it were that high, that's a reasonable cost. To afford 3500 a month, he should be making 10k a month. Most physicians can afford at least double that and have the luxury of being content with housing that only costs 10% of their monthly takehome and using the extra to build a nest egg or pay off other debt. Households that earn the typical 70-100k don't have this opportunity. The idea that a physician can't afford a typical upper-middle-classish 500k home and are stuck renting or buying a duplex or something is a little silly. You spent a decade or your life getting to where you are. Live a little before you kick the bucket.
 
atomi said:
Good luck but realize that's a very low ball offer in most markets. In many markets houses sell at list price and some receive multiple bids over list. In a healthy buyers market 3% off list would be reasonable. I.e., don't be surprised or angry if they come back at you with 495k.



No it's not that high. With 20% down, more like low 2s all in. Even it were that high, that's a reasonable cost. To afford 3500 a month, he should be making 10k a month. Most physicians can afford at least double that and have the luxury of being content with housing that only costs 10% of their monthly takehome and using the extra to build a nest egg or pay off other debt. Households that earn the typical 70-100k don't have this opportunity. The idea that a physician can't afford a typical upper-middle-classish 500k home and are stuck renting or buying a duplex or something is a little silly. You spent a decade or your life getting to where you are. Live a little before you kick the bucket.
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The rule for me is <= 20% of take home income... I think 10k/month take home is very high for psych doc unless their tax liability is low and they contribute nothing to retirement...
 
W19 said:
The rule for me is <= 20% of take home income... I think 10k/month take home is very high for psych doc unless their tax liability is low and they contribute nothing to retirement...
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OK but that's very conservative. Like I said, physicians have the option of being conservative like this if they want. When you only make gross 70k per year, you have to spend more than 20% of your takehome (assume you mean post tax) income on housing and people make this work.
 
I'd buy the home considering interest rates are at historical lows. Spend about 1-2 months researching homes and making sure they're inspected well.

My home is darned nice and has a freaking bar and movie theater in the basement!
 
W19 said:
The rule for me is <= 20% of take home income... I think 10k/month take home is very high for psych doc unless their tax liability is low and they contribute nothing to retirement...
Click to expand...

That's ultraconservative. Even the most conservative affordability calculators will be in the mid 20% of pre-tax income.
 
mgdsh said:
That's ultraconservative. Even the most conservative affordability calculators will be in the mid 20% of pre-tax income.
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I just want have more freedom because a mortgage is for 15 to 30 years... I am a non trad who already have a home and before I went to med school, our (my spouse and I) take home pay was over 6.2k-6.4k/month and our mortgage is less than 1.3k (everything included) and it's a 15-yeaar term. Now that I am in med school, my spouse takehome pay is still sufficient to pay for everything because our mortgage is the only outstanding debt we have. I just feel like you can do so much with more disposable income.
 
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whopper said:
I'd buy the home considering interest rates are at historical lows. Spend about 1-2 months researching homes and making sure they're inspected well.

My home is darned nice and has a freaking bar and movie theater in the basement!
Click to expand...

Basements are the best. That's a man hideout you got there.
 
mgdsh said:
That's ultraconservative. Even the most conservative affordability calculators will be in the mid 20% of pre-tax income.
Click to expand...

The figure I frequently see tossed around is no more than ~a third of income going to housing.

The wife and I are looking to buy a house after intern year. We're moving from a place with expensive real estate (Chicago) to a place with pretty cheap and plentiful real estate (Dallas) and buying a house is extremely appealing. Especially considering where interest rates are and the likelihood that they'll pick up as the economy continues to improve, I think I'd kick myself if I didn't get a mortgage before rates climb up from these insane levels they're at now.
 
NickNaylor said:
The figure I frequently see tossed around is no more than ~a third of income going to housing.

The wife and I are looking to buy a house after intern year. We're moving from a place with expensive real estate (Chicago) to a place with pretty cheap and plentiful real estate (Dallas) and buying a house is extremely appealing. Especially considering where interest rates are and the likelihood that they'll pick up as the economy continues to improve, I think I'd kick myself if I didn't get a mortgage before rates climb up from these insane levels they're at now.
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Wow, I think you're in for a surprise regarding Dallas real estate. Unless you're ok with commuting from the far flung 'burbs. The wife and I had been looking into moving to Dallas (we originally grew up around Chicago) and the real estate isn't really cheaper anymore. I think that's a myth that hasn't been true in a few years now. Compared to LA, SF, or NYC sure it's cheaper... compared to Chicago dunno about that anymore. This is of course comparing places you'd actually want to live in Dallas if you want to live south of Oakcliff best of luck to you.
 
trophyhusband said:
Wow, I think you're in for a surprise regarding Dallas real estate. Unless you're ok with commuting from the far flung 'burbs. The wife and I had been looking into moving to Dallas (we originally grew up around Chicago) and the real estate isn't really cheaper anymore. I think that's a myth that hasn't been true in a few years now. Compared to LA, SF, or NYC sure it's cheaper... compared to Chicago dunno about that anymore. This is of course comparing places you'd actually want to live in Dallas if you want to live south of Oakcliff best of luck to you.
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Areas north of the city are still very affordable. We've been doing casual housing searches, and there are plenty of 3-4 BD, 2-2.5 BA, ~2000+ sq. ft. homes in the Irving/Lewisville/Carrollton/The Colony areas on the market for $200k or less; some of those homes are older but there are a few that are less than 10-15 years on the market. There are some incredible deals to be had in the $150-160k range. Many of the former have recently updated interiors, and most are in good areas. I'm not sure if you'd consider those areas the "far flung 'burbs" but I'd still consider those to be relatively close to the downtown area. But it all depends on what you're looking for and your willingness to commute. Square foot for square foot that's insanely cheaper than what you see in Chicago. I'm living in a 2 BD, 1 BA 1100 sq. ft. condo in an undesirable area of the city that was originally bought by the owners for almost $100k. To me, the differences in what you can buy for $200k in Chicago vs. Dallas are separated by a large maritime body. But that all comes from the perspective of people that have zero interest in living anywhere near the city proper, so for me commuting to/from the burbs isn't much of a sacrifice.

If you bump your budget up to $300k (not affordable for us but perhaps to those on an attending salary) you can buy some excellent homes in suburbs that aren't terribly far from the city. Bump it up again to $400k and you can pretty much have your pick save the larger McMansions.

I agree that areas like Frisco etc. have great deals compared to areas further south but you obviously pay for that with horrendous commutes.
 
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NickNaylor said:
Areas north of the city are still very affordable. We've been doing casual housing searches, and there are plenty of 3-4 BD, 2-2.5 BA, ~2000+ sq. ft. homes in the Irving/Lewisville/Carrollton/The Colony areas on the market for $200k or less; some of those homes are older but there are a few that are less than 10-15 years on the market. There are some incredible deals to be had in the $150-160k range. Many of the former have recently updated interiors, and most are in good areas. I'm not sure if you'd consider those areas the "far flung 'burbs" but I'd still consider those to be relatively close to the downtown area. But it all depends on what you're looking for and your willingness to commute. Square foot for square foot that's insanely cheaper than what you see in Chicago. I'm living in a 2 BD, 1 BA 1100 sq. ft. condo in an undesirable area of the city that was originally bought by the owners for almost $100k. To me, the differences in what you can buy for $200k in Chicago vs. Dallas are separated by a large maritime body. But that all comes from the perspective of people that have zero interest in living anywhere near the city proper, so for me commuting to/from the burbs isn't much of a sacrifice.

I agree that areas like Frisco etc. have great deals compared to areas further south but you obviously pay for that with horrendous commutes.
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Only bad thing (other than commute) in the places you listed is that they don't necessarily have great schools. Which may not matter to you now but it might when you're looking to resell. At any rate, good luck to you. From what we've seen the real estate market in Dallas is a bloodbath with multiple above asking offers in the first few days. But we haven't looked in any of the places you mentioned other than Carrollton (which we liked but isn't necessarily a popular area for other buyers it seems) so you might not run into what we've seen.
 
trophyhusband said:
Only bad thing (other than commute) in the places you listed is that they don't necessarily have great schools. Which may not matter to you now but it might when you're looking to resell. At any rate, good luck to you. From what we've seen the real estate market in Dallas is a bloodbath with multiple above asking offers in the first few days. But we haven't looked in any of the places you mentioned other than Carrollton (which we liked but isn't necessarily a popular area for other buyers it seems) so you might not run into what we've seen.
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I will admit that short of seeing what's available I don't know how things are, so looking vs. actually executing a successful offer may very well be a whole other beast altogether. I suppose we're also a little more open with respect to what we're considering since this will very much be a starter home for us. Perhaps once we have the money to move into our "dream" home we'll be a bit more discerning.

I'm less sure of Irving, but my impression was that the Carrollton/Lewisville/Colony districts were pretty decent (disclosure: I'm a product of Carrollton ISD). Perhaps that's changed, I don't know. I know cities like Coppell, Flower Mound, Southlake, etc. have great schools and you're absolutely right that those communities are significantly more expensive.
 
masterofmonkeys said:
Pay off your loans first.

Also, Homes are GREAT investments.

But, umm, with rent that high, you need to be in a house instead.
Click to expand...

I definitely agree to pay off loans first and with buying > renting if you stay put.

Homes however are awful investments for the vast majority of Americans. Outside of purchasing during a huge housing recession (no longer the case), few homes appreciate in value at the rate of 1/2 that of the stock market.

Selling a home loses 6%ish in realtor fees. Upkeep can be substantial. Calculate costs on new air conditioners, heaters, roof, carpet, refinishing hardwood, new appliances, etc. Trends of today are unlikely to be the same in 10-20 years. Expect updating the house to attract sellers. HOA dues and insurance. If you own a home, you have a bigger need for umbrella insurance.

The reason to buy is that you lose more money renting than if you bought a similar home.

This post comes from someone who bought a home in 2010 at an interest rate that is likely the lowest on this board. I've seen gains for sure, but I've made out much better putting excess cash in the stock market over buying a nicer home.
 
atomi said:
Good luck but realize that's a very low ball offer in most markets. In many markets houses sell at list price and some receive multiple bids over list. In a healthy buyers market 3% off list would be reasonable. I.e., don't be surprised or angry if they come back at you with .....
Click to expand...

I would have bid lower, but it really depends on the area, market, and who is selling the home even. Higher priced homes are more likely to negotiate more in my area. They also start off asking a lot more.

It varies by a lot depending on location within my city.
 
TexasPhysician said:
I definitely agree to pay off loans first and with buying > renting if you stay put.

Homes however are awful investments for the vast majority of Americans. Outside of purchasing during a huge housing recession (no longer the case), few homes appreciate in value at the rate of 1/2 that of the stock market.

Selling a home loses 6%ish in realtor fees. Upkeep can be substantial. Calculate costs on new air conditioners, heaters, roof, carpet, refinishing hardwood, new appliances, etc. Trends of today are unlikely to be the same in 10-20 years. Expect updating the house to attract sellers. HOA dues and insurance. If you own a home, you have a bigger need for umbrella insurance.

The reason to buy is that you lose more money renting than if you bought a similar home.

This post comes from someone who bought a home in 2010 at an interest rate that is likely the lowest on this board. I've seen gains for sure, but I've made out much better putting excess cash in the stock market over buying a nicer home.
Click to expand...
Spot on... 15 year interest is as low as 2.93% now; you are a genius if you got something lower than that in 2010... I got a 3.25% 15 year term in 2011 and I thought that it could not go down any further... If it get down to 2.75%, I am going to start punching numbers to figure out at what point I should refinance to cut down another 2 year in my term...
 
TexasPhysician said:
I definitely agree to pay off loans first and with buying > renting if you stay put.

Homes however are awful investments for the vast majority of Americans. Outside of purchasing during a huge housing recession (no longer the case), few homes appreciate in value at the rate of 1/2 that of the stock market.

Selling a home loses 6%ish in realtor fees. Upkeep can be substantial. Calculate costs on new air conditioners, heaters, roof, carpet, refinishing hardwood, new appliances, etc. Trends of today are unlikely to be the same in 10-20 years. Expect updating the house to attract sellers. HOA dues and insurance. If you own a home, you have a bigger need for umbrella insurance.

The reason to buy is that you lose more money renting than if you bought a similar home.

This post comes from someone who bought a home in 2010 at an interest rate that is likely the lowest on this board. I've seen gains for sure, but I've made out much better putting excess cash in the stock market over buying a nicer home.
Click to expand...

Regarding stocks, do you recommend buying mutual funds, or individual stocks? Or should we folk, who are just fresh out of med school, just focus on paying back loans before venturing into the stock market? 🙂
 
psych72 said:
Regarding stocks, do you recommend buying mutual funds, or individual stocks? Or should we folk, who are just fresh out of med school, just focus on paying back loans before venturing into the stock market? 🙂
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Mutual funds. I'd stash extra money in retirement accounts first and then pay down debt.
 
psych72 said:
Regarding stocks, do you recommend buying mutual funds, or individual stocks? Or should we folk, who are just fresh out of med school, just focus on paying back loans before venturing into the stock market? 🙂
Click to expand...
If you're in any kind of employed position, maximize your 401k contributions in your early career, especially if the employer matches at all. Typical matching might be $1 for every $2 you contribute--which means you're automatically getting a 50% annual yield.
 
Thanks for the tips guys. I feel like I know nothing about financial aspect of things but I think I should definitely start.

I'm also planning on just taking my dad's car for residency as he doesn't drive much, it'll help save some.
 
Most mutual funds are a terrible idea, as in any actively-managed fund the fees involved will in the long run totally negate any higher returns you might achieve relative to the broader market as a whole. Much better idea to prioritize passively managed approaches like index funds ( a weighted basket of equities that approximate whatever market, sector, or exchange you prefer) or exchange-traded funds. Many options exist in this arena, but in the long run this is a vastly superior strategy.

Agreed that trying to pick individual stocks is roughly equivalent to putting it on red in Vegas.
 
Well I'll go ahead and say it. Are you single? Buy an excellent house, make it a bachelor pad (swimming pool, bar) and have some fun before you have the ball and chain. Live the good life. You deserve it after residency.
 
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