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  • Home budget

    I am a current PGY-3 in a primary care specialty. We are moving to a different city after graduation from residency and plan to purchase a house. We currently have $30k in our home now and should make an additional $40k when we sell it. Our savings/finances consist of $120k in our savings account, $100k in brokerage account, $50k in Roth 403b. We have paid off both our vehicles and don’t plan to upgrade them until 3-5 years from now. I currently have $62k left of student loan debt at 2% interest. I am paying $1500/month towards student loans. My first year salary will be $250k and based upon current partners previous income (private practice) I should gross around $400k by around year 3-4. We are currently looking to purchase a house for $475k-500k and live in it for at least 5 years. Does this sound reasonable? We will have enough cash/savings to put down 20% on the house. Thanks in advance.

  • #2
    The prevailing answer you're going to get is to rent until you get settled and figure out if you're a match for this job. The percent of graduates who leave their job in the first two years is high.


    • #3
      I should have also mentioned that this is the area we plan to stay in long-term. Both mine and my wife’s families live in the area and the state I’ll be working in does not have a non compete so even if this job didn’t work out we would plan to stay in that area and work with another group vs. work for a system.


      • #4
        Renting while you get the lay of the land and figure out where you want live as well as having the time to not rush the house buying process is valuable but I can already see where this is heading.


        • #5
          While the answer to wait 1 year to buy is probably the best advice, yes you can afford a house in that price range as long as no major outlier expenses.
          Does your spouse work and if so what is their income?
          From the amount you have saved i’m guessing either your spouse works or worked and/or you are a bit older and saved prior to going to med school.


          • #6
            Let’s assume that there are no reasonable places to rent (which is true), does the above budget sound reasonable?


            • #7
              You have demonstrated an ability to live frugally and save, assuming your spouse is non-working. Sounds like you may be going to a HCOL state and, if so, I w/b concerned about living in a house at this price for 5 yrs minimum (which is my personal ROT). That is a very general statement, however, and I may be totally wrong and the market may continue rising for the next 2-3 years or whenever you are out of contract and you’ll sell at a profit or at least no loss. Having both families there is a positive and, in general, it sounds as if you have thought this through pretty well.

              You should already know you’re not going to post this question on the forum and receive absolution for breaking a WCI cardinal rule, but I will say it sounds fairly reasonable, given that you understand the union may not be a long-term fit.
              Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


              • #8
                There are major shifts taking place in the economy right now. We are transitioning out of a low interest rate environment to a high interest rate environment and from a low inflation environment to a high inflation environment. There are going to be factors placing both massive upward pressures on prices of real estate and other factors placing massive downward pressure on prices of real estate. No one knows how this will play out, or which factor will prevail. It’s like the stock market. “No one knows nutin’!”

                As long as the house you purchase is is affordable for your budget, as long as you purchase it with fixed rate financing, and as long as you are going to be comfortable living in the house you purchase over the long haul, this should work out fine. But be forewarned, a lot of economic volatility is ahead. We just don’t really know clearly what it will look like. The leading indicators are already flashing early warnings that RE prices are in for a rough ride.


                • #9
                  It's only money.

                  ​​​​​You can certainly do it as the budget will work.

                  ​​​​​I will pose this question and scenario. Are you interested in direct real estate and does this home rent well... especially it being a low rental availability market.

                  As jfoxcpacfp mentioned, there is a large possibility that you will be out in five years either from job or house sizing/career at five years very different from fresh out of residency.

                  ​​​​​​​The caution is not financial in as much as the turmoil that comes with year one out of residency.


                  • #10
                    Sounds perfectly fine. I see no problem buying right away since it sounds like you're committed to the area and presumably familiar with the neighborhoods and such.


                    • #11
                      Originally posted by Adh1208 View Post
                      Let’s assume that there are no reasonable places to rent (which is true), does the above budget sound reasonable?
                      There is an unintended implication here.
                      “Both mine and my wife’s families live in the area and the state I’ll be working in does not have a non compete so even if this job didn’t work out we would plan to stay in that area and work with another group vs. work for a system.”
                      Finding the next house for you next job any where in the state is going to be problematic. I would hate that long commute.

                      “based upon current partners previous income (private practice)”. Sometimes former partners and associates provide useful points of view.

                      I really hope the job and house work out well for you. I feel sorry for everyone. Not one decent place to rent. I would be worried about the next job and next house.


                      • #12
                        One more thought, make sure any buyer of your existing house can complete the purchase before you plunk down earnest money for a new home. In a rapidly rising interest rate environment, only the strongest borrowers have a high likelihood of making it to the closing table.

                        Today I learned of a home sale that fell through after being in escrow for 2 months. The rise in interest rates meant the buyer no longer qualified for the loan, despite having multiple pre-qualification letters. This failed transaction is an example of exactly the type of volatile scenario that will become increasingly common in a rapidly shifting economic scenario. When this particular house goes back on the market after only 2 months, the market has already shifted in a significant fashion.


                        • #13
                          Originally posted by Adh1208 View Post
                          Let’s assume that there are no reasonable places to rent (which is true), does the above budget sound reasonable?
                          Extremely unlikely. If you can say what city you’re planning to move to after finishing residency, I bet I can find a half dozen decent single family rentals available for rent in acceptable neighborhoods. Heck, if you don’t want to post the location publicly, private message me the name of the city

                          If I can’t find five or six decent single family homes, I’ll be more than happy to reply to the thread that you were right and I misjudged the availability of acceptable rental housing in this unusual (yet unnamed) metro area.


                          • #14
                            Appreciate everyone’s response. PM has been sent to Hank with location of where I’ll be working for him to check out potential rentals. Just so everyone is aware I have a wife and two young kids and we are looking for a 4br house. The city’s public school is top 25 in the state and is a desirable place to live for that and other reasons. I am aware of the housing market volatility. However, similar to markets in general, it’s extremely difficult to time them. I also should note that I have shadowed and rotated with the PP group I have joined on multiple occasions. I understand that there is no taking the place of actually working as part of the group. However, I feel I am walking into this setup with a much different perspective than someone who has never worked with a group or even in a certain city. Again, all insight is very much appreciated.


                            • #15
                              Ladies and gentlemen, it looks like I might have to eat my hat after all. The original poster plans to live in a fairly small town. Within city limits, Zillow shows only two available 3/2 houses that might meet his family’s needs (quite affordably priced compared to coastal living and with decent schools and commutes). I still think it might make sense to rent a 3/2 for six to twelve months to get a feel for schools, neighborhoods, commute, etc. prior to buying. Heck, the town is small enough (about 16,000 people) that I'd want to be in a bigger city maybe an hour away. However, I wouldn't consider commuting an hour per day each way.

                              Anyway, I totally appreciate the good faith citation of location from the original poster. Totally up to him if he wants to disclose more particulars about the location. But it looks like a good to great location for geographic arbitrage. Bit of a shame that there aren't more / larger houses available for rent. It's entirely possible that more things open up during the summer moving season.

                              Total price this poster is looking to pay is more reasonable than the $1 million another poster is looking to spend in a small town. From a brief survey, it looks like there are a number of decent places for $200K+, although school quality would be the biggest driver for finding an acceptable place to live. One idea would be to identify the best local high school, then drill down to the best middle school that feeds into that high school, then the best one or two elementary schools that feed into that middle school and high school. If most of the houses that go to that elementary school are reasonably priced, then pick what you like. If the best elementary school catchment area is rather expensive, then target a 20th or 30th percentile house in that more expensive part of town.

                              Anyway, thanks to the original poster for being a good sport and best wishes for your first job out of residency!