Should I rent or buy home?

[Jay]

Wondering what to do in my situation.

I am currently in last year of residency with contract signed moving to mid size city next July

Debts- 160k of Mine at 6.8% on the pslf program with wife having debt of 140k

Savings- right now not much- 5k, planned to have 10k for moving expenses new location start up etc etc by next year

Income - Next year income- contract stipulates guaranteed for 2 years at 255k. wife not working

costs - no kids planned, taxes will be about 67k or so, and ill pay 20k in student loans for both of us

So I know a lot of doctors move within first 2 years.  Which is better- to buy a cheap home that I can potentially sell at a loss equal to the money spent on rent or just renting?

What would be a reasonable budget with our circumstances? We want to live in the city so we know things will be a bit more expensive.  My wife says she does not want to live in an apt/home thats similar to our current 700/mo rental - think of your very standard run of the mill apt

Our targeted budget for rental was bw 1800-2500.  Which potentially is doable to get what we want.

However, for properties that we can live in we were looking at about 300-450 for a home to purchase.  W zero down it looks like we'd pay anywhere from 2500-4000 a month.

Eg, the home we are currently looking at is 399k and would put us at 3000/mo including an 400 HOA/mo fee w only 10k down.

So questions:

1. I'm trying to figure out - is it ok to spend that much since its an "investment" of sorts- such that even if we have to leave quick we could sell it at a loss and still come out better than renting at 2000-2500k a month where its all gone?

2. Is our rental range too high? This is going to be tough since we want a certain lifestyle- living downtown in safe area so we can walk everywhere (only 1 car), along with a better property

3. Does it ever make sense to buy a home if its cheap enough to sell quickly in 2 years? How do I calculate this amount?

anything else you can add!!

I've been mulling over this for at least 2 months now and can't figure it out.

 

[jhwkr542]

Don't buy. You don't want to be stuck in one place because you bought a house. The transaction costs to buy a house are enormous. That's if you can sell it. What happens if they don't like you? Or you don't like them? Or they lose a contact? Or the housing market tanks in a year?

For the rental budget, that doesn't seem crazy, but recognize it for what it is: abrupt lifestyle inflation.

[jsr52]

I'd rent. How do you know you'd come out better than renting if you sold at after a year or two? That seems like a pain. Remember the mortgage is the minimum monthly payment you will make a month for household costs while rent is the maximum payment. Were you planning on using a doctor loan? It doesn't look like you have a down payment. Where are you planning on moving and where do you live currently, where I live in Boston 700/month is not an average run of the mill apartment, its the projects or run down college living. With your income, you can comfortably rent an apartment that runs 1500-3500/month

[Rotish]

Rule of thumb is 5 years minimum to break even with a house purchase. More likely you'll still be behind with closing costs. If two years is a remote possibility, don't even think about buying

[pistolpete]

Rent.

[VagabondMD]

No brainer, rent. Wait until you have steady financial footing, a reasonable down payment, less debt, and stability in your job. And if your spouse pressures you, tell her that the Vagabond put his foot down.

When I was contemplating my first home purchase, my attending advised me that buying a house is not an investment, it is a lifestyle. So true.

Everyone likes to compare the price of rent vs mortgage payment, as if this solves the issue. The roof needing to be replaced for $20k or a pipe bursting while you are out of town and doing $10k worth of damage, not to mention that steady drip of annoying little things that are constantly added to the to-do list never seems to get factored into the discussion.

 

[StarTrekDoc]

I am an ardent supporter of buying, but unless you fall into a discounted unit and a sizzling market, two years is too short.  \

you need to have a 12% rise at a minimum to really recoop fees, plus the hassle.  Not worth the time/effort while just starting out.

 

[Hatton]

RENT!

[ticker]

I think you should rent.

Also, I'd recommend you make the decision to rent or buy as objectively as you can, before you spend too much time looking at homes for sale.  If you keep looking at the local real estate market, you risk finding the PERFECT house for sale... and you'll do something stupid.

[East coast]

Jay wrote:

Wondering what to do in my situation.

I am currently in last year of residency with contract signed moving to mid size city next July

Debts- 160k of Mine at 6.8% on the pslf program with wife having debt of 140k

Savings- right now not much- 5k, planned to have 10k for moving expenses new location start up etc etc by next year

Income – Next year income- contract stipulates guaranteed for 2 years at 255k. wife not working

costs – no kids planned, taxes will be about 67k or so, and ill pay 20k in student loans for both of us

So I know a lot of doctors move within first 2 years.  Which is better- to buy a cheap home that I can potentially sell at a loss equal to the money spent on rent or just renting?

What would be a reasonable budget with our circumstances? We want to live in the city so we know things will be a bit more expensive.  My wife says she does not want to live in an apt/home thats similar to our current 700/mo rental – think of your very standard run of the mill apt

Our targeted budget for rental was bw 1800-2500.  Which potentially is doable to get what we want.

However, for properties that we can live in we were looking at about 300-450 for a home to purchase.  W zero down it looks like we’d pay anywhere from 2500-4000 a month.

Eg, the home we are currently looking at is 399k and would put us at 3000/mo including an 400 HOA/mo fee w only 10k down.

So questions:

1. I’m trying to figure out – is it ok to spend that much since its an “investment” of sorts- such that even if we have to leave quick we could sell it at a loss and still come out better than renting at 2000-2500k a month where its all gone?

2. Is our rental range too high? This is going to be tough since we want a certain lifestyle- living downtown in safe area so we can walk everywhere (only 1 car), along with a better property

3. Does it ever make sense to buy a home if its cheap enough to sell quickly in 2 years? How do I calculate this amount?

anything else you can add!!

I’ve been mulling over this for at least 2 months now and can’t figure it out.

 

Click to expand...

You aren't going to get much love in these parts - I'd say the number one top of the list recommendation of this website is 'live like a resident' to start the career (or until the high debt is paid off, which you have a ton of) and none of the numbers in the post suggest that's in the plans here.

To answer questions more directly  1) it's NOT an investment. the moment you buy that house you are (very likely) committing $24k just for the real estate agents. That's only one of many transaction fees you'll have to cover. The historical ROI on real estate is less than 1%(depends on where you look/real vs. nominal, but feel free to look it up).

2) I wouldn't hesitate to put that much towards rent assuming all my other ducks are in a row spending-wise. Why only 20k in student loan payments - you should be crushing your wife's debt (and frankly, yours, but if you're full speed ahead on pslf, go for it, just be sure to have a contingency plan in place)

3) I'm sure you could make up a case where it makes sense. google 'nytimes is it better to rent vs. buy' and you can play with the calculator there. I'd be willing to bet though that your situation is not one of them.

[PhysicianOnFIRE]

I think you're ignoring many of the hidden costs of owning a home, which aren't exactly hidden, but not often considered. Property taxes, maintenance, repairs, opportunity cost of money tied up in house, higher utility costs, etc...

I would encourage you to read the Happy Philosopher's experience and JL Collins' take.

 

 

[q-school]

We've always bought houses because my wife likes to own the house and feels more permanence and part of the community. Having said that you should unequivocally rent in your situation. On this there should be no debate.

[DMFA]

If you have to ask, the answer is "rent."

[u500_insulin]

I think that you should be looking at ways to increase your income and reduce spending.

Based on your debt load and minimal savings, I  would rent for the above reasons by other posters.

also,  wife not working, this reduces income potential which would be a great help in getting down payment fund which you should have a goal of 20% as this will make the underwriting that much easier and give you the best rates.

can you moonlight? this is a great way to get experience as well as good amount of money. Young docs like us live on coffee and you will be ok working the extra hours

just my thoughts

[beagler]

Is spouse able to work? 140k in debt for her, must have some kind of degree + no kids. Unless medical reason for not working that could be a nice income boost.