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How much rent is reasonable during residency?

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  • How much rent is reasonable during residency?

    I will be starting 2nd year of 4yr residency program in another city in a new state. My wife and I are mid 30s, having had prior careers, and about 300k saved up, no debt. Good schools for our kids is important to us, and the district we are looking at moving to has high rent/sale on homes (For single family home rent is 3-4k and buying is 500k and up). Our family plays a lot of music, so I am leaning away from apartment/condo that would be significantly cheaper (~2k/month). We have the cash to rent, it just scares me that rent at 3500 for thee years of residency will be about 130k. We've always been frugal, I just want to be in a nice neighborhood for wife and kids and schools. After residency we don't plan on staying in the area (though anything could happen).

    Am I being unreasonable to rent the house? Thanks

  • #2
    How do you afford 36-48k/ year on housing alone in residency? Does your wife work? Do you currently have that 300k and plan to use it to pay rent? Do you have retirement savings? This seems like a poor way to spend your money- as long as you are not playing music late at night or early in the morning I would definitely rent an apartment. Curious what others think though.

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    • #3

      if your salary can cover all other expenses and you're going to make $250k+ after residency I'd go for it.  You might have to wait longer to have a luxury car or fancy vacation but I think you're in great financial shape.

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      • #4
        If you're set on the area and can afford it, it shouldn't be an issue. Where you live is very important. Find a few neighborhoods you like in the area you've chosen. Follow them and farm them out. Eventually, you'll get a better idea of what things are actually renting for versus what they are advertised for. If you call on some listings, you may find a good real estate agent who works the area and may have things coming up in your price range which haven't been advertised yet. Always good to have others looking for you. Good luck!

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        • #5
          I wouldn’t do it. Putting basically 100% of your after tax income into rent is not a great idea. Sure, you are ahead of most other residents because you don’t have any debt and have some savings, but you are also older than most residents, so have fewer years of earning ahead of you. You are living beyond your means and tapping into savings to do so. Effectively you are borrowing from your future self to pay yourself now. That pattern of behavior is dangerous to wealth creation over the long term. I also question why rent is so expensive. I don’t think most $500k homes rent for $40k annually. I suspect you could find a cheaper rental in the same neighborhood.

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          • #6
            such a personal question and hard to define reasonable versus unreasonable.

            you can afford it.  as with any large expenditure, there are consequences to the decision.

            is there a better way to spend money than safety and education of family?

             

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            • #7
              Assuming the apartment and house are both in the neighborhood you're interested in, I'd rent the apartment for 2k/month less.  From what you wrote, the main reason you're willing to pay more to rent a house is to play music, 24k/yr to play music seems high(but I'm no musician).  If it's worth it to you, then fine, but maybe consider alternatives such as a ground unit, renting music space, etc.

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              • #8
                Good schools are valuable.  Is there a way to get into the good schools that is less costly and still comfortable?

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                • #9
                  How old are your kids?

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                  • #10
                    I echo some of the above comments. This is a bit unreasonable to think its the only option, its just an option.

                    You cant find anything safe for less than 4k? I understand the desire for music, etc...believe me, there are 4 guitars and two amps within arms reach of me right now. However, this is a period of a bit of sacrifice and it will pass quickly after all.

                    I dont think schools are nearly as important as people make them out to be, they will be coming from a high attainment household and do well no matter what because you'll insist on it. Unless of course its physically dangerous to get to and be at school safely, which is different and highly unlikely. If you're honest with yourself you are probably choosing and looking only where things are more expensive preferentially from the get go, other places likely exist. Nothing wrong with that, it just comes at a massive present and future cost. That 130k is 800k-1M in 20 years, and much more decades later.

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                    • #11




                      I echo some of the above comments. This is a bit unreasonable to think its the only option, its just an option.

                      You cant find anything safe for less than 4k? I understand the desire for music, etc…believe me, there are 4 guitars and two amps within arms reach of me right now. However, this is a period of a bit of sacrifice and it will pass quickly after all.

                      I dont think schools are nearly as important as people make them out to be, they will be coming from a high attainment household and do well no matter what because you’ll insist on it. Unless of course its physically dangerous to get to and be at school safely, which is different and highly unlikely. If you’re honest with yourself you are probably choosing and looking only where things are more expensive preferentially from the get go, other places likely exist. Nothing wrong with that, it just comes at a massive present and future cost. That 130k is 800k-1M in 20 years, and much more decades later.
                      Click to expand...


                      This.  I went to a mediocre school for my entire elementary, middle, and high school years, but did well academically because my parents were appropriately involved and set high expectations.  Schools may be more important if children have behavioral problems or need a lot of academic help, but if not I don't think you necessarily need to choose the best school district.  You can choose that if you like, but just recognize the opportunity cost of that money--which may be better used for your children down the road.  Either way they'll be leaving the school in 3 years.

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                      • #12
                        Thanks all for the input.

                        My kids are 5 and 3. So one is starting kindergarten and the other will be in preschool. We also have some retirement savings in a Roth IRA, and the cash mentioned above is from recent home sale in our current location. The area I am looking at is also convenient for me riding my bike to the hospital. I’ve been following the market in the area since last March after the match so the prices quoted above are what I’ve seen based on Zillow actual rentals. Having a basement is another draw of a house as the program is in the Midwest and having somewhere to run around when weather is crappy is convenient. To be specific, I’m looking in Clayton suburb of Saint Louis if anyone is familiar with area.

                        We don’t play music at odd hours, but my son plays drums, I play piano and my wife violin and she may work part time teaching lessons.

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                        • #13
                          there are many debates about the value of private school at all, whether exposing kids at younger ages to benefits are more valuable, than finishing at a private high school.  we will never be able to answer right or wrong.

                          i went to public school the whole way through as did my wife, 100% because lack of opportunity, and unknown % because of ethics or philosophy of raising children from parents.

                          everything has an opportunity cost.  if you are asking whether it will prevent you from dying a multimillionaire, the answer is no.  is it possible it might cause you to die with millions less later in life?  that's possible if you send two kids k-8 to the fanciest private school in St Louis.

                          however, you definitely have more options than you have verbalized.

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                          • #14
                            Clayton is a great place to live, and biking through Forest Park to get to the hospital is great as well.  I can easily understand why you would want to live there.

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                            • #15
                              I'm not familiar with the St. Louis rental market or school situation but renting a home in the middle of the country for $3-4k/month seems outrageous to me. There must be a better option that is a compromise between great schools/high rent and awful schools/low rent.

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