The House Buying Itch – Post Match Edition #illumedati 5


Hey guys, it’s Medicine Mondays.. and while buying a house may seem like a Whatever Wednesdays post, I think this particular post fit Medicine Mondays better since it pertains to this critical post match period. So let’s talk about The House Buying Itch – Post Match Edition.

Stock Photo from: Pexels

I’ve talked about Buying a House before in multiple prior posts:

The House Buying Itch – Medical Student Edition

Buying a House

Closing Costs

Selling a House

I’d recommend looking at those posts as a background for this one.


I’ve matched and I know where I’m going… time to buy a house right?

The short answer is no.

Here’s why:

Owning a house has its own set of responsibilities. Remember my prior posts about Priorities Part OnePart Two, and Part Three? Just being a resident will essentially dominate the majority of your time for the next few years. You don’t want any additional responsibilities if you can help it.

Here’s an example:

You’re on ICU rotation so you have to come in to the hospital at 6am tomorrow ready to present your patients for rounds at 6:30am. However, you live in the Northeast and there is supposed to be some snow overnight. So now:

If you own a house, you will have to set an alarm to get up early and shovel your driveway in order to get your car out. It’s also negative 10 degrees outside with a windchill of Antarctica.

If you rent an apartment, there should be a company contracted with your complex that will plow your area for you so you can get to work.


That’s not a huge deal…

You’re right, it’s not a huge deal, but that is only one example.

Here’s another example:

There was a pretty heavy storm last night and you wake up to a puddle in the kitchen and your living room’s carpets are soaked. There must be a leak in your roof somewhere.

If you own a house, you have to call a roofer to have it checked out and pay a hefty amount. You may need to even replace the whole roof.

If you rent an apartment, the likelihood of this happening is relatively low. However, in this instance you call your landlord and tell them it needs to be fixed.


Ok, I get it, so there’s less chance of a hassle… but aren’t I just burning money every month on rent?

No. You are paying for something you need, shelter.

When you buy a house, you are still paying for something you need, shelter. However, you are also assuming responsibility and liability for any problems that come with owning a house.

The “rule of thumb” for how much the maintenance on a house costs is the “1% rule”. This means you should budget 1% of your house’s value as costs to upkeep it. For example, if your house is valued at $300,000, then you should budget $3000 for upkeep per year.

I know, that’s “not much”, but when you account for closing costs associated with buying a house, things begin to add up. Also, you don’t know how much you will be able to sell the house for when you need to sell it.


But… don’t housing prices “always go up”?

In general, housing prices go up, yes. However, this is over a long period of time, longer than the average 3-5 years of residency.

Also, your house’s appraised value or its assumed value don’t matter. All that matters if how much it actually sells for when you need to. The problem is that, as a resident, your time in your house is most likely short-lived. You will probably be moving for fellowship or your first (or second job). This will force you to sell your house at a certain time, and you will not be able to wait for the opportune time for an “up market”.

Here’s an example:

You buy a decent house near your residency for $300,000. Whether you did a conventional 20% down or a physician home loan (0% down), I can’t really account for. However, now it’s 5 years later and you need to move 3000 miles away for fellowship, so you’re forced to sell. You’ve paid $3000 x 5 years = $15000 over the last few years in upkeep. Unfortunately for you, the market in your area either isn’t doing that well or has changed. For $300,000 people want 1 more bathroom than you have, or they want an updated kitchen/bathroom. As such, you are forced to price your house a little lower than you expected, let’s say $280,000. Luckily, you are able to sell it before you leave for fellowship.

So you took a loss of $15,000 + $20,000  = $35,000. This isn’t horrible because that’s spread out over 5 years. However, you have to account for the closing costs on buying and selling the house. In general, closing costs run between 2% and 7%. Let’s say you’re right in the middle at 5%. This is usually split between the buyer and seller, but the buyer usually pays more at 3-4% with the seller paying 1-2%. So let’s say as the buyer, you paid 3.5% and as the seller you paid 1.5% which is $10,500 and $4,200 respectively.

So all your costs for living in the house are $15,000 + $20,000, + $10,500 + $4,200 = $49,700 – let’s just around up to $50,000.

$50,000 / 60 months (5 years) = $833 a month – what you could have paid in rent.


So, in that example, as long as my rent would have been more than $833/month, then I came out on top?

Well, kind of. We still haven’t taken into account differences in costs for gas/electricity and the opportunity cost of maintaining your house. Your gas/electricity should be significantly less per month in a house versus a smaller apartment. It should also be significantly easier to furnish a smaller apartment. Then you have to account for keeping your house clean, vacuuming, dusting, etc.

The above costs can vary significantly, so I can’t really calculate them. However, they add up both financially and in terms of opportunity cost.

For example:

Instead of spending a few hours cleaning your house from top to bottom every week or two, wouldn’t you rather spend your little free time doing something else?


Long story short, is the potential hassle worth it?

I don’t think so… and I haven’t even given you the potentially disastrous situations that could arise.

For example, the air conditioner breaking in the middle of summer, or the heater breaking in the middle of winter.

Or what if your house gets termites? or mold? or any other hosts of problems… can you fix them? Do you want to?

Or what if you can’t sell the house? The bank tries to foreclose on you, or you end up paying a mortgage on an empty house and another apartment/house? Potentially disastrous.


Well Sensei, you didn’t buy a house, so how would you know?

It’s true. I didn’t buy my first house until I was an attending, 3 years out. However, in my short time living in my own house, I’ve seen all kinds of unforeseen problems pop up that I have to “find money for”… and I’m an attending! I can’t imagine having to deal with this stuff as a resident just trying to get by every month.

Additionally, I have two friends who both bought houses in residency. Dr. K did ok and Dr. E really had a lot of problems. I think their scenarios are common… You either “do ok” or you “have a lot of problems” I will try to talk to both of them this week/weekend and get their input, for a follow-up post next Monday.


Well, I’m not convince… I’m still going to buy a house…

Yes I know.

For some of you, there isn’t anything I can say to stop you from buying a house. However, for those who were on the fence or somewhat unsure, I hope I was able to make them stop and think about the potential problems that can arise… problems that you don’t want to deal with as a busy resident.


TL;DR

Please don’t buy a house in residency.

I don’t think the benefits outweigh the risks.

Come back next week for a more detailed case study of Dr. K and Dr. E.

-Sensei

Agree? Disagree? Questions, Comments and Suggestions are welcome.

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5 thoughts on “The House Buying Itch – Post Match Edition #illumedati

  • Fred

    For the most part I agree with Sensei. Most regions of the country don’t lend itself to buying a house as a resident (certainly any major metropolis where cost of living is killer). However, there are certain factors that make buying a house *possibly* worthwhile. The above article assumes a 300,000 house. That is a lot for a resident. A starter home costs much less and in some rural areas, you’ll find good, small homes in the 100’s with a disproportionately high rent in the region (typical for university towns). The home maintenance responsibilities remain the same, however, those costs may not be that bad in the overall scheme if the cost of the home is low. Also, looking for an area that has a high turnover is a big deal… for example, where there are a lot of residency spots or a university with students – easier to resell. Look at macroeconomic growth of the region. If there is an influx of new jobs (for example a hospital hiring a ton of nurses, or a new hospital or business complex opening), then there will be a need for housing and a lot of homes will be sold. Also, if you buy a duplex, you can possibly break even for your costs and/or continue to rent both units after residency and build your wealth. The other side of it is this… if you are derm, rads, ophtho, or another specialty where you’ll have a decent life DURING residency, it *may* be worth the risk. If you are a surgical resident and don’t have a partner willing and able to take on the responsibility to manage the home, I would think twice before buying. Just my thoughts. Great article and advice as always, Sensei.

    • Sensei Post author

      It’s true, there are a lot of other factors that could make buying a house potentially worthwhile. I was trying to demonstrate the many costs that first time home buyers don’t consider prior to buying a house. You always hear about people “coming out” ahead when buying a house, but no one likes to talk about having “lost money”. For those who say that they “broke even”, did they really break even?

      I’ll try to do two case studies these next two weeks from two friends of mine.

      Thanks for your comment Fred!

      -Sensei

  • Johnny

    Also, in the earlier years of a mortgage, most of your mortgage payment goes to interest instead of actually “building equity,” which is a favorite excuse used by lots of my friends.

    • Sensei Post author

      This is very true.

      Could you still come out on top? Yes, of course.

      However, I consider buying a house during residency to be an additional risk/liability that you don’t need.

      Thanks for your comment!

      -Sensei