Ok, let’s talk about The House Buying Itch – Medical Student Edition.
You’re paying someone else money every month and so you feel like you’re lighting money on fire every month. Money that you really need. Money that you could be using on other things, LOTS OF OTHER THINGS. You feel like a sucker or a chump paying some landlord of a rental management company every month. You’re an ideal tenant… You’ve never caused any problems, kept the property clean, paid the rent on time, etc. etc. You feel like you are being taken advantage of. You want to buy a house… like YESTERDAY.
My first “Whatever Wednesday” post fits well with the new year. 4th year medical students, who I hope are or will be reading this blog soon or someday should be mostly done with interviewing for the match. While your rank list may not yet be finalized, it pretty much is in your head, you just don’t want to lock it into ERAS yet because then it’d be TOO REAL.
Anyways, Match Day will come and go, and most likely you will end up moving unless you are staying at your home program. Either way, you will be starting residency in July and for most of you this will be your first time making real money. That internship you did in college, those summers working for your Uncle Rob where you got paid to do nothing, that week you worked fast food, or that month you worked retail don’t count in my book.
As a physician, someone somewhere may have already told you about “physician home loans”. No Money Down. No PMI. All you need is a copy of your signed contract with ABC University Hospital and then, you too can be home-owner and begin your American Dream. White picket fences, Two Volvos and 2.5 children await…
Don’t. Believe. The. Hype.
Buying a house, even a cheap one, makes you very inflexible, and it weighs you down like an anchor. As a resident you want to be lean and mean. Renting for the most part is “low-stress”. If something breaks you call the landlord and tell them it needs to be fixed. Your responsibility as a renter is pretty low overall and you should have renters insurance anyways (which is cheap). As a resident, you have way too many other new responsibilities to deal with. A house is another responsibility (and source of stress) you don’t really need. Being in residency is like being in survival mode, and the 3 core principles are food, water, shelter. Renting gives you water and shelter. Food you can get from the hospital, ramen, or McDonald’s. I will discuss survival mode in more depth in a future post.
Can you say with 100% certainty you will be staying with ABC University Hospital for more than 5 years? Did you say yes? If you did, you’re lying to yourself. No one has that kind of certainty. With something as big and concrete as a house you need to consider the worst case scenarios, not the best case scenarios. What if there is a death in the family and you need to move home? Or maybe you find out that your dream specialty X turned out to be your worst nightmare and you need to get out ASAP? Or what if everything goes as planned and you finish your residency, just to have the market crash when you move for your first job?
Are these situations unlikely…? Perhaps, but not impossible. Ask anyone who tried to sell their house in 2008 and see how they made out. They may still have that house… paying the mortgage on an empty house.. Like I said, only the worst case scenarios matter.
I know what you’re thinking!
PSHHH, this Sensei guy is a typical doctor who has no clue about income property, I’ll just rent it out.
Sure… “just rent it out”.
Have you looked at the rental market for the house you plan to be in thoroughly and know the break even point? If it is empty for 3 months are you still doing ok? 6 months? a year? Have you factored in any maintenance you will need to deal with? Have you been a landlord before? From 50 miles away? 200 miles? 3000 miles?
Ok, now everyone will think in their heads “Well, I know this guy Jimmy who bought his house as a 1st year ortho resident and then sold it for ONE HUNDRED THOUSAND DOLLARS PROFIT after he finished when he had to move to another state”
. Well now, that’s awesome, how much were his closing costs? How much money did he put into the house over the course of his residency? And how much did he pay in interest on his mortgage during his residency? How much would it have cost him to rent instead? Is that “100k profit” really 100k?
If it is 100k after all the above I mentioned, then I just have one thing to say. JIMMY GOT LUCKY. Will you be as lucky as Jimmy?
What about all the people who “broke even”?
Look at the things I listed above, do you really think they “broke even”?
Ok ok ok. Let’s back up for a second. I am not saying buying a house is a dumb decision. I just want everyone to know that buying a house should not be taken lightly. There are so many hidden and confounding factors that arise when buying a house that it makes the risk not worth the benefit, in most situations. The people who know what they’re in for already know about everything I’ve discussed above and understand the logistics as well as their risk/benefit ratio.
If anything I said above is unknown to you or makes you question whether you should buy or not… then PLEASE just rent and forget about it.
… until you start your first job, and the itch starts again. I will discuss this in a future post.
Renting is not for suckers. You are paying for shelter. Consider it like staying at a hotel long term with little responsibility and low stress.
Buying a house makes you inflexible and anchored to an area. You really don’t want this as a resident because you don’t know where you are going to end up.
JIMMY GOT LUCKY.
Agree? Disagree? Questions, Comments and Suggestions are welcome.
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