There are plenty links on the finances of renting vs. buying. This isn’t that kind of post. Rewind a few years: “Don’t buy a house, rent for a year. ” said my co-residents to me after some rare downtime between morning didactic and clinic. It was good advice and I came to think about how I didn’t take it quite a bit over the next 5 years.
We bought in residency, sold for a slight loss but overall we happy with home ownership. 1600 sq ft condo like house with a nice deck just a few miles from the beaches of South Carolina.
Got a decent deal at 245K and had no problems with paying the mortgage. My wife, a PA, and I had about 200K in combined loan debt plus a 20K car note. She paid her debt down during training with minimum payments and I deferred my loans to live a bit large before we had kids. So we could easily afford the $1600 mortgage payment.
After training, my pay went up about 6 times with possible 10-12 times if/when I made partner in 2 years. The math, media and mortgage lenders said I could afford a much larger house than residency. We settled on a $600,000 new construction 3000 sq ft 4 bedroom house in the center of town. A mcMansion with a small m. Gilded, like a thin veneer of gold over a lead sculpture. Granite, triple crown molding and wood where it counts to get the deal closed. We were going to grow into the house, starting with zero kids. Well, I’d have my music studio for a couple of years until a kid took it over : )
Of course we financed 100%, the no money down doctor loan. (On a side note I used Chris Roberts with Regions and he was excellent, no money made on saying that or ever on this blog to date). Work started, life went on, we expected our firstborn and oh, I started reading financial books.
My paycheck just vanished each month, like a fart in the wind. The mortgage, student loans (no deferment now baby), furniture, interior decorator, on and on was death by 1,000 cuts. Still nothing in retirement. I freaked…. OMG I thought, I am condemned to a prison of debt and I am now totally dependent on making partner to make ends meet.
Then came the emancipation epiphany given by potential financial independence. I started reading more books (William Bernstein) and blogs (White Coat Investor, etc – this was pre Physician on Fire) and realized we had to make better choices. I was anxious about my job for several reasons, so when an opportunity to take another job from a friend near Canada came up, I took it. I figured, at the very least, it would be a reset on my financial blunders.
We’ll just sell the house if we need to move
For sale sign went up, hired the best agent for luxury houses and started packing. We had 2 offers in the first week and a good faith check in hand by then end of the month. Around 1pm on a Monday, my realtor sent me a text pic of brick mortar strewn down the long veneer brick wall on the side of our house….. Like a false positive PET scan, this can be explained right?
I got home that afternoon and saw a series of large cracks in the brick veneer wall. These were on several other walls. There were also drywall cracks interior, ceiling cracks, crown molding separation, door sticking etc. Long story short, the foundation was undergoing settlement, which could take up to a year and posed no threat to the structural integrity. My house was shifting like the Leaning Tower of Pisa.
Unfortunately, that the house was safe didn’t matter to the potential buyers. The good faith check was cancelled and the house sat on the market for another year while we were going on with life in the new Northern locale. Funny how word of that sort of house thing gets around the realtors.
Then oil prices tanked. My home was in a city highly dependent on oil. Within a few months, my house was to be joined on the market by several larger, nicer homes at the same or lower price from oil service field jobs who were laid off and had to fire sell to cut losses and move on to another city.
Fast forward 4 years, 2 renters (thank you God, both docs and great tenants), $10,000 legal fees, $3000 engineer fees, $30,000 in non-deductible house costs and a $50,000 loss on the eventual sale and here we are blogging about it. More importantly than the money drain, it drained mental bandwidth when we needed it most with new jobs in an unfamiliar city without family and with 2 kids. I was Tom Hanks in The Money Pit.
Reasons not to buy a big house out of training:
- See above
- Might not like the job and if no compete or specialist may have to move cities
- Job might go away with medicine changing
- This happened to Physician on FIRE, read about his experience.
- Unknown traffic patterns without wheels on the streets for a while
- Unknown schools
- Unknown social activities
- Unknown place of worship
- Renting is so much less headache than owning which is Yuge during those first few Attendinghood years.
- Example: A bad storm came though a few years back. I went outside to grill the next night and noticed the cheap plastic interlocking porch had blown away and was scattered in the nearby park. I text my landlord “Todd…. porch blew away” and grilled me up a steak, porch issue solved.
- Houses are part of the Circumstances of Life. These circumstances only account for about 10% of our happiness as I’ve posted about.
- Hedonic Adaptation is real and that house you think about all the time isn’t immune. The house excitement will wear off, or worse (again, see above)
Now we’re financially independent and looking to set roots down in our next move in May. We will be buying our bigger (within reason of course) house after a year or so of renting, but we’ve got cash for the whole dang thing chillin’ in Municipal Money Market and no other debt with a sizable nest egg. Nothing wrong with the Doctor house, just not until it is affordable, which it is not for most doctors right out of training.
Did you/will you rent or buy out of training? Have a similar house nightmares? Thoughts about the Doctor house issue?