Medicine’s money pit – The Doctor House

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 :  )

We were supposed to grow into your big floor plan and tiny trees!

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.

Alcatraz… You too can buy one of these for yourself, right out of training!

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?

Crack is Wack

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
  • 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?

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30 Replies to “Medicine’s money pit – The Doctor House”

  1. Obviously, I can identify with owning too much home. I went through a number of the same things, although our house wasn’t cracking like the House of Usher!

    We had long-term renters, seasonal renters, over a year on the market with no offers, and finally a sale price at about a quarter million less than we had into our “dream home” that was starting to resemble a nightmare.

    We are fortunate to have incomes that allowed us to recover from our housing mistakes. Others won’t be so fortunate. Better to avoid buying the big “Doctor House” too soon.



    1. Quarter million…. lesson learned right? I knew you had a big loss and read your post while we still owned the house. I does help that others have it worse than you sometimes : )

      I wonder, did you end up buying a big house again? Dream to nightmare back to dream?

  2. I’m three years into practice and still living in the apartment I’ve lived in since residency. While there are some things that would be better about owning a house, it is really nice to watch my savings go up and my debt down. And I love not having to worry about having to deal with unexpected costs/house emergencies.

    1. SD,
      Seems like you’re adept at the delayed gratification all docs are good at by nature of our long schooling but many forget when the big Pay checks start coming in.

      We love renting for the reasons you describe. It’s probably costing us money but I don’t exist just to maximize my lifetime money, rather we try to strike a balance between spending and saving that maximizes life quality. Renting does that for now, but we’ll set down roots soon and buy.

      Glad to see your blog growing. Traveling too!


  3. Ouch and yes…I bought it and it burned I’m the fire. Next up I am rebuilding the doctor’s house (post to come out next week) and going to sell it. I think and hope the market will allow me to make a profit. I am sitting on cash too for next possible purchase. To buy it in cash would be pretty sweet.

    1. DDD,
      I forgot about the fire! That’s is act of God and I guess a foundation issue is also in a way. At least you have the insurance and also fortitude to stick it out. Houses cut both ways so often.

      So you and I are sitting on cash… Well, at least valuations and volatility are high so I don’t feel any loss aversion yet. I look forward to your doc house post.

  4. You could do a remake of that Kansas song “Dust in the Wind” to “fart in the wind”

    We are 1 year 9 mo out of training. It’s easier to make headway on loans when we have $1500 mo rent instead of a 4k mortgage.

    1. Marilyn,
      Ha, Fart in the Wind. Makes me think of Bill and Ted’s Excellent Adventure. You’re not much younger than me if you went straight though school so you know what I’m talking about. The first lyric of the song would work well without and changes:

      I close my eyes, only for a moment, and the moment’s gone


      Renting takes a mental load off when you need it most. Young docs would do well not to buy into the American Dream is a big house noise. The dream is a house that fits your family when you can afford it.

      Sage words from a young doc – thanks,

  5. Love the post. I agree that residents and new attendings should never buy a house. It’s just too risky at that time. But it is very hard to convince people who have been inundated with the notion that renting is “throwing away money.” There is a season for everything. Renting is for temporary (residency) or unsure (new job) situations. Owning is for permanent situations (been in the job three years and plan to stay).

    Using the right tool at the right time is the best solution. I tried to explain it fully in my book for new attendings, The Doctors Guide to Starting Your Practice Right. Even then, people argue about why it is best for “them” to buy. Everyone always thinks their situation is unique.

    Dr. Cory S. Fawcett
    Prescription for Financial Success

    1. Dr. Fawcett,
      I like your right tool for the job analogy. Young docs (myself included) buy the big house for several reasons: American dream, throwing away money, status symbol, entitlement after long education, think they need to buy if they have kids, spousal pressure, tax tail wagging the dog (not so much anymore) etc.

      By the way, I plan on buying your new book of “Doctors Guide to Smart Career Alternatives”. Not that I plan too transition, but I like having options in case I change my mind. It’s like insurance against a changing healthcare landscape. Great subject for a book especially in today’s healthcare environment. It’s part of the reason I started this blog, to learn about expanding options and well-being to keep me satisfied in medicine.

      Appreciate you expert comments,

      1. I hope if you like my book, you will do a book review so your followers will get it also or at least leave me a review on Amazon.

        I enjoy your posts,

        Dr. Cory S. Fawcett
        Prescription for Financial Success

  6. When I took a permanent job I rented a little house and I waited 2 years to buy. In the mean time I learned the market cold. What I wanted was a house with some acreage, 15 minutes from the hospital that the average guy, say a 30%-er could afford, because if I was going to split there are a whole LOT more average guys/girls available to buy. My place was 4 br 2400sq ft brick 2 story with a pool on a couple acres with a 25×40 out building. I live in red neck FL and that out building alone would sell the place over night, but wait there’s more! I was buying from the builder and the place had a 12×33 ft porch. I had the guy enclose this with glass, ceramic tile the floor, bring A/C out to the room and now I had a 400 sq ft Florida room under air.

    The garage had a really long bay for his really long truck I could easily frame in another 150 sq feet and add some A/C and I was now pushing 3000 sq feet under air and the upgrade cost me about $5 a sq ft. I also had the guy build a 19×19 screened spa house for a hot tub on the back side of the pool. The shootin match was another 6K on the loan. When I was done the previous owner said he didn’t want to move. This purchase was bullet proof and I could turn the house in a nanosecond at a profit if necessary. In the land of fishing boats, 4 wheelers, motorcycles, endless sunshine and space workers, you gotta understand your clientele.

    I looked at ALL of the high end stuff on the market during that 2 years. MY RE had it in her head what she was going to sell me and the commission she would make. Every home I looked at had some silly “feature” like a fireplace the size of a battle ship or a hot tub in the bedroom (oo la la!),,, let’s talk about the mold, or a whole room devoted to some guys curio figurine collection, or a living room so massive you could loose 3 separate sectionals in the place. They all were pretty proud of their mcMansions and had prices to prove it. Beside being over priced these “features” made the place un-salable. Those jokers were calling me up 2 years later begging me to make an offer ANY OFFER. Rule #1 if you want to survive do not shoot yourself in the head.

    Glad you lived to fight another day GLMD and for sure it IS a GoodLife!

  7. Gasem,
    I’m impressed with the depth of knowledge you have on many subjects. If/when you start a blog (DO IT!), you should consider Renaissance Doc or something like that.
    Your unsellable McMansion feature point is well taken. The house described in this post had an 800 sq ft kitchen with a double island AND a breakfast nook AND a dining room. Cool, but totally unnecessary. I guess if I had 12 kids that needed a place to eat or something.
    We’ll be looking in our new market and have been a bit. As a seasoned home owner, can you give me a few high-yield tips that would let me know the market “cold” like you say?
    Much appreciated and yeah, tis a GoodLife….

  8. My buddy was an heir to the RJ Reynolds fortune. He had a dining room/kitchen like you describe, he used that excess un-used space to rebuild his Harleys.

    I live in the shadow of NASA so there is a large component of Company Town involved. When the space port is doin’ good we all be doin’ good, when it’s doin’ bad … In fact part of the reason I moved here is because this place had the third highest number of indemnified insuree’s in the state back in the early 90’s. In 1994 when I bought, there was a down swing which meant the number of 1% ers available as home sellers outnumbered the 1% ers available to buy, in a very thin market so I decided there was way too much risk in owning the big kahuna in that kind of market, so I bought a place with profit built in from day 1, paid 25% down on a 15 year note and never looked back.

    I’ve always held to one rule in business. The first question I ask “To whom and under what circumstance am I going to sell”. If I can’t clearly define that (which I couldn’t for a mcMansion) then I don’t do the deal. You can win at a deal or you can loose, and you can even spend some money to experience and define the boundaries of your knowledge, but If you don’t understand the market your risk is undefined and that is dangerous. Even a Lotto ticket has a defined risk.

    I’ve had a couple blogs in the past, not financial related, and found over time they became too much of a taskmaster and time burner. I did buy a domain however and I already have some hosting from other ventures, so color me MDonFIRE. I couldn’t believe that one was available. My logo:

    MD on FIRE
    You’d Better Take It Easy, ‘Cause This Place Is HOT!

    Name that tune!

    1. It seems I got caught when the 1%ers were selling from low oil prices. Lesson learned on that one. There is a sweet spot between home price and sell-ability and I need to find it, we will rent for a while.

      Steve Winwood as featured in Days of Thunder. My college roommate was a huge NASCAR fan, I’ve seen days of thunder more than a few times. “Rubbin’ is racin’ son”

  9. I bought my first home with cash. It was equal to my one year gross income. It was half a home with my mom who wanted to move closer to the city and did not have the full amount. It was a duplex so it was perfect. My kids got to know their grandparents very well so it was a win-win.

    Since I had no mortgage it became super easy to save. A few years later, I bought another lovely duplex but in a very popular area of my city. I rented this property out for about 10 years. We moved into that home about 6 years ago. Now my adult kids live in the other duplex unit. It has worked out very well. The original duplex, I leave empty for guests who visit, etc.

    My girlfriends with their young adult kids are all looking for a way to do the same. We all want our kids close but also want them to start learning independence.

    I do not pretend any other physicians would want to live that way. But it was perfect for us.

    1. Dr MB,
      I’m starting to get the impression that you excel at the win-win. Parents nearby with kids, rental income, no mortgage, your kids close now. Nice…
      We’re moving back to my home state soon to be closer to Parents for the kids to have that experience.

  10. Did similar after residency lived in wife’s house that she could afford on her salary, allowed us to pay off student loans, buy 2 condos in Florida, one to vacation, one to rent
    Finally bought the retirement home, all one floor with 3rd garage for the mustang, delayed gratification , but brand new with all the upgrades
    All 3 children are graduated, new GT mustang arrives in 4 weeks, sold the rental to pay off the retirement house, now 62. I get decide each day- Do I Want to go to work?
    Lesson, 1.-right partner who works with you, 2-have a plan, we started 10 years ago, wrote it all down one cold January night in michigan 3-stay with the plan even through the good, extra bonus money, bad- basement water and fence blew down

    1. Tom,
      Savvy Plan. Delayed gratification is part of a physicians training. We learn to live with it but sometimes the delayed bars get broken down and the caged gratification tiger gets loose and tears our paycheck to shreds.

      Congrats on getting to ask the holy grail of employment questions – do I need to work today.

      Sage advice of having and sticking to a plan. I would add the old cliche – the enemy of a good plan is a prefect plan. Seems like you factored that it with “the bad” and kept flexible.


  11. “The math, media and mortgage lenders said I could afford a much larger house than residency.”

    This is a key component. Just because new attendings CAN afford a large house, it doesn’t mean they should buy it. A lot of people don’t realize that the true cost of buying a large house goes beyond the purchase price, initial down payment, and monthly mortgage payments. People tend to forget about the cost of property tax and maintenance. And what about the cost of landscaping a huge yard (can be expensive). Then you have to buy 5 more cars to fill your 6 car garage. More furniture to fill the empty rooms. Then you realize there are too many rooms to clean by yourself, so you hire a maid. Then you start to think: Well gee, there’s so much space in this house… I might as well accumulate even more stuff I don’t even need that will most likely not make me any happier. It never ends…

    I ended up buying a house within the first two years of being an attending. I guess you can say that I’m lucky because housing prices started skyrocketing shortly after I bought. I live in a high cost of living area; and if I had to buy now, I probably wouldn’t be able to comfortably afford the house that I live in.

    Whether I am renting or buying, I have this rule that my monthly payments should not be more than 20% of my monthly income. And if I am buying a home, the purchase prices should not be more than three times my gross annual salary. Since my current home was within these guidelines, I felt that I can comfortably afford the house.

    Btw, I hope you’re feeling 100% now.

    -Dr. McFrugal

    1. Dr McF,
      Well said about the hidden costs of owning a house, particularly more than one needs. You also make a good point that a house can be the kindling that sparks the lifestyle inflation bonfire. Landscaping, drapes, fancy cars, club members ships, second house, jet skis, etc. All of that as you say feeds off each other. Best not to let it start…
      Your purchase rule of 20% or 2-3 time Annual seems generous but reflects your HCOL Area. It probably won’t get you in deep trouble, unless you lose your job.
      I would say straight outa training aim for a house not more than 1 standard deviation above mean if possible so it can be sold quickly if needed. Or rent! I realize that’s not always possible.


  12. Ha! The poor truck. I’m glad you’re able to make light of the situation.

    Yeah,… unfortunately in my area of the country, you can’t find anything reasonable under $500,000. The median house price for the metropolitan area is $675,000. It’s pretty ridiculous!

  13. I was given bad advice coming out of med school and ended up buying not one but two houses DURING residency one of which became a bit of a financial anchor while I bought a 3rd house 1 year out of residency (thankfully this one is my forever home and I’ve already been here 12 yrs). Definitely a lot of financial traps a physician has in front of him and her at the end of med school and unfortunately I fell for the majority of them.

  14. I rented for a few years before I bought a house. Then the market crashed. I was relocated to one city and could not get a home to rent. We were adopting and the attorney advised purchasing a house. I bought and then spent 20K in modernizing. Then my contract was cancelled. I had two homes. I needed to relocate to the North. My wife and I spent a few weeks trying to rent a house. None were available. We bought an incomplete house from a developed who did not complete the work. Has anyone had their front door fall in because it was not put into the studs? This was in the days before cell phones. The builder forgot to have phone jacks installed. I spent thousands fixing it up. There were more items to discuss. I was then fortunate to sell house 2 for a 15K loss but it meant fewer payments. I had problems with the “employer” when we decided not to have an abortion. The rocky pregnancy upset his schedule. My contract was cancelled. I came back to where I started, Sold the third house, or so we thought. The buyers turned out to be in some complex prior divorce case and their money disappeared. Moved back to the city I started in, but my first house, which I still owned, was now an albatross. The neighborhood went down hill. I had rented it out to an older couple who destroyed it. I spent money, fixed it and sold it at a giant loss. By now, my retirement money and my lifetime savings was gone. We rented until the houses all sold and I was able to save money for the 4th house. We are living in it. There is a small crack in the veneer. I had a foundation company that said ignore it. I am not sure how that will fly when we need to sell.

    Had I rented (and we tried to) I would have been a couple of hundred thousand dollars ahead.

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