Should You Rent or Buy a Home During Residency?

Beth Skwarecki

Disclosures

September 16, 2016

With medical school finally over and a steady income coming in, it's tempting to put that money toward a house. However, buying a home isn't necessarily the best choice for all residents. Unless you have a hefty down payment already saved up, and you plan to be in the same house for a while, renting may still be the better option.

"For anyone, renting is a personal decision, but you're not building equity when you don't own a home," says Dawn Carpenter, a real estate broker based in New York City. There, rents can easily be in the range of $2000-$5000 per month, which is "a lot of money to throw away."

But equity isn't everything. Pam Poldiak, a financial planner based in Salem, Virginia, whose firm specializes in advising physicians, points out that the cost of renting is more predictable. You're not on the hook for unexpected repairs, and you also don't have to dedicate as much time, or money, to such tasks as maintaining a lawn. In the meantime, you can be socking money away for a down payment on your dream home when the time is right.

"Most residents do end up buying houses," she says, but in her experience, many end up wishing they had waited until after their residency.

How Long Will You Live in the House?

Both experts agreed that if you'll stay in the same location for a very short time, renting makes more sense. Carpenter feels that 3-5 years is enough to consider buying, whereas Poldiak sees 5 years as a minimum.

The length of time matters, in part, because buying or selling a home can be expensive. If you buy a home every few years, you'll incur those extra costs every time. Poldiak estimates that a person should budget 10%-15% of the price of the house for closing costs and real estate commissions, plus miscellaneous expenses, such as buying new furnishings.

Staying in the house for a longer time also protects you somewhat from a potential downturn in the real estate market, during which the value of your house might be less than what you owe when you try to sell it.

Even if you know that you'll live in the area for many years, Poldiak points out that's not the same thing as staying in the same house. "A lot of physicians, when they get a bump in salary, want a nicer house than what they could afford as a resident," she says.

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