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Renting versus Buying

So you’re an FINALLY an attending!  You’ve worked your butt off in high school and college to be the top of your class.  You paid your dues in four long years of medical school and then many years of residency… there were many sleepless nights and endless pages. You’re ready to reward yourself. Your spouse has probably been waiting for this.  You’ve signed your first attending contract and are about to move to a new town as the new doc.

Banks will be salivating to throw money at you.  Your new job probably booked a realtor tour for you when you interviewed.  You could probably get a great loan with a great interest rate. But, wait… is this the right move?  Renting is throwing money down the drain and buying lets you get your money back right?

I’m going to tell you my story.  Bright eyed and bushy tailed, I signed my first attending contract in Savannah.  My husband and I had great plans. We would finally buy the attending house. And, it was relatively easy.  

The One

We found the one.  We wanted to buy a fixer upper- the smallest house in the nicest neighborhood, and fix it up.  That’s what we enjoyed doing and we thought that would be a wise financial move. We were preapproved for $500k or so but we ended up buying a 3 bed/ 2.5bath  for $335k that met that description in a gated community with a deep water dock in case we decided to buy a boat (thank heavens we didn’t do this). We put nothing down thanks to the physician loan.

When we sold in 2 years, we were able to sell it for $360k after 3 months on the market.  Sounds pretty good right? We only lived there for 2 years and we had no trouble selling the place.  We even made a little money. But, it’s not as rosy as it sounds.

The first week we moved in, we were just getting settled in and had a 6 week old baby.  We went to bed in our large, airy bedroom and turned out the lights. As I drifted off to sleep, I heard “scratch….” “scratch…” 

I popped up and checked on the baby first. He was still sleeping peacefully. Then, I woke my husband up. 

“What’s that?” 

“scratch… scratch….”

We. Had. Rats.

Rats!  We had bought a house on the marsh.  Those damn beautiful palm trees and moss hung magnolias were very close to the house in the back.  The rats were jumping from there onto our roof and making a home in the walls. 

So, here came our first homeowners expense of the exterminator and then ultimately cutting down those trees in the back.  Several sleepless nights here listening to those blasted rats scratching at the walls and worrying about the baby.

Repair estimate: $500

Renovations

Once the rats were taken care of (yuck!), we got to fixing the place up.  

There was some wood rot.  Some siding, porch boards and shingles needed to be replaced.   $2,175

Running repair total: $2,675

My husband and I painted the whole place top to bottom, including trims.  It could have cost $5000-10,000, but since we did it ourselves, the price was mostly just the cost of the expensive Benjamin Moore paint and other supplies (somewhere around a $1000).  We put up those artsy shelves and plank wall.  

Running repair total: $3,675

The beautiful wrap around porch needed work.  We pressure washed it, then restained it and painted the railings.  $300.  We built a nice bed swing for the porch and I sewed some pillows for it.  $500.

Running repair total: $4,475

My crazy husband

The roof to the wrap around porch was leaking which led to wood rot.  We needed to replace all of it. $3,500

Running repair total: $7,975

I white washed and refinished the dated fireplace: $100.

Running repair total: $8,075

Our first summer there, a hurricane came through and we had to evacuate.  We came home to roof damage.  Time for repairs. $1000.  Just big enough to be annoying, not large enough to file with insurance.

Running repair total: $9,075

The basement room was a dingy hole in the wall covered in cobwebs.  We decided to take down a wall and expand the space. We refinished it with carpet, crown moulding, a sliding barn door, and a rustic looking support beam.  I sewed the now infamous cover to the couch for downstairs.  $5,755

Running repair total: $14,830

More Costs

Summer came and another hurricane.  More damage. $850 for repair of shingles.

Running repair total: $15,680

As we got ready to move and list the house, our real estate agent walked the property and gave us suggestions for things to touch up.

The upstairs bathroom needed a overhaul- new mirror and countertop, along with new paint. $600

Running repair total: $16,280

The backyard needed to be re-landscaped.  We did that, then realized water was pooling and killing the sod, we we then had to install a drainage system. $650

Running repair total: $16,930

We then listed the house.  We had lots of interest! We had over 50 showings!  That’s a ton of showings in 3 months. We had two large dogs and 2 babies at this point. Needing to get the house spotless on an hour’s notice was not uncommon.  It was incredibly taxing.

The Flood

Finally, the house was under contract and we began the procedures to close.  Would you believe it, two weeks before the closing, after we had already moved to the Northeast, Hurricane Irma hit the gulf coast but the storm surge affected the opposite shore and flooded our newly refinished basement!

Now, we had to hustle and get the place cleaned up and redone  All of Savannah flooded, so contractors were hard to come by. Thank GOD that one of my best friends owned a disaster restoration company.  She came in immediately and dried out the basement with large fans and then got to cutting out the drywall through the entire level. Then we had to refinish the newly finished basement.  In fact, the carpet didn’t go in until the day after closing.  Thankfully, we had paid attention to the flood insurance.  So, I’m not going to add any extra repair cost here… just headache.

Adding up the Numbers

Loan origination fees at closing when we bought the house + Earnest Money= 4,138.29

By selling time, we had made 26 months of mortgage and escrow payments: $2187.21x 26= 56,867.46.  

We had paid for 2 years of HOA fees: $1100 +1300= $2,400.

And, we had put in many repairs: Above total: $16,930

So we had put in a total of $80,335.75 along with many hours of personal labor and time away from the kids.

I still have the ALTA from the sale of the house.  We sold for $360k.

We paid $1175 for bank loan charges, $516.50 for appraisal and credit report.  $1871.50 for Title and escrow, $21,600 for Real Estate Agent commission, $1437 for Government recording and transfer charges, $1373.25 for taxes, HOA and home warranty.  So, for closing costs, we paid a grand total of $27,973.25.

We bought the house for $335k and the loan was down to 324,145.25 when we sold it for $360k.  We paid $28k just to sell the house.  So, we walked away with only  $7.8k. But, remember we actually put in $80k in mortgage, escrow, HOA, and repairs.  So really, we came out of the deal having lost $72,454.25! 

So did we “get our money back” because we bought a house?

Heck no!  In fact, this same house was being rented before we bought it for $2300/month.  If we had rented it, we would have spent $62,100 ($2300 rent x 26 months + $2300 deposit).  So, we actually threw more money away buying and selling in two years, then we would have if we had just rented ($10k more!).  The house was a money and time sink.  It tied me to a job I would have left much earlier, had I not owned the house.  I got a lot more greys watching hurricanes barrel toward the house every year and worrying about the potential damage.  I do have to say one amazing positive of owning this house were the neighbors.  We made friendships that will last a lifetime.   My husband and I also enjoyed the process of working with our hands and making improvements.  But, if I could go back, I would definitely have rented until I was sure we’d stay in the town forever.

Should New Attendings Buy a House?

So here’s the moral of the story- Don’t buy your attending house as soon as you move into town for a new job.  Wait and see if you like everything first.  You may actually come out ahead renting for a couple of years.  This tool from the New York Times can help you work through that.  Buy a house when you know you’ll hold on to it forever, or at least for longer than your first two year contract.   

I hope our story helps some of you.

Stay Frugal, ya’ll.

Much Love,

Dr. D

We're still ok! Photo by Mia Kani Photography

Standard Disclaimer: Not meant as individualized financial advice.  Photos from Unsplash.com, SMLC, Mia Kani Photography, and personal photos.            

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