Residency: To Buy or Rent?

The Decision to buy or rent in residency is a complicated one. I personally do not think there is one cut and dry answer for everyone.

I helped one resident buy a condo at the beginning of a three year residency. When I helped them sell- they used the proceeds to completely pay off 100% of all of their medical school debt. You cannot say that for that individual they would not recommend buying a home to any other person in training.

But then you hear the horror stories of the residents that bought in 2006 before the housing crash. Anyone who completed training in proximity to the 2000-2010 year span is very wary to advise anyone to purchase a home in residency purely because they saw many colleagues get burned.

So if there is not a right or wrong answer- what are some factors and information that can help one decide if buying or renting is the right pathway for them.

The two questions I ask residents who match and reach out to me to see if they should buy here in Utah is this:

1. Do you plan on trying to stay in this area long term even after residency?

2. Would you like to include some real estate investment properties in your plans to reach your retirement portfolio?

The reason I ask these questions first is anytime you can convert a personal residence to an investment property it is more ideal that buying an investment property outright and renting it off the bat. Investment properties usually have interest rates that will be 0.75% higher than a personal residence mortgage. Investment properties in general also require a minimum of 15% down- meaning you have to fork out more money to get into that investment up front. For physicians specifically, rates are even better on physician loans- which are only offered on personal residences. You cannot use a physician loan to buy an investment property. But if you move out from an old primary residence you bought with a physician loan- you can keep it AND still purchase your new home with a physician loan.

Also the average long term ROI on real estate in the USA is 10.6% if you keep and hold it through the ups and downs in market turns.

So if the answer to those two questions above is yes. It seems like a good idea to invest in real estate.

If I have a resident with a 3 year residency that wants to buy and the answer is no to those questions- I usually caution against them buying.

Here is a sheet to help get you started on trying to weigh and measure some important factors when deciding to buy or rent.