Thoughts on buying vs. renting a condo/apartment

[Dabo]

Hello everyone,

I am graduating with a B.S. this spring, and in the summer I will be enrolling in a Medical Scientist Training Program (MSTP) for a duration of 8-9 years. I am very ignorant when it comes to personal finance/investing. Thus, I will most likely ask many questions over the next few months on this forum.

I'm not sure exactly what university (specific city) I will enroll in currently, but I do know a few details:

1. I will be stationary for 8-9 years.
2. My tuition is paid for, and I will receive a stipend between $24,000-28,000/year + health insurance.
3. I will not have any pre-existing debt or student loans, but I also will not have any savings.

With this information in mind, should I go ahead and purchase a property rather than rent? I think I read somewhere on the forum that the general suggestion is to not purchase any property that is 3X greater than your annual salary. Thus, I would be looking somewhere in the neighborhood of 75,000 to 90,000 for a condo/apartment.

Let me know if this is not enough information to make a suggestion.

Thank you for your help!

[disneysteve]

1. I will be stationary for 8-9 years.
2. I will receive a stipend between $24,000-28,000/year.
3. I also will not have any savings.

With this information in mind, should I go ahead and purchase a property rather than rent?

Welcome to the forum!

If #3 is true, that you have no savings, how exactly do you intend to buy a home?

Before buying a home, you should have:
a) a 6-month emergency fund and
b) a 20% down payment

I have no idea what your monthly expenses will be so I can't guess at what part a) would consist of.
Part b) would be somewhere in the 15-16K range, though I'd urge you to stay closer to 2.5 times income or less. Will 65K buy a property that you would want to live in? Until you know for sure what school you will attend, you can't answer that.

So for right now, I'd work on piling up as much cash as possible, first to build your EF and then to start building your down payment if you do choose to buy. Once you know for sure where you are heading, start researching the options in that town and see if buying is a realisitic option. If it is, figure out out long it will take you to accumulate the necessary down payment. If it will take 5 years, then I wouldn't buy since you'd only live in the place for 3-4 years before you'd be selling it.

[Dabo]

Thanks for the advice disneysteve. My parents mentioned helping with the downpayment, but it looks like I need to hash out more details before I even consider buying.

[MonkeyMama]

We chose to own very young because when we ran the numbers it just made more financial sense (was much cheaper than renting). For that, my first thought is "it depends." If you are in a good financial spot to buy and plan to stay in the area for a long time, then I would do so if it made more financial sense than renting.

Anyway, I agree with Steve. I would personally not buy a property without at least 20% down. IT sounds like you will need to rent while you save up some money and come up with a plan. I think it's probably also wise to always rent while you get established - new city/new program - take some time to make sure you are happy there and get to know the city, before taking on that kind of commitment.

[snafu]

I think the current housing market may be an important factor as you graduate and continue in your program. Will you ultimately complete a masters and doctorate? Location will be a major factor in housing options as prices are hugely variable depending on state and city. If you can tolerate losing some privacy by renting/sharing a condo with a roommate that can influence your decision. If your parents can do a 20% DP, you will not be required to buy expensive mortgage insurance...that's over and above home and property insurance.

I wouldn't buy anything over 2.5 times annual income. Would you have the skill sets and motivation needed to buy a fixer upper?

[elessar78]

I think the current housing market may be an important factor as you graduate and continue in your program. Will you ultimately complete a masters and doctorate? Location will be a major factor in housing options as prices are hugely variable depending on state and city. If you can tolerate losing some privacy by renting/sharing a condo with a roommate that can influence your decision. If your parents can do a 20% DP, you will not be required to buy expensive mortgage insurance...that's over and above home and property insurance.

I wouldn't buy anything over 2.5 times annual income. Would you have the skill sets and motivation needed to buy a fixer upper?

If he's going to be studying more, I'd stay away from a fixer upper—that just diverts focus, IMO.

[Dabo]

I think the current housing market may be an important factor as you graduate and continue in your program. Will you ultimately complete a masters and doctorate? Location will be a major factor in housing options as prices are hugely variable depending on state and city. If you can tolerate losing some privacy by renting/sharing a condo with a roommate that can influence your decision. If your parents can do a 20% DP, you will not be required to buy expensive mortgage insurance...that's over and above home and property insurance.

I wouldn't buy anything over 2.5 times annual income. Would you have the skill sets and motivation needed to buy a fixer upper?

-I will receive a MD and PhD.

-The cities I am looking at are in the southeast and have a reasonably low cost of living. It is very likely that I will have a roommate.

-I don't the skill sets for a fixer upper, and I honestly don't think I would have the time to develop those skill sets during the program.

Thanks for the help everyone. I will try to add some specific details once I determine my location and exact stipend amount.

[esb3357]

Disclaimer: Real Estate is a passion of mine. I have been following it for years.

We bought our first house using a VA loan and nothing down. We bough in an area where we could rent the house out easily once we were stationed somewhere else. So far it has been a great investment. We were able to buy a terrific house in the right area.