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Entering medical school this fall: Rent apt or buy house?
I will be attending medical school in the fall. I'm going back and forth between the pros and cons of renting vs. owning in the area. To me, owning seems like the better idea, but I am young and naive and am probably not realizing all the hidden costs.
It costs around $450/month + utilities to rent a room or share a 2-bedroom apartment. I will be needing housing in the area for at least four years and possibly up to seven years.
A 3-bedroom, 2-bath house can be had for around $70K-$90K. As a student, I qualify for an FHA loan that only requires 3.5% down, no PMI, and a fixed interest rate of 4% for 15 years.
Here's why I think I should buy:
-Purchasing $80K house would result in monthly payment of ~$550/month
-I can rent out two rooms to fellow students for $400-$450/month + utilities
-Their rent will at least let me break even on monthly mortgage/insurance/tax. Any extra can be put into savings for potential home maintenance.
-I would essentially live there for free
-So not only would I not need to spend ~$5,400 per year on rent, I also receive at least $9,600 per year towards paying the house. My net gain after four years is at least $60,000.
-I can easily rent to incoming medical students if I have to leave after four years. They are on loans so they will always pay rent.
-Eventually I can keep the place as vacation home, give to parents, or sell. No matter how much the market tanks, since most of mortgage was paid by rent money, I come out ahead.
-Not much rain (and no snow at all) in the area so probably won't have major issues to deal with like leaking roofs.
What are the cons?
-Have to find tenants (not hard, since 200+ students come in yearly)
-Unknown cost of repairs. What if fridge dies? I'd shell out the equivalent of almost 2 months of rent to replace it.
-Four years of rent will basically cover the interest I'd be paying on the house
-Lots of sunk costs (interest to bank, homeowners insurance, property tax, closing costs that might or might not be paid by seller, maybe HOA fees)
-No tax benefits since I will have no income
What should I do?
It costs around $450/month + utilities to rent a room or share a 2-bedroom apartment. I will be needing housing in the area for at least four years and possibly up to seven years.
A 3-bedroom, 2-bath house can be had for around $70K-$90K. As a student, I qualify for an FHA loan that only requires 3.5% down, no PMI, and a fixed interest rate of 4% for 15 years.
Here's why I think I should buy:
-Purchasing $80K house would result in monthly payment of ~$550/month
-I can rent out two rooms to fellow students for $400-$450/month + utilities
-Their rent will at least let me break even on monthly mortgage/insurance/tax. Any extra can be put into savings for potential home maintenance.
-I would essentially live there for free
-So not only would I not need to spend ~$5,400 per year on rent, I also receive at least $9,600 per year towards paying the house. My net gain after four years is at least $60,000.
-I can easily rent to incoming medical students if I have to leave after four years. They are on loans so they will always pay rent.
-Eventually I can keep the place as vacation home, give to parents, or sell. No matter how much the market tanks, since most of mortgage was paid by rent money, I come out ahead.
-Not much rain (and no snow at all) in the area so probably won't have major issues to deal with like leaking roofs.
What are the cons?
-Have to find tenants (not hard, since 200+ students come in yearly)
-Unknown cost of repairs. What if fridge dies? I'd shell out the equivalent of almost 2 months of rent to replace it.
-Four years of rent will basically cover the interest I'd be paying on the house
-Lots of sunk costs (interest to bank, homeowners insurance, property tax, closing costs that might or might not be paid by seller, maybe HOA fees)
-No tax benefits since I will have no income
What should I do?
