Invest now or after medical school?

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Invest now or after medical school?

Carlos Cevallos
Midlothian, VA · Member since 2017 · 21 posts · 6 votes

Hello Everybody,

I am new to RE, and as of late it has become one of my passions. While I really want to get into it, I am wondering if it is the best course of action for me at this point in my life. I have recently graduated college and am in a job where I will make around 27K this year, however I plan on starting medical school next fall (Assuming that I get accepted). My ideal plan would be to house hack a house near my future school and live for free for four years. However, while my credit score is 700+ I don't know if I will have enough money or if I will be able to qualify for even an FHA loan due to only working for one year.

Does anyone have any advice or recommendation on whether I should try and invest during this gap year, possibility of qualifying for an FHA loan, or save during the next four years and invest once I am out of school?

Thank you.

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Andrew Johnson
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y

@Carlos Cevallos Okay, I'll go ahead and be the person that says DON'T DO IT!  Why?  At the outset you haven't said if you're going to apply locally or apply to 20 schools across the U.S.  Assuming you want to be a doctor it's not like you have a ton of free time while you're going to medical school.  Are you really going to want to get calls from tenants or property managers when you're doing your residency and sleeping on a cot in the hospital during a rotation?  Focus on getting your M.D., get a great job, and you'll have plenty of excess income to invest at that point.  

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  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    9y

    Save, you could house hack by renting, then save for a FHA loan, then think about investing.

    2Reply
  • Jim D.
    Investor · United States · Member since 2015 · 415 posts · 487 votes
    9y
    FHA only requires 3.5% down. Once you get accepted somewhere, I would try hard to come up with that down payment somehow and do it. You'll come out far ahead after four years by renting out your other rooms (assuming you buy a good deal).
    3Reply
  • Andrew Johnson
    Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    9y

    @Carlos Cevallos Okay, I'll go ahead and be the person that says DON'T DO IT!  Why?  At the outset you haven't said if you're going to apply locally or apply to 20 schools across the U.S.  Assuming you want to be a doctor it's not like you have a ton of free time while you're going to medical school.  Are you really going to want to get calls from tenants or property managers when you're doing your residency and sleeping on a cot in the hospital during a rotation?  Focus on getting your M.D., get a great job, and you'll have plenty of excess income to invest at that point.  

    5Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    9y
    Originally posted by @Jim D.:

    FHA only requires 3.5% down. Once you get accepted somewhere, I would try hard to come up with that down payment somehow and do it. You'll come out far ahead after four years by renting out your other rooms (assuming you buy a good deal).

     He makes 27k that doesn't seem like he has much room for buying a house at the current time. Why not rent a 2+ bd and get room mates to reduce or even cover the cost.

    1Reply
  • Hau N.
    CA · Member since 2017 · 153 posts · 74 votes
    9y

    I knew someone house hack while he was in medical school.  It can be done, but Andrew does have a very good point.  

    1Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    9y

    Look at the value though, not the money. 27k will get you what like maybe 100k (probably closer to like 75k). Then you have to come up with the down payment and closing costs. Then I hope you have a savings account because maintenance is on you. If you run out of money renting you at worse get evicted, you run out of money on a house you get foreclosed. Then on top of an already stressful program you get to play landlord... 

    Or you could probably rent for similar to what a mortgage would cost. Then you could get a room mate or rent a room and reduce your expense significantly. Build up your savings and not have to be responsible for repairs. 

    Then when you graduate and get a job you have the freedom to move where you want and get something that makes sense then vs now. 

    1Reply
  • Carlos Cevallos
    OP
    Midlothian, VA · Member since 2017 · 21 posts · 6 votes
    9y

    Thank you for the input everyone. I guess with the excitement of owning my own property, I didn't think about the stress that it could cause me as a medical student. School is definitely my #1 priority, so I will probably try and save and learn as much as I can for investing in the future. 

    0Reply
  • Terrell Garren
    Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes
    9y

    @Andrew Johnson is absolutely right.  I have twin sons that just finished Med school.  The last thing they needed to be doing was being a landlord.  Your Med school and exam grades will determine your match and where you do your residency.  Your residency will determine your longer term career - Fellowship, attending physician, location, pay, etc.  Put Millionaire Next Door and White Coat Investor on your M4 reading list.  Good luck!

    2Reply
  • Michael Cohen
    Investor · Towson, MD · Member since 2014 · 472 posts · 257 votes
    9y

    Hi @Carlos Cevallos - all conforming (conventional or government) loans require a 2-year employment history, but university and/or trade school is considered as employment so you would have been fine with only 1-year work history. However, they must project out income for at least three years and if you are planning to not have any income, the lender will want to know how you intend to pay your mortgage while going to school and not having an income.

    0Reply
  • Hau N.
    CA · Member since 2017 · 153 posts · 74 votes
    9y

    @Carlos Cevallos If you go for MD/PhD, you get a monthly stipend for >8 years and free tuition.  @Terrell 

    @Terrell Garren is right on the spot.  If you're thinking of doing primary care, then it'll be easier than another competitive specialty such as derm/orthopedic/ophtho/anes, etc.  If you're aiming for competitive residency in a highly competitive field, then being a landord would be a bad idea.  

    0Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    9y

    Free tution say what...

    0Reply
  • Hau N.
    CA · Member since 2017 · 153 posts · 74 votes
    9y

    @Matt K.Yup, free tuition and get paid >$1,000 a month to become a doctor scientist.  It's funded by the federal government.  

    0Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    9y

    Details, I'm just curious little to late in life for me to go down that road haha. I've head or loan forgiveness, but not this.

    0Reply
  • Christian Wathne
    Investor · San Jose, CA, Bellevue, WA · Member since 2016 · 327 posts · 257 votes
    9y

    I agree with the others; if you're about to go into medical school i would not at this time get into the property business. You wont want anything to distract you from school

    Now if someone was getting a liberal arts degree I would say quit school and focus on REI

    2Reply
  • Richard C.
    Rental Property Investor · Orange County, CA · Member since 2014 · 49 posts · 80 votes
    9y

    Do everything you can to scrounge for a downpayment, and definitely house hack through medical school.  You will learn property ownership and property management, you will have a decreased cost of housing (possibly free), and you will have an investment after medical school that you can either keep / rent or sell.   Once you start your residency, you can repeat the process.     When you finally graduate, you will be a seasoned landlord and you won't make all of those stupid financial mistakes that I see so many young doctors and lawyers make with all of their new found "wealth".

    Congrats and good luck!

    1Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    9y

    @Carlos Cevallos,

    I'm going to say something you might not expect:

    If you're going to continue into medical school, you may need to choose between vocations: medicine or the real estate business.

    I personally hold that compassion and profit motive are diametric opposites.

    If you would be a dedicated medical person, you may find real estate rather a serious distraction. If you would be a successful real estate investor you may find medicine an unprofitable distraction.

    So, I'm going to offer you one of my more conventional concepts: Invest for income, and use that income to fund your life or, in this case, your more altruistic intentions: the pursuit of medicine.

    Once you've built your financial future, restart your medical studies so that when you are prepared to go into practice you won't be distracted by the financial needs of everyday life and you can focus solely on your patients' needs and your oath to their well being.

    Purely my opinion ...

    1Reply
  • Brian Ploszay
    Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
    9y

    Concentrate on your studies.  Do real estate afterwards.  Medical school is intense.  

    3Reply
  • Derrick E.
    Investor · The Creek, WV · Member since 2014 · 890 posts · 1k+ votes
    9y
    Originally posted by @Carlos Cevallos:

    Thank you for the input everyone. I guess with the excitement of owning my own property, I didn't think about the stress that it could cause me as a medical student. School is definitely my #1 priority, so I will probably try and save and learn as much as I can for investing in the future. 

    Possibly save up and just buy a house for yourself to live in during medical school so you don't spend close to $50,000 paying down equity for someone else?

     Why not first apply to medical schools in areas that you can afford to invest? Just buy a house somewhat near campus and rent out the other rooms in the house. You will get to choose your room mates and live for free at the same time. 

    Obviously be picky about who you rent to, if at all. Or try to find a duplex or property with guest house/garage apartment? I assure you that your rent those 4+ years of college will be more than what the mortgage would be. I say tone it down a bit, be realistic about the type of house you could buy with your budget and if you still want to do it then start looking around.

    0Reply
  • Hau N.
    CA · Member since 2017 · 153 posts · 74 votes
    9y

    Where you get in medical school will dictate whether you can invest or not.  I don't see how you can invest if you were to get in NYU, Columbia, UCSF, USC, UCLA, etc.  But if it were in a location that would generate cash flow easily, I'd go for it.  

    1Reply
  • Steve D.
    Investor · Cincinnati, OH · Member since 2016 · 34 posts · 53 votes
    9y
    David Dachtera I respect this is your opinion, but I have to come out and express my disagreement. Doctors have to make a living just like everyone else, and financial independence and wealth generation need not be sacrificed because their work involves caring for others. One can be compassionate and caring not just in one's day job but also in the way one treats tenants and other team players (contractors, agents, maintenance people). The 2 are not diametrically opposed.
    1Reply
  • Hernan Dobal
    Rental Property Investor · Houston, TX · Member since 2015 · 12 posts · 4 votes
    9y

    In my opinion, I would solely concentrate in medical school as this career path will be a solid foundation for big capital buildup in the future.

    Even if it takes you 7-10 yrs to complete you will be making serious cash (depending on which concentration) then you can start investing that money for greater return to achieve your wealth or financial freedom. 

    1Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    9y
    Originally posted by @Steve D.:

    David Dachtera

    I respect this is your opinion, but I have to come out and express my disagreement. Doctors have to make a living just like everyone else, and financial independence and wealth generation need not be sacrificed because their work involves caring for others. One can be compassionate and caring not just in one's day job but also in the way one treats tenants and other team players (contractors, agents, maintenance people). The 2 are not diametrically opposed.

    I'd prefer not to have that discussion here in the forum. If you want, connect with me and we can continue privately.

    0Reply
  • Carlos Cevallos
    OP
    Midlothian, VA · Member since 2017 · 21 posts · 6 votes
    9y

    Thank you everyone for the input, I have applied to schools in Virginia, Pennsylvania, North Carolina, and Chicago. I actually just got my first interview invitation two days ago from VaTech! And, the more I think about it, the more I am leaning towards solely focusing on my studies. Were I to find a great deal, or maybe partner up with another student during my second or third year to buy a house together might be the only way for me to get into RE, but of course school always comes first.  

    @Michael Cohen That is really interesting, I did not know that university counts as employment. I will definitely look into that, thank you. 

    @Hau N. An MD/PhD has intrigued me but it is extremely difficult to get accepted and it is too much of a commitment for me. I would not be out of school until my mid 30s (I'm 22) haha

    @Steve D. I agree with you, I think everyone, no matter their profession deserves to make a living that satisfies their needs and desires. I believe that a lot of people who want wealth don't do it solely for themselves, but so they can provide for their loved ones.  

    0Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    9y

    As a proof of concept and about 5 min worth of research:

    RENT

    239 Fairfax Court Blacksburg, VA 24060 Rents for 1k mo, figure a room mate could go 5-700, so you're looking at 3-500 yourself.


    BUY: 237 Fairfax Rd, Blacksburg, VA 2406 Listed at 163k.
    So at list you'll need:
    6520 for the downpayment

    Then you're looking at $1,119 per month:
    3.815 interst, 835/yr tax, 800/yr insurance, 120 mo HOA.


    So... you could sock away nearly 7k, pay 100 dollars less per mo and not be on the hook for maintenance/repair.
     
    Plus look at the amortization... by year 10 your loan balance is only down to 123,181. You've paid like 50k in interest and 34k towards your principal.  Now people may come claiming tax benefits... but you make 27k, you're not in a position to really benefit from those tax benefits.......

    But this is all a pipe dream anyways, because you wouldn't get approved for 163k with that income. 

    Rent smart and you'll be fine.

    2Reply
  • Matthew J.
    Consultant / commercial financing · East Greenwich, RI · Member since 2016 · 30 posts · 4 votes
    9y

    Carlos,

    In my honest opinion, I would suggest taking it easy and focusing on passing medical school.  I do not think you are going to lose any miraculous deal at this time in the real estate market, prices are at a high in reality and I believe we are in for a new overdue cycle.  Prices will enviably drop, this is a sellers market right now not a buyers market.  Unless you have the deal of a lifetime I would not strain yourself.  Not to mention when you come out of medical school you may relocate depending on opportunities, you may not want to be strapped down to a specific location at this time in your life.  

    What ever you choose I wish you luck on your endeavors!

    Cordially,

    MJ

    1Reply
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