MD resident: House hack w/ kids vs. two mortgages vs. pay debt?

Question

Hi,

I'm a new medical resident currently completing a residency. I've been interested in real estate investing for a long time but haven't had the time to do it secondary to my medical training. Now that I'm a newly minted doc, I qualify for a physician mortgage (0 down, no PMI, higher interest rate loan). My spouse and I want to use this loan to buy a house for our family of four. We also have a big chunk of money saved now and were considering using this money to get a second mortgage. We'd love to buy a rental property (condo, duplex, etc) in the area that I'm completing my residency. Ideally we'd get the physician loan first (only first-time homeowners can have the deal) and then use our saved money to open a traditional mortgage (20% down) on a condo/duplex, etc to use as our first rental property.

I know it would be better to get our feet wet and "house hack" using the physician loan, but because of our children and the area we want to live, we haven't been able to find something that would work. Is getting this second mortgage a bad idea? Would a bank allow us to do that? Is it better to pay off all of my student loans first before I start messing around in real estate? My debt isn't horrible, but it is significant. I could probably pay it off in 5 years on my meager resident salary.

Thanks for any advice!

Julia

Mustafa S. · Answer

Hey Julia,

I have recently finished my fellowship training and I am in a similar situation, more or less, to yours. I am looking into buying my first home. But wondering whether I should incorporate into that REI (house hack). I am not completely sold on the idea though. I like to think about a property as either my house or an investment. I feel like you will have to give up some of the criteria that you want in either one of them if you try to combine both( for example: the area that you want to live in vs the area you want to own a rental property in). At least in my case, the area that I want to live in, I dont think I can afford a duplex there. Also I am not sure if being a live in landlord a good idea in our profession and how much more work would that entail. Obviously I am new at this too and would appreciate any feedback. On a second note: why does that Dr. Loan idea not sound appealing to me, no payment down is definitely good. but higher interest rate? Isnt that similar to paying mortgage insurance at the end of the day. Hope this helps. Keep us posted.

Regards,

Mustafa

Justine Ade · Answer

@Julia Kirsten

Hi!

I’m finishing up fellowship here and am planning on doing something similar. Husband has some student loans but we are not making extra payments due to the low interest rate (he refinanced after completing training) so now it makes more sense for us to let the loan run it’s course.

In the mean time we are also getting started with REI - potentially will use either a DR loan or FHA to house hack a duplex (no kids , yet - but the duplexes we are looking into are large enough to raise our first child if we choose) then put 20% on a conventional loan to potentially buy another property.

This is just a tentative plan and something that I think we are both comfortable with. I think the decision to pay off your loans vs taking on more debt for real estate depends on how debt averse you are in addition to what the interest rate is on the loan. Others will think that’s crazy and say you should pay off your loan as quick as possible (not paying the interest is free money after all) but ultimately I think it’s a personal choice.

Feel free to connect if you’d like to chat more ! Love meeting people with similar backgrounds and interests.

Julio Garcia · Answer

Hello Dr! Do me a fav, hurry up and find that vaccine for Covid eh? (JK) upside to your education is the power of that loan. 0% down and 0% pmi thats great, and in your market you can get some good property with that.

House hacking isnt for everyone, i'm able to as I do not have children. you have to really take into consideration of your own situation. If i had a family, i wouldn't house hack either.

Use the DR loan to get your primary and then use the saving to get a rental, sounds like a great idea. There's really no right way into this REI world, just make sure the numbers make sense.

As faras your loans, that depends on how much of your take home its claiming. If you wait 5 years to get started you might regret it... what if you get a rental that covers that expense?

Best of luck

MD resident: House hack w/ kids vs. two mortgages vs. pay debt?

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