A few weeks ago, I read a Wall Street Journal article circulating through the web: “Your Parent’s Advice is (Kind Of) Wrong.” While I didn’t learn anything new from the article, it was nice to hear the financial plight of my generation laid out by a respected financial journal.
Anyone with student debt is probably aware that their parents didn’t shoulder such a heavy load. You may be less aware of how housing costs have changed. Not only are younger people less able to afford a home of their own, they are spending a greater percentage of their income on rent. Pew Charitable Fund reports that the number of households spending more than 50 percent of their monthly on rent increased by 42 percent between 2001 and 2017. This now includes 17 percent of rental households.
As health professional students, we’re in a unique position. Many of us are borrowing to pay for housing. This means that we’ll be paying interest on every dollar we spend over the next ten, twenty or thirty years. Whatever you think you’re paying in rent, you’re actually paying much more. Housing is one area where a little bit of financial creativity and planning can serve you well.
Creative Housing Option 1: House Hacking
What is house-hacking?
House hacking is when you live in one of the multiple units of your investment property as your primary residence, and have renters from the other units pay your mortgage and expenses.Auction.com
Example 1: Duplex Requiring Renovations
My husband and I bought a fixer-upper duplex with a low-money-down, government-backed renovation loan. We rent out one side of the house. This is one form of “house-hacking.” After taking our rental income into account we spend $1000/month on housing, about half what we would pay in rent for a comparable sized home in our neighborhood.
I don’t want to underplay the difficulty involved in renovating a home while also completing the first year of medical school. It was more work and frustration than I thought it would be and took significantly longer than planned. If I could go back in time, I would have chosen a multi-unit home that needed less work (we had to do a full electrical rewire from knob and tube wiring) or planned renovations over the summer. The fixer-upper part of our home, though a more intense experience than I anticipated, did ensure that we had instant equity on top of our rental income.
We did have family help to come up with the down payment. My husband and I were surprised how quickly that money was eaten up in the process before even confirming that we’d be buying a house. We ended up buying the second house we made an offer on. If that sale had fallen through, we would have blown through too much of our allotted down payment on inspections to start over. If we had managed to purchase the first house we had made an offer on – a move-in-ready triplex in a less desirable neighborhood – we would have been living entirely rent free.
Example 2: Rowhouse Near School
My situation is somewhat unique because I have a family, planned on living some distance from school, and was not interested in living with roommates. Saif Yasin, young and single, was in a different situation. Instead of buying a duplex in a family friendly part of town, Saif bought a rowhouse walking distance from school. Today he lives with two roommates, whose payments fully cover his mortgage. Saif was kind enough to answer a few questions about his experience:
What gave you the idea to buy a rowhouse?
Another MD/PhD student. I can think of three off the top of my head who have done it. And so that’s where I got the idea.
Do you think it would be a useful arrangement as an MD-only student?
It would be useful as an MD. It definitely is convenient in terms of money saved because it’s a good investment in a good area. Even if I were to leave, it wouldn’t be a bad idea to keep the property and rent it out because students are always around. Though it might be more hassle than it is worth for four years, because there are extra things involved in being landlord such as dealing with repairs. Other than that, I think it would be feasible for MD students as well.
About how much are you saving on rent each month?
I have two roommates. So, they each pay $700 and I use that to pay the mortgage. My parents helped me out in purchasing the house and now I put all the rental income towards the house.
So, you’re able to pay your whole mortgage with the rental income?
That’s awesome. Have there been any hassles, or has it mostly gone well?
I think it’s mostly gone well. Obviously, there are a few hassles to deal with. In our house we had a major squirrel problem. Other than little home-owning hassles it has definitely gone well. And for me, it’s the reason I’m living in a house. I most likely would have stuck to an apartment and I enjoy the house living situation more.
Should You House Hack?
Buying a home during health professional school isn’t the right decision for everyone. You need to consider how long you intend to live in the home, whether you’re interested in holding a rental if you end up elsewhere else for residency, the cost of housing in your neighborhood, and current interest rates. You need to ensure you can handle your mortgage payments without renters or roommates, just in case you can’t find any. The number crunching is essential. Finding the right property is also important, but every month you wait to purchase changes the numbers. If this is something you’re interested in, start house hunting early and be ready to walk away if the right situation doesn’t present itself.
Creative Housing Option 2: Living on a Boat
Another of my classmates at the University of Maryland took a different creative housing route. Anthony Cole lives on a boat, so I caught up with him to ask a few questions:
What gave you the idea to live on a boat during medical school?
Another friend in our medical school class had lived on a boat before and suggested it to Mike and I while we were discussing options for moving in together. We wanted to avoid paying rent for the entire length of our program since we would not see any return on that money spent. While it was possible to buy a house, that option was a significant financial investment and required large down payments.
In contrast, we were able to buy a boat with two bedrooms, two bathrooms, a kitchen, and a living area for $28,000 total, or only $14,000 each! And the best part was, we fully owned the boat and were able to sell it once we were done. Even anticipating significant depreciation of the boat, we would only have to spend a few thousand dollars in net cost while greatly reducing our monthly expenses. When you put this expense into the context of paying several years of rent at $700 dollars a month ($8,400 / year or $16,800 for the two of us), it seemed like a reasonable option.
Have you saved money living on a boat?
Living with a roommate, our yearly expenses for keeping the boat at the marina were around $300/month, meaning I saved around $400/month compared to cheaper land-based rent options. With this logic, the savings from rent would pay for the boat outright in about three years of living aboard. After that, any money I received from selling the boat was pure profit!
I used my portion of the money from that sale and some additional money to buy a second boat, this time a sailboat with just me living on it. Now that I am living on my own, my cost is closer to $500/month and that boat is nearly paid off.
The way I consider it, living aboard for a few years means I get the boat for free! There are boat-related expenses to take into account as well including insurance, repair and maintenance costs, and documentation but they have not been substantial compared to living expenses. I save significant money in electric costs (I have yet to pay more than the minimum metered bill of $12/month on my sailboat), I get to use shower and gym facilities at the marina, and I get to feel outside of the hustle and bustle of the city while still being smack in the middle of it.
Would you do it again?
I would absolutely do it again in a heartbeat! It is one of the best decisions I have made and will be an unforgettable experience to remember for the rest of my life. I acknowledge that I will eventually have to grow up and move back to more conventional housing in the future, but for this particular period of my life I truly believe I have picked the best option.
Creative Housing Option 3: Living With Elders
Though it may sound less creative, living at home or with family during school is an excellent option if you’re lucky enough to enroll close to home. Lisa Roskes lives with her grandmother. The arrangement helps Lisa save money on rent, while also ensuring that someone is around in case her grandmother needs anything. It’s a win-win.
Why did you decide to live with you grandmother during medical school?
I’ve always been really close to my family, including my grandparents. I wanted to stay in Maryland for medical school, and always planned to live at home during this time. After I graduated college the December before starting med school, I was spending so much time with my grandmother during my semester off that I just ended up sleeping at her house more and more, until I had completely moved in. My parents’ house in only a half a mile for her house, so I go back and forth a lot. But since I spend most of my time when I’m at home studying, and it’s so helpful for my grandmother to have someone in the house a lot, it just made sense for me to continue living with her.
What has been great about living at home and what has been challenging?
I’m very lucky that my grandmother is able to do so much for both herself and for me, so one of the obvious benefits of living with her is that I have very little cooking, cleaning, laundry, etc. to do for myself. It also amazing to come home after school to someone who is always happy to hear about my day, offer to help me study, and provide an outsider’s view into the crazy world of med school. I don’t love driving in downtown Baltimore and sometimes wish that I lived closer to school, but the commute sometimes provides a nice debriefing time, to separate school from home.
Would you do it again?
I really can’t imagine med school with a different living situation! I’m so lucky to say that I’m able to live with my grandmother – most 20somethings can’t say that – and I love that I can help her and spend time with her while my main focus is school and studying.
If you don’t have an epic elder in your family near your school, you might still be able to take advantage of this option. At Judson Manor in Cleveland, OH, students can apply to receive room and board at the retirement home in exchange for helping out. Though still a new idea, this arrangement can offer benefits to everyone involved and it’s worth asking around if you’re interested. Maybe you’ll be the first student to bring intergenerational living to a retirement home in your community.
Choosing Creative Housing isn’t for Everyone
At the end of the day, health professional school is about becoming an excellent doctor. Whatever you need to make sure that happens is the top priority. If you need privacy, quiet and zero distractions, then you should prioritize those needs over saving money on housing. But if you can maintain good study habits while house-hacking, living on a boat, or staying with family, your finances will thank you later.