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Updated about 8 years ago, 11/20/2016
Resident doctor with $370k in student loans
Originally posted by @Christian Wathne:
I have 2 younger resident doctors applying to rent one of my properties for $3k/mo rent. They are planning on opening a practice in the area. Currently both working at local hospital. Should I be scared of $370k student loans? I know doctors will make a significant income, but is this normal or a risk? Other than the high student loan debt these applicants are great.
No, don't worry about the student loans. They can get deferments based on their income. So, if they aren't making money, or aren't making much money, etc., their student loan payments can be delayed (as in they pay zero per month), or they pay a lower amount per month based on their income. In fact, if I recall correctly, there is a built-in deferment for students starting their own practices (law students, med students).
So, as long as the student loans are not in default, I wouldn't worry about them.
No, that's pretty "normal" for resident physicians. The loans are likely in forbearance meaning no payments are needed until they graduate. Main down side I see is that they will move away once they graduate and start making "doctor income".
So basically me. I'm a year out of training with $200k in debt.
All new docs just spent 4hrs in school and 3-7yrs training after that. I can't imagine they would risk ruining their credit score on a rent payment.
A lot of banks will loan 100% mortgage without PMI. So clearly the banks think it's worth the risk. I'd rent to them.
It's been over ten years since I finished my residency. Most medical residents makes 45-55k a year with a slight increase each year. Don't worry about the student loans because most physicians defer making payments until completion of residency. Just check their rental history and credit history. Hope this helps.
Thanks everyone, these answers make sense!
As far as federal student loans go, I can tell you, being a supervisor at Navient, there is no deferment dedicated to doctors starting their own practice. However there is the income based repayment program and he maybe be eligible for as low as a zero dollar payment depending on his income and family size.
Not something I would worry about. People will pay their rent far before their student loans. I hear it every day.
Nope if they otherwise check out I wouldn't stress about it! If you are worried you can always see if they will up your security deposit amount (check if your state allows it, some states are VERY strict).
Resident Physicians' median income is around $50k at least where I'm from. I only know this since I work in Payroll for a Network of Hospitals in CA.
I would be more concerned on how long their lease is than their student loans. Once they are out of the residency, they may end up leaving to go fish for better opportunities elsewhere where they can make the big bucks.
Statistically, only about 20-25% of Resident Physicians decide to practice in the same area after their 2 to 2.5 year program. Again, this varies with every residency program and the geographic data, among other factors.
Really great advice. These 2 resident physicians are good friends, one local, one from out of state and are staring a practice together in the same city as the rental. We just signed them this morning in a 2 yr lease.
#2 General Landlording & Rental Properties Contributor
I would not be concerned about their loans but I would be concerned about their personal standards. Unless there are no lower rental rates in the area I think they are living beyond their means if they are intent on eliminating their debts any time soon.
Originally posted by @Christian Wathne:
I have 2 younger resident doctors applying to rent one of my properties for $3k/mo rent. They are planning on opening a practice in the area. Currently both working at local hospital. Should I be scared of $370k student loans? I know doctors will make a significant income, but is this normal or a risk? Other than the high student loan debt these applicants are great.
As someone above said, civilian residents typically earn ~$45-55k per year. So you figure, they will split the rent at $1500/mo. a piece. Going by the standard 3X gross income per month, you should look for a minimum of $4500/mo. (which is $54,000/year). This might be more than each of them makes, disqualifying them. Plus, if they are currently paying down their medical school loans, this will make them less favorable (their income is effectively less than it is on paper). I would confirm each of their gross income and if they are paying down debts such as school loans, and screen per the usual.
I'm probably partial since I just finished my residency and training. I would rent to these two in a heart beat. I don't know any resident that was ever evicted or had problems paying their rent. Remember these guys just finished 8yrs of college and med school. They know how to budget.
What kind of country do we have if doctors are considered high risk renters?
I would love to rent to resident physicians... Those guys are always at the hospital and rarely at home!
I finished residency about 21 years ago. Most of the comments are spot-on, except the "2-2.5 years" comment about residency length. Residencies are a minimum of 3 years and often up to 6 years after medical school.
Agree that most loans are deferred until after residency, with only very rare exceptions.
I've got a question myself: I have a young family (Physician Assistant student) on student loans only. I'm sure I can get documentation of their bank deposits and student loan amounts, and speak with their training program to see if they're stable. But should I get a cosigner for the lease since there really isn't any "income"?
As a physician, I can tell you that we are probably the best tenants you are going to have. We have tremendous job security, earning potential, and we are very low credit risks. The banks know this and they practically throw money at us for free. We also tend to be pretty conservative with our money. If you find a resident who has 3-4 years of training left, get them on board and treat them well. They don't have the time to go apartment shopping and they won't unless you give them reason to!
Originally posted by @Mark Pierce:
A lot of banks will loan 100% mortgage without PMI. So clearly the banks think it's worth the risk. I'd rent to them.
It's actually just lender paid PMI with a bumped rate and/or being an ARM, but branded well. :)