Time to go look at UWS OHs again

What's the square footage. Bet it's no more than 1,200 meaning the rooms are small and overpriced, in my opinion.

I've been in this building. Room dimensions aren't bad, esp. if you compare to most postwar/new construction. Ceiling ht is good. I would compare to the Gramont (though apts are bigger there), all the upper WEA buildings and the gargoyle building (I forget the address) as well as the west 100s by RSD for pricing.

In the middle of no place, right by the projects.

Nice.

Thanks for the feedback.

Steve, it's right next door to Silver Moon Bakery--I go out of my way to go there. Is the area really so repugnant?

Honestly, I looked up there about a year ago when I was thinking of moving, and I was struck by the desolate feeling of the place. Having gone to Columbia I really do like it a few blocks north, but right there, and even moving closer to the Park, felt barren to me.

That's just MHO. Other people might like it. It's good that they've reduced the price almost 20%, but I think it has more to go. Here's a rental in a better neighborhood, closer to the park, cheaper:

http://www.fenwick-keats.com/listing_details.aspx?index=9&pages=1

And a 3-bed 3-bath 2 blocks away:

http://dermotproperties.com/default.asp?f=listing_details&listingid=165983&listingtype=7

rents for $4,095. The one to buy costs:

Down Payment $219,000
Mortgage Amount $876,000
Mortgage Payment $5,252
Total Monthly Payment $6,644

why would you pay $6,644 a month to own - and take the increased risk - when you could rent a bigger apartment for 50% less, with no risk, 2 blocks away?

Please don't answer the mortgage tax deduction. I'll barf.

The first link doesn't work - sorry! You'll have to go to Fenwick Keats' website.

Or nybits.com.

Thanks, steve. I'm actually looking at the 3 (really 2) bed, 2 bath, not the 1 bed rental. I agree that there are some dodgy blocks to the east, but Bway up and down the area is kinda fun.

As long as you stay on Broadway or thereabouts, I agree. Even toward Riverside Drive, though walking up the hill is exhausting. :) If you can buy for what it costs you to rent, then buy. If not, take your chances if you want to, but it's too risky for me. If I could buy my apartment for what it costs me to rent it, I certainly would.

And don't take the "tax deduction" into account - even if it survives (I doubt it), it goes away over time, and doesn't account for the risk of a the falling knife.

rlmnyc, so funny that you are writing about this apartment today. This afternoon, I was at the Silver Moon Bakery buying a very good latte - I could have met you at the building!

To start, the apartment has three of my favorite features - tons of closets, an eat-in-kitchen and an in-unit washer/dryer. I like that the windows mainly face east and west as the southern exposure can be too bright at times. The smallest bedroom would make an ideal office space if needed. Only negative on the floorplan is that long gallery space which might be wasted space. Also, the apartment was previously listed for $200,000 more about a year ago so the seller may be very anxious to sell.

Give us an update after the open house tomorrow.

I saw this one during its previous incarnation. I liked the apartment, but thought the pricing at $1.295MM was nutty. This was fall 2009, still a nervous time, and #11B had just set the market for a wreck in this line, closing for $975K in early October. #4B is in decent shape, but the condition is nothing special. So it didn't take much to see that #4B was overpriced. It still doesn't seem like a particular bargain, since #5B couldn't find a buyer this September, asking $1.2MM, and a classic six in estate condition, #3A, just sold for $1.275MM. But #4B does now seem to be slotted correctly against its competition. A buyer who can afford more (and doesn't mind the low floor) might consider 300 West 108th #3A, a classic six just listed for $1.255MM (see http://streeteasy.com/nyc/sale/567798-coop-300-west-108th-street-manhattan-valley-new-york ). At the sub-$1.1MM price point, I can't think of anything in the neighborhood that would blow the doors off 230 W105 #4B, although I would personally prefer to be around the corner on West End

are any of you actual real estate brokers? You seem to have so much information.

Mermaid: I've been licensed for about a year and a half. I think nyc10023 and lobster are amateurs in the best sense - they are motivated by pristine passion.

stevejhx: I'm not sure those rental comps bear scrutiny. 230 W107th is non-doorman, which accounts for a significant part of the cost difference and means the buildings will appeal to different buyers. Also, the bend of Broadway at 106th Street puts 230 W105th on the corner, while 230 W107th is mid-block, nearly halfway to Amsterdam. Lastly, why do you think the rental on 107th is larger? If anything, it might be a bit smaller, because the rooms look tiny; hard to tell without a floorplan.

I don't see anything on the Fenwick-Keats site or nybits that matches your description of the first comp. What is the FKG Web ID?

The value of the mortgage interest deduction is specific to each person's circumstances. Clearly, if you value it at zero, the playing field tilts rather decisively toward renting.

I live close to the target apartment, and I wouldn't mind living on west 105. I guess school zoning would be a question in my mind, though.

and lob, does SM really make good lattes? because their basic coffee is, to me, awful.

ali r.
DG Neary Realty

rlmnyc: it's a pretty nice neighborhood, with some really good restaurants within a few blocks. If you like Silver Moon you should also try the little french bakery on Columbus and 107 (La Baguette). The area has changed a lot in the last 5-10 years with many new places opening, and I think it will continue to get more and more desirable.

ali - zoned school is not the best, but it is district 3, with all that has to offer, and P.S. 163 just to the south (97th) is a really excellent one.

Shocking that steve's comps are grounded in moronicville. Not to mention he is using an interest rate that is a good 1.5% over market. Rlmnyc, need to be careful listening to this guy, he gets a kick out of being disingenuous. There are plenty of others on this thread that give fantastic advice however.

"There are plenty of others on this thread that give fantastic advice however."

You and LICCdope, for instance?

I didn't "give" that interest rate - it's the one that popped up by default. Choose a different one, you still wind up at 50% above rental rates.

Which is what you deny, because in your bizarro world the right thing to do is to pay MORE money for increased risk - buying over renting - than what any other sane person (or sound risk theory) would do.

Regardless of the "person's circumstances," the "value" of the mortgage tax deduction is offset by the value of the opportunity cost. And as a highly levered asset, the more real estate goes down, the faster you eat away at your principal.

"Shocking that steve's comps are grounded in moronicville."

And why is that, Juicy? Because they don't prove what you're desperately trying to convince yourself of - that there is some mysterious 50% "premium" to be had by buying rather than renting?

And I didn't even include the 15%+ transaction costs...

...which Juicy and LICCdope conveniently ignore, as well.

Steve, it is really simple. Just use facts. Every post from you is an exaggeration of some sort. People are looking for legitimate opinions and you fill this board with the same garbage day in and day out. If you used real numbers and real comps and still felt that buying was more expensive, fine. But you never do. I just don't understand why this is so much fun for you, sort of like the troll.

I don't have to convince myself of anything, Sounds like you do.

Ali, I drink alot of coffee, but I would not claim to be a coffee expert. However, the skim latte I ordered yesterday was not bitter at all and was better than I thought it would be. Originally, I stopped in at the Hungarian place near the Church of St. John the Divine, but the line was too long. Those are the only two places I know to get coffee in that neighborhood.

I hate to put down my district, but D3 doesn't have that much to offer kids who aren't zoned for a strong gened or score 95+ on the OLSAT.

Rounding off the list of Steve's omissions/errors, he completely ignored the principal amortization portion of the mortgage payment. He also ignored the tax deductibility of the underlying interest and real estate taxes in the MM. The RE tax deduction is unlikely to go away, even if you assume the elimination of the mortgage deduction. Finally, transaction costs to buy that coop, if it sells for under $1MM are 0.5% - 1.0%, probably toward the lower end of that range. If it sells for over $1MM, 1.5% - 2.0%.

Oh, and even using his own inaccurate numbers, $4,095 is 38% less than $6,644, not 50% less as stated in his 2nd post above.

JuiceMan
17 minutes ago
ignore this person
report abuse ...I just don't understand why this is so much fun for you, sort of like the troll.

What are you trying to say? Aboutready says you have anger issues.

Sorry, Juicy, dem's da comps.

But if you prefer, you can compare this:

http://streeteasy.com/nyc/sale/557461-condo-101-west-24th-street-chelsea-new-york

Down Payment $360,000
Mortgage Amount $1,440,000
Mortgage Payment $8,176
Total Monthly Payment $9,310

at $1.8 million with a 5.5% jumbo rate (I checked bankrate - that's what they averaged), amounting to $9,310 a month.

which is LISTED for rent at $6,800 a month

http://streeteasy.com/nyc/rental/694642-condo-101-west-24th-street-chelsea-new-york

And seems to have rented last year at $6,200. So if we figure it goes for $6,500 (which I doubt, but go ahead), you have a 33% premium to own, not to mention the ever-increasing property taxes (abated) and the transaction costs, and you have a 50% premium again.

Same apartment.

seg - the principal amortization gets you nothing, so I don't know what you mean.

The tax deductibility of the "underlying interest and real estate taxes" are capped at $1,000,000 (the former), and the latter there aren't any of in this case, and they are denied under AMT. For the comp you're discussing - and all real-estate transactions - you have to count both the buy and sell side, as eventually you will sell the place. So you have:

Real-estate brokerage fees
Mansion tax
Flip tax / mortgage tax
City / state conveyance tax
Attorneys' fees

etc. And that doesn't include special assessments, repairs, etc., that as an owner you're responsible for, and as a renter you're not.

It doesn't take into account the risk of losing your down payment (as would have happened in my first example had the place sold for the $1,200,000 original price, rather than the current $1,000,000 price.

You can make all the arguments you want - if you were right, you'd see prices increasing and inventories falling. You're seeing exactly the opposite.

"seg - the principal amortization gets you nothing, so I don't know what you mean."

Steve:
Two people each sell their apartment for $500k. The first guy has paid interest-only on his mortgage and still owes $400k. The second guy has amortized his mortgage and only owes $300k at time of sale. Who nets more from the sale?

If you acknowledge that the 2nd guy nets more $ from the sale, then there's no rational way you can claim that his principal amortization payments "[got] him nothing."

If, on the other hand, you do not understand that the 2nd guy nets more $ from the sale, then it's not even worth continuing this discussion with you, which is looking like is the case.

seg, he doesn't net anything: he just gets his own money back, without interest.

The second guy grosses more than the first guy, but the net is the same.

"the tax deductibility of the "underlying interest and real estate taxes" are capped at $1,000,000 (the former), and the latter there aren't any of in this case"

For coops, real estate taxes are included in the maintenance. Every coop maintenance figure that I have ever seen includes real estate taxes.

Mikhail Baryshnikov bought his pied-a-terre near WEA/104, so that's a solid endorsement. The low W 100s around broadway and west end/rsd reminds me a bit of the W 80s twenty years ago. There are signs of development throughout but the area is still a bit forlorn.

BTW, there's a larger, more gracious one bedroom on the market 11 blocks south in Joan Allen's building for $500k, The net cost is higher than the one bedroom at 230 W 105, but I think the value justifies the price.

nyc10023: A number of D3 elementary schools seem to have improved during the boom. The old formula of "87, 199, G&T or bust" may oversimplify a more nuanced reality. The viable options for middle school have widened too. Whether progress can be sustained in harder times remains to be seen.

Stevejhx: rlmnyc asked for feedback on an Upper West Side listing. A Chelsea rent-vs.buy discussion seems out of place here. In the subject neighborhood, rental firms that specialize in product that might compete with 230 West 105th - Rita Citrin, Metropolitan Equities, Stone Crest, Empire Management - have very little inventory, so a meaningful rent/buy analysis is difficult.

Everyone: Please don't feed the troll.

"seg, he doesn't net anything: he just gets his own money back, without interest. The second guy grosses more than the first guy, but the net is the same."

No. You used an amortizing-mortgage payment in your example above. If you want to ignore amortization then you need to use an interest-only payment. However you choose to look at it, the economic cost to the buyer is the cost of capital, i.e, the interest, plus the cost of capital on the downpayment. If you had factored the cost of the capital on the downpayment into your analysis, I'd have had no problem with that. But to treat principal amortization as a cost is simply incorrect. the cost of money is the figure comparable to rent.

PMG: The building you mentioned (250 West 94th) is one I've been watching closely. It suffered several gap-down sales of five- and six-room apartments in 2009, and I'm very curious to see how those comps affect future appraisals.

BTW, I think MB's purchase at the Armstead was less pied-a-terre than off-campus housing. That's a nice secondary line, especially on high floors.

Lobster: nabe aside, the B-line 5-room is close to what I think you are looking for. In yr case, I would open up the kitchen to the 3rd rm and use it as entertaining space.

West 81st: Apologies, you're right. Thanks as always for your insightful commentary and the reminder to stay on topic.

W81, have you viewed any apartments at 250w94? I'm a bit curious about that one bedroom offering.

I have no problem doing it your way, seg, but that's not what I was doing, and your analysis of what I was doing is wrong: I was amortizing the capitalized cost of rent, which includes the principal, down payment, and interest. That way it doesn't matter if the down payment is $0 or $10 or $100, because it is all part of the capitalized stream of prepaid rent.

To do it your way you would have to look at the cost of the property as if you were renting it to an unrelated third party. I have no problem with that, but in that case, the cost of the rent you would obtain would be interest + depreciation + taxes; the principal isn't included per se, but it is amortized over the life of the rental.

To say that you're netting more because you're getting your own money back (maybe) counts it twice - once in the netting, and again in the reduced interest payments. It further ignores the opportunity cost and the risk and the transaction costs, which are considerably higher in buying than in renting.

then, I remember why I live in a condo: there's the pesky coop board.

"seg, he doesn't net anything: he just gets his own money back, without interest."

So if he gets his money back why would you include it in the monthly cost?

Once again, this proves that steve has no interest in providing valuable advice on this board. I just don't understand his motivation or why he gets a kick out of being a contrairian without facts.

Good to see you West81st, hope you are well.

I had the audacity to go to sleep last night and miss lots of insightful comments.

Lobster, I bet we've crossed paths already and don't realize it. I think we're in the market for similar apartments. Silver Moon rocks. We should meet in person at the next SE meet-up.

W81, I was going to email you separately about this apartment, but I was waiting to see if we liked it first. Thanks for the feedback.

I'll let you all know what we think. Thanks much as always for your thoughts.

seg: No worries. It's a fun argument, and we all get drawn into it. By the way, my admonition about feeding the troll wasn't directed at Steve or his antagonists. I had noticed the REAL troll popping up as "aboutspready".

PMG: I've seen five larger apartments at 250 W.94th during the past two years. In general, I prefer the lines that don't look directly at the Lyric. Can't comment on the 1BR specifically, since I don't cover that market.

JuiceMan: Thanks - all good here. Hope the younger generation of JuicePeople is thriving.

rlmnyc: If you see the guy on the left in this photo, sporting a bit of facial hair, at 230 W105th, please say hello.
http://www.nytimes.com/imagepages/2009/05/03/realestate/03cov2.ready.html

"So if he gets his money back why would you include it in the monthly cost?"

Because by putting down money all you do is reduce the interest costs.

Take it to the extreme:

Person A buys a house for $100,000 in cash.

Person B buys the house next door for $0 down and a mortgage of $100,000.

Persons A & B both sell their houses on for $120,000.

Under the JuiceMan theory, Person A not only lived for FREE, but he got $120,000 BACK when he sold his house.

Whereas the cost for Person B was the stream of interest on the $100,000 mortgage, less the $20,000 in capital gains.

Now Juicy, if you're willing to go out on a limb and say that Person A REALLY DID LIVE FOR FREE, then that's your skewed (and baseless) opinion. Obviously there was a cost to both Person A and to Person B to live in their respective houses. Adjusted for risk, they should have paid EXACTLY the same to live in their houses - the person with the mortgage pays interest, but only risks $20,000 (in most cases); the person who pays in cash not only risks $100,000, but the opportunity cost of investing that money elsewhere. Which would probably be the expected return on the S&P 500, which has a similar risk profile.

Thoughts, gentlemen?

Steve, sorry to say but you are a total moron. As seg said, your answer does not justify a response. Glad it is fun for you to make false claims, use bad data, and then change the context of the discussion. I will never understand it but I guess it entertains you in some perverse way.

Thanks, W81st. JuiceBoy is doing well, walking, talking, and in to everything. Expecting number #2 next spring. I continue to enjoy your posts.

JM: 1 -> 2 is life-changing :)

"Use bad data" = same apartment to buy and rent.

OKAY!

"make false claims" = 2 people buying the same house for the same price at the same time, one with financing, one without.

"Change the context of the discussion" = answer the silly claims that you make.

"I will never understand it"

No, you don't; that's the whole problem. The reason why you don't take the principal out of the equation is demonstrated precisely above: because if you don't take out a loan, it costs the exact same to live in the home, just the costs are calculated differently.

Unless you can answer how you would account for the difference between Person A and Person B, above....

which you can't.

Well, the end of the story is that I fell asleep and missed the OH. I think this demonstrates my level of enthusiasm for the current apartments on offer. Zzzzzzz.

230 West 105th street is in no way "in the middle of the projects". The building in question is on the corner of Broadway and 105th street. The projects are several blocks away at 103rd and Amsterdam. And those project aren't particularly tough.

The location of 230 West 105th street is not bad, nor "forlorn" and has not been close to that description for decades. If you walk over to Amsterdam Avenue there is a larger Hispanic population and there are still tenements, but the area is packed with young, white students and professionals who need a cheaper rent than west of Broadway.

It is not a high-crime area and it is not dangerous - sometimes I wonder if the people posting stuff like that on these boards are from New York, or just out of towners who only know the 3 blocks around their apartment.

oohah, i have no problems generally with the area (and none specifically with 105th and b'way), but the retail on amsterdam is still kind of grim, no?

rlmnyc, funny. looking at the floorplan i wonder if it would be desirable and feasible to remove the second closet in the entryway. it seems like it would make for a much more flexible living/dining arrangement. as it is now, the living room is quite small and the long entrance foyer doesn't seem to add much in terms of utility.

Are you planning on moving uptown?

230 W 105th is just off broadway. in my opinion that stretch of broadway around Straus Park is quite nice, and in fact it's generally more appealing than broadway in the mid- to upper-90's. to each his own of course.

JM: Glad to hear there's another JuiceSnack on the way. Best to you and the JuiceWoman for a bountiful harvest.

aboutready: I wouldn't call the retail along that stretch of Amsterdam grim. Remember the scene in "L.A. Story" where Steve Martin tells Sara Jessica Parker that her breasts feel weird, and she explains that it's because they're real? The Upper West Side has been so Barnesenobled that we've forgotten what real retail looks like: spunky, gritty, and perky - like Sara Jessica Parker, circa 1991.

west81, funny. but i take your point. i just like some more dining options with my reality. they don't have to be fancy (in fact, i'd prefer they weren't) but they should offer good food.

hell, i frequent alphabet city, and i have for years. and hell's kitchen. i'm all for gritty and spunky. perky, not so sure about.

rlmnyc, it's a very normal, good Manhattan nabe. Lots of real New Yorkers, lots of students and good mixed with not so good, as anywhere else in Manhattan. Don't listen to know-it-alls like aboutready who rents in Peter Cooper but opines authoritatively on any RE-related topic, or her place in it.

lob: coffee up here is on Amsterdam. Tropical Sensations, which is sort of a nice Latin diner between 106 and 107, makes a killer cafe con leche. If you're a little further south, Cafe Mocias between 94th and 95th will make you a nice hipster latte (I haven't asked for a 'flat white' but I'm sure they could do it). Just remember they're religious enough that they're not open on Saturday.

ali r.
DG Neary Realty

commoner, what the hell are you talking about? i said i have no problems with 105th and b'way. i think upper amsterdam is a bit gritty. i think first avenue between 23rd and 34th is a more than a bit gritty and has nothing. go back to your penthouse discussions.

I suppose commoner is another one with anger issues

aboutready
35 minutes ago
ignore this person
report abuse
...hell, i frequent alphabet city, and i have for years. and hell's kitchen. i'm all for gritty and spunky. perky, not so sure about.

Hey, tell us once more about you and the toilet plunger on Christmas eve in the late 80s.

There's also one of the best Mexican places, Noche Mexicana, on Amsterdam between 101 and 102. Looks like nothing much but believe me, great food.

I'm still waiting for Juicy & Seg to explain their economic theories, that principal repayments shouldn't be counted when figuring out how much it costs you to buy a piece of property. Because under that theory, if you pay all cash, YOU LIVE FOR FREE!

HAHAHAHA!

What maroons.

stevejhx- nobody ever said a cash buyer lives for free. I pointed out earlier that the calculation should account for a cost of capital on the downpayment. Therefore, if a buyer wit 20% down has a cost on his downpayment, then a 100% cash buyer must logically also have a cost of capital on the entire cash purchase price. This is how to figure out how much it costs to live there. The way some highly-regarded people here (like inonada) have dealt with this issue, is to apply a cost of capital to the entire purchase price. Then the buyer's economic cost is that cost of capital on 100% of the purchase price. You would then add on maintenance/taxes/insurance, but you do not hit the cost with principal amortization.

However you look at it, what you absolutely cannot do -- and which I believe you repeatedly try to do --is assess on the cash-portion/downpayment, AND calculate a fully-loaded mortgage cost (principal + interest), AND you treat the principal as an economic "cost", when the principal repayment is not a cost -- it is debt reduction/equity build. You are double-counting when you do this.

Hopefully my "economic theory" (i.e, common sense) speaks for itself. As mentioned above, this is not a rent vs. buy discussion so I'm done with the conversation. Last word ceded to you.

stevejhx: Could you take it outside, please? There are countless threads on your chosen topic. You can revive one of those, or start a new one if you like.

"when the principal repayment is not a cost"

"Person A buys a house for $100,000 in cash. Person B buys the house next door for $0 down and a mortgage of $100,000. Persons A & B both sell their houses on for $120,000. Under this theory, Person A not only lived for FREE, but he got $120,000 BACK when he sold his house...."

Yes it is a cost - it's a capitalized stream of rent.

"which I believe you repeatedly try to do"

All I do is what economic theory (and banks, btw) do: compare a stream of rent payments with a stream of mortgage and tax payments for an identical or closely-related property. The concept is either called PITI (principal, interest, taxes, insurance) or PTI (payment to income ratio). That's how they do it in the market.

: I second West81st. stevejhx: get your own site, subscription and all, and rant there.

Oops - misspelled "Sarah Jessica Parker". Better file the movie references with the rent-buy debates.

"JM: 1 -> 2 is life-changing :)"

Yes, nyc10023, very much so. Looks like man-to-man defense going forward :)

"However you look at it, what you absolutely cannot do -- and which I believe you repeatedly try to do --is assess on the cash-portion/downpayment, AND calculate a fully-loaded mortgage cost (principal + interest), AND you treat the principal as an economic "cost", when the principal repayment is not a cost -- it is debt reduction/equity build. You are double-counting when you do this."

That is absolutely correct seg, but it doesn't matter. steve will rant on anyways.

Apologies to rlmnyc for engaging steve and ruining a good thread. I'm done, please carry on.

"when the principal repayment is not a cost -- it is debt reduction/equity build."

Wrong. Wrong on finance, wrong on economics, wrong on accounting.

Only on streeteasy would people say that spending money to buy a place to live is "not a cost"; it is "debt reduction/equity build."

First, something the reduces debt CANNOT build equity - they are both on the same side of the balance sheet, so to do both at the same time would require you to count it as (minus) debt (plus) equity.

Buying a property is a capitalized expense, meaning that it is added to assets and to liabilities at the same time: the capitalized expense (the price of the house) is the asset; the liability is the amount owed on it. As you pay off the property you decreased capitalized expenses (amortize them) and decrease liabilities for the same amount. "Interest" is an expense, but the interest due would go on the balance sheet under short- and long-term liabilities.

The fatal flaw in your argument cannot be overcome: if you do what you say and buy a property in cash, THERE WOULD BE NO COST TO YOU because you're putting up cash that you expect to get back later. So according to you, you live for free; to you it's like "money in the bank."

But it's not. From an economic (not accounting) perspective, the cost to you is the cost of not investing that money elsewhere - the opportunity cost. And there is the added risk of investing in an illiquid asset, which must be accounted for. The financial cost of paying cash for your property is precisely the lost income stream from investing elsewhere.

Neither of you is an accountant or an economist (obviously) - a realtor & dentist, respectively. That's why you think that "You are double-counting when you do this," but you're not. Doing it my way - the correct way - you book equal assets and liabilities and reduce them by the same amount over time. Your (incorrect) way is to decrease debt and increase equity by the same amount, and leave the asset side of the balance sheet untouched.

You can't do that.

Exactly because they are on the same side of the balance sheet, when you reduce debt you increase equity, (if the value of the asset is fixed).

Wrong. Because a property is an asset, not equity.

Their theory also falls apart under this scenario:

You buy a house for $100,000 with an $80,000 mortgage. The price of the home falls to $70,000. According to the JuiceMan theory, paying off your mortgage is INCREASING your equity, yet it's plain for the world to see that you've lost $30,000 on the transaction, and every time you make a mortgage payment you are wasting money, losing increasingly MORE money, not increasing your equity.

The JuiceMan theory falls apart if a) you pay all cash for a property, under which scenario you "live for free"; and b) if the property falls in value instead of rises, in which case you're paying off a debt with collateral that is worth less than the debt.

JuiceMan needs to separate out the concepts of a) debt; b) collateral; c) economic value; d) book value; e) realization value.

Because no matter how you finance a place to live, adjusted for risk the price MUST be exactly the same: all cash, 0% down, or somewhere in between.

That value should NEVER be more than the market rent. The realizable value of the property can only be considered when that value is realized, not as you go along.

and so it goes....

steve, you have absolutely no respect for people. You have been asked nicely to rant on another thread. seg even started one for you. What is your problem?

http://streeteasy.com/nyc/talk/discussion/23733-attn-stevejhx-post-here

'Twasn't I who brought the subject up, Juicy, 'twas thou.

Just answer, then: how does your theory comport with the facts? How do you take into account, under your theory, all-cash payments, or falling property prices?

And if you come up with a good answer, then it will be done. :)

Two separate steps stevejhx: 1-Value of house declines and value of equity declines by like amount. 2-Pay down mortgage, amount of equity increases by like amount.

I see, urfna: You buy a house for $100,000, with a $20,000 mortgage. The house declines 20% in value, making it now worth $80,000. You repay your $20,000 mortgage, and now your house is worth $100,000 again.

Very good. Very, very good.

The equation is: "Pay down mortgage, amount of debt decreases by like amount." A mortgage is a debt, not equity. You don't "increase" your equity; you decrease your debt.

No, you buy a house for 100K, with a 20K mortgage, and therefore 80K downpayment which is your equity. Your home value declines by 20K, so the home is worth 80K and your equity in your home is 60K. You send 20K to the bank to pay off the mortgage, the value of the home hasn't changed further but the 20K increases the equity by the amount of the reduction of the mortgage of 20K. Home is already 80K, debt is 0, equity is 80K. Pretty simple.

Try that again, urnie: you buy the house for $100k with a $20k mortgage, meaning you have an $80k down payment. The price falls by $20k and is now worth $80k. You have to pay the bank $20k to pay off your mortgage. Therefore, your total "equity," as you call it, is $60k: the $80k the house is worth less the $20k you had to pay back in mortgage principal.

In other words, you lost $20k on the deal, or 25% of your investment.

Pretty simple this way, no?

Please Guys!!!! This is/was a great RE thread. As W81st politely suggested, please take it to your thread and not ruin this thread. http://streeteasy.com/nyc/talk/discussion/23733-attn-stevejhx-post-here

Thanks

Steve: you've spent 100k = 80k+20k. But you are left with 80k, 20k/100k - 20% of your investment. Your "equity" is 80k. Magical math.

You've lost 20% of your investment. If your total equity is 60k, that means you are left with 60k in your pocket when you sell your place. Your equity WAS 60k before you put in the extra 20k to pay the bank.

Steve, this is not 3 Card Monty. This is simple balance sheet accounting. You can say all you want, but you are wrong in your statement "something that reduces debt CANNOT build equity - they are both on the same side of the balance sheet, so to do both at the same time would require you to count it as (minus) debt (plus) equity."

nyc, I don't get what you mean, sorry.

urnie, sorry to you, too: try to do an accounting entry with a negative and a positive entry on the right-hand side, tell me what your auditors say. You just can't willy-nilly reduce debt and add it to equity. There has to be an offsetting asset transaction for both liability transactions.

Sorry.

You win

I'm glad no one is fooled by steve and takes him seriously anymore. It is actually quite galling that someone comes on this thread looking for advice and steve tries to screw the person up by pushing his views with illogical arguments, distorted facts, idiotic analyses and bad data.