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Major Midwest city
2BR Rents for $2300.
Cost is $180k with a 2.8% mortgage.
Taxes = $300
Condo fee = $600
Would you buy this?
A simple "yes" or "no" answer is requested.
If I lived there and that was my target home, "yes". But in typical Manhattan where costs 3x as much for the same level of rent, "no". And if you find youself in circumstances where you are looking at a 5x difference, "hell no".
what color is the bathroom?
So total maintenance is $900 and rent net of maintenance is thus $1400.
That means the selling price is about 129 months' rent. Looks like a decent buy, all other things being equal (and assuming that the hypothetical buyer actually wants to live in this Midwestern city).
Pistachio.
Yes, assuming you were forced to live there (Chicago) and it was a cookie-cutter modern construction.
And you only had these 2 choices: Pay $2300 to rent or pay $180k to buy. What would be your decision?
People who need a a very particular bathroom tile have OCD issues, and need not clutter our survey with your obsessive insanity. You are doomed in life, either way.
why the rent is so high there?
and why the condo is so cheap???
sounds fake
rent pistachio, buy white
That is the way the Chicago market is. Just answer the question.
Buy.
Vacancy rate in mid-western cities on an average is >5% and the owner typically has to pay the broker 1 month rent. So you are really getting 10.5 months of rent. $2300*10.5 = $24150 less $10,800 fixed expenses (taxes+maintenance) less insurance $1000 per year less $3k per year average upkeep and maintenance = $8200. Yield 5% or so. The taxes do seem lower than usual in your example. Will I buy for investment NO unless I expected 3-5% price increase, in which case yes it would be worth the hassle and transaction costs.
I'm a bear and I own in this market. But my bathroom walls are white. And I'll clutter your survey if I damn well want to.
I'd never buy in Chicago because I'd never quit hoping I'd eventually find a way to leave.
300_mercer, not for investment.
You are forced to move to Chicago at gunpoint.
You will never be allowed to move away. Ever.
For housing, you are only given 2 choices (or death is the 3rd choice)
Pay $2300 to rent or pay $180k to buy.
Which do you choose?
Now, let's try again, please answer the question above.
If you're unable to do so, please STFU.
about the gunpoint:
how big of a gun, what time of day and what neighborhood?
For living there myself with a timeframe of 7y+ YES. Tax deductions, ability to customize to your liking. You have to have a view that real is done going down which I do and it is showing up in all the statistics.
I don't think Chicago had any major landmarks. I'd skip it.
Yes, because every survey or study currently says that renting is more expensive than buying everywhere BUT Manhattan and San Francisco now. So without even knowing where it is, in any other market currently its better to buy than rent.
Unless your family size might change, your job location might move, your school district goes south. There are many reasons to value mobility even within a given city.
in reality a lot of things could make this deal a bad investment but clearly this is a solely number-based exercise, assuming that, i would buy
That property doesn't exist, not with even with salmon tiles.
CHEAPEST 2-2 in Streeterville listed is $260k. CHEAPEST, and it's a short sale. Comparable rent is $2450.
Try again.
Are there bullets in the gun?
I don't where stevejhx gets Streeterville from what rufus posted, but the simple fact is that sale prices relative to rents will be discounted in cities with shrinking populations and shrinking industry.
Put another way, people are happy to pay a premium to rent rather than own in places like Chitroit.
>but the simple fact is that sale prices relative to rents will be discounted in cities with shrinking populations and shrinking industry.
Very insightful statement.
How can we apply that to New York City?
most people can't afford to rent or buy in manhattan. it's going to price itself into a london, or it's going to change some zoning laws and claim some land from the water and there will be high-rises all around. or the chinese will quit buying. or the russians will become disenchanted with their plaza purchases and spew hatred abroad.
although i don't know anything about streeterville, i did take a look on realtor.com for new construction-type units for sale and for rent. dealboy's numbers seem WAY off. I'm calling fake unless he produces an actual listing, and then it would probably be a "lovely luxury new building, almost completed" type of listing. or foreclosure that has been destroyed.
and don't forget, Illinois is one of the states hardest hit by fiscal problems/pension issues. you might want to think two or three or twenty times about buying in a location that might have to triple your real estate taxes.
so STFU, dealboy.
>so STFU, dealboy.
wow, you do realize that dealboy has talked to inododo, right? He's ok with inododo, you understand that, right?
why would i care? bizarre. i totally get along with cc and w67th and don't give a shit if people know it, although i have no problems disagreeing with them
i get along with inonada, who has been around here keeping the peace very well for years, although you might not have noticed.
in real life i'm fairly certain i'd get along with dealboy. we'd chortle, drink a couple of drinks, and spew our reflective thoughts about NYC RE like only NYC RE obsessed people can. or we would ignore the subject and have a couple of drinks and share war stories.
who the fuck cares?
ooh, please don't spew with dealboy.
>who the fuck cares?
What do you mean who cares? You care. You are here. You are here because you care. You like the topic. You want to chortle and drink. You care. You are the caring type.
No, your reading comprehension sucks. Who cares if nada and dealboy communicate? Other than you, who seems inordinately fascinated by all things nada.
AH, I picked Chicago b/c it's in the post: "Yes, assuming you were forced to live there (Chicago)...," and it's an area with a bunch of rentals of that description at that price.
Let's tally the results so far. The point of this exercise was to see who would be an owner in a more favorable market. In other words, who are the logical and sane posters who can correctly analyze real estate. By doing this we can distill out the irrational perma-nuts who would find problems in buying even if the property was $1. These people can't analyze a dead cat, and simply have mental problems. These people can not be taken seriously, as they are broken records and not objective. The 3rd category is comprised of posters who did not even vote yes or no, which shows they are incapable of analysis and are just trolls who clutter serious debate on SE:
These posters would buy the Chicago apt. Tt me, these posters can be taken seriously, and are more objective with regards to their bearishness of NYC real estae (if bearish)
inonada
somewhereelse
300_mercer
jason10006
nyc1234
These posters would NOT buy the Chicago apt. They are broken permabears who will never own in ANY market:
Triple_Zero
caonima
stevejhx
aboutready
These posters were not able to come up with an answer
Perhaps this topic was too complex for them?
I considered these posters the "peanut galley".
West34
Ottawanyc
Brooks2
aboutready
alanhart
huntersburg
Aboutready, things will be ok.
The math problem is what it is. Whether it makes sense or not, the question is pay $180k vs rent for $2300. In that scenario, buying is a no-brainer.
The big issues in considering NY vs anywhere else right now are (1) how much of my monthly income is being spent on housing (answer-- still far too much for a family-sized apt in most good neighborhoods), and (2) how much of my savings do I have to drain for a down payment (answer-- too much but will always be higher here than in other markets).
Both of those issues can be at least partially addressed by a modest correction in this market. Unfortunately, anything resembling a correction over the last few years was extremely quick (look at the thread on best deals from the 09 dip for evidence) since people are so informed, many are waiting to buy, and many others are priced out or unable to get a mortgage.
As much as I REALLY want to buy (thank Ben Bernanke and ZIRP for completely skewing the risk/reward), we genuinely need a at least a partial flush where people DON'T want to go anywhere near NY real estate (though I know another 1992-1993 market is not likely)-- that will be the time to go all in. Until then, and as painful as it is, waiting makes a lot of sense for a lot of us out here...
I didn't say I wouldn't buy. I said that the property does not exist - therefore, buying is moot, unless the apartment is available on Farmville.
And I don't play Farmville, either.
I think the real question is: who takes you seriously dumb boy
?
dumbbell, your aliteracy is consistent: I made it quite clear that I wouldn't buy in a market that is shrinking. The long-term supply/demand thing isn't very favorable when too few households are chasing a glut of houses.
If you had given your completely imaginary numbers and said they referred to "City X", or even to a growing dusty desert city like Las Vegas that's just in the middle of a big hiccup, or prime Manhattan in another year when the rent ratio was favorable (and yes, that was the case in recent decades) my answer would be "buy".
If your numbers referred to somewhat downscale housing (which generally has much better cap rates), even though unglamorous and not where I'd want to live, it would be "strong buy". Because, it's important to note, an investment is not consumption, and consumption is not an investment, and never the twain shall meet.
Dealboy, I think you put me on the wrong team: "Looks like a decent buy" implies that I would buy.
000, it's very important that dealboy records you in the right team.
HB, well, obviously. Who wants to be a "broken perma-bear"?
AR made two categories.
Wow, arrogant douche. Glad I was included on those who didn't bother playing your silly game.
arrogant douche...balsamic vinegar...right?
Go me. Although Dealboy's reading comprehension skills leave something to be desired. I clearly wrote "I own in this market." Being a bear hasn't prevented me from owning TWO properties, currently at the same time no less. One a profoundly stupid purchase that I don't regret (and that I acknowledged was stupid all along), and one that makes a tremendous amount of sense from the perspectives of rent/buy, flexibility and estate planning.
dealboy can't comprehend the notion of a bearish owner
Honestly, sounds like apples and oranges. If I can buy for 180k and rent that place close to 2300/mo, i'm in. In fact give me 2 of them. Actually make it 3...
I'm serious. I used to live in Chicago, any have family there. So please give me specifics. I want in.
I must apologize to Triple_Zero. That was an error.
These posters would buy the Chicago apt. Tt me, these posters can be taken seriously, and are more objective with regards to their bearishness of NYC real estae (if bearish)
inonada
somewhereelse
300_mercer
jason10006
nyc1234
Triple_Zero
These posters would NOT buy the Chicago apt. They are broken permabears who will never own in ANY market:
caonima
stevejhx
aboutready
These posters were not able to come up with an answer
Perhaps this topic was too complex for them?
I considered these posters the "peanut galley".
West34
Ottawanyc
Brooks2
aboutready
alanhart
huntersburg
stevejhx, here you go. $168k. Rents for $2200 or so.
http://www.urbanrealestate.com/property/1717-S-Prairie-Unit-2006-CHICAGO-IL-60616-TPZQ524GEA334.html
Dealboy, again, I own in TWO markets. And no, I would not buy the Chicago apartment.
a) It doesn't give a rental price; and b) it's a FORECLOSURE; and c) must be all cash; and d) it has outstanding assessments that must be paid by the buyer at closing.
And E) most of the 2/2 units in that building go for nearly twice that price.
Ergo - not even a realistic price, and unsupported rent. Being a foreclosure, it is likely deliberately underpriced to attract multiple offers.
Just get real.
Steve,
You're totally missing the point.
It's a hypothetical to determine how much of a nutcase you are.
"Buy for $180k or rent for $2200."
IF THOSE WERE YOUR TWO OPTIONS, WOULD YOU RENT OR BUY?
I can't make it more clear than I have, hence you being relegated to the nutcase list.
aboutready,
One the one hand, the reasons you gave identify you are a "would never buy under any circumstance".
Yet, you say you are happy to be an owner for one property. Under what circumstances would you buy?
And why do the Chicago numbers not work for you? It's not about moving, etc. This is a hypothetical.
If I could rent an upper east side brownstone for $1000 a month, or buy it for $15 million, I'd rent it.
That's not the hypothetical. See the CAPS above.
You really are obtuse. I am curious what you do for a living, if anything.
How much income and how much assets.
That's right in this hypothetical the fact one chooses rent does not affect buy price. Maybe rents r going up bc ppl anticipate the buy price to go down. Maybe rents will go to $4k/month, but buy price will go to $100k.
There are 13% dividend yielding real estate reits.
Either the dividends will decreas or prices of stk will go higher. ???? No that is the $1mm question. Will sprint go to bk or go to $10/share?
It's the same as your hypothetical: I would take whichever is the better long-term deal.
Your interest-rate assumption is also not correct; since it's a variable-rate interest that you quoted, you need to adjust it for the risk of rising interest rates. But no need to do a lot of calculations: banks do it for you. It's called the 30-year fixed rate, which is about 4%.
What I do for a living is make enormous amounts of money.
I suspect Chicago has a fairly high possibility of becoming a highly illiquid market. I would not have bought in NYC recently if I had not found something with the following attributes: our daughter likes it, and will take it post-college (it will be in a trust, if she decides to move she can deal with market conditions at that time); the rent/buy is highly favorable, less so without the tax deduction, but still favorable; the after abatement taxes (year 6 out of a 25-year abatement) are comparably very low; and the bank was willing to loan 90% without PMI, so my cash outlay wasn't very high, and with $17 a month real estate taxes and extremely low mtc (no amenities or doorman) almost all of my payment is tax deductible . Additionally, my husband's job is about as secure as they come and he will likely continue there until retirement, so I do not anticipate needing to downsize when our daughter leaves, as we bought well below our means.
I would never choose to buy based solely on a rent/buy ratio. Yorkville, for example, has a fairly decent rent/buy ratio, but for a number of reasons I wouldn't buy a small unit there. I can be happy renting just about anywhere, but I really need to more than just like where I buy, which is one of the many reasons I decided not to stick around waiting for resolution at PCV.
Who's giving out 2.8% mortgages for condo resales? And are you sure buyers can even get a mortgage in this building? That may be why it is so cheap, because it is not a typical rent/buy scenario for Chicago.
Aboutready, I'm curious which career you classify as "as secure as they come"
Its a pretty easy guess what the dumb boy aspires to do for a living
it's all a hypothetical game, at the end of the day there are a ton of other factors. he never even implied that the numbers were real. in fact if the numbers were multiplied by 20 i would probably choose to rent, simply as at $3.6 million the $ at risk would be too high for the potential return given my income and asset levels.
he is simply gauging the mental status of the "market" participants on this board.
also i will save u time if u want to know what everyone on this board does, they are all successful gazillionaires, ok? if they weren't why would they flock to an anonymous internet board mid-day?!
He's an equity partner at a large law firm. The firm culture may change sometime in the future, but this is a very conservative firm (that shuns all debt) that has not engaged in significant deequitizations or lay offs of equity partners. Nor has it offered enormous incentives to lateral partners. Discontent at the firm is over relatively minor, procedural types of things, not a general concern regarding the direction it is taking. Nothing is certain, but this is a very good bet.
You're also wrong about me & real estate, db. My co-op in NY goes into contract shortly, and assuming all goes well I'll be buying someplace in here in Ft. Lauderdale. I have my eyes on some short sales where $500k can get you 3,000 square feet & a pool.
The point, rufus, is not simply that THIS unit must be bought all-cash ... it's that the entire building is nonfinanceable, according to the listing description. The person who bought it is the proverbial greater fool. Dumbbell is the greatest fool.
What did the boy hope to accomplish here? As a few indicated(ny1234, ah to name a few), there are a lot more things to consider when purchasing RE that a simple math equation. Probably why a few including myself don't take him seriously.
Have any significant midwest markets been growing population-wise or by gross economy in the past 20 years? If no, rent in such a declining or flat market. Transaction costs are too high for the short-term comparison, and for the long-term comparison you have to assume a trend reversal.
Dealboy:
If you are living in NYC and renting in Chicago you might experience significantly
higher naintenance costs + significantly lower revenuwe because as an absentee owner
dishonest brokers and vendors will - rightfully - consider you a pigeon.
That is a real factor which has to be considered by any realistic investor: control
of the property.
And if you need a local broker to rent for you you will run up against the same problem
recently discussed on the condo-tel thread: the commission on your one unit doesnt com-
pare with those that can be earned from investors with multiple units and locals who are
better able to switch brokers: so you might suffer from LIFO rental - last in, first out