Friends cashing out. Live rent-free forever

Owners have tons of gravy, including a multi-million dollar payout when they retire or 30 more years of rent free living. The deduction is almost a moot point, and most owners earn too much anyway. Take the million dollar lottery payout at retirement and be happy.

Renters, they can't afford to buy. They will need to be broke renters until they can amass 6-figures liquid. Most idiots can not manage to do this. Hence, they do not get the jackpot at retirement and 30 years of rent-free living, to boot. Lifelong paycheck to paycheck renters?

Buyer buys $80k townhouse in 1980. Sells it for $6mm when he retires. And no, saying he could have taken that $8k downpayment to the racetrack and put it all on some horse (or investing into a company on the verge of bankruptcy) is not a valid opportunity cost comparison, you blithering imbecile.

What if stupid renter eventually buys in old age? Owners would be living rent-free at that age. Instead, she subjects herself to $60,000 a year in rent. LOL, nice "retirement" sucker. Correct, she is a ginormous fool. This is a case of "too little, too late" She should have bought something back in the 1970s or 1980s, like other people her age. She'd be sitting on millions and be living rent free. A true idiot renter who had made things even worse. At the least, should have moved to a $1500 studio.

Maybe not NYC, but owners have literally recouped 100% of the cost of their apartment in the 10 years of paying below market cost to own than to rent (owning is much cheaper than renting). Even if the apartment was today valued at $0, owners am still ahead. Wrap your mind around that.

2 years ago, I recall seeing $200k studios being posted here. Of course, some of SE crazies told buyers they were CRAZY. Now, there seem to be none of these $200k studios. If the cheapest studios are now listing for $300k, can we infer that the smart investors who bought 2 years ago are now sitting on a 6-figure profit cushion? Pretty damn incredible. Live for $1000/mo, and get paid $100k to do so. A renter doesn't see that sort of money in a lifetime!

Renters LOSE: Bought in 1983 for $1m. Sold in 2012 for $8mil. Owner walks away with a $7m profit. Renter's profit? $0. Yes, those brilliant renters can avoid the increasing cost of electricity and point out the 6 people who bought in 2009 who are underwater. They are so frickin' smart! Just think owners live for free for decades after paying off the mortgage. And get $7 million bucks as a parting gift.

Renters get ZERO percent return. And, renters pay MORE every single month, both during the mortgage and after it's retired.

Average renter net worth $5k
Average owner net worth $250k

Renting is for short-term thinkers. People used to say Manhattan was overpriced in the 1950s, 60s, 70s, 80s, and 90s. Guess what? Anyone who paid off their mortgage over 30 years was looking at a jackpot of wealthy when they retired. Renters? Nothing. Just sniveling ants trying to keep their rent control. If you take a long term perspective, buying is ALWAYS a no-brainer jackpot lottery system for your retirement. And, no, being down on your purchase from 2010 does not negate this.

Wow, anyone who bought a studio or 1BR in the 1990s is sitting on about $300,000 of cold hard cash for apartment sitting. Real estate is truly a money tree, if there ever was one. Oh, and you'be be living mortgage free by now as well. For the rest of your life.

NOT BUYING NOW VS. NOT BUYING EVER? BIG difference. Sure, this is a stupid time to buy at inflated prices after prices have gone up x00% in the last x years. Anyone who already bought from 1850 to 2008 has made out like a robber baron. That boat has sailed. Anyone who bought in 2009 or 2010 lost lost money. BUT, anyone who never EVER buys in their entire lifetime is a stupid f*cking renter idiot funding someone else's retirement. It's an important clarification that some here are too dumb to understand.

I am 100% agreement that prices are headed down. If you're not already sitting on a mountain of pre-2008 profit, then don't bother. That ship has sailed. Owners should now just concentrate on paying off the mortgage, and living rent free for the rest of their lives. Renters, well, I guess can just keep paying off their master's mortgage.

You're lucky they don't have debtor's prison anymore, dumbbell. You'd live free there for all eternity.

Deal boy, I am no bear on realestate, sitting on at least a 35 percent gain on market value ( much higher on down payment) as per the same line comps for a 2011 purchase, and believe that buying in a coop ( not condo necessarily) is still cheaper than renting with 5/1, but in your analysis you assume the renter did not do anything with the down payment money.

>sitting on at least a 35 percent gain on market value ( much higher on down payment) as per the same line comps for a 2011 purchase, and believe that buying in a coop ( not condo necessarily) is still cheaper than renting with 5/1,

Uh oh, how many more years left on that 5/1? Still sweating over what happens when interest rates rise? Bye bye 35% gain? Bye bye affordable monthly payment? Why are you the most scared owner on SE?

dealboy,

if you had bought the dow jones index in 1983, it was at 1250, not it s at 15000, it s 1100% gain, more than the 700% gain you re talking about (and stock pay dividends too, like real estate can give you cash flows, both are a couple of percent). Clearly, you just don't understand much about finance, cash flows and inflation...
As for your forecast on prices, only time will tell.

Renters don't have money to invest. Owning has a cheaper monthly nut than renting. So, it's the OWNER who gets to live cheaper for 30 years, then live free, AND have money to invest each month. Renters simply pay rent, and investing nothing. Owners live cheaply and invest the difference. The only thing in favor of renters is the downpayment. But, if they had the downpayment, they wouldn't be renters!

Average renter net worth $5k
Average owner net worth $250k

TheTourist, just shows what you know.

If you had bought that in 1983, how many times would you have renovated the Dow Jones kitchen? How often would you have replaced the gold/red flocked chinoise wallpaper of the Industrials? What would have been your assessment for the index's crumbling facade, and all the Local Law 11 inspections along the way? How soon would you need to rip out the design-obsolescenced "timeless" 1990s Martha Stewart for KMart white kitchen with glass-light upper cabinets?

Not to mention all the terlets that you would have needed to flush away every time they got tired-looking.

You'd be too poor for the poorhouse to take you in -- just like dumbbell.

alanhart and the terlet humour again.

Dealboy, are you trying to start a debate or are you just simply that naive?

Fieldchester and his new names again. How many has it been, now?

Hi aboutready, are you back from your latest vacation, or just checking-in mid-transit? Tell us about what you saw and what you did, we want to know about your latest vacation!

"Owning has a cheaper monthly nut than renting."

Thuis proves the OP is not worth responding to.

> So, it's the OWNER who gets to live cheaper for 30 years, then live free, AND have money to invest each month.

Are we all talking about the same borough here?

I live in a place called Manhattan where prices sky-rocket with size. Almost no one can afford a family size apartment out of the gate. If fact most people stay one 0-1 steps ahead (e.g. live in a 1-bed when really need a 2-bed).

Dealboy, I take it you would forgo raising a family to lock in a cheap studio apartment living for life?

I tend to agree with dealboy that renting is a losing proposition. Many renters would like to buy, but saving up for the down payment, closing costs, and 1 to 2 years of liquidity requirements is nearly impossible in part because the rent and taxes are so high.

@dealboy

then if the problem of the renters is that they have nothing to invest, what you are saying has nothing to do with real estate really. I just pointed out that real estate has not been a particularly good asset class in the last 30 years (compared to other like stocks). And for many people WITH money, in many cases they would be better off renting and just investing their money. For people with no money, yes it sucks, but it has nothing to do with an owner/renter thing, it is just a have and have-not thing, and you did not invent much here saying it s better to be in the first group...

One thing is for certain, tons of people are maxed to their limits. I definitely think the rental market is hitting or has already hit, a peak of sort. I am curious to see if the rental market will soften in the 4th qtr and 1st qtr next year. There are buildings that are are offering no increase renewals to their tenants at this very moment, something just 4-6 months wasn't being done. In addition, if you do a general studio and 1bdrm search on streeteasy up to $2500, which really is the best baramoter of the health of the market, I am seeing a lot of downward arrows (I.e. price reductions), which based on what we perceive of the market, shouldn't be happening. I am curious to know if others have a similar belief of a softening rental market. I mean frankly, a shitty studio for $1900 in a 4th floor walk-up in midtown west (hells kitchen), for example can't possibly go any higher at this point. The same apt that was $1450 in 2010. I think most people would agree and are just not ready to admit it. I see a lot of investor minded property owners on these forums that somewhat refuse to believe we might very well be at another peak in the rental market, perhaps the entire real estate market in general, although property for sale remains very tight. Thats not the case for rentals. There are actually quite a few rentals on the market it appears.

And before people ask why "$2500 is the best barometer of the market" that is 40x $2k and 40x $2500 -- $80k and $100k respectively, which is the most realistic range for a working professional in NYC without any type of parental support, etc. That's how an intelligent and practical landlord used to and should still think. Although I'll admit many landlords seem to automatically think you have a "guarantor" these days and if you don't and do not qualify for their obscene $2250 a month studio rent, then you're basically screwed. That type of practice in the NYC rental market can only go on for so long before it retracts. I'm not taking about the countless attorneys in the city who make $250k a year and rent a 1bdrm in a lux doorman building to $3850. These people don't count. Despite what appears to be endless amounts of these buffoons, that's actually not the reality of things in the rental market. What I witnessed last week at a studio for rent was very sad. The quality of applicants were not very good and it was it was watching a moment of panic, while had that studio been $1650 its real value and not $2250, 75% of the visitors would have qualified. Weird stuff when you're actually witness to it.

"And before people ask why "$2500 is the best barometer of the market" that is 40x $2k and 40x $2500 -- $80k and $100k respectively, which is the most realistic range for a working professional in NYC"

I would say that's even pushing it. Take-home pay (after federal, state, city, social security, medicare, health insurance, maxing out 401k) for 120K salary is about $2500 every 2 weeks.

dealboy forgot to mention that the 500K plus in gains is tax free as they are married and the apartment is their primary residence (i'm assuming). i'm sure they held onto the apartment for 2+ years.

http://streeteasy.com/nyc/talk/discussion/36413-1-br-20103600-20114200-20134800-fee-each

"Real value"?

Why would a landlord rent it out for $1650 when there're tenants who'll pay $2250?

dumboy

A client of mine purchased a 3 bedroom unit in Williamsburg for about 980K and now trying to sell it for 1.7 million. That's a cool 720K profit in 4 short years. They're going to take those winnings and buying a house in Long Island which haven't moved since 2009.

"dealboy forgot to mention that the 500K plus in gains is tax free as they are married and the apartment is their primary residence"

There are lots of tax benefits to owning. The irony is that people who can afford NYC real estate probably don't need all these special tax benefits:
- capital gains exemption up to 500k for married couple in primary residence for 2 out of last 5 years. No other investment has this capital gains benefit to my knowledge.
- mortgage interest deduction
- ability to deduct portion of maintenance fee that is property tax
- if you consider inflation to be an indirect form of taxation, then the portion of the home appreciation that is due to inflation can be viewed as a tax benefit. Also ability to avoid the portion of rent increases that are due to inflation.

"now trying to sell it for 1.7 million"

let them keep trying. and if they sell for 1.2 Mill, after 10% in and 10% out, they'll be left with..... their down payment while they spent 4 yrs paying 1 1/2 times what a similar rental would cost.... oooops

Closing cost was covered by the developer.
They don't need to try, already got a number of bids for their unit.

Dealboy,
You talking about this unit in Long Island City?

http://streeteasy.com/nyc/sale/976404-condo-50-09-2nd-street-hunters-point-long-island-city

Bought at 697K with closing cost covered by the developer.
Looking to sell at 1.195 million.

try generating REAL returns in the equity markets. theoretically one could have gotten a higher return in the market with all the S&P going up blah blah talk but really... think of how many people actually had enough balls (risk appetite) to realize those returns over the last 30+ years. i talk to my tax guy and he's like people (retail) who have brokerage accounts report losses 90% of the time. HE SEES THIS EVERY YEAR. not many people i know make money in the market. fine if you can leave your money in some S&P index forever and not look at it, go for it. NOT REALISTIC

not only did the 2 people make 500K TAX FREE (if married and primary residence blah blah) but they actually were living somewhere nice (most likely a place they wanted to live). put a price on that and annualize that return.... CUS YOU CAN'T

let me sharpen my pencil and do some calculations...

Apple is at $505. My in was $390. Times 2.5K shares... add in dividends, delta with $2.4 sprint trade... minus minus 400K short puts expiring worthless at 8-17-13.... mix in some reach around.. invested capital of $0... $1MM up...

w67 can't seem to get his rate of return.... something about can't divide with zero....

FLMAOzzzzz... it's all good, GO TEAM RE! Carol... pls keep it pumping... W67 just wants you to know... W67 IS ON TEAM RE!

w67, you forgot to add in your share of the 200 condos you bought.

luciato, you've been on streeteasy since the financial crisis, but only 104 posts. What brought you back? Are you selling?

Field jester, you've been on SE forever. With absolutely no apparent reason. Are you or have you been interested in buying or selling? Grow the fuck up you immature and misinformed arbiter of pedantic nonsense.

Yikes - 1.195 for a building almost next door to loud train depot, low income housing, below average schoosl, etc. We must be going into a bubble!

http://streeteasy.com/nyc/sale/976404-condo-50-09-2nd-street-hunters-point-long-island-city

Bought at 697K with closing cost covered by the developer.
Looking to sell at 1.195 million.

You know, I was thinking more about what dealboy said and thinking about aboutready. Aboutready saved money by using a government supported program to save on rent, then received a windfall lawsuit settlement at the expense of the taxpayer, and she got to use all that money and savings to go and buy a place some time in 2011 or 2012. Oh, and the place aboutready bought ... tax abatement.

"Yikes - 1.195 for a building almost next door to loud train depot, low income housing, below average schoosl, etc. We must be going into a bubble!"

Loud train depot? Not an issue as the trains are 3 blocks away.
Low income housing? No, it's middle income housing.
Below average school? No, PS78Q is rated an A. New elementary and high school just opened with state of the art facility. None of this old stall Manhattan schools with no room to breath.
Park? An extended Gantry park just opened last month and it's by far the nicest park in all of NYC.
Going into a Bubble? So at $550 psf, you idiots were screaming to sell. Now at $1,000 psf, you idiots can eat crow.

That unit is banking 75% gain. Eat your heart out mofos.

Hahahahaaa. Go team RE!

And pencilstreet. Did you bank $1mm in 3 yrs?

I banked a pen up your urethra.

now a urethra fixation....interesting...and we've expanded the device selection to include pens.

do share any other bodily/device fixations you may be harboring, carol.

I agree with yicky, that's gross

sorry, yikes, not yicky

>One thing is for certain, tons of people are maxed to their limits.

Not sure what planet you live on.
Everyone is flush with excess money, and has no idea how to invest it.
Hence the historic bond boom and bubble. All this money chasing nothing yields.
Every pretty much has serious excess disposable income, and have no idea what to do with it.

> I mean frankly, a shitty studio for $1900 in a 4th floor walk-up in midtown west (hells kitchen), for example can't possibly go any higher at this point.

If it went to $3000 a month, nothing will change.
People were saying NYC was overpriced in the 40s.
The 50s. The 60s. The 70s. The 80s. The 90s. The 00s.
Can you see a pattern yet?

For the next generation, NYC rent will only double from here as urban and suburban population drains accelerate to ghost lands.

> $80k and $100k respectively, which is the most realistic range for a working professional in NYC"

$80k and $100k is what cops and teachers make.
For private, that is junior level wages while you're in your mid/late 20s.
Then it takes off into multiple 6-figs.

"For private, that is junior level wages while you're in your mid/late 20s. Then it takes off into multiple 6-figs."

Which industry are you referring to? Finance, I assume?

”If it went to $3000 a month, nothing will change. ”

Such rents will only come about if the 40x ratio changes, because jobs with $120k salaries for people who are in the market for studios (i. e., under 40 and not yet married) are not exactly easy to come by.

With Mortgage lows still low, why can't a person making 120K finance a 2 bedroom. 120K x 60% = 72K. That's about 6K a month available after taxes, insurance, etc.

Assume you can find a place between 600-700K and need to borrow 500K, that's about 2,500 a month on mortgage payment for a 30 year fix (4.5%). Throw in tax benefits and you are really paying around 2,000 a month. Maint & Utilities will set you back about 1,500 leaving you with about 2,500 a month for fun and games.

$2000 for a 1BR is cheaper than renting!

w67 in now on TEAM RE.

Agreed deal boy. Buy and own a piece of it. Why pay rent. Interest rates are at an all time low. RE is good and holy. It's a great hedge against inflation and a "REAL" asset. Not some piece of financial paper that can disappear whenever the gov't deems it too expensive to pay for.

Rent at $5K?... after tax cost at $2K... it's a no brainer. BUY RE.

"With Mortgage lows still low, why can't a person making 120K finance a 2 bedroom. 120K x 60% = 72K. That's about 6K a month available after taxes, insurance, etc."

Take-home pay for 120k is about $2500 every 2 weeks after taxes, health-insurance, and maxing out 401k (which everyone should be doing, unless you trust in Social Security benefits not being cut and Social Security retirement age not being increased). That works out to $5400 per month on avg. Assume $2500 for a studio, and you're immediately down to $2900 per month. Then factor in student loan, utilities, phone, transportation, food, etc. and you quickly realize that such a person is not going to be socking away large amounts of savings.

Also, the down payment of 72k is not the entire story. Closing costs and transfer fees can easily add up to 10k. And don't forget about the 2-year liquidity requirement for most co-ops. So if maintenance + mortgage is 2k/month, that would translate into 2k * 24 months = 48k. So 72k + 10k + 48k = 130k. A significant amount for someone to save out of salary. Probably only way to do it is through bonuses, which tend to be significant in the financial services sector.

>w67 in now on TEAM RE.

http://streeteasy.com/nyc/talk/discussion/35745-well-well-w67-says-he-owns-67-condos

Minions.....

sorry but this helps no one.

It's appears that myself and 9d8b..... Are the only ones who truly grasp the reality of the situation and really the root of what is being discussed.

Got to love the comment above "everyone is flush with excess money" Ha. I have about $70k liquid and you know what that gets me in NYC? Not a damn thing. I can even put a downpayment down on a $250k apt, if it were even to exist. So "flush" is relative to perhaps your own situation, but hardly a testament of others buying power. I could blink and that $70k is gone. You do realize that in order to buy even just a 1bdrm, say $600k, that you need an annual income of $250k and at least $250k in liquid assets ($120k for downpayment) and another 50% liquid for back up. That's bare minimum and while there are many yoyos that can do that and have that or more, we're approaching 1% territory. Obviously people like to move those 1% goal posts to claim they're NOT part of it, but $120k a year is a very realistic income (top end) for many folks. And no, teachers aren't making $100k. Some sure, most, no.

And that's where the problem is. 70K in cash and you want to live in Manhattan or communities (Williamsburg, dumbo, parkslope, lic, etc) right outside of it. Here's my recommendation. Go a bit further out. How bout Rego Park, Forest Hills, Kew Garden in queens? You can get a 1 bedroom for about 200-250K. Your commute is longer and the communities might not be as hip, but those are the sacrifices you need to make.

nah - 1% in Manhattan is about $850k+ and there are over 15,000 a year making $1 million+ that claim Manhattan as their primary residence. There are also a lot of people from outside the city which have pied-a-terres as well. 1% of the US working population alone is over 1 million people, not to mention the rest of the world. so if you account for all buyers, there are likely several million people in the world who can easily afford a Manhattan apartment. also keep in mind, we are discussing 1% income. 1% net worth is over $10m in the US, which means there are a lot of cash buyers out there in the US alone.

street easy has less than 3,000 listing for apartments in Manhattan over $1m...if you do the math, it is not difficult to see why so many people can buy here. you are thinking like a W2 employee, not realizing that a large proportion of the people in the 1% own businesses and make money in a different way than getting biweekly paychecks. in my rental building there are several hundred units, and almost everyone owns an LLC or Corporation. just trying to put things in perspective.

top 1% is net worth of $6.8MM, not $10MM. And you assume incorrectly that all or even most of those people would spend that money on buying in Manhattan or NYC as opposed to any of the many other places in the U.S. people can buy $1MM plus homes.

"“The top 1% of U.S. households have a net worth above $6.8 million or at least $521,000 in income, according to data from the Federal Reserve and the Tax Policy Center in Washington. The cutoffs for the top 5% are $1.9 million in net worth, or $209,000 in income.”

from

"Baby, You’re a Rich Man
LAURA SAUNDERS
WSJ, December 28, 2012 "

http://online.wsj.com/article/SB10001424127887323300404578205502185873348.html

http://economix.blogs.nytimes.com/2012/01/17/measuring-the-top-1-by-wealth-not-income/?_r=0

says $8.4m

but we are mincing words. also, remind me where i said EVERYONE or most people are buying here.

3,000 apts on sale

1 million potential buyers in this country alone that have the funds to buy.

0.3% would need to buy. is that all or even most to you? now u may say ok but that is now and tomorrow the inventory will change, etc. u can run the numbers any way u want...

i'm not even counting foreign buyers, which i would guess are more than 25% of rich buyers, maybe an agent can give a more accurate figure on that.

the world is awash with alot of wealthy individuals and although the game may stop if heli-ben cuts off the supply, it doesn't change the fact that there are a lot more rich people in the world than needed to support manhattan prices currently.

of course, u don't need to listen to me, just look at the prices.

WTF? People can BORROW. THERE IS plenty MONEY. FED just gave 2yr green light to pump....

3% 30yr fixed... FK a $65K/yr mid level secretary and $50K/yr cop can swing a $2MM mortgage and if they get in trouble, there's another bank (tax payer) willing to fund $100K 2nd...

YOU ARE JUST FKING RETARDED IF YOU DON'T BUY RE. Hell, get two and get a NICE SOFA with an Xbox.... getting PAID to sofa surf.. .yeah homies.

After TAX MONEY. LEVERAGE! HARD ASSET... yeah boy!

Look at APPLE it went from $700 to $390... IN A YEAR. WTF... RE RE RE.

W67 gotz CRAZY LUCKY ON SPRINT... Ain't gonna happen again....

GO TEAM RE!!!

APPLE.. NO CHINA, a thumbprint and $800 IPONE? WTF APPLE IS DEAD MONEY....

RE
RE
RE

NO MATTER WHAT DON'T BUY APPLE

Burp

"if you had bought the dow jones index in 1983, it was at 1250, not it s at 15000, it s 1100% gain, more than the 700% gain you re talking about"

whoops

"Renters don't have money to invest"

Now, that's just being dumb.

"Owning has a cheaper monthly nut than renting"

Not even close for a while.

"But, if they had the downpayment, they wouldn't be renters!"

Pathetic.

Jeez, some pretty lousy rationalizations here. I guess when that's all you got...

"Dealboy, are you trying to start a debate or are you just simply that naive?"

Some naive... and a whole lot of wishful thinking.

My SSOs are up 500% in a few years, btw...

Fk somewhereelse w67 is up 338% on apple 9/27 $485 call options. But I only out $50k in it.

How much you gotz in SSO and how much of it is your net worth? Come on make shit up. W67 always does.

That's over the weekend when the imbeciles were panicked! On no nobody wants an iPhone anymore! Half the line at the apple store were droidbots throwing in the towel. And there are millions more Iphone users waiting for their 24 month contracts to expire. And all the old iPhones end up in china/India. Cash flow machine.

Intelligence Quotient Scale:
Moron = 50-69
Imbecile = 30-49
Idiot = 29 & below

so...your family knows about you?

awkward.

One year later, friends taking steps to sell. Apt now worth closer to $1.2mm. They will walk away with at least a $600,000 tax free windfall, after ALL expenses (closing, realtor, lawyers, etc) They will now live RENT FREE from their mid 30s until they DIE.

Renters gonna rent.

Dealboy, I agree with much of what you say. But where in NYC can one buy a home outright for only $600K -- at least comparable to the home they're leaving that's selling for $1.2 million? Unless they're moving to another city?

Yes, they are moving to the $750k suburbs. Take the money and run 30 min. commute to midtown, and $600k in profits applied towards the home.

LOL "30 min. commute to Midtown".

Half of Manhattan can barely get to Midtown -- DOOR TO DOOR -- in 30 minutes.

"30 minutes" on a Metro-North timetable does not equate to a 30-minute commute.

So they're moving to the $750K suburbs ... a clever variation on soul-murdering known as soul-suicide.

Fondue, Amazon, the deelux cable package, perpetual remodels because of bad bones, a shift to the wrong political party, hate-radio addiction (plus of course an embarrassing case of oxicontinence, kept on the hush-hush).

And all for the chance to have pistachio walls for a few years.

Excelsior!

I like fondue. We painted our walls at PCV (although not pistachio) and kids did unspeakable things to the parquet floors (involving nail polish, among other things) and we received 100% of our security deposit when we vacated.