am i stupid?

"not looking forward to dumping 60k/yr into a rental..."

but very willing to dump $100k/year not including transaction costs and possibly part or all of your down payment?

Let me be the first to tell you that owning a home when you have a kid is rarely a bad move in terms of family stability. This thread will very soon devolve into W67 and others telling you the bottom is somewhere in the future, and they're probably right. But if you plan to move in 2 years or 3 or 5 or whenever the "bottom" presents itself, you will uproot your family at a potentially inconvenient time. If you plan to be here for a while, buy the apartment - sounds like a good deal. My advice would also be that you consider putting more toward the down payment.

Purchase approved. You can easily afford this.

Assuming the property is properly discounted to where this market is trading today, even with the slight improvement since last March, I say its a GO if you truly love this apartment, it meets all your needs, and you really are sick and tired of renting. If it doesnt OR if the price you have to pay represents a premium over where this market seems to be trading, then you have some choices to make.

good hedge against inflation, Get a low interest mortgage and block another 200K in long term secure investment and it is a home run.

the price of the apt seems to be in line with where mkt is today.. Very little supply for what we are looking for unfort. .. same line, 1 floor above traded higher in 2006 by about 100k, same line 5 floors higher traded higher by 120k in 2004, and same line 7 floors higher traded 300k higher in early '08 at the peak. Be clear here, I'm not looking for a home run investment. I am looking for a stable, affordable (for me) environment where I can safely and comfortably raise a family. If I get out flat in 5yrs, I am pretty cool with that..

Key question is whether you are planning to have another child and wheter that apt will be big enough for 4.

1400 sf is big enough for two kids. Sheesh. This is NYC, not suburbia.

the apt could handle 2 kids pretty readily... thats why i am ok buying it. If the world fell apart and I needed to stay there for 10 yrs, I theoretically could. and I'd be PS6, so I could avoid the 30k for private school and still get good educations etc... Peanut... sounds like we are in a similar boat...

You didn't mention your non-liquid assets but you sound fine.

On the asset side, after taking $350K for your dp and $600K as an unemployment reserve, you still have $450K in liquid assets for weird unexpected expenses like a big medical crisis.

On the income side, the rule of thumb I put in my book is that you can carry a loan balance of 2-3x income, and you will be nicely on the lower half of that.

ali r.
p.s., the book's here: http://tinyurl.com/2ag28z

want to buy my apartment instead? condo. 1350sqft 3br -

What does the mrs think under this scenario.
Pay off home, have $0 savings and hope for the best.
Or. Rent 2 yrs, see how pareting changes your life, bank another $300k, buy the same place for $1.0mm, and buy wife $100k 5th yr anniversary ring?

Choice two seems like what w67 would do, cause I guarantee you NYC re is gonna take another kick in the groin this summer as bankers hoard their cash.

ps6 is so yesterday, by the way, lol.

With a 4-6 year time horizon you're a little on the short side in my view as the transaction costs will offset much of the interest savings and equity accumulation, not to mention possible further price declines. But since you are willing to stay up to approx 10 years if circumstances warrant, I'd say its a go. From a finances perspective, you're certainly clear.

Sorry w67th, but a guarantee by you that the same place will be available and drop 40% in 2 years is kind of like the guy in my office who guaranteed the Jets would win the Super Bowl last week. They don't make grains of salt that big.

Seriously. Just bc you can get 80% financing do you look at your $1.4mm apt as $300k? Flmao. No wonder we are in this mess.

Fwiw, I'm looking at this dude's $1.4mm as 1.4 mm more reasons not to have to work and. Spend time with kids money, not 'catching' a falling knife...... Butz that's just me.

Once again bj, (who remembers bj and the bear?), if my wife feels a lump and says you've got cancer..... That's a 100% guarantee. When she sees a patient and says dead in a week, you are dead in a week. Jets she knows nothing about
I've laid my arguments ad nauseum, I just get to the punchlines.

Call me suburban if you like, but in your situation, I would wait to buy until a C6 fell into my price range. You have NO idea if 1400 sqft for 2+ kids (I assume you want more) is livable or not until you've lived it. It's more than fine for some (esp. if you don't have any other options) but less so if you do have options.

In my opinion, to be truly "safe" if there is such a thing, wait for a classic 6. Oh, and ask the board about subletting.

i'm 100% with you 67w, but some people just like the rat race. they define themselves by their work, they are not looking forward to break free from it.

W67: not many men (I'm assuming that cb is a guy) have wives who can support them in style. So like it or not, he's stuck in the rat race.

Cbs: forget about being flat, if you lost your job tomorrow, you may lose your entire dp to get out of the apt. Ask yourself if that's okay. It may very well be okay. I was of that mindset when I initially bought - as in I was prepared to say goodbye to the 20% dp in return for the additional comfort and space (at that time rent > costs of buying). And there are no guarantees as to school zone unless you live on the west side of the street next to PS6, and even then.

Raise of hands, how big is your debt load?

I'll start. $1mm cash, zero debt, $700k/yr income (pre tax). 5yo and 4yo late 30's. And I'm not buying till there is calrity in rentals' freefall

Flmao. No one fell for it? Damn. Id thought they'd be 1mm extroverts in NYC se..... If it makes anyone feel better I'm typing this from the computer room in okc correctional facility.

looking at what I could "afford" vs what I am buying, I think I am being conservative with my purchase. I could probbaly "afford" a much more expensive apartment, but I am not stretching myself too much here.. YEah, there are financial risks with buying a home now, I get that.. However, the added joy I have from owning a home (or as I'm sure you'll point out, co-owning the home with the bank), decorating it the way I want, being part of a community in small co-op with other young families, and knowing my wife and child will be in an environment that will be good for them is appealing. Being in a rental building to me is very transient, you never know who your neighbors are, you never have any incentive to improving the environment you live in (why spend $2k on new window treatments, just sepnd $50 for example) this plus being a short stroll from the park, the subway, the gorcery store, the drug store and all the schools and baby services we will need, makes me comfortable... We live in a pre-war rental now and although its a nice building, it in no way feels like home...

w67, at what age did you start making serious $?

cbs, good luck to you! seems to me that you've already opt for buying.

"Make 550-600k per year in relatively volatile industry."

how much could your wife make if you suddenly lose your job?

W67 - new to this a little bit, but it seems you have been ont hese boards.. are you a renter or an owner? I've paid rent for the last 12yrs in NYC..

"I've laid my arguments ad nauseum, I just get to the punchlines."

Well those who are nauseous will have to forgive me if I ask you how you get to a 55%+ drop from peak, especially for the type of apartment in question. I can buy another dip down the road or flatlining, but for you to guarantee such a pronounced drop doesn't really strike me as a Joe Namath situation.

BY dumping $60k into a rental this last year...I saved $200k+ in losses.

Personally, and I have thought a lot about this...if you work in finance as it sounds like you do...you shouldnt buy until you have enough $$$ to put down to qualify for the monthlies on your base alone. So unless you have a $350k base, you should wait until you can push the monthly down to 28% of your base.

The bottom line is it never feels 'good' to rent. However the bubble was extraordinary and to feel the need to buy just 18 months into the downswing just seems too anxious. What you are looking at sounds like a $7k rental, it prob has $2500 in maintenance. 3.8% stinks it just does.

Housemath.com is a good place to do a fully costed rent buy analysis. The problem is -30% is very easy to see, whereas +30% seems ridiculous. Its too much risk to satisfy your yearning to own. Worst case could be -60% from peak.

I think you are suffering from illusion in terms of what you can afford. Finance is a unique industry. Its not like you are an ad exec with a $500k base and a $100k bonus. Even if it were, there is nothing wildly conservative about spending $1.4mm when you make $500-600k. Truly conservative is affording your payment on your guaranteed base.

cbs - as predicted, the conversation has mostly devolved (although not as bad as most on this board). First, if you think you can find an apartment to rent for $5K per month that is an equivalent unit to what you are considering buying, then go for it. But in the neighborhood you are looking at, I doubt you will (yes, if you move to Hudson Yards, Brooklyn, etc. the math changes). I have been here a year longer than you have, rented for half the time, and have owned for the second half. My only regret is that I was not able to own sooner.

I imagine most of the people here who speak about owning a primary residence as if it were trading financial products are either young & unmarried, or not in a financial position to own. Make your own decisions around what works for you. I will also tell you that your wife will feel a tremendous amount of pressure from the new friends she will make through being a mom to own a place - not sure why that is, but it's very real, and very powerful. Similar to "who's got the bigger stone" syndrome.

OT: maybe on the UES, there's a lot of pressure. I can tell you that it's not the same on the UWS. If you really want to stretch an argument as to whether to own or not, here's an argument for owning. Say your liquid assets are 2m, and you don't foresee retiring in the near future, what are you going to put the $ into? If you have been burned in the past and keep getting burned (like moi) on various investments, it doesn't seem that foolish or it seems equally foolish to put a quarter or a third of that into a downpayment? As to the size of mtge, I don't know your job situation, so it depends on your comfort level as to monthlies.

Put it this way, we have been bad at investing our $, it's no worse throwing 20% or at most a third into a downpayment. If we lose the entire downpayment, it's not any different than losing it in some other investment. The real issue is whether you should be assuming a 1m mortgage on a volatile 500k-ish income. Hmm.

That is my point. Its only in the modern era of recklessness that this scenario would be called conservative. The real question for finance professionals is whether or not bonuses should be relied upon for mortgages.

FYI, you cant duplicated $1.4mm places for $5k a month. Based on sales at 10 E 85 and 40 E 88, $6k rental equals $1.2mm purchase right now. So you can assume say $7k is required to duplicate $1.4mm. The trouble is its hard to find that extra 200-250 sqft in a rental in this neighborhood.

I will tell you, as we have a one year old, you should be in no rush to buy that extra space for the second kid ahead of time in a market like this...just because you are 'sick of renting'. Its a suckers bet. You can get that $1.4mm place in a rental for less than $8k. Call transaction costs and deductions a wash. And 1400 with a quasi-third bedroom might feel tight when the second kid comes along.

You are not crazy, you just want to nest...you are a numbers person...the numbers do not makes sense here at all.

As a young mother in a relatively situation to cbs2003 (haven't bought but similar to slightly higher income/savings profile), I kind of agree with NYC10023 - the pressure to own is not that great, I don't think. While it's definitely there (of my mostly male collegues who are looking to buy - their wives want to more than them), I think it's more self-imposed by the women than it is peer pressure. None of my "mommmy" friends ask us why we don't own or seem to care.

I do completely understand the wanting to own a home thing. On the other hand, now that we have a child, I kind of like knowing we can pick up and go at any time. It's a mixed benefit.

Since you think you could have another child there, that gives you some nice downside protection. My question is if you think you'll only be there 4-5 years (in an ideal world) why you're paying for a school district you really won't use (kindergartnen starts at 5 at the youngest - with a spring birthday the kid will be 5.5). I understand a good school zone can provide downside to an investment, but there is so much risk of rezoning these days I would hesitate to buy in a zone I won't get to use for several years. If you had a kid who was starting immediately I would feel differently, since often you can stay in the same school even with rezoning once you're already there.

Right, he'd be paying for space he doesn't need and a school. Granted, I live here in PS 6 and its just nice. And you really dont get much less for your money here than you get East of Lex.

Resist the urge! Enjoy 2000 level rents.

CBS- This is a bear den. West67th and Aboutready are mama and papa bear. Good luck with your decision. Either way, you are fine, IMHO.

cbs, well said on the merits of ownership. As you've seen, many on this board look at real estate primarily from a dollars and cents perspective and not as a home. I've been both renter and owner and much prefer the latter. With your cash on hand and income (volatile though it may be), the purchase is hardly a stretch by either aggressive or conservative measures. As I said previously, the time frame of your ownership is my only concern, but so long as you are prepared (and will be happy) to stay put if the market demands, good luck with your purchase.

It would be fine to take a common sense traditional view of owning if we hadn't just been through a historical bubble followed by potential inflection point in the rise of the finance industry (1980 to 2008) in the capital of finance. You open yourself to unnecessary risk by buying right now, under your circumstances.

I do agree fundamentally with Rhino. The "unnecessary risk" in my view is predicated mostly by your time frame of ownership. If you had said 10+ years, I probably would have been an unequivocal yes. But if you truly do want to stay 4-6 years, and possibly less, then stay a renter.

Gee, I saw the title and I thought LICC was putting that out for a vote.

I own, so don't oversimplify. This is not a bears-only thread. More like proceed with caution.

"Make 550-600k per year in relatively volatile industry."

How much of that is bonus, and how much is salary?

I have to tell you, in talking to people who work on Wall Street (that is, the people who are cleaning up the mess on Wall Street), many folks are still in deep denial about their future earning power. We're in for some major compensation adjustments, and no more will incompetent fools be able to hang onto half-million dollar jobs based on who their father-in-law is or where they went to school.

I'm not saying "cbs" falls into that category, but for the long term, he would do well to buy a home scaled to the affordability of a $200K/year salary, rather than an admitted "volatile" 600K year "income".

Buy the place and enjoy home ownership.

You will never be sorry.

Me, I'm getting ready to sleep on the couch on the corner of w67th street and Don Ho Boulevard.
(what's that I feel....oh...tiny bubbles)

nyc10023: I am interested in the comparison of this property to a classic 6. If there are eventually 2 children, is there a specific difference that jumps out in your mind -- like the separate DR or the Maid's? Or is it more just the general openness of having an extra 300-400sft in a C6? (I presume this would depend on a lot of things like layout, bathrooms, sleeping arrangement for kids etc...)

cbs-- you can obviously afford this for several reasons, the largest of which is your liquid assets remaining after downpayment/closing costs. In unfortunate event of a job loss...that cushion buys you a LOT of time/flexibility to figure out plan B.

Overall if you like the apartment you probably won't go wrong in that neighborhood, but I also can't disagree with the idea of waiting for something slightly larger such as a classic 6...all depending on your expected needs/preferences.

Even more importantly, will your wife be able to swing the mortgage and monthly maintenance after the divorce?

Coupla observations.. (bj.. i'm doing taxes.. and can't bring myself to the thesis of bubble to 50%+ down... but again => cash flow => asset price absent "crazy" credit => ipso facto greek butt lovin' => rental need to stabilize bf asset price stabilization.
1) Falco.. get me the address, I'll take care of the barking dog;
2) nyc10023.. given your penchant for bad timing... here is a winner, Volcker crusader of 18% mortgages will crush NYC RE, sit $2MM cash. Wait till gov't risk free 10% IRR, invest $2MM, earn $200K/per year for 30 years. That should make up for all your other "bad" decisions. - cant' wait till me wife starts losing money in the mkt and then tells me.. let me buy that tiffany ring for $400K, at least we "know" itz a bad investment going in! - ; )
3) UWSer... that's like labeling my wife a Cancer causer!, she happens to specialize in it;
4) The fact someone asks Suze Orman if he/she can buy something means you are never allowed to buy it, GIRLFRIEND!;
5) notadmin.. .as soon as my wife stopped paying for the "privilage" to work in a Ivy Tower. that would coincide with the birth of our 2nd child, 4 yrs ago.
6) cb, renter and owner. I've owned in nyc since 1995... but choose to rent my 3bdrm at the moment and keep my 1bdrm coop. FYI, my cost basis on the co-op is $200psf, in 1997; last trade $1000psf (nope no bubble herez!), --- let me preempt... I choose not to sell, bc my mother lives in the apt at the moment. I dream of my kid getting into Juliard and giving her the apt when she turns 18. See I can be irrational like all the other ninnies. and another thing, I do tend to compartalmentalize assets, that's the "no touch" heirloom.
Flame away.....

CBS, I'm firmly in the bear camp, and I think you're looking at an expected loss of a few hundred thousand. Might happen through higher monthly nut & no benefit for risk on $350K down payment, might happen through a drop in price when you want to sell (e.g., things go your way and you want to upgrade), might happen in transaction costs, might not happen at all. But to me, that is the expectation.

Can you afford a loss of a few hundred thousand? Not a problem for you. Can you handle it even with a job loss? Sure: worse-case, just plow your $1.4M to pay off the mortgage, and a $100K job will cover your maintenance. There is never complete certainty, but you're pretty safe.

To me, it comes down to whether "the benefits of owning" are worth a few hundred thousand to you.

NYMATT - you are a fool.. to the the humans on the board... figure 330k combined salary and totla comp 2009 more like 800k and 2010 750k betweent the 2 of us. (i have guarantee for min) I most likely would look to pay down mtg as quickly as I can... Luckily (for us) we have money for college already put away that is separate from what I consider liquid assets... in addition we probably have 200k put away is 401k / IRAs. we are mid 30s and have zero debt right now... I paid off all my grad school loans years ago.. The apartment has living room, dining room, kitchen, and 3 full bedrooms (1 is former maids) as it is.. so if thats your definition of classic six, then it is.. we have seen 70+ apartments easily over the last 4 months..

cbs: if you're comfortable with your job situation and you love the place, I'd say go for it; but if you're just buying because you're sick of renting and need some stable place to live, I'd say wait until you find something you definitely love and won't regret say 1 or 2 years after buying and want to trade up. I'd also put more into the down payment if I'm buying and perhaps qualify for the conforming mortgage. Good luck!

inonada - so if I own this place for 5yrs and lose 300k.. how is that different than renting for 5yrs at 5k/month and spending 300k?

letz me explain en espanol. si, tu es mistaking capital loss ontopo' de carry senor.

muy grande dinero at risko senor... no es factorito su enormito capitato ato risko, si?

: ) Oh man i'm gonna get flamed by my homies... peace out! Gotta get back to tazes.

"w67thstreet
about 3 hours ago
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Raise of hands, how big is your debt load?

I'll start. $1mm cash, zero debt, $700k/yr income (pre tax). 5yo and 4yo late 30's. And I'm not buying till there is calrity in rentals' freefall
"

Funniest shit i read in a while.

"inonada - so if I own this place for 5yrs and lose 300k.. how is that different than renting for 5yrs at 5k/month and spending 300k?"

None.

How much mortgage can you afford at the given maintenance cost if you told the bank to ignore your bonus?
That would be the conservative view of what you can afford. $1mm is not a terribly big mortgage for $330k in combined base salary. 28% x $300k / 12 = $7700. So you can afford this. The question is how you view the risk of downside. Remember, the downsides are related. The scenario where one of you loses your job, or one or both of you get a zero bonus is the likely the same scenario that sees the value of the apartment down 30%. Maybe it doesnt matter. Maybe you then hunker down and stay there till this first kid of yours graduates PS 6. By then, it should be at or above your purchase price.

It really just matters if you hate renting more than you hate risk. 30%+ downside to me seems way to big a risk to get away from renting. Valuation is not compelling.

So in summary, you are not crazy, but you seem over-anxious in the face of a lot of uncertainty. You may also be jaded, because you have managed through this crisis without disruption, so you are not fully discounting the future possibility of same.

"inonada - so if I own this place for 5yrs and lose 300k.. how is that different than renting for 5yrs at 5k/month and spending 300k?"

None.

Its actually very different...because you forgot maintenance, mortgage interest and transaction costs. The owner in that case is much worse off.

"None.

Its actually very different...because you forgot maintenance, mortgage interest and transaction costs. The owner in that case is much worse off. "

Wrong.
What about the equity from paying down your mortgage over the 5 year period?

let's forget 5 years...how bout 10 years?

"inonada - so if I own this place for 5yrs and lose 300k.. how is that different than renting for 5yrs at 5k/month and spending 300k?"
"None."
"Its actually very different...because you forgot maintenance, mortgage interest and transaction costs. The owner in that case is much worse off."

It's actually VERY VERY different. In an ownership scenario there is chance for upside; you may lose $, you may make $ when the economy recovers. Renting is a always a guaranteed loss.

We didnt talk about principal repayments...but the reality of the current market is, if you work through transaction costs and a reasonable capital charge on the downpayment, then there is no principal repay for an apples to apples rent vs. buy. On an interest only mortgage, your monthly outflows are already more than rent.

cbs2003b -
"inonada - so if I own this place for 5yrs and lose 300k.. how is that different than renting for 5yrs at 5k/month and spending 300k?"

Statements like this make me think you must be a troll. How could anyone earning that kind of salary not understand how different these are? Unless you're a baseball player or some such.

"Renting is a always a guaranteed loss."

Unless the market falls. This all comes down to a market call. Any renter who didn't buy after 2004 or so is right now ahead of buyers from 2005-2008.

After 5 years you still owe ~92% of the original balance.
After 10 years you still owe ~81% of the original balance.

The mechanics of the principal repay dont matter. What matters is the fully costed monthly payments on owning are already higher than rent...So there is no principal repay vs. renting at todays prices.

yeah, was a stupid comment. mea culpa.. funniest part of the whole thing is I work in fixed income so its really what I do all day. Anyway... moving on.. nothing to see here..

You can afford it. You want to buy it. Do what so many other people do. Ignore the risks. Buy what you want. If its not a question of the valuation being sensible or not, then you should buy it. You already know the risk reward is bad.

"but very willing to dump $100k/year not including transaction costs and possibly part or all of your down payment?"

Bingo. I'm not going off ont he OP specifically here, but, in general, it is funny how much ignorance you need to rationalize some of these decisions. "throwing away", "investment", "long term" are terms that sound nice but have led to some HORRENDOUS decisions in the past few years.

Not to mention, the rule of thumb is you have to live somewhere for 5 years to really start thinking of breaking even without closing costs.

This one doesn't make muhc sense to me.

> What about the equity from paying down your mortgage over the 5 year period?

What about all the equity folks you suckered into buying lost over the last year?

"Its actually very different...because you forgot maintenance, mortgage interest and transaction costs. The owner in that case is much worse off"

Bingo.

I love how if you pay a landlord to pay taxes and maintenance, you're "throwing it away", but if you pay the same costs directly, and often higher levels, its magically an "investment".

;-)

At the very least, I wish people would get in the habit of deducting maintenance from the 'dead loss' that renting is constantly referred to as. Transaction costs is at least slightly more subtle...also after tax mortgage interest.

"At the very least, I wish people would get in the habit of deducting maintenance from the 'dead loss' that renting is constantly referred to as. Transaction costs is at least slightly more subtle...also after tax mortgage interest."

Definitely - that's why it's nearly impossible to have a good rent vs buy analysis on this board (yet it's been tried over and over). It gets a bit messy when you have the sponsor covering your monthlies for a while, and anything else that wouldn't really show up in ACRIS, not to mention months of free rent, bonuses, etc.

"inonada - so if I own this place for 5yrs and lose 300k.. how is that different than renting for 5yrs at 5k/month and spending 300k?"

The few hundred thousand I'm talking about is relative to renting, and correcting for the principal portion of monthly payments. Comparing rent to after-tax interest / maintenance / taxes / upkeep / insurance (but not principal), you're probably looking at a $20K negative carry compared to renting (e.g., $80K costs rather than $60K). You might want to consider the opportunity cost of that down payment as well in that calculus, but you've got $100K just there for 5 years. Then you've got $140K in transaction costs (10% of $1.4M), so you're up to $240K. Then you've got to put in your expectation on the capital gain / loss. Mine is negative; yours might be different.

Here's my point. You can handle the risk no problem, so the question should be one of expectation. How much money would you be willing to pay for your perceived benefits of owning over renting? If the answer is at least on the order of $50-100K a year, then life is easy because even in my bearish view.

Alternatively, do you expect to lose money (expected-case)? If you don't, then again you have a simple decision because the risk is easily handleable for you.

The only real rent buy analysis you can do well is knowing the rental market of where you are looking to buy. The only dilemma I see in CBSs situation is that its tough to find nice Classic 6 rentals in PS 6. I think its so dead obvious that unusual times call for caution. You dont need room for a second kid before the first one is born.

"funniest part of the whole thing is I work in fixed income so its really what I do all day."

You rat, having us waste our time ;).

alright.. I'm outta here... thnks for the thots folks.. Will let ya know how it goes.

If your first child is expected in 4 months your timing sucks. Stay where you are, enjoy the stress and sleeplessness that comes with being a parent for the first time. You don't need to throw a move into the middle of all that. BTW, seems you have the world by the tail, take a chill pill and enjoy it. Congrats on the bambino!

"The mechanics of the principal repay dont matter. What matters is the fully costed monthly payments on owning are already higher than rent...So there is no principal repay vs. renting at todays prices"

But is this really true here? Rhino you said this was likely a $7,000 rental, so let's use that.

OP said he was putting $350k down and total monthlies are $8,300. Assuming a 6.0% rate that means $6,295 mortgage payment + $2,005 maintenance = $8,300. We don't know the rate or the MM for sure, but this smells right for this property.

If you look at it your way and run interest-only on the full $1.4mm, then that's $7,000/month in interest and the same $2,005 maintenance. Tax-effect these at 28% and you're at $5,040 in monthly interest and $1,724 in maintenance (assume 50% deductible).

Total tax-adjusted monthlies are below $7,000, which is the estimated rent on this property.

So can't a case be made for equivalence here in the rent vs. buy calcuation?

You forgot transaction costs...but even if I concede that, you nailed it. Where is the principal repay at equivalence? You have demonstrated there is none. Further, I think maintenance would likely be a little higher.

"NYMATT - you are a fool."

How so?

Pointing out your self-admitted "volatile" income, or even entertaining the thought that you might have to finance a divorce (and the odds of divorce in New York City in your income bracket are much higher than the national average of about 50%).

It's not that hard to move when you're pregnant. I did it. Especially if - and this poster clearly can - afford full service movers. You still have to put away stuff yourself, but if you can get movers to throw away all the boxes and wrapping it's helpful.

Much better to move when pregnant than with a newborn. Maybe the current poster is in a 1 bedroom - I suspect they are if they've saved this much on that income profile! A lot of people keep the baby in their bedroom, but this would not have worked for me.

I completely agree that this is not purely a financial decision. The one thing I would say to CBS is that having the baby might cause you to re-evaluate a lot - where you want to live, what kind of job you want to have, whether your wife will keep working (I've know lots who said they would never quit and did; I've also known some women who swore they would stay at home and decided not to). There is tremendous value to staying flexible right now.

Nothing says buy in this situation as described other than ego.

Yes, transaction costs. Also you the buyer may hit AMT so not all the tax savings are necessarily achievable.

But I thought the point people were making is the monthly cost of owning is higher than renting, for this property and virtually all others in this market.

My math showed this property is, very roughly speaking, carry neutral tax-affected and excluding transaction costs. The question is, considering the aforementioned benefits of owning, would a potential buyer rather own or rent this place, if carry is (roughly) neutral?

ps. maintenance might be higher, but for this exercise it would cause the interest rate to go down in order to solve for the same $8,300, which I'm assuming is correct per OP

No the argument was that I needed to figure in principal repayment as a bonus of purchasing. And it is not so at todays prices. It is as you demonstrate. So the real question is, will you be there long enough to amortize the transaction costs...and as well, is the downside worth accepting if you dont even make any return on your investment monthly.

desiring a comfortable, friendly, stable environment to raise your child(ren) is egotistic? but putting your needs and desires ahead of your wife and children so that on the 50/50 chance apt prices come down in the next 3yrs you can brag about on streeteasy is selfless.....only in rhino world.

In an overvalued market, with ample rental choices that the math favors heavily, the tug to buy is ego.

To buy something bigger than you need because you can afford it and are sick of renting...Its heady, and it would and will be its own reward. 50/50 prices fall? Haha.

"In an overvalued market, with ample rental choices that the math favors heavily, the tug to buy is ego. "

Agreed.

Claims of "stability", when you're talking about moving twice in 4-5 years, to me further demonstrate that its an answer already chosen, just looking for justification.

> so that on the 50/50 chance apt prices come down in the next 3yrs

Actually, didn't printer say that 3 months ago?

Turns out its 100%, prices fell again last quarter. So now its certain. ;-)

Go for it.

My buddy bought for cash, a lifetime place...See he doesnt give a shit and wants something better than he can find in a rental.. Thats not me, that doesnt seem to be CBS. If you buy for cash and stay forever. He didnt even think he was getting the market right...he was just paying with the boom money he made.

"funniest part of the whole thing is I work in fixed income so its really what I do all day. Anyway... moving on.. nothing to see here.."

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now that cbs is gone, between us, to me more than funny is scary and explains the mess we are in. how come a guy in fixed income cannot do the math at home and have a clue of the risks his getting into? i'm not talking about not getting w67 comment about how asset prices are the net present value of future cash flow (on falling rents in this case). this guy believes that finance is "relatively volatile" lmao. these are obvious shocks to his income that would not surprise anybody:

* higher taxes and limits on bonuses.
* he or she, or both get fired, banks have yet to make official old losses, more to come. limits on proprietary trading.
* wife might just stop working after the birth of the new baby.

"Turns out its 100%, prices fell again last quarter. So now its certain. ;-)"

Really? Take a look at the median sales price chart on the Miller-Samuel report - looks pretty flat to me for the past 4 quarters.

http://www.millersamuel.com/reports/pdf-reports/MMO4Q09.pdf

Though I rented because I couldn't find what I wanted in a buy... and because I got more that what I would have wanted to pay for if I used the money for buying.

It really depends on what specifically you want. If you say "i want a prewar coop with a stuffy board", of course you're not going to find that in a rental... but I found at the high end of new construction, the best rental buildings actually seemed to do better than the best buy buildings. I found one or two comparables, but one was not in a good location.

btw, OP, don't think your stupid... you're asking the question. Thats the best approach.

idiotic move. This is a great way to lose a million dollars in a couple of years PLUS taxes, interest payments etc. Stick with your 60k rental...it is a much better deal and you will be far better off in the long run than if you buy now. The apartment you are looking at will probably drop to 400k over the next few years. NYC real estate is just beginning its downward spiral....we have a LONG way to go...

> how come a guy in fixed income cannot do the math at home and have a clue of the risks his getting into?

Because the real estate industry has so many suckered. They're helped by a non-transparent and non-liquid market, where anecdoate replaces fact...

where folks who don't know better get convinced by terms that are BS but sound nice

"investment"
"long term"
"throw away rent"
"pay your landlord's mortgage"
"buy now or be priced out forever"
"your parents made 200% on their house" (of course, over 40 years and forgetting about the interest paid)

Imagine there was a industry of people whose goal was to have you NOT sell.
Imagine what the tv ads would be like.

"transaction costs"
"highly leveraged"
"extra cost"
"maintenance"
"water damage"
"foreclosure"
"real return"
"call the handyman"
"housing bubble"

;-)

ok, back.. For me and for my wife, the decision is not ego, its lifestyle. at this point, the lifestyle we want, and can afford involves owning an apartment in the neighborhood we like... Yes we live 1brm now and pay very little in rent... To rent an apartment, in the neighborhood we want, with room to have family over for christmas and thanksgiving and b-day parties etc would be about the same as we are spending to buy.... The difference for me is that its still a rental...the appliances suck, the bathrooms suck, the paint sucks and I have no motivation to change them.. there is really no sense of home... my neighbors could be anyone.... Is this the smartest financial decision I will ever make? maybe/ maybe not... but when I look at what we want from life with a newborn in manahattan, it doesn't invovle renting random apartments throughout the city to save myself the extra 100-200kk... it invovles living in a place where we can develop relationships, have neighbors who can "watch the kids for 10 minutes", have doormen who have an interest in the tenents... My feeling is that there are too many bankers on this board who like to look at the present value of taking the subway versus a cab before they are able to make a decision...... either way.. if I buy, I'll live with the consequences and if I rent, I'll do the same.

he was just paying with the boom money he made.

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i actually like this attitude. if the money came without much effort, why making sure the move is financially wise? that evens it out for those that didn't get $ during the boom. it's like people that get $ through inheritances, in general, they blow it.

"when I look at what we want from life with a newborn in manahattan, it doesn't invovle renting random apartments throughout the city to save myself the extra 100-200kk... it invovles living in a place where we can develop relationships, have neighbors who can "watch the kids for 10 minutes", have doormen who have an interest in the tenents... My feeling is that there are too many bankers on this board who like to look at the present value of taking the subway versus a cab before they are able to make a decision...... either way.. if I buy, I'll live with the consequences and if I rent, I'll do the same."

You can do all of this without spending 1.4 million on an apartment.

You should be looking in the $700K range.