MANHATTAN HOUSE SOLICITATION!!! Buy Now or be priced out forever!!

I don't if they are writing conforming mortgages yet at the 720k limit, but if they aren't $696k is a jumbo and using a 30-yr fixed rate (to make the comparison calculation valid for more than a few years), the mortgage payment is $4232, which more than wipes out the supposed savings.

So they used almost every trick in the book to get the comparison to look good but it only applies if you are in the right tax situation, keep your job, and assume the near-negative amortization mortgage.

Their $4200 rent assumption seems insane. No idea if the 919SF is true or brokerish, but you can get pretty nice 1-bedrooms for a whole lot less, and even pretty decent 2-bedrooms for less.

One day we will march these liars and sycophants down the plank ;-)

Aside from not accounting for AMT, the estimate is internally inconsistent. If you're not in AMT and can deduct state and local taxes, then the value of the mortgage interest deduction isn't 45%, but 41.5% (the 10% ny/nyc deduction is only worth 6.5%, since if you had paid the 10%, you could deduct it at 35% on your federal). But, if you are in AMT, then you can't deduct state and local, so the mortgage interest is worth 45%, but the property tax isn't deductible.

Opportunity cost on $300K down payment is at least $500/mo. (at a 2% return), I'm guessing a bit higher over the longer term.

And, yeah, the idea of paying $4200/month for a 1 BR on 66th/2nd is laughable. I'd think ~$2800 is more realistic in this environment.

Thanks -- good input

First of all, the "comparable rent" is insane:

http://www.olnick.com/residential/letriomphe/availabilities.phtml

It is closer to $3,400. Second of all, you can't count the "tax savings" without calculating the other side of the equation: the opportunity cost of investing your money elsewhere. And the risk of losing your money, which doesn't exist with a rental.

If you bought this apartment:

http://www.streeteasy.com/nyc/sale/407711-condo-200-east-66th-street-lenox-hill-new-york

it would cost you $5,900 a month, approximately. You could rent it out to an unrelated third party for MAYBE $3,400. You would lose $2,500 a month.

Sound like a good deal to you?

Yes, but based on all the above input -- there would be no intrinsic value to owning rather than renting.....

Mostly because I like my money too much to throw it away...

Perhaps JuiceMan and/or LIC can make sense out of this equation for us?

For the love of marketing!

For my next trick I will change water into wine...stand back.

JohnDoe - everything looks correct (and quite insightful) on the tax question, but if the buyer is in AMT, the federal tax rate is 26% or 28%, thus total tax rate is 36% 38%. But your basic negative stance I agree with entirely.

crescent, thanks for your kind words and for the thought. In general, I take your point. But, it's worth noting that the marginal tax rate in AMT depends on your income. At certain levels, each extra dollar of income also reduces your AMT exemption by 25 cents, so that your marginal federal tax rate on that extra dollar is 35% (because your dollar of income increased AMT income by $1.25 in certain ranges and 1.25*28% = 35%).

Most of the chain so far has rightly discovered the typical load of nonsense about "Savings" of buying vs renting - as a CPA I have seen that the tax effects only exists at the highest marginal rates, etc. What people really should be considering is how long does it take to get your invested dollar back? A dollar lost is a dollar lost - regardless of "tax savings". So why not plan to preserve your net worth? Working in mortgage risk for an investment bank, we're projecting further drops in prices of around 30% before some kind of bottomn is reached. So that sounds like the down payment in this example just went up in smoke. Then there's the expected recovery period - which the rsearch is suggesting might be lik 20 years.... yes that's right, just to get your net worth back may take 20 years after going down the rubes temporarily with the investment.

Imagine taking 20 years just to get your investment to break even. My suggestion: buy corporate bonds, and pay rents.

Helpful analysis all. 1931 -- is that 30% off of current market levels? - I still see the above analysis as overpriced by 40%. In general -- we are at 2005 levels -- so 30% off of there? thanks.

bump... 1931?

Point well taken, JohnDoe. I find that oddity in the AMT tax worksheet inexplicable (the 25% reduction in exemption). It makes for a funny-shaped curve when plotting AMT liability against income.

And lets not forget your massive leverage on a tanking "investment".

Factor in what a 10% decline does for you!

They don't put anything for the risk factor in.

Looking at this building for a client. Interesting to read these past threads, 1931...sort of missed this call.

It's really telling that the Times's rent/buy calculator is basically made or broken on the apartment value growth assumption.
That said, this doesn't look half bad (Apt A1103):
01/09/2009 Previous Sale recorded $1,080,478
09/30/2014 Listing sold $1,550,000
Sale recorded $1,500,000

So how is all of that analysis working out for you? Record prices and record rents.