Question for the renters

Why should I pay $900k for a one bedroom apartment. I'd rather invest and stay in a rental. There is also the freedom with living in a rental. I know a number of people who hate their apartment co-op board, neighbors, etc. but they can't move. Why be stuck with an apartment when I can move whenever I want. Renting isn't for everyone but it's not just a financial reason why I rent.

op here,
Believe it or not, it's actually difficult to manage your money if you have a lot of it.
Aren't you/wouldn't you be worried in the least about diversification of your assets? You are ok with having 500-1M in the stock market?

I don't keep my money in the stock market...

#3, I am a renter and have 2.5MM+ in the market in various forms, equities, bonds, mutual funds, munis, PE, thru different accounts (529s, 401ks, brokerage, etc.) Over the last 2 yrs as a renter (I was an owner before the bubble really got out of control), I've averaged 18% return, so I am quite comfortable with my diversification, thank you. I will go back into the RE in 2008/09 after this bubble pops. Until then I am fine watching my net worth grow and with the freedom to be liquid and move it around as I need to. By renting, I am saving at least 50K a year (includes adjusting for tax benefits)

http://www.bloomberg.com/apps/news?pid=20601206&sid=aonDdgoWQ.pg&refer=realestate

#6, is that supposed to mean something?

I just started working a couple years ago and make 200+. However, I was also lucky enough to have a trust fund (not huge, but 200k or so). I have about 400k in assets, but I agree with #2 - why would I want to spend 900k on a 1 bedroom apartment when I can spend 1200/month (half the rent with my spouse) on a nice 1 bd apartment and get great returns (yes in the stock market - diversified in many different areas). If I invest 200k in a 1MM apartment I will probably lose the entire amount in a few years as the market continues to tank. Why would one do that to oneself? Owning a home is about the least diversified one could be. I've done a TON of research into this and actually considered buying about a year ago before I came to my senses. Since then I'm more convinced than ever that buying is a terrible financial decision, particularly in new york where your maintenance can be more than the rent you'd pay for the same apartment. Prices are OUT OF WHACK - they are not sustainable and investing in this market is asking to lose money. I freely admit I'm one of the buyers who wasn't here when RE was going way up (I was young and in school) but now I'm here, with my spouse we make over 400k/yr and can barely afford a 1bd apt. This doesn't make any sense at all - if I can't afford to buy, very very few starting buyers can afford to buy and this will affect the market greatly.

op for #5.
With 2.5M, I would think it would not hurt you at all to have 200k in real estate. If you aren't as diversified as you think and the stock market cools drastically, you could lose lets say 20% of 2M which is 400k in a flash. I don't understand why you wouldn't want to diversify yourself into real estate.

The original poster is just looking to criticize or justify his/her decision.

You don't need to own RE to have a diversified portfolio or to protect against market decreases. Plus, you need to consider the carrying and upkeep costs involved with owning residential RE -- costs that are not present in other types of investments. For that reason and others, the historic average return on RE in NY is considerably lower than the market. That's not debatable.

And I think #8 hit the nail on the head. When the people who make Wall Street and NYC a financial mecca (the bankers, lawyers, consultants, accountants) can no longer afford starter condos with their $200k beginning salary, then you have a problem. That same inadequate NY salary, which is at all time highs, buys you a mansion in most other major cities. Since we just enjoyed big salaries bumps and I don't see them going up much more in the near future, don't expect huge RE increases. Instead, maybe you should bet against the market.

I have saved a lot over the past 10 years. And yes, I have well over 7 figures invested.

I have also relocated for work 6 times, never spending more than 2 years in any once place. Renting gives me a lot of flexibility to accept assignments abroad and around the country without worrying about my carrying costs, finding a tenant, selling, etc.

When I am ready to settle down in one place, I'll buy.

I have saved a lot over the past 10 years. And yes, I have well over 7 figures invested.

I have also relocated for work 6 times, never spending more than 2 years in any once place. Renting gives me a lot of flexibility to accept assignments abroad and around the country without worrying about my carrying costs, finding a tenant, selling, etc.

When I am ready to settle down in one place, I'll buy.

10, it takes several years to save up the cash to buy. I believe that even historically in the 80s and 90s this was the case as well because buying always takes some saving/stretching and/or discipline. You're dreaming if you think you should be able to buy a starter condo/home right away without saving, even with a good salary.

Re #8

Only working a couple years for 200K income that can accumulate 400+K assets...did you even get taxed ? Also, it's tough to find a couple making 400K *combined* while living in a $2400 apartment in Manhattan (well, south of 110 St), unless it's been rent-stabilized AGES ago. That price can get you a 1BR in an old co-op or a studio in a brand new luxury high-rise. And a $400K income couple will put up with that?

besides, working couple years and 200K+? As far as I'm aware, even Med school grads start at low 100s, lawyers start around 130-150, and the average Wharton MBA starts around 105 (well, pre-bonus).

It depends on what you want and your situation. If you're going to be here for at least a few years than buying would make more sense than renting, and even on a $200k salary, you can get something (assuming you don't have heavy debts or school loans).

Not all coops are run like prisons and have crazy high maint fees.

I earn about $175k and can well afford the 1 br coop I just bought. Granted, I had a cheap rental for the past few years that allowed me to save $$. I had to move this year and just couldn't justify paying upwards of $2500 for the type of place I was looking for. And my acct said I needed a tax break. So with my mortgage & maint it's worth it to me. Sure, I could've waited a couple of years but it would have cost in the long run.

I don't view my purchase as just another investment but as my home.

Renter here. I agree that if you had means to buy 2-4 years ago and didn't you were an idiot. but thats hindsight. i bought in 2004 and sold out with a 700% return on my down payment. now i rent. why? cause to live in a decent 1 BR would cost me at least 650K or more. I make about 300K but made less in prior years. i keep every dime in a high yield bank account for now b/c its my little vulture fund for foreclosures which are starting to come fast and furious. sure, not in prime manhattan but in the outer boroughs.

And to #1. 200-300K really is not a lot of money. I know it sounds like a lot, but its not.

#13, you're just plain wrong. A recent JD or MBA grad, who works at a big firm and has no debt and at least some savings from summer work, can easily buy a starter condo in virtually all US cities after less than a year of work. Just look at the prices in Texas and Chicago -- places where the big law and bank salaries are the same. Moreover, before the recent RE spike in NYC, these same grad students could have afforded starter condos in NYC too. You have to realize that junior salaries have not kept up with the RE market: In the 90s, with bonus, some junior salaries were actually higher than today's. That there is so little correlation between what NYers actually make and what RE prices are is the problem. All I am saying is that if RE is going up, so should general salaries; they should not be inversely correlated.

#14, your salaries are off. Top-tier law firms pay $165k base salary (+ $30k bonus), banks have salary-matching bonuses and pay about the same as law firms (can be more or less depending on the market), and top hedge funds and private equity firms pay upwards of $300k. Med grads do not make up Wall Street.

17, These places where a starter mba can get a starter home immediately indicates they are probably considered very high income in the area. How many jobs like that are there in these cities? I think these will be the areas hit hardest by a slowdown. Someone coming out with an MBA in manhattan is behind the curve and needs to buckle down and save for a few years.

#17. First, BigLaw pays $160,000 to start, not 165 to start and please show me the law school grads with no debt I'd love to meet them. They like the unicorn do not exist. And first year Ibank salaries even with bonus do not match first year law firm salaries, period. Trus, by year 2, possibly 3, I-bankers generally surpass their law school counterparts. And in NYC, a "starter" condo maybe begins at $450,000 these days (in manhattan), and lets say $350 in BK (like Willie B), thus unless your plunking down only 5% still need to save 45,000 so not that easy to enter the market here in NYC>

Plenty of law school grads graduate with no debt. Not the majority of course, but I'd estimate 20% of my law school class. Top-tier first year associates at I-banks made in the $300K range last year after bonus.

I KNEW YOU WERE A LAWYER. How can you not even know what 1st years make? And first year associates do not across the board at ibanks, which is a very general statement, make 300K with bonus. Just not true. Perhaps the superstar at GS who sucks enough cock and/or works for the top top producer gets a bigger bonus than the rest, but even then its more like 250-275, liberally. I deal with them every day and i am a 6th year attorney at a big law firm. And if 20% of your class grad-ed with no debt you must have gone to a state school paying in state tuition. How you can even make that estimate is beyond me. Did you take a random sampling or are you talking out of your ass.

WHATEVER!!!! This is supposed to be about affording a place to live, not how much do recent law grads earn vs. mba's...

#20 here. But, just # 20 - this was my first post. Quite well aware that first year lawyers make $160 + 35. I didn't say all or even most ibankers make $300K, but that "top-tier" ones do. The point is that the salaries are quite good and certainly enough to afford to buy a place.

As for the 20% figure, it's a private school with the normal $40k/year tuition. How do I know the numbers? The school releases figures on the number of students receiving financial aid (where it defines "financial aid" to include any type of loans). So, neither random sampling, nor ass-talking, but thanks for asking.

22--you're the one who brought up the topic of what JDs and MBAs make (incorrectly).

Boies corporate and Wachtell pay first years over $160k. So #19, if you're going to correct posters, make sure you're right.

Numerous students at Columbia and NYU, since those are the schools I am familiar with, graduate with no debt. As a JD-MBA, I have had three summers of work + two years of part-time firm work to more than cover my tuition. I am not alone in doing this.

Banks: People with MBAs skip or already did analyst-level work. In today's market, at the top 10 banks, their salaries are more than what junior lawyers earn.

Starter condos in prime Manhattan are not $450k. Look at the listings.

These JDs and MBAs are not behind the curve. They are the middle portion. If they start feeling a crunch, they will leave their jobs, causing problems for the people who can afford to live in the city. One of the reasons for the salary increases was to solve retention.

the salary increases were not enough...COL in this city is too high.

25, if you're coming out of school with no debt, you still probably don't have 200k already banked up, thus you are "behind the curve of buying".

#25. I am right. Starting salaires at Big Law firms are 160K in this town. You're gonna cite fuckin Wachtell and tell me I'M wrong? Okay, 198 out of 200 law firms start at 160. And the poster said FIRST YEAR Ibank associates rake in 300K which is not true except in the extreme minority of examples. You say "junior lawyers". Thats a term encompassing the first 3-4 years of practice and if you read my post, I said by year 2, or 3, ibankers overtake lawyers.

And you can absolutely get a condo in NYC for 450. I just looked at one. Nobody said anything about "prime" Manhattan whatever the fuck that means. Secondly, it was an example.

So if you're gonna correct people, make sure YOU'RE right.

FIRST YEAR Ibank associates out of bschool do not rake in 300K unless they made a ridiculously killer trade. They might make 300k if they've stayed there as an analyst for many years.

shouln't you two go to a lawyer board and rant there. This is tiresome.

Let them fight it out #30.... I havent kept up with the latest lawyer salaries, so its interesting.

point is, if you're single, graduate debt-free and earn upwards of $160k you CAN afford to purchase something. Just depends on what you spend your money on.

After all, working 12-15 hr days you get free dinner, car service home, etc. Unless you enjoy paying more money in taxes instead of a mortgage that can help you build equity.

The real question is what TYPE of place you're looking for, for how long you plan to stay in the place and if it's cheaper for you right now to rent.

Do you want a new designer condo downtown? or are you willing to spend less for an older place uptown?

NYC has ALWAYS been an expensive place to live....people were complaining about the same issue (income vs. cost of living) when I graduated 10 years ago. And they complained when my sister graduated in the 80's.

IB Associates at my firm make 110K in base. The sign on bonus is 45K and the first year stub was 50K last year (likely to be more the next). Once they have worked a full year, the bonus is performance based and increases substantially.

Without wanting to fuel the flames of any pay discussion here, am i right in thinking then that Manhattan is now largely inhabited by lawyers, MBA'ers and trustafarians?

I don't want to generalise, and of course i am to an extend, but it seems likely judging from what you can pull from this thread...

I remember back in the day there used to be more artists. Where have they all gone?

extent*

Without wanting to fuel the flames of any pay discussion here, am i right in thinking then that Manhattan is now largely inhabited by lawyers, MBA'ers and trustafarians?

I don't want to generalise, and of course i am to an extend, but it seems likely judging from what you can pull from this thread...

I remember back in the day there used to be more artists. Where have they all gone?

There are other industries - med, media/advertising and tech.

I have saved lots of money but i want to invest this money on effective apartment or place ...Yet , i live rent in NYC but when my salary will increase then i'll buy .