Advice appreciated: Does it make sense to buy under any circumstance?
Started by admitone21
about 16 years ago
Posts: 2
Member since: Feb 2007
Discussion about
I am hoping to get some advice from the board. Flame me if necessary, but I am genuinely seeking some feedback. I have been living in NYC for almost 5 years. I have been looking at properties for about 3 years. I have probably attended over 150 open houses mostly in the neighborhoods of EV, GV, and LES. In 07 & early 08, I almost put in offers for two different places. Mostly out of dumb luck,... [more]
I am hoping to get some advice from the board. Flame me if necessary, but I am genuinely seeking some feedback. I have been living in NYC for almost 5 years. I have been looking at properties for about 3 years. I have probably attended over 150 open houses mostly in the neighborhoods of EV, GV, and LES. In 07 & early 08, I almost put in offers for two different places. Mostly out of dumb luck, I didn't and am thankful for it.
However, my folks made their money investing in real estate and believe it's the way to go. Basically just upgrading their single family homes and holding onto them.
With such market uncertainty esp for NYC, is there any scenarios where it would make sense to buy now?
Some of my details:
My biggest issue is I work a variable comp job and in 07 and this year I will get killed with taxes. While in 06 and 08 I had very average years. Almost makes me want to move out of the city. I really don't need to be in NYC for work but I am here because I want to live here by choice. I also feel I could see myself moving away in the next 3 years. And I know folks say not to buy a property just for tax breaks. I am very risk adverse and while ultimately no one can time the market, if we were to look at the broader horizon of 10-15 years, could it make sense to buy now? Being risk adverse also means I'm not really heavily vested in the stock market so the opportunity cost of investing in a property isn't as great as someone who is in the market.
I know this was a bit long, but appreciate any feedback.
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Response by anonymous
about 16 years ago
First one should never panic buy any asset whether it be real estate or stocks etc..Secondly you need to decide your time frame for holding the property. In your post you mention either a 3 year or 10-15 year horizon for moving. Personally I wouldn't buy anything unless I was planning on holding for greater than 10 years. As for timing the market, it can be done. That is a tired maxim foisted upon the public by wall street so they hold our money through thick and thin. That said I wouldn't be so concerned with catching the exact bottom. I think the downside risk is still there for NYC real estate. We have not had the correction seen elsewhere yet we've had just as much a meteoric rise. The only recent parallel is 1987-1992. The stock market crashed in '87 and took the RE market with it. We took 5 years to recover. My gut tells me we have another 20% to go despite this recent boomlet, particularly in outerboros and marginal Manhattan. The key metric to watch is the employment figures. Unless businesses start hiring this recent surge of buying will look like a dead cat bounce.
I recently returned from Miami were I am purchasing a condo as an investment. The perma-bulls of RE-brokers-are in capitulation mode and that signals a bottom to me. We've not had that here yet. Maybe we won't but I am keeping my powder dry for NYC RE for the foreseeable future.
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Response by somewhereelse
about 16 years ago
Posts: 7435
Member since: Oct 2009
"However, my folks made their money investing in real estate and believe it's the way to go. Basically just upgrading their single family homes and holding onto them. "
I knew lots of folks who made their money in .com stocks. And oil in 2007. And tulips.. and...
At the top of a bubble, everyone looks like a genius. That doesn't make it a good investment.
> I also feel I could see myself moving away in the next 3 years.
Well, thats the real important part. With a 3 year horizon, transaction costs will kill any profit potential. And even the most optimistic bulls aren't saying you're making money in 3 years...
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Response by somewhereelse
about 16 years ago
Posts: 7435
Member since: Oct 2009
"perma-bulls of RE-brokers-are in capitulation mode and that signals a bottom to me."
Agreed 100%. I saw that in California, too. We're NOWHERE near that. There are still folks in denial here.
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Response by nyc10023
about 16 years ago
Posts: 7614
Member since: Nov 2008
With the personal details you have revealed -no, makes no sense for you to buy.
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Response by admitone21
about 16 years ago
Posts: 2
Member since: Feb 2007
To add a few more clarifications, yes I could see myself moving in 3 years but if I did buy I would expect to hold the property as an investment. I see myself either moving abroad or back to California. In those instances, I would figure hiring a manager for the property.
I guess I've been brainwashed a bit to believing that paying approx $75k in rent over my time here has gone down the tubes yet I also know I have been paying that for a roof over my head.
As for my folks, I'm sure luck played a role in their success but ultimately that is their immigrant experience and how they achieved upward mobility so that's why they are so firmly entrenched in their beliefs. Alas, the greatest gift the bestowed on me is that I don't think I will have to worry about them financially when they are older.
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Response by evnyc
about 16 years ago
Posts: 1844
Member since: Aug 2008
If you are looking to purchase with the option of renting out the property as an "investment," please search some of the rent/buy threads. There's good information there, and the arithmetic shows that you pretty much can't rent out a place for enough money to cover your carrying costs. Financially, buying does not make sense in the city when compared to renting.
So what you need to consider, and what no poster on this or any other board can tell you, is whether or not you want to stay in New York. Do you like it enough to stick with the city through any future ups and downs? (Because there are some likely substantial downs in the city's future.) If so, and if you find a place you can live in long-term and be happy with the carrying costs and lifestyle, then it makes sense to buy. Eventually rents are going to catch up with your carrying costs, so you'd be making a long-term investment in the city.
First one should never panic buy any asset whether it be real estate or stocks etc..Secondly you need to decide your time frame for holding the property. In your post you mention either a 3 year or 10-15 year horizon for moving. Personally I wouldn't buy anything unless I was planning on holding for greater than 10 years. As for timing the market, it can be done. That is a tired maxim foisted upon the public by wall street so they hold our money through thick and thin. That said I wouldn't be so concerned with catching the exact bottom. I think the downside risk is still there for NYC real estate. We have not had the correction seen elsewhere yet we've had just as much a meteoric rise. The only recent parallel is 1987-1992. The stock market crashed in '87 and took the RE market with it. We took 5 years to recover. My gut tells me we have another 20% to go despite this recent boomlet, particularly in outerboros and marginal Manhattan. The key metric to watch is the employment figures. Unless businesses start hiring this recent surge of buying will look like a dead cat bounce.
I recently returned from Miami were I am purchasing a condo as an investment. The perma-bulls of RE-brokers-are in capitulation mode and that signals a bottom to me. We've not had that here yet. Maybe we won't but I am keeping my powder dry for NYC RE for the foreseeable future.
"However, my folks made their money investing in real estate and believe it's the way to go. Basically just upgrading their single family homes and holding onto them. "
I knew lots of folks who made their money in .com stocks. And oil in 2007. And tulips.. and...
At the top of a bubble, everyone looks like a genius. That doesn't make it a good investment.
> I also feel I could see myself moving away in the next 3 years.
Well, thats the real important part. With a 3 year horizon, transaction costs will kill any profit potential. And even the most optimistic bulls aren't saying you're making money in 3 years...
"perma-bulls of RE-brokers-are in capitulation mode and that signals a bottom to me."
Agreed 100%. I saw that in California, too. We're NOWHERE near that. There are still folks in denial here.
With the personal details you have revealed -no, makes no sense for you to buy.
To add a few more clarifications, yes I could see myself moving in 3 years but if I did buy I would expect to hold the property as an investment. I see myself either moving abroad or back to California. In those instances, I would figure hiring a manager for the property.
I guess I've been brainwashed a bit to believing that paying approx $75k in rent over my time here has gone down the tubes yet I also know I have been paying that for a roof over my head.
As for my folks, I'm sure luck played a role in their success but ultimately that is their immigrant experience and how they achieved upward mobility so that's why they are so firmly entrenched in their beliefs. Alas, the greatest gift the bestowed on me is that I don't think I will have to worry about them financially when they are older.
If you are looking to purchase with the option of renting out the property as an "investment," please search some of the rent/buy threads. There's good information there, and the arithmetic shows that you pretty much can't rent out a place for enough money to cover your carrying costs. Financially, buying does not make sense in the city when compared to renting.
So what you need to consider, and what no poster on this or any other board can tell you, is whether or not you want to stay in New York. Do you like it enough to stick with the city through any future ups and downs? (Because there are some likely substantial downs in the city's future.) If so, and if you find a place you can live in long-term and be happy with the carrying costs and lifestyle, then it makes sense to buy. Eventually rents are going to catch up with your carrying costs, so you'd be making a long-term investment in the city.