Housing options for family with 1 boy and 1 girl

Another option in the summer (if your kid is not a runner) is outdoor dining at the many places that have a patio - all the Lincoln Center places + places on Columbus & Amsterdam.

Get something in Tribeca thats open and let them sleep in Tokyo style bunk cubicles in the wall.

Get in PS 234.... Try to get 1300 sqft for $5k or so.

Why is it so hard for people to imagine families in Brooklyn passing up buying $1.2mm places they can rent for $4k.

Rhino: "Why is it so hard for people to imagine families in Brooklyn passing up buying $1.2mm places they can rent for $4k."

Was that was a response to my comment?: "Can't imagine too many said families are currently paying close to $4k on 3br rental in Brooklyn. If they are spending $4k for housing and willing to live in Brooklyn, won't they buy something there instead?"

I am saying that of all the families that wanted a 3br, had $4K available for housing expenses, and has chosen Brooklyn, they would mostly likely had bought a place already OR will buy such a place when the prices come down more. Many of the latter (who haven't already bought), will probably stay in a 2br for as long as possible or get a lower rent 3br to save money for a purchase in a couple of years. Some cannot wait or unwilling to wait and will rent that $4k rental in Brooklyn; I'm just saying I can't imagine too many of these last cases. I mean, how many occupied $4k, 3br rentals can there possibly be in Brooklyn???

Take a stroll in Cobble Hill (PS 29), Boerum Hill (PS 261), Carroll Gardens (PS 58) or Park Slope (PS 321).
You can do that virtually, of course, but theses are nice walks. Lots and lots of brownstones, most cut in 2 or 3 apartments. A 3 bedroom duplex can be had for about $4,000. Your question was about how upper middle class families do it? That's how: a real 3 bedroom in a pee-war duplex, located in a great public school zone. These are people who make $250,000 or so, not enough to purchase a house in these neighborhoods.

$250k used to be plenty...this is why prices will need to fall. What do they want as a price to purchase for $4000 apartment like these?

Sunday what do you think $4000 in a housing payment affords you in a purchase flavor?

Many people are willing (foolishly or not) to leverage themselves up more in bstone bk by buying a multi-fam. So it's a question of how much rental income they get from the other part of the townhouse. It hasn't made much sense to buy an apt in Bk for a long time now vs. a multi-fam.

That sounds scary as shit. With 3 or 4 units (meaning 2 or 3 other than you)...are these the type of people who can even afford one vacancy for any period of time? Prob not. Yikes.

Prior to these crazy bubblicious times, it has worked out for many families to count on rental income.
Or for extended families to buy THs. Haven't yet seen too many situations where people are selling
their houses out of desperation. Probably helped along by the fact that not many houses change hands
in any given year, and it's never easy to work out financing (90-10 or 80-20 not so easy to get).

alright.. this might be the right time for me to ask..

we are a couple with 1 child, hoping to have 1 more and would like to stay in Cobble Hill (PS 29), or Boerum Hill (PS 261). We have 300k to put down, 350k tops. Annual combined salary roughly 250k, 100-150k bonus. Can we afford a multi fam? We would like to keep our portion of the cost to $3500 a month.

Duplex + 2 rentals does sound like something that might work. What is the upper limit of what we can afford?

You can afford it...but it doesnt sound like you have enough income to cover slippage. I would be curious what is nicer, something you can buy for $650k or so, or something you can rent for $3500.

On the multi fam side, I would include all expenses against all rents (including your own) and see if the 'yield' on the investment, assumed all cash, is better than 5%. If it is, and you can live there for a long time... you can apply your bonuses to the mortgage each year and put yourself in a very safe, comfortable position over two or three years.

hjl: ask the same question on brownstoner.com. People are in trenches there and can give you better idea.

Do ask yourself how much vacancy for how long comfortably.

how much vacancy you can take that is.

PS29 - $$$. This is the cheapest I could find on SE (bearing in mind that many Bk THs are listed with small mom-and-pop realtors).

http://streeteasy.com/nyc/sale/380546-multi-296-degraw-street-cobble-hill-brooklyn

http://streeteasy.com/nyc/sale/467682-multi-505-hicks-st-cobble-hill-brooklyn

Does this seem too big a place with too much risk to the one tenant for HJL?

Or if you are handy and can manage a reno while living there - http://www.fillmore.com/view_details.php?WebID=112133

I would be curious if a bank would lend them $1mm+

It is way out of his/her budget. Just showing him/her what is currently available that is renovated and not. There are better deals to be had if you pound the street. Most people I know who get "deals" on bstone Bk didn't get them off the Internet.

Nope, not on multi-fam. 70/30 if not 60/40.

Stepping back a touch...is this really a market so cheap that someone with $250k in base salary should be considering such a thing at all.

hjl, I am a real estate agent who doesn't work Brooklyn, but I have to say that $3500/mo. sounds like a terribly low housing budget given your income: 10% of your income? 17% of your salary?

On that basis alone I'd say you should keep renting.

ali r.

If I were in the hj's shoes (not knowing any more about his/her personal situation), I would borrow no more than 700k and try to work out some FHA deal with the interest rate ala joedavis and to get more leverage (so they have enough liquid left to deal with emergencies). At that price point, you're looking at fixer-uppers (to put it kindly) in Cobble Hill/Boerum Hill. If they had enough energy to clean up and do cosmetic things themselves (to bring it up to move-in), it might work.

The fact that you can rent something nice for $3500-4000 for your family in Brooklyn is reason enough to keep renting. Ali, I think their budget is in light of the risk they'd take in a multifam, and in light of the fact is that you can get a nice rental for that so why spend more because you can.

Everyone has diff. risk appetites and needs. It is certainly a very risky approach for most. People buying multi-fam beasts in this market better have a compelling reason.

It sounds like two people who work in finance, who dont need the headache or the risk...who probably dont have the free time to bother...who cant afford something with multiple units to spread risk...who probably should bank another couple of years of bonuses and enjoy the fact that rents are so low.

If there were excellent investment cap rates on offer in the market, then sure, stretch. There dont seem to be.

This is headache and risk for two people who don't need it in the least and for whom current prices do not compensate. No one needs a big renovation in family with two full-time out of the house working parents.

Sorry, I'm back. And thanks! for all the comments.

First, we currently own a 2br condo (with about 250k equity minimum, large DP when we bought) which we would sell to get the DP for the house. We still have another 250k+ just sitting in low-interest accounts. Yes, we're a conservative bunch. Our monthly cost for the 2br condo is $3200.

A house that came to mind was this:
http://streeteasy.com/nyc/sale/411659-60-wyckoff-st-cobble-hill-brooklyn

which sold for 1,550,000.

Could we have done this? We could live in the lower duplex and slowly occupy the entire house as we increase our income. What will the 2 rentals bring in? What Rate should I put in the Mortgage Calculator?

This is more a question for a bank...and the other question is whether or not your net monthly cost to live there is equal or less that your current place for an equal or better unit. A bank will tell you the rate...and the market value of the rentals is something you need to research.

Hjl, we are in a somewhat similar situation (and a similar conservative mindset with money.)
I think you shouldn't buy a house you can't afford on your own income, and the rental income should be gravy to minimize your housing expenses. Based on salary and current mortgage environment, you shouldn't borrow more than $729,000. Add your dp, that gives you your budget, which is currently not enough for that house on Wyckoff. I think you should put your place on the market if you are really interested in moving, save your money and rent for a year or two. Prices are still coming down, so it's possible that between your larger downpayment and lower prices, you might be able to buy down the line.

hjl, have you read this?

http://therealdeal.com/newyork/articles/brooklyn-foreclosures-not-just-in-east-new-york

"Ken MacBride, director of REO marketing for Fillmore Real Estate, said he has seen a lot of foreclosures caused by tenants who couldn't pay the rent and who in turn left owners in the lurch. Many owner-occupied homes throughout Brooklyn have one or two additional units that are rented to cover the mortgage.

"Some people, sadly, will just base their purchase upon the tenants paying rent every month. And now if that tenant has an issue %u2026 the [owner] can't meet their obligation at the end of the month," he said. "

Maly that's pretty precise...$729k. How do you get that? I generally agree that bonuses should not be applied to the income calculus of purchasing a multifamily. They do have $250k + $250k in equity... So I guess they have $1.2mm in purchasing power....without a reserve fund. You prob cant find a multifamily for $1.2mm...So yeah....$150 net of taxes is only about $90k...so if all goes well in two years they'll have another $180k... Buying $1.6mm would be insane. Also troubling is that the rental income/rent savings as a cap rate is probably lower than the mortgage...so there wouldn't be any systematic paydown of the mortgage, other than by paying principal out of bonuses... Yeah Suzi Orman says no way on $1.5-1.6mm.

rhino, up to $729,750 = conforming loan limit for high cost area like NYC.

maly,

I have thought about selling first and renting for a couple of years. At first I thought maybe I could get a good deal in a DT BK rental, but from what I've noticed at Avalon and DKLB, prices are going up. So I thought, what's the point? We also looked at some 3br apartments at Forte right before Christmas, all in the same line, but on different floors, the cheapest would cost the same as our 2br. However, the high maintenance, bad school district, and the small MBR killed it.

Back to the 729k. Are you suggesting that we should not borrow more than 3x salary?

Sunday,

That 729k number is only for condo/coop & single family homes right? The conforming loan limit is higher for 2/3/4 families no?

The conversation is a little stuck until you know what a bank would lend you.

729k and under is the most competitive area for mortgage issuers, so that's the sweet spot. Not all banks do 2 or 3 family conforming, and 4 family is even more challenging to finance. If you want to borrow more than 729K, you may have to put 35% or more down, so based on your dp amount, it will not change your budget much.
I don't think the rule is 3 times your salary, it's housing costs under 28% of income. It really depends on rates if 28% is 2.5 or 4 times your annual income. My advice is not to rely on rental income and stay under 28%, so if your tenants default, or you don't rent for a few months, it's not catastrophic.
Finally, I wouldn't look at Forte or Downtown Brooklyn Avalon. There are a lot more options for family-size rentals out there, and these developments are in subpar school zones.

This is the same as telling them not to go it though...which I think is the right answer. Assuming $125k in reserve, they shouldn't go much over $1mm....and there is no multifamily in that range. If the bears are right, in a year or two it comes down a little, they save a little...and maybe can do something sensible in the $1.2mm-1.3mm range.

Exactly. I don't want to say don't do it, because 1- it doesn't explain the reasoning behind the advice, and 2- if they do see a 2-family for 1.1 or less, they shouldn't wait for the sake of patience.

I would also add, that if you can find something that generates a total carrying cost of $5000 per month, assuming you reserve $125-150k...I could support that. For instance, a two family that has a studio or one bed rental commanding $1500/mo... That would meet the monthly payment goal of $3500...and you can arguably tighten your belt or dip into the reserve at those times of vacancy for the rental unit. So I agree with Maly...if you can find that $1.1mm today...that collects total market rents of $5000....with the rental unit comprising $1500 or so of that. Bear in mind, 18x gross rents is no historical bargain... and I would also feel much better if you could see this as your lifetime place.

So we're all more or less on the same page, hlj. If you can find (or get there with a little elbow grease, no major reno) a move-in condition TH with at least 1 rental in PS29/261/321 (what about WT or S. Slope schools or PS282) for 1m or less, go for it if it'll meet your needs for the next 15+ years. I'd much rather see you in a 1m house with a rental or two than a 700k 3-bedroom new-build condo. TH RE taxes are (shamefully) low in Bk. If you are on top of it, mtce shouldn't be bad.

I sound repetitive, but hit the streets to find the deals. Every "deal" I've seen in Bk has not been advertised well or slipped under the radar somehow.

Thanks for the analysis. This is good. Looks like my options to buy bigger is limited in the 29/261 area. Well, non-existent right now.

hjl, considering your total household income, you would think it should be easier (have more options) than this right?

Sunday: ding, ding. We've talked about this ad nauseum, and I've talked about it loads IRL. Middle-class, middle-income, whatever. People who worked in similar professions back in the 70s, 80s could afford way more in terms of housing, private school, whatever compared to the 90s, 00s. It should be easier, and it's not. Some blame the rise of the dual-income household, erosion of our mfg base, interest rates, changing values. I dunno. IMO, as far as nice Bk bstone areas go, there was a golden era back in the 80s and early 90s, when Park Slope say, had improved tremendously in terms of services (it was always safe, right?) but was still VERY affordable for many professionals.

It was lending standards, when they went away, so did purchasers price sensitivity. It was a boon to then-owners and it fucked everyone else. The flip side is, making $400k combined for two people in finance (as I assume these are) is much easier than it was in the past...and its a much bigger industry than it was in the 1990s and 1980s... Therefore competition. Oh yeah, and the thousands of hedge funds where one good year even for a relatively junior person generates wealth to pay for $2mm brownstones. Such a career trajectory didnt exist in the 1990s when they're were only a handful of large hedge funds getting 2 & 20.

Too simplistic to attribute it all to lending standards. Doesn't account for the huge ramp up from 70s to 80s or 80s to 90s. Neither does it account for similar rises in cities w/o a huge financial industry.

Why was aboutready going nuts on Sunday yesterday on the first page? There appears to be no provocation whatsoever from Sunday to aboutready.

I was never talking about the 70s or the 80s. I was talking about the 1990s till now. I also think people with good incomes can actually afford multifamily purchases in many areas of the country....and in many areas of the country prices are more normalized relative to rents. So 10023, it sounds like you are having a different conversation than I. I am explaining why I think the situation for a $400k total income family in NYC metro doesn't have as many options today as they did in the 1990s. I am being that specific...here in NYC...over the last 15 years.

Shitcomm what motivates you. No one cares.

By the way, clever on the "shitcomm".

I wasn't around or paying paying attention in couple of the decades mentioned, but did people got more and more lazy and the idea of actually earning your money through hard work fade a bit? Like the tech stock bubble, people didn't need to know anything to make money. Just buy/sell/flip = easy money... I think that combined with greed contributed to the bubble, along with all the other stuff mentioned by rhino.

Rhino just buys and sells stocks for a living. Nothing else. Doesn't add value to the companies he buys stock in. Just buys, sells.

Again we're talking about NYC...I dont think flipping had much to do with it here at all.

Why was aboutready so nasty to Sunday on the prior page?