Buying Now Beats Renting

Looking forward to the day this becomes the case in Manhattan.

funny, since spinny posted the NYtimes rent/buy calculator i've been running dozens upon dozens of real examples through the program. i'm not seeing the monetary benefit of buying.

The calculator works pretty well if you can predict the future, otherwise I've never really considered it much more than a toy. I like it because it provides an easy to understand representation of the effects of interest rate, down payment, market appreciation, etc. Renting will always be cheaper short term, owing to the effects of high initial transaction costs in buying, that is the only certainty in any of this. Once you look beyond 5 to 10 years, things become a lot less certain. Show me a rent/buy calculator with a data entry point for aubergine factor and you'll really have something.

"There are still significant pockets where renting looks promising — including parts of Manhattan."

Should read: "the good parts of Manhattan."

"The buy-versus-rent question is particularly relevant right now. To qualify for an expiring federal tax credit of up to $8,000, home buyers must sign a contract by April 30 and close on the house by June 30."

And then comes the double-dip.

it's like valuing a stock based on P/E ratio. Good for quick comparitive analysis, but that's about it. 20x seems rich though. There was someone else here that suggested 200x monthly rent. That equates to 16.67x

Yeah, that 20x is really funny. Of course published with no reference - meaning they pulled the number out of the air, likely.

You can get 20x if you use the imputed rent model, which takes into account forecasts for home-price and rent appreciation. If you use just the naked price-to-rent ratio, the historic average in NY is 12x. It was as low as 9x at the trough of the last downturn.

Do the math: $3,500 x 20 x 12 = $840,000.

80% financed gives you a mortgage of $672,000, for monthly payments of about $4,030. Add $1,500 a month for maintenance / common charges, you get $5,530. Calculate 15% of the total purchase price in transaction costs, amortized over the 7 years the average homeowner stays in a home, you get another $1,500 in monthly costs. Now you're up to $7,030.

Then take your down payment of $168,000, invest it in the stock market at historic long-term returns of 10% per year, and you make almost $17,000 a year. Divide that by 12 and subtract it from the rent and you have a net effective rent of $2,083 a month.

Versus the $7,030 that it costs you to own THE SAME PLACE.

Makes sense to me.

transaction costs arent 15% though. I think 5-6% from the buyer perspective is accurate.

The calculator is great if you really examine (and often change) all of the default assumptions. Though playing with the calculator can really show how difficult it is to predict which course of action will work out best in the end. With my numbers, for instance, the rent-versus-buy advantage totally shifts if I add or subtract 2% from my assumed investment returns.

I don't understand the logic of using this buy/rent ratio, perhaps I'm missing something...

For most new yorkers, the monthly carrying costs including taxes/maintenance are the important figure, not the purchase price.
Wouldn't it make more sense if you subtracted the annual taxes/maintenance cost from the annual rent, and then ran the adjusted rent to purchase price ratio?

"I think 5-6% from the buyer perspective is accurate"

No - you have to sell it again (eventually), and the real estate commission alone is 6%.

Steve, I don't know where you keep getting this 12X ratio. I recall looking this up for a previous post, and both bears like me and bulls agreed that the data did not support this - the lowest I could find was around that level, for a brief period when coops became common all at once, but the ACTUAL average is more in the 15-20X range.

Sorry Jason:

http://money.cnn.com/magazines/fortune/price_rent_ratios/

Press the PR tab.

Then:

http://www.cnbc.com/id/25625777

And here's my favorite, from THE SAME AUTHOR now touting 20x:

http://www.myopenwallet.net/2008/05/david-leonhardt-on-rent-vs-buy.html

"Throughout the 1970s, ’80s and ’90s, the average rent ratio nationwide hovered between 10 and 14. In the last few years, though, it broke through that historical range and hit almost 19 by the time the housing market peaked, in 2006."

What he published today is a CROCK OF SH*T.

One might also need to consider that in an eight year span following the last real estate downturn, the rent on my doorman one bedroom nearly tripled.

And, you can't really impute some investment return value on the foregone downpayment, without attributing some investment return value on the real estate. Given the leverage involved, even if you assume real estate appreciates at 1/2 the stock market return (5%), the entire analysis goes kapooey.

Jason: back in '99, '00, and even '01, you could find buy/rent ratios under 10X in the W60s & 70s. I bought my first place in '00 at 8x. That place was probably 5x in '97.

sport, people can make up numbers all they want:

"In Manhattan, 1,000-square-foot, two-bedroom apartments on the Upper East Side now rent for about $3,700 a month. Buying a similar apartment costs around $1.1 million, which can translate into monthly payments of $6,000 or so."

http://www.nytimes.com/2005/09/25/realestate/25cov.html

Same author, 2005.

Rents have effectively not changed in 5 years:

http://www.nybits.com/apartmentlistings/e4a33cee14ddf10aae18b03667e7e728.html

Dem's da stats. Sorry.

sport: tripling of rents in 8 years since the last downturn is not the norm on the lower UWS (doorman bldgs). When rents were at their highest, at most, rents doubled (on 1 and 2 bedrooms).

steve is making a fool of himself again. He makes dumb assumptions on transactions costs, but does not factor in the MORTGAGE INTEREST DEDUCTION (amazingly stupid), increases in rents over time or price appreciation of the property over time. (and he assumes stock investments at 10% returns to calculate the opportunity costs of the down payment- just clownish).

A 12X ratio is another ridiculous claim by steve. Maybe when mortgage rates were 10%+ it could make some sense, but of course steve doesn't take into account interest costs. Amateur.

p.s. when I bought at 8x, my 5/1 ARM interest rate was 7.25% (and I got a free adjustment to 6.5% after 1 year).

LICC, no matter what you do you can't escape the fact that you bought in LONG ISLAND CITY at 30x rent. Just because you wasted all of your money to live in a slum doesn't mean that you have to try to blame it on other people.

LICC: "A 12X ratio is another ridiculous claim by steve."

Fact: "Throughout the 1970s, ’80s and ’90s, the average rent ratio nationwide hovered between 10 and 14."

Let's see: (10 + 14) = 24 / 2 = TWELVE!

HAHAHAHAHA.

Fact: CNN Money: 11.7x for NY as the 10-year average.

Where are LICC's facts?

Up his....

I started a thread a few month ago about Gross Rent Multipliers in New York City over Time :
http://streeteasy.com/nyc/talk/discussion/18274-a-little-bit-of-history-gross-rent-multipliers-in-new-york-city-over-time

Sledge, I started the first-ever thread on this subject over 2 years ago. People told me I was crazy. Malraux wanted to bet me $50,000 that property prices would never fall in Manhattan.

And we have it - down about 25% from peak. Still way overpriced. Lots of shadow inventory.

While what LICC says about interest rates is true, they also don't have that much of an effect precisely because of the tax deduction. And I DO take the tax deduction into account: if you use a model that takes it into account, such as the imputed rent model. But the price-to-rent ratio does not take that effect into account explicitly - it's computed implicitly.

All the facts bear this out. Manhattan real estate is still grossly overpriced on a historical basis, and as Professor Shiller demonstrated, these trends go back as far as the records exist: 350 years.

Remember the "New Economy," as the dot.com bubble was called? That died a death. So did is this "New Normal" for real estate dying a death. And so will the present sucker's rally on the stock market die a death.

When? That's harder to predict. But it will happen. It always has.

Steve you have a valid argument, buy you go and make a mockery of the argument and yourself with your ridiculous assumptions. You leave out mtge interest deduction, pick a historically very high 10% rate of return on stocks, ignore taxes on those gains, ignore principal paydown, exaggerate maintenance and transaction costs, and make no assumption for either rent or price increases.

Let's put those all in and see what happens:
Over the 7yrs, one would average 38,400 of interest payments. using a 35% marginal rate (fed city state), that reduces your monthly by 1120/month, we are down to 5,900
Over the 7yrs, one would average 830/month in principal paydowns, we are down to 5070
Use a more realistic but still high 8%, reduced by taxes to 6%. Approx 9600/yr, so we are now up to $2640.
Use a more realistic 10% transaction costs, and you are now down to 4070.
Use a more realistic 1300/month maintenance and you are now down to 3870.

Now, for appreciation: Let's say that maintenance and rents both rise by a modest 2%/yr, and that the price/rent ratio holds. Over the 7yrs, you will average 1380/month is maintenace, and 3715 in rent, so vs. the starting levels, that's another 135/month.
Now we are up to $2775/month in net rental cost.

If the 20x ratio holds, that 840k apt will now be worth 20*12*3940 = 945,600. Take 6% of that 105,600 gain away for transaction costs, and we're at a net gain of 99,000. Divide that by the 84 months, and that's $2,700.

Wow, so put in some realistic assumptions, and your $5k/month difference completely vanishes.

Steve -- I am not disagreeing with the rent vs. buy numbers, or that renting has been a better deal for some time. I just gave one anecdotal reality that you also can't assume rent prices will stay flat, and the fact that rents have been flat (or declining) for 4-5 years probably makes it less safe to assume that these levels will hold long term unless you assume that the markets generally will continue to decline (which then makes the rent vs. buy debate pointless since no one should buy if the assumption is a declining market). Rents dropped by about 40% from the late 1980s to early 1990s. I paid $1200 a month for a 1 bdrm in 1991. The rent was over $3K in 1999. Renting looked very good in 1991, especially with 10% mortgage rates.

steve predicted NYC real estate prices would drop 50% or more. WRONG!

steve, you want facts, see printer's excellent comment above.

steve my only issue with your analysis is the assumed 10% annual return on your equity investments..i don't doubt many have averaged that return but find it unnecessary in your breakdown comparison..if you stick with a modest 2-3% return your case is still valid

steve my only issue with your analysis is the assumed 10% annual return on your equity investments..i don't doubt many have averaged that return but find it unnecessary in your breakdown comparison..if you stick with a modest 2-3% return your case is still valid

I was looking for Manhattan price to rent ratios, not New York City or New York metro. What you posted was New York metro.

When I have more time I will dig it up, but the MANHATTAN price to rent ratios averaged much higher than what you posted for a very long time, including now, and this what the article in TOP says too. Anecdotel stories don't cut it - I want data on Manhattan-only historic price to rent ratios.

printer, I don't do ANY of those things that you say. If you use an imputed-rent to rent model all of those things that you say are EXPLICITLY included. If you use a price-to-rent ratio, they are IMPLICITLY included. You can't do what LICC does: include them both implicitly and explicitly, because that counts them twice.

The other rule of thumb is - can you buy it with normal long-term financing and make a profit?

Presently - no.

moxie - that's the long-term S&P average total return on investment. It's just an example. Change it to whatever you want.

"but the MANHATTAN price to rent ratios averaged much higher than what you posted for a very long time"

No they're not. In 1998 I bought a 2-bedroom 1 bath co-op for $215,000. I was renting a smaller 1-bedroom 1 bath apartment down the street for $1700.

"steve predicted NYC real estate prices would drop 50% or more."

No. I said UP TO 50%, and I stand by that. We're already at 25%. Some properties are 50%.

Today that co-op would sell for about $1 million. That apartment would rent for about $2,500.

Do the math.

Don't know why my edits didn't take!

"but the MANHATTAN price to rent ratios averaged much higher than what you posted for a very long time"

No they're not. In 1998 I bought a 2-bedroom 1 bath co-op for $215,000. I was renting a smaller 1-bedroom 1 bath apartment down the street for $1700.

Today that co-op would sell for about $1 million. That apartment would rent for about $2,500.

Do the math.

printer, I don't do ANY of those things that you say. If you use an imputed-rent to rent model all of those things that you say are EXPLICITLY included. If you use a price-to-rent ratio, they are IMPLICITLY included. You can't do what LICC does: include them both implicitly and explicitly, because that counts them twice.

steve, the hole you are digging is getting deeper. we are using actual rents to actual prices and actual costs. your attempt to squirm out of your absurd arguments is ridiculous. again, your basic premise that 20x actual rent is not cheap as the article implies is a fair point, why do you go and make a mockery of yourself by exaggerating the assumptions and now trying to mumbo-jumbo yourself out of the hole you put yourself in?

printer, your ignorance <> my hole. Or maybe it does.

I'm not squirming out of anything. If you use a different model - imputed rent to rent - then you can well come up with a number of 20x. Such a model EXPLICITLY takes into account things like insurance, mortgage interest deductions, tax deductions, etc.

The price-to-rent ratio is a GROSS ratio. In that sort of ratio - which is like a fraction, if you know what that is, rather than an algorithm - all of the factors are considered intrinsically accounted for. That is, the price-to-rent ratio is x precisely BECAUSE of the tax deductions, mortgage deductions, etc., and therefore they're not counted twice.

Just read the articles and what they're describing. You'll see that I'm right.

ok steve- following the link from the article:

"Houses have their own version of such a ratio. Take the price of a typical house in an area, divide it by the amount that house would cost to rent for a year and the result is what might be called a rent ratio, an imperfect but still telling measure of real estate."

absolutely NOTHING about any factors other than house price and comparable rent. they are NOT looking at effective rents or anything of the like - nothing is intrinsically accounted for. I'm actually rather scared for you that you base your entire outlook on a formula you clearly have little understanding of. Your logic is insanely circular.

Exactly right, printer. NOTHING other than that.

And then the author goes on to say that 20x is the appropriate ratio. And he pulls that figure out of thin air without citing where he got it from. But go to an article written by THAT SAME AUTHOR in 2006, and he says:

"Throughout the 1970s, ’80s and ’90s, the average rent ratio nationwide hovered between 10 and 14. In the last few years, though, it broke through that historical range and hit almost 19 by the time the housing market peaked, in 2006."

So, the historical average is 12 (between 10 and 14), and CNN Money calculates the same thing (as does everyone else), and it HIT ALMOST 19 BY THE TIME THE HOUSING MARKET PEAKED, IN 2006...

...and now he's saying that 20 - above the peak - is the right number.

It's a NY Times Real Estate Shill article, yet again.

You CAN get a 20x number if you use a different formula, but ALL the historic data say that that number is WRONG.

Your logic is insanely circular.

Typical steve. Throws out a flawed, mistaken analysis. Someone points out how stupid it is. He makes up distorted nonsense to try to say he is not wrong. He calls the other person names. Then he makes up more nonsense and can never admit he is wrong.

Thank you for finally admitting you were wrong, and tried to confuse things by injecting inaccurate terminology to your arguments.

Read through my posts Steve - I agree w/you that 20x, measured the way the article does, does not mean things are cheap. But to prove that you don't need to exaggerate - it just makes your arguments look weak. Even after using all my adjustments, at 20x things are only at break-even. Cheap, is of course, a relative term, but I'd say you need to be 20% lower (16x) to be a good deal.

Of course, you need to understand that not everyone needs RE to be a bargain to buy it - they just need to feel that its not a bad deal. So if 20x with reasonable assumptions gets you to break-even over a 7yr period, that's why they'll consider it now.

So steve thinks that an apartment that actually rents for $3000, based on the market demand, should only sell for $432k. He thinks that is the historical number. Even though the after-tax monthly cost to buy a $432k apartment based on an 80/20 mortgage would be, even estimating conservatively, under $2500. But this all makes perfect sense in steve's insane bizarro world.

Steve, I cleary said "I want the data. Anecdotes don't cut it." I want a web site like Moodys or the WSJ or anyone authoritative to show that MANHATTAN price to rent ratios were the same as NYC. Not what you personally experienced. I personally have gone to the Grammys with a backstage pass, swam with giant fishies at the great barrier reef, but also was one of those kids who sat next to a parent who panhandled. i don't think any of those things however is proof that these things are "average" for a New Yorker.

And 86k? Pick an annual return on that and that would make mortgage deductions irrelevant? At 5% it's about $360 monthly interest.

The problem with owning that you need also to do renovations, repairs, etc, etc. That's needs to be calculated in the total cost.

as any good investor knows, sentiment > data (whether flawed or not - most likely former). stevey, i'm rooting for ya 'cause i want you to be my neighbor.

but you've been on these boards for ages, and i sometimes wonder how much rent you've wasted and could've put as a down so we can do brunch on 9th..

maybe ill see ya on Long Island in the summer, it is a nice setting, albeit being third world.

"Thank you for finally admitting you were wrong"

I was not, and I did not.

"tried to confuse things by injecting inaccurate terminology to your arguments."

Ditto - was, did not.

"But to prove that you don't need to exaggerate"

Was not - did not. Sorry. The data are the data, and historically, the average is 12x annual rent.

For 350 years.

"at 20x things are only at break-even"

No they're not. Break even is when you can buy a property and rent it out and break even. For that you would need a figure of around 12x. Or else do the math and show the difference.

"I want a web site like Moodys or the WSJ or anyone authoritative to show that MANHATTAN price to rent ratios were the same as NYC"

I don't care what you want. The data are there. Disregard them at your peril.

LICC - you are a boor. But you prove my point:

"Even though the after-tax monthly cost to buy a $432k apartment based on an 80/20 mortgage would be, even estimating conservatively, under $2500."

So take your $3,000 rent and subtract out $500 a month that you would make on the down payment invested elsewhere, and you come up with $2,500!

Same as the cost of buying the place.

Thank you, thank you, thank you.

And here's my favorite, from THE SAME AUTHOR now touting 20x:

"Throughout the 1970s, ’80s and ’90s, the average rent ratio nationwide hovered between 10 and 14. In the last few years, though, it broke through that historical range and hit almost 19 by the time the housing market peaked, in 2006."

But Steve, you left out this line from today's article (same author):

"The rent ratio has long been higher in New York and San Francisco than most places, perhaps because of zoning rules or because the cities are home to large numbers of affluent households willing to pay extra to own."

how's your rental website going steve?

"The rent ratio has long been higher in New York and San Francisco than most places"

Yup. AMAZINGLY, in the same shill article going to bat for 20x, he adds the above.

And it's completely disproved by the CNN Money data, which show: 11.7x.

It is true for San Francisco, however.

Read the methodology:

http://money.cnn.com/magazines/fortune/price_rent_ratios/

steve, you want to assume opportunity cost on the down payment but exclude rent appreciation and price appreciation.
steve likes to exclude things that show how ridiculous are his assertions.

You are welcome, you are welcome, you are welcome.

No, LICC: LET'S INCLUDE THEM:

"At an average of price of $3,812, the borough's apartment rents are up 0.6% from the fourth quarter but still down 8% from the year-earlier levels."

http://www.crainsnewyork.com/article/20100408/REAL_ESTATE/100409908

And for apartments to buy: "the prices mark a 22 decrease from the first quarter of 2009, where averages hovered around $1.8 million."

http://dnainfo.com/20100402/manhattan/average-price-of-manhattan-apartments-rises-14m-but-highend-sales-down

So let's do what you do and extrapolate forever: it seems to me that I'll be paying $0 rent someday, but your apartment will be worth $0 a lot sooner.

LICC likes to exclude things that show how ridiculous are his assertions.

Like - FALLING property prices and negative equity, you mean?

HAHAHAHAHA!

You are welcome, you are welcome, you are welcome.

so, its news that the rest of the country started falling earlier?

It just means we have more to go, no?

SWE, I agree with that. Historically NYC is behind the curve on these things.

Eventually everything will stabilize (except Long Island City - HAHAHAHA!) and the world will move on. Rents will rise with incomes and property prices will rise with rents. That's how it works - except in the fantasy world of "My House is Worth What?"

If one were to look at PE ratios when buying stocks, it would have told you to never buy Apple, but yet if you did, you would have quadrupled your money. Not saying you should go run out and buy right now, but those multiples are just one piece of information to make your decision.

Except the entire logic of p/e for owner-occupied residential real estate is ridiculous, if e = earnings.

There aren't any.

If e = expenses, then it makes sense, as all it is is a capitalized stream of prepaid rent. Apple's stock goes up or down based - in the long-run - on how much it earns.

How much do you earn on your apartment, LICC?

Who the other day said that unemployment isn't a fundamental economic indicator.

HAHAHAHAHA!

Now steve adds assumed long-term decreases in rents and prices for his analysis to work.

steve, Bellevue called, they want you back at the asylum immediately . . .

"Now steve adds assumed long-term decreases in rents and prices for his analysis to work."

HAHAHAHAHA! Bellevue. HAHAHAHAHA!

I say, "Rents will rise with incomes and property prices will rise with rents."

LICC says, "steve adds assumed long-term decreases in rents and prices for his analysis to work"

Which part of what I'm saying don't you understand, LICC, besides 99% of it?

Property prices WILL fall until owners' carrying costs = market rents. Then they will stabilize.

In the meantime, you'll lose your shirt on your slum flat, and I'll be happy in my 2-bedroom 2-bathroom 2-balcony midtown high-rise with views of the Hudson.

HAHAHAHAHA!

Steve is not the best at making his point. Steve, why don't you re-run you model with more reasonable stock appreciation number and also run an imputed rent model that includes all of Printer's numbers?

Here is the definition of Price-Rent ratio per wikipedia:

"The price-rent ratio is the average cost of ownership divided by the received rent income (if buying to let) or the estimated rent that would be paid if renting (if buying to reside):

House Price-Rent ratio = House price\(Monthly Rent x 12}

The latter is often measured using the "owner's equivalent rent" numbers published by the Bureau of Labor Statistics. It can be viewed as the real estate equivalent of stocks' price-earnings ratio; in other terms it measures how much the buyer is paying for each dollar of received rent income (or dollar saved from rent spending). Rents, just like corporate and personal incomes, are generally tied very closely to supply and demand fundamentals; one rarely sees an unsustainable "rent bubble" (or "income bubble" for that matter). Therefore a rapid increase of home prices combined with a flat renting market can signal the onset of a bubble. The U.S. price-rent ratio was 18% higher than its long-run average as of October 2004."

This by definition, does not take into account all the other factors listed by Printer. That is not to say that they are not important, but by rule are not included in this particular calculation. Imputed rent is a whole other thing.

steve, you live in a cheap rental between 8th and 9th avenue in midtown. Do you think anyone in a beautiful new condo at the waterfront in LIC is jealous of that??????? HAHAHAHAHAHAHAHAH!

"Combative, mean-spirited, and having a penchant for distortion and verbosity." Just a suggestion for Steve's online social network profile tagline.

Boss, you're right on the model. Use whatever opportunity cost figure you want.

LICC - is that where I live? Funny, I thought I lived between 7th and 8th on an upper floor of a luxury building.

Just goes to show you how much more you know about me than I do!

HAHAHAHAHA!

"Do you think anyone in a beautiful new condo at the waterfront in LIC is jealous of that?"

On the Newtown Creek?

Stick to the subject LICC - you can't win on price or location. Justify your 20x figure....

Ok, between 7th and 8th- even worse.

Exactly, LICC: it's HORRIBLE here! Theaters across the street and around the block, restaurants galore, shopping, bars, clubs, Central Park, A, C, E, B, D, F, Q, 1, 2, 3, N, R, W trains all within a few blocks, safe to walk at night....

Horrible. Truly horrible.

There are even 3 DUANE READES within a 2-block radius. More than Long Island City has from the creek to the bridge.

HAHAHAHA!

'Funny, I thought I lived between 7th and 8th on an upper floor of a luxury building.'

when you go to nearby Vlada, Ritz, or Therapy to cruise on us pretty young things, does your high-floor RENTAL help to seal the deal? exactly.

stevejhx analysis is not taking into account what will happen when you sell the apartment. You will earn a payment of 840K (+/- whatever). Otherwise you will still keep 168K since you have added the supposedly 10% in the net monthly rent.
You have also not accounted for tax differences between renting and paying interest/common charges so the net monthly difference is less.

steve, you live in a dumpy building right off Times Square. Believe me, no one in a beautiful new condo at the waterfront in Hunters Point is jealous of your place.

hol4 - don't know what you're talking about, but you seem to know lots about whatever it is.

LICC's famous last words: "Believe me."

Plus his geography is all wrong: Times Square is 10+ blocks from my house.

WHERE'S YOUR MATH, LICC?

jackm1 1: paragraph 1: What?

Paragraph 2: yes i did for imputed rent, not for price/rent ratios as they are implicit.

> Plus his geography is all wrong: Times Square is 10+ blocks from my house.

Unless they moved times square, uh, nope. Times square extends to 47 and broadway.

But, then again, the direction you're going, it actually gets worse...

On the $2 million and up apartments where there is no long term rental equivalent, buying is of course better than renting, and then on some of the lower end things where you can either buy into a small place that is yours or be at the mercy of too many NYC slumlords or even just landlord s who don't really care. In the middle, at the $3,000 to $10,000 range, renting is a good option.

Whether it renting makes more economical sense than owning or not, I have never seen such ridiculous assumptions before. I therefore have to comment....

"80% financed gives you a mortgage of $672,000, for monthly payments of about $4,030. Add $1,500 a month for maintenance / common charges, you get $5,530. Calculate 15% of the total purchase price in transaction costs, amortized over the 7 years the average homeowner stays in a home, you get another $1,500 in monthly costs. Now you're up to $7,030."

Mortgage Payment - Highball. Conforming jumbos now priced at 5.50-5.75%

$1500 for maintenance - Highball. More like 1100-1200 for efficiently-run coops. Also consider lower maintenace condos where $500 is high depending upon ammenities offered. Also consider tax abated properties (15-25 years). I pay $33/$80 month for my prop.'s

Transactions costs - HOLY F'ing HIGHBALL. Dude what are you smokin' 15%?!?!? I had a buyer the other day on $800K existing coop pay less than 2%. On New construstion your lookin' at 5-6% TOPS and that's only if you don't have smart attorney who'll negotiate you out of all the costs developers attempt to pass onto you. In fact, most Dev.'s are smart and are not laying off Transfer Taxes onto the buyer in this market.

"Then take your down payment of $168,000, invest it in the stock market at historic long-term returns of 10% per year, and you make almost $17,000 a year. Divide that by 12 and subtract it from the rent and you have a net effective rent of $2,083 a month."

This is where this guy gets just downright ridiculous. What newspapers have you been reading lately? See http://s.wsj.net/public/resources/documents/BADDECADE09.html for a -.5% return from 2000-2010.

Anyway, the reason why the rent-own scenario is absolutely BOGUS, is that on both endsof the spectrum, the FACTS are jiggered and re-jiggered to suits the one another's argument. In the end, a bear will be a bear (renter) and a bull (owner) will be a bulls. Sure, renters are smart right now, but will they be when the next cycle (maybe starting right now) passes them like the last one. I know one's things for sure, I'd be pissed is I had 100K in 2000 and invested solely in the stock market...just as I'd likely be pissed if I bought an apt. in NYC in 2007 and am now deciding, or in the very near future I'd say up to about 2017, to sell it.

Then take your down payment of $168,000, invest it in the stock market at historic long-term returns of 10% per year, and you make almost $17,000 a year. Divide that by 12 and subtract it from the rent and you have a net effective rent of $2,083 a month.

"I had a buyer the other day on $800K existing coop pay less than 2%...."

HAHAHAHA! And how much did the SELLER pay you and your "colleagues"?

6%.

And the transfer tax?

And the mortgage tax?

And the mansions tax?

15% both sides.

"More like 1100-1200 for efficiently-run coops...."

HAHAHAHA!

Show me one of those - a co-op with an underlying mortgage.

http://streeteasy.com/nyc/sale/499604-coop-350-bleecker-street-west-village-new-york

You're a real estate broker - OF COURSE you think buying is a good idea.

"On the $2 million and up apartments where there is no long term rental equivalent, buying is of course better than renting,"

Yes, because you certainly can't rent a SLIGHTLY ABOVE AVERAGE apartment.

of course!

what a painfully incorrect premise... making the conclusion garbage.

"On the $2 million and up apartments where there is no long term rental equivalent, buying is of course better than renting, and then on some of the lower end things where you can either buy into a small place that is yours or be at the mercy of too many NYC slumlords or even just landlord s who don't really care. In the middle, at the $3,000 to $10,000 range, renting is a good option."

What are you talking about? This ain't Iowa. There are probably several hundred $2M+ apartments available right now for rent. Most of the time, the owner's preference is for a long-term lease, and their plan is to rent it out indefinitely. Have you actually ever rented one, or are you just theorizing?

And for $10K, you can find a $3M apartment with a little effort. If you've got tight constraints or are just happy to take the 5th place you see, then a $2.5M place for $10K. To only do a $2M place for $10K, you really gotta be some kinda special. At that level, I wholeheartedly agree that you are better off buying a $2M apartment.

Except that you'll probably pay $2.5M for it.

> Have you actually ever rented one, or are you just theorizing?

If "theorizing" is the new polite term for "pulling it out of your *ss".... then, yes, theorizing.

"On the $2 million and up apartments where there is no long term rental equivalent, buying is of course better than renting."

HAHAHAHA!

You mean like this 2-bedroom apartment for $1.9 million:

http://streeteasy.com/nyc/sale/470588-condo-310-west-52nd-street-clinton-new-york

That you can rent at the Ellington across the street for $3,600?

http://www.ellingtonnyc.com/18_28_c.html

And then wait for the taxes to kick in at The Link!

With window you can't even open.

Sure, the bathrooms are nicer at The Link, but how much are you willing to spend on a nice bathroom?

Steve, what's with the incessant need to exaggerate? There is a perfect comp on this one: the damn unit itself. As the marketing states, it is currently being rented at $5600 through next year:

http://streeteasy.com/nyc/sale/470588-condo-310-west-52nd-street-clinton-new-york

A good sale comp is this, which sold for $1.59M 13 floors below in Aug last year:

http://streeteasy.com/nyc/sale/390500-condo-310-west-52nd-street-clinton-new-york

So, I'd guess that something like $1.7M is about right for the additional 13 floors of elevation. Perhaps you wouldn't pay $5600 for it, just like someone wouldn't pay $1.7M for it, but the point is that someone in the market did.

Interestingly, the last ask on this place that went for $5600 was actually $6500:

http://streeteasy.com/nyc/rental/433701-condo-310-west-52nd-street-clinton-new-york

In any case, for all you 25x-deniers, here's yet another place that is at 25x rent-to-price. Can someone who actually believes 16x is correct post a true comp like this?

That's a nice minty condo for $1500psf with tenant in place for $5600/mth. Doesn't get much more prime than Clinton I guess.

Yeah, spinny, I get it. You wouldn't pay those kinds of prices for that. I wouldn't either. That's why you and I are not living there. However, there is a 43-story building full of people who would pay prices like that. I bet they wouldn't pay the kind of prices you pay to live in the place where you live. Otherwise, they'd be living there. That's how it works.

In any case, you seem to need to exaggerate just like Steve. No one's actually paying $1500 psf for that place. Someone paid $1280 psf last year for 13 floors lower. I bumped it up to $1350 to account for the height difference.

nada, what ARE you talking about?

You rent your place out for $5,600. Here's what it costs you to own it:

Down Payment $385,000
Mortgage Amount $1,540,000
Mortgage Payment $8,744
Total Monthly Payment $10,244

Meaning you're losing 50% EVERY MONTH. And then the taxes will start kicking in....

If you think that's a good investment: invest away!

And the fact remains - directly across the street, $3,600 for a similarly sized (though not as nicely appointed) apartment.

When I was single I could live anywhere -even a boat for a while. So ya, Clinton is fine. And this building, whoa! Did you see that lobby? Without exaggerating, My pet panda would go crazy in there.

Actually, spin, I look at that building from one of my windows. It looks like an office building. Very pretentious lobby staff - one guy wears a single white glove a la M.J. And you can't do anything about the fact that it sits right next to the Radio City Station post office - the trucks start rumbling out at 4 am.

People can pay anything they want. Let's say that it actually is rented out for $5,600, and that that actually is a market rent, you couldn't come close to buying it and renting it out for a profit.

And that, traditionally - for hundreds of years - is the market equilibrium.

In any case, $5,600 an outlier, to be sure, because even the pricey Archstone West goes for less:

http://www.nybits.com/apartmentlistings/8277bdbfb6c26c3a049a5d37e04a4f3a.html

Especially since you don't need an enormous down payment, the taxes won't continue to go up, and they give you 2 months' free rent.

And how far can you really push it without a proper swim-up tiki bar on the roof?

Notice how several people above pointed out steve's mistakes and inaccuracies, yet he still posts his dumb conclusions using the same mistakes and inaccuracies. He also just fell back on an old trick of his to compare two apartments that are completely different in quality to distort the facts in his favor. Pathetic.

"If you think that's a good investment: invest away!"

Have you ever read a single post I've posted? Who said it was a good investment at $5600? I just pointed out that your 44x price-to-rent was disingenuous comparing $1.9M to $3600 because that very unit rents for $5600 (deal signed last year) and comps would indicate a sale price of $1.7M, at a very-typical 25x multiple. Your unncessary exaggeration & desire for spin weakens your point. Mind you, this is the same guy talking who backed you up when people were pulling crap out of their rears saying your place was like 900 sq ft.

LIC, it's not like you're any better. What do you think is the typical price-to-rent in LIC?

"In any case, $5,600 an outlier, to be sure"

Except they are not outliers. For example, here are two at 1331 sq ft, 9 & 10 floor lower, with a last asks of $6000 & $6500:

http://streeteasy.com/nyc/rental/588361-condo-310-west-52nd-street-clinton-new-york
http://streeteasy.com/nyc/rental/554730-condo-310-west-52nd-street-clinton-new-york

Both seem to have short times on market at those last asks, indicating probable transactions in that neighborhood of price.

Better yet, here's the link to the building with 150 rental listings:

http://streeteasy.com/nyc/building/the-link

Please find me one that is consistent with anything significantly less than $5600 (like $3600 or even $4600) for that apartment. I don't disagree with the idea that you find better value at the Ellington, but there are dozens of people who find, from their viewpoint, better value at the Link.

inonada - I never said that your "comp" wasn't correct. I said there were better deals out there, and that $5,600 doesn't necessarily represent a true market rent today. In fact, it seems high based on the other comps I've seen for no-fee market rentals that are readily accessible.

There was nothing "disingenuous" about what I wrote - entirely fact-based, you can check them out yourself.

LICC - again, a boor. Adds nothing. Still thinks he made a great investment with a view of the Newtown Creek.

And see, this is why I like dealing with stupid people. Your example above, nada, claims to be 1253 square feet. You claim my apartment - somehow - is 900.

The Ellington apartment layout I posted is my apartment. EVERY ROOM SIZE in the Ellington apartment has more square feet than the comparable Link apartment, where the Ellington is slightly smaller. The dimensions given for the Ellington apartment, however, doesn't include the alcove in the LR, making it even larger.

Therefore, how can the Link be 1253 square feet but mine only 900?

Fools.

Erratum: ", where the Ellington is slightly smaller" = "except the smaller bedroom, where the Ellington is slightly smaller"

nada- you won't find comments by me with a lack of logic, distorted comparisons and mistaken analysis like steve. You also won't find me calling you stupid or a fool.

"you won't find comments by me with a lack of logic, distorted comparisons and mistaken analysis like steve."

You're right, LICC: none of your posts contain ANY logic, ANY comparisons, or ANY analysis. How could you be wrong?

HAHAHAHAHA!

Wow steve, you do you "side" zero favors, by constantly attacking and ridiculing fellow bears like myself and inonada. Whom, btw, I agree with on one point: you are are SO hyberbolic and insulting it sours your arguments entirely.

And she is entirely correct - $5600 is not "too high" by any means. She went through the trouble of showing you CURRENT listings in this range, and you counter with you months-old rental deal.

In fact, a quick search of all rentals currently listed in Clinton show that $5600 is smack-dab in the middle of asking rents for 2 bd, 2bath doorman buildings. Its almost exaclty the median asking rent.

http://streeteasy.com/nyc/rentals/clinton-manhattan/beds:2|baths%3E=2|amenities:doorman

Expand the search to ALL of "midtown west" and it would appear on page 5 of 9 - again, exactly in the middle:

http://streeteasy.com/nyc/rentals/midtown-west-manhattan/beds:2|baths%3E=2|amenities:doorman?page=5&sort_by=price_asc

You may counter that the asking rents are not reflective of actual rent paid, but i could counter that askign selling prices are not indicative either.

"Your example above, nada, claims to be 1253 square feet. You claim my apartment - somehow - is 900."
"Therefore, how can the Link be 1253 square feet but mine only 900?"
"Fools."

Boy, you've got some reading comprehension issues. Try to read more carefully before hurling insults. Let me repeat my words above:

"Mind you, this is the same guy talking who backed you up when people were pulling crap out of their rears saying your place was like 900 sq ft."

Let me also remind you of this thread:

http://streeteasy.com/nyc/talk/discussion/15605-where-can-you-buy-this-apartment-for-3600-a-month

Where I first say:

"Congrats, Steve. I count 1100-1200 sq ft (closer to 1100 if you don't count outside walls, 1200 if you do), but then again that's because I know how to count. Regardless, nice deal. "

Followed by a whole lot of factual backup of how that number is derived intermixed with hurlings of insults.

FWIW, I do agree with you that size-wise the Link apartment is very comparable to yours. In fact, it's probably a hair smaller than yours, like 50-ish sq ft. But for whatever reason that you and I don't understand, the Link commands a 50% premium over the Ellington. Perhaps you got a very special deal at the Ellington, perhaps not. But the fact remains that $5600 is the market rent for an apartment of that size in that building. It is not an outlier, but rather backed by dozens of other listings in that building that appear to have actually rented.

There are 150 rental listings historically in the Link. Could you not find one that was for significantly less than $5600 on a size-adjusted basis?

"Whom, btw, I agree with on one point: you are are SO hyberbolic and insulting it sours your arguments entirely."

But then again, the hyperbole and insults is what makes Steve fun.

i have nothing to add to this conversation. except, jason, nada is a he.

and, personally, i prefer the poetry. reducing things to three or five lines adds an attractive level of constraint.

Damn, AR. Why'd you have to ruin my Crying Game moment? I wanna be like West81st!

i know west81st, and you sir will never be west81st.

Then I take it back, nada - I apologize, I thought you were one of the arseholes like LICC constantly making things up.

My bad. I guess I get attacked here so much that I get testy. :0

No, my deal at the Ellington is the same that everybody gets: I asked my neighbors. When things went sour they lowered EVERYBODY's rent, which is one reason why it's such a great place to live. They value people who actually pay the rent.

jason - I only go by professionally managed buildings for comps: people can ask whatever they want, and there's no way to find out what individual rentals actually go for. nybits is my source, where $5600 is at the very upper end:

http://www.nybits.com/search/?_a!process=y&_rid_=3&_ust_todo_=65733&_xid_=8_fdWXtWj7xDnl-1271954886&!!atypes=2br&!!rmin=&!!rmax=&!!orderby=neighborhood&submit=+SHOW+RENTAL+APARTMENTS+&!!nsearch=central_midtown&!!nsearch=hells_kitchen

weird, i totally had nada pegged as a woman too

Dogs are male and cats are female. Bulls are male, but you never know about bears. Cubs are juvenile, and they live in Chitroit.

I hope that clarifies things.

I appreciate the apology, steve, but no need to apologize. Hurling insults back-and-forth is always a most cherished activity here on SE, particularly since the comm-Nazi stopped patrolling.

Printer & jason, what gave you the impression of female? I'm curious...

W81 and Inonada are both honeys.

exactly, 10023.

Is that female-speak for nice & polite?

the reasonableness of your arguments, calmness of your demeanor, lack of snarkiness & screen name all imply a sense of humbleness generally lacking in the male posters on here.