Timeframe considerations
Started by hberg32
about 18 years ago
Posts: 1
Member since: Jul 2007
Discussion about
I'm having a really difficult time deciding if an apartment I'm looking at is a smart investment and thought I'd throw the numbers out to the group to see what you guys think. Should I buy this place or stick with a rental for now? I love my rental and am, at best, lukewarm on the apartment I'm looking at, I'm trying to calculate if I will come out with anything in the end if I go stick it out in... [more]
I'm having a really difficult time deciding if an apartment I'm looking at is a smart investment and thought I'd throw the numbers out to the group to see what you guys think. Should I buy this place or stick with a rental for now? I love my rental and am, at best, lukewarm on the apartment I'm looking at, I'm trying to calculate if I will come out with anything in the end if I go stick it out in this place for 5,6,7 years. Obviously buying beats renting over the long haul (barring extraordinary events) but the picture is a bit more clouded in the short term. A classic model of "moving up" is to buy what you can afford, let it appreciate and plow that into the downpayment on a bigger place. However, due to closing costs on the buy side and various fees on the sell side, you have to stick with the place for a certain period before you start building equity -- I'm trying to calculate where that point is (I've seen the NYTimes calculator and it didn't quite fit). My rental is 2600/month, the co-op is the same size and the seller will take my offer of 625k. The unit is rennovated and in a pre-war building that has had lots of recent maintenance so I don't see any major projects (like a local law 11) in the near future. My mortgage company is giving me an estimate of closing costs that sounds kind of low at $7,224, but if we go with that and toss in the attorney, loan, appraisal, and move-in fees we get $11,054 to move in. According to the contract, the seller is paying transfer and flip taxes, attorney, broker, and moving fees coming to $54,463. The mortgage, maintenance, and insurance will add up to about $4,100 a month of which I'll be able to deduct about $1,000 from taxes, so let's call the monthly cost of owning $3,100, as opposed to the current rent of $2,600. Here's where the guesswork begins. It seems to me that rent goes up about 5-7% every other year for a 2-year lease so if we take the 7% number, the rent payment will equal the mortgage payment in 2014. At that point I would still not have pulled ahead quite yet because one has to take into account the costs of buying and selling which, if we take the numbers from the current deal, we get $65,517. If we spread those costs over the life of living there, it appears that it will take till about 2018 to reach the break-even point. If these conclusions are correct, it sounds like I need to be prepared to live in this place for 10 years in order for this deal to be fiscally sound. Granted, the property value will increase, but you can't take that till you cash out and since I never want to leave New York, I don't think that the appreciation has an impact on the equation. It seems awfully long, does this sound right to the group? Thanks, Henry P.S. I don't care at all about the soft benefits of ownership (like being able to paint), I'm just looking at the numbers. [less]
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