I need to live in the outer NYC suburbs for 5 years. I also want to own more investment real estate I am looking at a condo for $125k. Assume $25k down, and 100K mortgage (5/1 ARM at 3% (30 year)) Amort table shows $420 monthly payment. After 5 years, I will have paid $14k in interest, and have a balance on $89k ($11k principal paid) Over 5 years, I will have paid $12,500 in taxes. Total 5 year... [more]
I need to live in the outer NYC suburbs for 5 years.
I also want to own more investment real estate
I am looking at a condo for $125k.
Assume $25k down, and 100K mortgage (5/1 ARM at 3% (30 year))
Amort table shows $420 monthly payment.
After 5 years, I will have paid $14k in interest, and have a balance on $89k ($11k principal paid) Over 5 years, I will have paid $12,500 in taxes.
Total 5 year "sunk cost" (interest+taxes) = $14,k + $12,500 = $27k
The $27k can be written off on taxes, so that saves me 1/3rd (now down to 18k)
So, if you take $18k and divide by 60 months, you get $300 per month.
Add $200 in common fees = $500 per month in "sunk" costs of ownership
At the end of 5 years, I would owe $88k, which I would pay off with cash.
That would leave me with a place worth $125k (roughly, assume no increase or decrease),
that I have paid $125k into, but got to live there for $500/mo for 5 years.
This is much cheaper than renting something for those 5 years.
Is my math correct? Am I overlooking anything major?
Transaction costs = $2k
Furnishing the apt = $1k
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Response by wdj24
almost 15 years ago
Posts: 2
Member since: May 2009
You are overlooking a lot. To name a few that stand out immediately:
-transaction costs at least 5k but probably closer to 10k. The realtor alone is 5k. Plus lawyer plus closing costs
- a 5/1 is much higher than 3% now. Probably 3.6 is a decent level. So 454 payment
- you ignore upkeep which u don't worry about in a rental
- opportunity cost on the 25k down is about $20 per month assuming a conservative 1% interest rate
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Response by buyer11
almost 15 years ago
Posts: 179
Member since: Feb 2010
Also where can you buy a condo for 125k?? even in Jersey
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Response by ab_11218
almost 15 years ago
Posts: 2017
Member since: May 2009
if you can buy it for $125K, then it would rent for no more then $800 per month and that's if you're lucky.
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Response by dealboy
almost 15 years ago
Posts: 528
Member since: Jan 2011
There was a post on here a while back where someone listed a comprehensive list of hidden expenses of ownership, such as furniture, assessments, etc. Is it possible someone here knows which thread?
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Response by dealboy
almost 15 years ago
Posts: 528
Member since: Jan 2011
I can buy for $125k, and nothing equivalent rents for under $1000/mo.
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Response by dealboy
almost 15 years ago
Posts: 528
Member since: Jan 2011
-transaction costs at least 5k but probably closer to 10k. The realtor
alone is 5k. Plus lawyer plus closing costs
I'm not paying the realtor.
Transaction costs are nowhere near 5k.
Lawyer = $500.
Title search = $500.
Misc filing fees.
Forget about the "paid in" stuff. Escrow, first mtg
payment, etc. Those aren't expenses, they are just pre-pays.
- a 5/1 is much higher than 3% now. Probably 3.6 is a decent level. So
454 payment
Wrong. I can get 3.0 now
- you ignore upkeep which u don't worry about in a rental
Upkeep? It's concrete.
- opportunity cost on the 25k down is about $20 per month assuming a
conservative 1% interest rate
Ok, $520/mo
- if you can buy it for $125K, then it would rent for no more then
$800 per month and that's if you're lucky.
These rent for $1200
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Response by dealboy
almost 15 years ago
Posts: 528
Member since: Jan 2011
It is not within commuting distance of NYC.
The economics change drastically.
Cost is $125k.
Units in the same building rent for $1200.
The rest of the numbers are above.
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Response by dealboy
almost 15 years ago
Posts: 528
Member since: Jan 2011
The total absence of perma-bear commentary on this deal is very bullish.
Hence, I believe I have found what they'd call a no-brainer.
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Response by dealboy
almost 15 years ago
Posts: 528
Member since: Jan 2011
I have decided to buy a 2BR.
The entire cost of the apt's monthly expenses will be covered by a renter in the 2nd bedroom.
In essense, I will have a place to stay in for free for the next 5 years.
Note, this is not NYC, but another metro. There are firesale prices outside of NYC.
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Response by dealboy
almost 15 years ago
Posts: 528
Member since: Jan 2011
Made an offer on a 1B condo in a smaller city for $100k
So, here's the math:
>>
>> Common fees = 202
>> Taxes = 120
>> Opp Cost on 100k (2%) = 167
>> --------------------------------------------
>> Total per month = 489 = 5868 per year
>> 5 year total = 29340 (ignoring writing off property taxes)
>>
>> So, if I can sell this place for 135k in 5 years, I will have lived
>> there for free. I think it is probably worth 135k+ right now.
>>
>> This place was rented for $1400/month before it went on the market
>> (they made a rental exception for her).
>>
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You are overlooking a lot. To name a few that stand out immediately:
-transaction costs at least 5k but probably closer to 10k. The realtor alone is 5k. Plus lawyer plus closing costs
- a 5/1 is much higher than 3% now. Probably 3.6 is a decent level. So 454 payment
- you ignore upkeep which u don't worry about in a rental
- opportunity cost on the 25k down is about $20 per month assuming a conservative 1% interest rate
Also where can you buy a condo for 125k?? even in Jersey
if you can buy it for $125K, then it would rent for no more then $800 per month and that's if you're lucky.
There was a post on here a while back where someone listed a comprehensive list of hidden expenses of ownership, such as furniture, assessments, etc. Is it possible someone here knows which thread?
I can buy for $125k, and nothing equivalent rents for under $1000/mo.
-transaction costs at least 5k but probably closer to 10k. The realtor
alone is 5k. Plus lawyer plus closing costs
I'm not paying the realtor.
Transaction costs are nowhere near 5k.
Lawyer = $500.
Title search = $500.
Misc filing fees.
Forget about the "paid in" stuff. Escrow, first mtg
payment, etc. Those aren't expenses, they are just pre-pays.
- a 5/1 is much higher than 3% now. Probably 3.6 is a decent level. So
454 payment
Wrong. I can get 3.0 now
- you ignore upkeep which u don't worry about in a rental
Upkeep? It's concrete.
- opportunity cost on the 25k down is about $20 per month assuming a
conservative 1% interest rate
Ok, $520/mo
- if you can buy it for $125K, then it would rent for no more then
$800 per month and that's if you're lucky.
These rent for $1200
It is not within commuting distance of NYC.
The economics change drastically.
Cost is $125k.
Units in the same building rent for $1200.
The rest of the numbers are above.
The total absence of perma-bear commentary on this deal is very bullish.
Hence, I believe I have found what they'd call a no-brainer.
I have decided to buy a 2BR.
The entire cost of the apt's monthly expenses will be covered by a renter in the 2nd bedroom.
In essense, I will have a place to stay in for free for the next 5 years.
Note, this is not NYC, but another metro. There are firesale prices outside of NYC.
Made an offer on a 1B condo in a smaller city for $100k
So, here's the math:
>>
>> Common fees = 202
>> Taxes = 120
>> Opp Cost on 100k (2%) = 167
>> --------------------------------------------
>> Total per month = 489 = 5868 per year
>> 5 year total = 29340 (ignoring writing off property taxes)
>>
>> So, if I can sell this place for 135k in 5 years, I will have lived
>> there for free. I think it is probably worth 135k+ right now.
>>
>> This place was rented for $1400/month before it went on the market
>> (they made a rental exception for her).
>>