How much house can I afford?

What type if work do you do and how do you know how much you will "get" in 11 and 12 ?

I have a binding contract with a company in place that goes over the next two years.

1.) Your credit score(s) is(are) crucial to your lender and your obtaining a loan. You can get these yourself. Do so, and review them.

2.) The fact that you carry no debt is terrific, and I assume you pay your credit card monthly and have no revolving balance.

3.) The only thing the bank will look at is your last two years tax returns (2010/2009). Anything before that will probably not be taken into consideration.

4.) What the lender will be reviewing is your SALARIED earnings. If your earnings are primarily from freelance work or all schedule C, you will have a huge problem securing a loan of any kind.

5.) What you will be making in the future will not be taken into account.

6.) You earned $1MM over the past three years and have no savings? If that is true, and you have no net worth, you will not be approved for a loan.

I would say, having recently gone through the pre-approval process myself, and based on the little info you've provided here, that you will not be considered as a worthy loan applicant.

if your green card comes through your company and you are not a citizen, why buy? After all, employment is not a long term contract. You should save, save save IMO

Thanks for you input on this matsonjones.
A couple of questions;

re 4.)Are you saying that if you don't have a "regular" job, you don't stand a chance?
I am sure there must be a lot of self employed people in this city with mortgages?

re 6.) Yes, it's an expensive city to rent in and raise kids in. Finally, this year I made enough to also set aside enough to put down for an apartment. Do banks demand a certain savings/income ratio?

Are my chances really that grim?

PMG:
I have a EB 1A green card, that I got myself, not through any company.
I freelance, and have always dealt with numerous different companies at the same time.
It's not like I am employed by this company that I did this one deal with.
I want to buy, as I am thinking long term and want to have something to call my own.

Just wanted to go on record that I'm not being snarky - just trying to be honest in terms of what I experienced and was told when recently going through the process myself...

I am indeed saying that if you don't have a 'regular' job (meaning specifically a salary history that the bank can independently verify with pay stubs) you will probably don't stand a chance. Self employed folks had a much easier time getting a mortgage pre-Lehman. But now, with private/personal credit seized up (corporate credit is flowing again, but that's entirely different), it is near impossible for a self employed person to be approved for a mortgage - PARTICULARLY when you have (according to you) absolutely no savings/net worth to show.

Yes, banks/lenders most certainly have net worth requirements in addition to credit scores, employment verification, etc.

I wish I could be more positive, and of course you should still try, but I would be mightily impressed if you made it through the process successfully.

I agree with mj - you have little chance to get a mortgage. If you want to buy it looks like all cash is your best option.

Andy,
Instead of being freelance, why not form an LLC & become a company? Banks & buildings may look more favorably upon you if you have your own company & are not simply "freelance". Discuss with your accountant to see if this is beneficial. However, the lack of savings does sound like a problem.

I disagree with the posters above, partly because I'm a real estate agent and I work with tough problems like this, & partly because I too am a freelancer and I'm writing this from the living room of a co-op that I own.

If you want to buy, you can probably buy a $1mm apartment by the end of the year. (This depends, of course, on your credit score). If you put $500K down you can probably borrow $500K. Since you have no savings, though, a better scenario is that you put $400K down, borrow around $450K, and have $100K liquid.

You'll need to focus on condos as co-op approvals are unlikely at this time.

If you're not working with an agent I'll be happy to work with you (I work for a boutique firm based in Chelsea). Step #1 is to start pushing up your credit score -- and I can help you do this.

ali r.
DG Neary Realty

ali [at] dgneary [dot] com

ali - When did you buy that co-op that you own? And did you do it yourself?

"If you're not working with an agent I'll be happy to work with you" - of course you would

"Step #1 is to start pushing up your credit score -- and I can help you do this." - you get better and better every day

You are the Rachel Uchitel of Real Estate!!!

MJ, post-Lehman -- summer of 2009, when credit was tighter than it is now.

I did buy with my husband, but we couldn't have made the numbers unless my income "counted" -- which according to all the posters above it doesn't.

That's simply not true. When we bought I hadn't held a full-time job for four years.

ali r.
DG Neary Realty

^^ Note that "freelance income" -- income from someone who works full-time in a field, often on a contract basis -- is treated differently from "bonus income" -- the dosh that a Wall Streeter who has already been paid for their work with a salary might expect, but that isn't guaranteed contractually.

The latter has indeed been ignored by most mortgage lenders for the past few years.

ali r.
DG Neary Realty

ali is right. having a green card is the key (defines a US "person" for financial purposes). as you have no bad debt getting a good score is quite easy (get an unsecure loan from the bank, more than 6 months, pay religioulsly fro 6 months then prepay the balance: this will boost your number in no time.it really works). with your income you WILL find a mortgage. no question. a good mortgage broker will send you to the right lender. this is america remember. without loans the whole thing collapses in a instant ( i say that because a lot of countries require full cash to buy RE).
If u need one i'll give u mine (no fee here for me just so u know).

easy on the shilling, alison

plenty of info on the web on how to effect the best credit score, whatever your circumstances

green card gets you into the process, decent down pmt good, decent credit score good, decent steady income based on tax returns (more important than self-employed vs LLC etc)good---your prob is that, despite your decent income, youhave, for some reason, been unable to savethis will concern both lenders and coop boards

if youre not comfortable researching this yourself, get a good mortgage broker, or begin the process with a reputable bank like wells fargo (got nuttin to do with them--not shilling)---easier to get a mortgage than to buy in a coop---you will not be able to buy in a credible coop

also, for other very good reasons, if you freelance, have contracts, make decent, consistent money, you should work through an LLC--plenty on the web on why this makes sense--most compelling is the NYC Unincorported Income Tax you will save part of, at least--many other reasons which can easily be researched on the web

woops UBT--uninc BUSINESS Tax

dwell: I do have my own company (LLC) that all my income is channeled through. Does this make my situation better with the bank?

btw UBT is a complete ripoff fo small entities with no lobby power--the city will blow steinbrenner and big RE developers with tax relief galore--but they tax add'lly via UBT the smallest entities

the smallest entities are where the entrprneural seeds are sown, and they stamp all over the field

>easy on the shilling, alison

What "shilling"? And why "easy" on it? She's perfectly transparent about who she is and what she does for a living. Even where she owns apartments.

From all the comments here, the general consensus seems to be that I will run into trouble because I should have saved more of my income.
It sounds like I have been grossly overspending, but to break it down;

average yearly income over the last three years: 325K

Rent for 2 bedroom apt (6k a month): 72k pr. year
2 kids in school: 70k pr year

After tax that's 284k.

That leaves me with around 20k after tax, pr. year for food, clothes, travel etc.

Is this excessive looking from a banks perspective?

W, posters on this site are continually asking what brokers do -- this is one of the things that brokers do. And sure, it's pretty easy to research on the web some ways of rebuilding your credit score -- I've been writing about personal finance for decades, so I've written some of them.

Andym, not sure I get your math:

Gross income $325K
After-tax income $284K (paying 13% taxes? that seems low)

You spend 25% of that after-tax income on housing (not unreasonable); 25% of it on schooling (high, but not completely unusual)... so you have $142K a year, or $12K a month left to play with?

Is that right?

On that you ought to be able to save, though not necessarily a fortune.

ali r.
DG Neary Realty

Not sure about the math but it looks like it takes 284K pre tax to pay for housing and school. Leaving about 20K after taxes for living expenses. That seems really tight considering the housing and schooling costs/lifestyle.

Andym:
1. Lose the kids -- your P&L statement will thank you
2. Get your answer from the mouth of the horse, by talking to a mortgage broker/officer, for free, about your situation. One guy, who's been very generous with his advice on this discussion board, is Sunny Hong, sunny.hong@bankofamerica.com NB: I haven't done business with him, nor do I know him personally, etc.
3. You might need to focus on condos, which are pricier, rather than coops, which are far more numerous and tend to be what you get if you want a prewar building.

ali, you're forgetting that YOUR HUSBAND does have a stable job. i think that made your life easier.

you have a person here will only 3 yrs of minimal credit history who's income moves up and down more then 50% each year. this is a problem.

putting down a large down payment (40%+) will definitely help in getting a mortgage. the issue here is that you would be looking at properties, based on what you're renting now, over $1M. you'll need to save significantly more then what you want to get into RE.

here's a question for you. can you find a rental at $8K per month in the area where your kids don't have to go to private school? that would save $46K per year.

Andy,
I think it looks more professional & established to have an LLC instead of working w/o any entity. So, really you are not a freelancer, but instead are a one man company. Perhaps it would be better to present yourself as a "self employed whatever " (I don't know what your profession is) instead of a "freelancer".

Wbottom: are you saying I can avoid the UBT if I form an LLC? I pay UBT on some fees I receive. Thnx

front_porch: Sorry, I see how it looks confusing.
I pay 50% tax. I meant that 284K of my income(including tax) goes to rent and school

that leaves me with 41k gross before tax, so around 20k left after tax.

Flmaoz. Rule #1 of personal finance. Know the incentive of the person selling you shit.

And to the euro penis lancer. How do you sleep at nite? 2012 then what? Why don't you duration match your 'home' to income. Me, I may be a bit conservative, but wouldn't feel comfortable unless I can pay 100% cash. Funny enough, every year nyc re gets cheaper? So stfu and rent.

Andym, do you pay tax to somewhere outside of the US? If not, your effective tax rate is more like 40% to 42%. That leaves you with $220K or so.

Inonada: there are usually tax treaties.

Andym: I was in a similar position not too long ago (didn't have a GC, 2 years of U.S. credit history). Thought I was doomed to shop in the condo market (with accompanying premium). No broker even bothered pointing out that there are always sponsor units (co-op) that go on the market that don't require board approval. We were lucky to get sponsor units 3x. And for whatever reason, the market didn't price up the sponsor units.
On the UWS there are always sponsor units on the market - not too long ago, I think a sponsor unit 522 WEA sold for under 1m? http://streeteasy.com/nyc/sale/368360-coop-522-west-end-ave-upper-west-side-new-york, classic 6.

As to what you can afford, I don't know your biz, income stability, blablabla.

as to mtge underwriting, shouldn't be that big an issue - if you banked previously with some place like HSBC, should be able to get financial ref. through them to improve chances of getting a mtge.

Even 40% for taxes seems too high for an average rate; that looks more like the marginal rate at that point (28% AMT + State/City). A salaryman at that income would hardly pay a third all told, and a business should be able to find additional deductions.

Maybe the first thing you need, Andym, is a new accountant who can explain your budget to you.

And then you need to think about why you want to make a highly leveraged, illiquid, apparently short-term investment in a bubble-priced real estate market.

I agree re: why buy? Probly be better to rent. But, also agree re: sponsor units. Just found 1 cuz someone posted about the Normandy, which I know nothing about:
http://streeteasy.com/nyc/sale/241404-coop-140-riverside-drive-upper-west-side-new-york
But, I think prices are still bubbly & maintnce/com charges will rise due to rising fuel/utility prices & RE tax.

According to OP's income info, an average tax rate of 40% is actually right on the spot if you live in NYC.

Income = 325K
After-taxes = 195K
After private school + rent = 53K left

So 53K per year is left for food, dining, travel, insurance, vacation, etc., about $4,400 per month. A family of 4 can easily rack up the food bill to $1,000 per month, and no fine dining included and mostly home cooking. Vacations are expensive too, e.g. if flying to SFO, tickets for 4 are about $1200, let alone hotels ($500 for 5 days), car rentals ($200), and other stuff = $300 per month (and this is no luxury-type of vacation). Since OP is going solo in business, health insurance will be expensive. An adult could be insured for $400-500 per month, a family of 4 maybe $800-$1000 per month. So how much does OP have after all these expenses? About $2,100 per month. Remember, there are phone bills, gas & electric, life insurance, transportation etc. Remember, MTA is now $2.50 and 30-day unlimited is $100 and this is for OP alone (what about kids going to school?). Gas and electric in the winter could easily top $200 for a 2-bedroom apartment.

Assuming OP *can* save $1,500 per month = saving $54K in 3 years. Not enough for down payment for a 2 bedroom.

I remember there was a post on how a guy said he made 1 mil per year and still considered himself a middle class. Even though I do not believe what he was saying, as a matter of fact, even with OP's very decent salary of $325K per year, it's not easy to save at all if you live in the city.

"I remember there was a post on how a guy said he made 1 mil per year and still considered himself a middle class. Even though I do not believe what he was saying, as a matter of fact, even with OP's very decent salary of $325K per year, it's not easy to save at all if you live in the city."

Yet ANOTHER example of how it's actually a slap in the face to the true Middle Class for people with seven-figure incomes to assert that they're "middle class".

The median household income for New York City is $55K. For Manhattan it's just over $70K.

Households (not individuals, but HOUSEHOLDS) that make in excess of $92,000/year are in the top 20% of all households in New York.

Over $167K you're in the top 5%.

$250K ... top 1.5%.

Over $350K is the top 1%.

There is absolutely nothing "middle" about being in the top 5 or 1 percent of anything.

There isn't even anything "middle" about being in the top 20%.

I don't care how you "feel" at your income; if you're making more than 90% of everyone else you are NOT MIDDLE CLASS.

sara, $1K for food for home cooking???? holly cow. my family of 4 spends $500 and we have no space in the freezer and the fridge is somewhat full as well. if you're talking about going and buying preped food in Gristedes, Balthazar, etc, then it's understandable, but don't call it "home cooking".

Matthew, you seem to have conflated "middle class" and "middle income" ... ?

"Even 40% for taxes seems too high for an average rate; that looks more like the marginal rate at that point (28% AMT + State/City). A salaryman at that income would hardly pay a third all told, and a business should be able to find additional deductions."

I think at that salary, you are probably hitting AMT more or less fully: 28% of total income minus $1.75K per exemption (?). I might be wrong though. State tax is just shy of 7-8%. (State taxes have a narrow range where they are marginal, after which your rate is applied to your whole income. Read about "recapture" if you want; a pet peeve of mine is that there is a $50K income range where the effective marginal state rate is over 20%.) Local is 3.648%, and that's on anything above something low like $20K. Then, 1.45% to medicare, and 7.x% on a third of the income to SS.

ab_11218, when I said home cooking, I included "mostly home cooking". If dining out once per week, a dinner for 4, including taxes and tips, could easily top $100 per meal in NYC (which is $25 per person). So buying grocery, including toilet papers, etc, $600 is about where you are! But even with your figure of $500, let's say OP doesn't dine out at all for a full year, OP can save an extra $18K, his savings increase to $72K in 3 years. I still do not think this would be enough for a down payment for a 2 bedroom in NYC.

NYCMatt, I said "I do not believe what he was saying" and I never argue about the definition of middle class. I simply said, "it's not easy to save at all if you live in the city."

"I made $225,000 in 2008, $590,000 in 2009, $160,000 in 2010 and will receive $1 mill for 2011 and $700,000 for 2012.

I don't have any savings, but I'm planning on using a lot of my money this year to put down for an apartment. I was thinking $500,000, but I don't know how much for sure as I of course also need money to manage the mortgage."

Andym, I think you might be planning on spending beyond your means. You currently spend on the order of $325K gross a year, and you've been running on the edge with no savings for a rainy day / retirement / college / whatever. If you receive the amounts you are expecting and keep your expenses where they're at, you will have $1M gross left in 2 years, putting you at $500K net after 2 years. Your "lot of my money this year" does not amount to a $500K downpayment you were thinking about; only after 2 years and $1.7M of gross expected income will you have this sum.

Given your income history, where do you think you'll be longer-term beyond 2012? If there's a significant possibility of, say, $200K (and I think there is given your income in 2008 and 2010), then what are you going to do? Suppose you decide to buy with a $500K downpayment plus an after-tax monthly nut of $6000, which is probably a place that costs $1.5M. Realistically, no improvement and possibly a downgrade compared to where you are living now. For each of those $200K years, where will you be going to go to for the extra $75K you'll need? Credit card? Put the kids in public school? Local loan shark? Family?

The point here is that you've been running at the margin the past 3 years, and you are thinking of setting yourself up to be running at the margin in the future as well. Right now, you have 0 years of savings built up in relation to your spending and have been living paycheck-to-paycheck. Even if you bank the entire excess $500K from the next two years, you'll be at 2.5-year cushion. I don't think spending that is a great idea: you need a cushion.

I understand that not everyone can have a 2.5-year cushion, but we're not talking about a guy with normal / steady income here. You have high and unstable income, and even a 2.5-year cushion is low IMO. So the thought of spending it might not be such a good idea.

inonada's estimates are probably on the optimistic side. Most people tend to spend more when they make more; some more so than others. Given Andy's record of zero savings thus far, his spending will likely increase significantly as his income increases.

I agree with Sunday & nada & we're not just talking about Andy here but his wife & two little ones, as well. A LOT could go wrong & you should freeze your current spending & put every extra dime into savings.

I concur with inonada + Sunday + drdrd

An oldie but a goodie.
http://www.nytimes.com/2005/07/17/realestate/17habi.html?scp=1&sq=super%20saver%20sal&st=cse

I hear what you're saying.
I guess I have been looking at buying a place as a good way of saving money.
That way I don't have all my assets liquid, so no chance of over spending.
And if I was to run out of business in three years I could always sell the place and downscale/move.
If the market has recovered a bit at that time I'd be in a great place, on the other hand if not....

Anyway, I appreciate the advice, a lot of honest and valid points have been made.

just remember that the transaction costs from the buy/sell can be as high as 15%. do you think that if you need to sell in 3 yrs after buying, you'll have an easy time selling with that margin?

Andym, by "good way of saving money" I assume you know that your monthly housing cost will be much higher if your rent, and that what you mean is that it forces you to invest.

Putting aside the fact that investing in NYC housing right now, with all its transaction costs, upkeep costs, and unfabulous short-term outlook, will almost certainly yield you negative returns, why don't you set up something that sucks a good chunk of change out of your bank account every month, and deposits it in whatever other investment makes sense to you, then pretend that there's an unbreakable deathray forcefield around it so you can't touch it?

What line are you in, anyway?

line 2: *than* if *you* rent

I concur with inonada, sunday, drdrd and ab_11218. Of course I have no say in telling other people on how to spend their money, but 70K for schooling seems like a lot to me. 70K after-tax is like $100K pre-tax! And a salary of 100K is definitely not a small amount.

I know OP can save in other things, e.g. vacation, dining out, etc, but counting out $70K per year for 3 years can save OP $210K after-tax alone and this could be enough for a down payment for 2 bedroom in NYC.

P.S. I have no knowledge on how much private schools charge in NYC. $35K per kid per year almost = 70-80% costs of Harvard per year for undergrads - Correct me pls if I am wrong.

school costs trump all other budget items in my world

always said id sell the car and move to a coldwater flat before i let money figure into my kids' education--and it aint done been cheap

i do drive a shitbox and live in a rental!!!

ny private all in 40--ivy or comp all in 55-60--save your ass off, it will outrun inflation

but andy, you are spread a bit thin, frankly. the last thing you want to do is yank your kids from a good school, where they are thriving, due to financial troubles. force yourself to save/invest, yes...but not in RE

Sorry, Andy, I've been out showing all day.

Mr front_porch and I don't have kids, but I'd like to point out that some of the people who are recoiling at the cost of $35K private schools don't either. It is a choice some of my friends have made, and I think that it's a vaild spending choice.

And boy, oh boy, do I understand the idea of buying real estate as a means of forced savings.

So I don't think it's a dumb idea for you to buy, although I would (as I posted above) try to keep the cost of what you buy to about $900K. That can get you an improvement on your rental if you're willing to live in, say, South Harlem.

I would also carry about $100K as reserves. That way you'll have enough of an emergency fund that you can get a new contract or whatever.

ali r.
DG Neary Realty

If you want places to put money where you cannot touch it (for the most part, anyways), you might want to consider a 529 college savings plan and/or a SEP retirement plan (or whichever variant allows you to put away $50K a year or so). I don't know how it works if you pay foreign taxes, but getting tax-free growth on as much money as you can as early as you can is something that cannot be made up for with contributions 10 or 20 years down the line.

On private school for the kids, I think that's the most obvious fat in your current spending. Push comes to shove, it's the only place you can really cut out $70K a year if you have a sustainted drop in after-tax income from, say, $170K to $100K. It's not like you're going to spend $70K on private school and $30K on housing/food/etc.

Even at your 2008-2010 income, the private school isn't sustainable (you're scraping by). The good news is that you have a nice out. At your 2011-2012 income, private school a piece of cake. The problem is that you don't know at which income you'll be running longer-term. Since you're obviously a nutcase who is willing to spend $70K on private school in a year where you grossed $160K ;), here's my suggestion on creating an invisible force field around that $500K coming in over the next two years. Treat that as your kids' education money. You touch it, you're depriving little Johnny of the education he so deserves or whatever line of thinking that convinced you spending $70K on private school was a good idea at your income level.

I'm pretty conservative, If I thought that I may have to sell in 3 years, I would never buy, unless had deep pockets like west67th (;
Sounds like a recipe for "forced spending".

keith (broker)
http://ubivoletaudentunicornium.blogspot.com/

"That can get you an improvement on your rental if you're willing to live in, say, South Harlem."

What does that mean? Can't he just rent a townhouse in South Harlem for $5000 or whatever and get an improvement that way?

"I would also carry about $100K as reserves. That way you'll have enough of an emergency fund that you can get a new contract or whatever."

The guy is burning through close to $200K a year, that's 6 months' spending. A pretty crappy emergency fund for a guy who's pulling in $1M next year, no?

if this guy is for real, this sums up the entire problem. not to mention getting financial advice from a real estate agent.

One other thought, Andym. When you buy an apartment, you are fixing yourself to a place for many years unless you don't mind blowing 10% of your apartment price on transaction costs every few years.

Now, suppose you buy that South Harlem apartment this year, which probably rents for $3750 or something. Come January 2013, you see that you have $800K in contracts lined up for those years as well. Your net worth is now looking like it will be $1M, your income seems in the range of $800K. You're probably thinking you should upgrade.

Unless you are maxed-out on the type of home you want (meaning even if you had more money, you wouldn't upgrade), your increasing and highly-varying income makes you a prime candidate for renting even if the rent vs. buy cost analysis was balanced, which it ain't.

Sound advice, inonada. I guess it makes sense to save/invest as much as possible over the next two years and re-evaluate.
Worst case, prices have gone up in the meantime, but then I am at least standing on more solid ground financially going into it.

oh my god. do not even consider buying. sorry. but anything less than a seven to ten year hold period is insane right now. particularly with your circumstances. and to commit to harlem, which may or may not have serious depreciation issues, is insane. particularly when you could go and rent for less than $4000 in the neighborhood and save another $24000 a year without any reduction in QOL.

ali, i am a bit ashamed here for you. this is not a person who should be buying. unless, and just maybe, he's thinking about moving to forest hills and putting the kids in public school.

photo of aboutready: http://www.google.com/imgres?imgurl=http://www.threedonia.com/wp-content/uploads/2010/04/High-Anxiety.jpg&imgrefurl=http://www.threedonia.com/archives/22652&usg=__HaGjrj5s-NisDy0diZPwM_xOruU=&h=734&w=347&sz=75&hl=en&start=0&sig2=x8f7Z-vdJIKmmCfE-QK5yg&zoom=1&tbnid=TyZHqlk5JFB05M:&tbnh=148&tbnw=70&ei=mh9CTZilO4HQgAe5ru3NAQ&prev=/images%3Fq%3Dcloris%2Bleachman%2Bnurse%2Bdiesel%26um%3D1%26hl%3Den%26client%3Dfirefox-a%26sa%3DN%26rls%3Dorg.mozilla:en-US:official%26biw%3D1280%26bih%3D609%26tbs%3Disch:1&um=1&itbs=1&iact=rc&dur=1389&oei=mh9CTZilO4HQgAe5ru3NAQ&esq=1&page=1&ndsp=20&ved=1t:429,r:0,s:0&tx=35&ty=95

[Note: Not an actual photo of aboutready. Please, no more lawsuits.*]

*Lawsuits not actual lawsuits, only frequent aggressive threats of lawsuits**.

**Note, frequent and aggressive not intended to upset aboutready's husband*** in any manner.

***Double Note, Use code:litigation partner at BrickUnderground for a special advertising discount.

I refrained from commenting on whether andy can afford, because I don't know what he does for a living and what his income trajectory is going forward and whether he has family backing.

really, 10023? you think that someone who is giving this level of detailed info would not volunteer that certain family support is available? as to income trajectory, i think his numbers speak for themselves, they are all over the place.

aboutready doesn't like Andym.

Can I suggest Andym advertise on brickunderground?

Much depends on what his profession is. I don't think he's given that much info. Sure, we have his yearly numbers for 5 years, but there's no profession I can think right off the bat that fits his profile. He's sure about his number in 2012 (and it's down from 2011 - so it doesn't sound like an IB guarantee). And he's "free-lancing?"

As for family support, it comes in all forms. Doesn't have to be a yearly take but family could have substantial assets (no guarantee of course).

nyc10023, he's in online advertising sales.

(and that has no reference to anyone else here)

(seriously)

who says i don't like andy? and 10023 i disagree, with numbers like he is posting there is no possibility of a nice, stable job. maybe he can afford to have his parents take the 15% hit if he has to sell, but that's not what i'm getting from this poster.

right, Andym is in online advertising sales in NYC. Not a hedge fund guy.

Wow, I had forgotten about the incredible anti-buying bias on this board.

Apparently, I lost my mind when I advises someone with $1.7 mm of contracted income over the next two years to consider buying a home with a mortgage which would equal less than eight months' income.

Especially since I suggested that he do that AFTER he had shown the discipline to save, what was it I suggested? $600,000.

I apparently had not considered the unstable labor markets being faced by someone who has an EB1A, a visa specifically granted by the government because he (he, right? I guess andy's a gender-neutral name) works in a field where there are so few U.S. workers to meet demand that the government has chosen to relax standard immigration policy.

Nor had I considered that someone who historically had difficulty saving might enjoy the benefits of having a mortgage, the payments of which traditionally serve as a forced savings plan.

I guess I also forgot that this guy was facing 50% tax rates, so that the rent vs. buy calculation might nearly be balanced in his favor.

Good thing I didn't recommend that he buy a two-bedroom condo, which even with two kids would allow for a seven-year hold period (a good point, ar, but one I'd considered).

And I'm happy I didn't suggest putting him in a gentrifying neighborhood where Columbia University is constructing a new $6 billion campus, (just got court approval) so that if he outgrew the property (a reasonable bet, I grant you, nada) it could become an investment rental for him while he and his family rented something fancier.

Andy, my apologies. I owe you a cup of coffee.

ali r.
DG Neary Realty

except he doesn't necessarily have a seven-year hold period. you'd really recommend buying after reading this?

"And if I was to run out of business in three years I could always sell the place and downscale/move.
If the market has recovered a bit at that time I'd be in a great place, on the other hand if not...."

Ali G...one of your better lines:

"Nor had I considered that someone who historically had difficulty saving might enjoy the benefits of having a mortgage, the payments of which traditionally serve as a forced savings plan."

Really, I guess I wasn't aware that all of your mortgage payments go towards paying down principal and not towards interest...Must be that NY Post mortgage calculater you are using

In real life:

600k 30yr fixed mortgage @ 5.5% over the first 5 years of the term:

total payments: 200k
interest: 156k
principal: 44k

so, if you are unable to save 44k over 5 years on your own without being "forced" to via a mortgage, that you hasve bigger problems than this

So Ali, as a financial advisor, would you recommond this as a good saving strategy or rather an automatic savings plan of $730 per month into a CD that would get you to the same place in 5 years?

Ali, you typically give pretty good advice, but this person is really a terrible candidate. His horizon is 3 years, he has no savings, his income is wildly unpredictable, he's living above his means (spending as if he made 400K gross, but earned 325K gross in the last 3 years.
Of course he can find someone to lend him money; this is America, someone will always lend you money. At minima, a regular bank will lend him $417,000, because there is no risk for them, especially if he puts 35% down or more on a real estate purchase. It doesn't mean he should do it. Between the rent/buy differential, the high transaction costs and the required flexibility required by the contract nature of his occupation, buying now is very, very risky, with a limited upside and the worst possible method of savings.

mortgage broker here doing my loans with Wells Fargo. Would be glad to talk to my contact at Wells about your situation.

www.esfunding.instantlender.com

ali has finally lost it. i guess your commissions are not coming in so you're trying to do the 2006 thing in 2011. good luck with that. all respect has been lost.

ab, did I not already apologize?

ali

Sarcasm only works when you are actually right. When you are obviously wrong, you end up sounding like a _______?

"Wow, I had forgotten about the incredible anti-buying bias on this board."

FP, I think you are confusing the biases here: the bulk of the argument here has nothing to do with renting vs. buying, but rather with maintaining liquidity against an income stream that has been all over the place. His year-over-year income changes 2008-2012 have been 2.6x, 0.27x, 6.25x, 0.70x. It's pretty clear he doesn't know what 2013- will bring. Let me put it this way. Suppose he owned his place and his out-of-pocket costs were $6000 a month. If he had said he was going to take that $500K and put it in some illiquid investment that is "good" in my estimation, my advice would not change. He simply has no buffer against his lifestyle, and the first order of business is to build up that buffer.

FP, I've got some questions for you since your attitude towards money and liquidity seem very different than mine, and I'd like to learn something about how the other half thinks.

1) Suppose the higher-income of you or your husband loses their job. How many months/years worth of liquid assets do you have assuming this income is not replaced? How many months/years if the income is replaced by some minimal income stream that you are sure it could be replaced by?

2) What if you both lost your jobs?

3) Do you think this is the right amount of liquid buffer, or are you trying to increase it? I.e., if you got a pile of cash tomorrow, would you keep it liquid, or would you invest it in RE (or whatever your favorite illiquid asset happens to be)?

Andy,

When you sent your kids to private schools, is it for religious reasons or for the quality of education? If it is just for the quality of education, then you may consider moving to Long Island or other sub urban neighborhoodss. For example, many public school districts in Long Island are very good and were ranked in the top 100 in the country. They are also very racially diversified. Also, You can save a lot of money.

First of all, you do no need to pay any NYC income tax living in LI, even if you work in NYC. You just need to pay NYS income tax and Federal tax. With your income level, the zero NYC income tax plus no private school, you can save $200K in just 2 years.

Nada, you know I have the highest level of respect for you, and for your willingness to disagree without name-calling, so I'll answer those questions very specifically in person if you really care.

For general consumption: I would advise most people to have a year's worth of housing costs in near-liquid reserves.

Also, thanks for that "suppose" -- I come from an industry (publishing) where regular job loss is a very real fact of life. In my former career, I had not one, but two magazines shuttered out from under me.

The flip side of non-theoretical unemployment is that it makes you realize that job loss is far from the worst-case scenario.

ali r.
DG Neary Realty

vic...i guess that pesky little real estate taxes on LI are not a concern...or the fact the nassau was just taken over by the state for its fiscal ills

"For general consumption: I would advise most people to have a year's worth of housing costs in near-liquid reserves."

What about "living expenses", which can be equal to "housing costs" if you are out of work i.e. food, medical ins, potential school costs, coned, etc?

Apt_boy,

Andy seems to be saying he is renting a 2 bedroom apartment for $6K per month. If he continues to rent, $6K will definately get him a much larger place in Nassau (property tax included), even in any town borders the city. Also, his lease can protect him from any property tax hike even with the state takeover and any property tax hike go along with (In fact, property tax in Nassau was cut by about 10% last year). In NYC, there will be a major property tax hike anyway.. Is it July? something like 9%.

As everyone knows, if you own, you pay property tax. Property tax also gives you credit on your NYS income tax. For the $100K per year expenses Andy will incur paying private school and NYC income tax, which will be equal to property tax of an estate worthing over $5M and may be with 10 arces of land. The propety tax of a more moderate house with quater acre (11,000 sqft)land near the Queens border will be around $15K per year.

vic...where can you get a house that you speak of for 6k a month all in close to the city in a good school district

this one meets this criteria: 4 bed, 3 bath, .23 acres in Manhasset and it is 1.4mm with 15k in tax

http://www.realtor.com/realestateandhomes-detail/14-Waldo-Lane_Manhasset_NY_11030_M45495-91448?source=web

And then you live in Manhasset, and will spend 500 hours of your awake life, every year, to commute to and from Manhasset. As a recent immigrant without local family, I can't imagine a more drastic reduction in quality of life than moving to the suburbs. Plus, he'll spend an extra $40K for 2 cars.
There are other solutions for his problem, no?

Apt_boy,

The very good school districts nearing the City are Great Neck, Herricks, and Manhasset.
If you go to mlsli to search for rental or for sell and enter these criteria:

For rental less than $7K a month and minimum 2 bedrooms, you can 81 results within just these 3 school districts. ml number 2358617, 2350797,2324069 are just a few examples in each of these school districts. They all have minimum 3 bedrooms. two with 5 and 6 bedrooms.

For sales properies under $1M under $20K property tax within the same districts yields 179 properties.
Examples:

ml#2326354 Manhasset school 4 beds 2.5 bath Tax $12,835 lot size 217 X 100, asking $999,000

ml#2265198 Herricks school 4 beds 3 bath Tax $15,653 lot size 94 X 105 asking $999,900

ml#2353818 Great Neck 4 bed 2.5 bath tax $13,948 lot size 105 X 120 asking $980,000

So, there seems to be a lot of choices.

vic64, why on earth would you suggest the OP move to the suburbs? Did he give the slightest indication that he was asking for advice on where to live. And even if he had, why not suggest he move to Kansas? The suburbs are dying (across the nation, not just here), and will continue to do so.

Maly,

We ride on the Port Washington line. No need to switch in Jaimaica. One seat ride of 25 minutes to Penn station. If you choose to own vehicles, insurance is much cheaper than Manhattan. Full coverage for my two new vehicles (together) is only $1,900 per year. I would have to pay 3 times more in NYC. Did I mention that these communities are very diversified. New immigrants are welcomed.

Use myself as an example. I spent my annual $100K savings to buy inexpensive investment properties in NYC's outer borough in cash. I now have 2, in the process of buying another one in the Bronx. each costing about $100K only. I paid with cash. After expense, I get over 8% return. Do the math.

Fk. Ali's income income is inverse to a buyer's. Nuff said. Stupid borker move on Inonada.

Alanhart,

I provided the advice to help Andy save money. He has zero saving now.
He had his own business, so probably have a more flexible commute. May be the nearest towns that border the city will work for him. Not Kansas.
If he thinks these towns are dying, then just rent there. No commitment.

Personally I find the North Shore is too spread out for my taste- Great Neck is not that bad but most of the houses hardly have any property.

I prefer the back villages in the 5 Towns- Hewlett Neck, Hewlett Harbor, Hewlett Bay Park and Woodsburgh. Everything is much closer together and you dont feel like youre living off of a highway. Its more urbany. You can get a house their for under $1M and even one on the water for less than $1.5M. Hewlett Woodmere is a very good school district too even though the taxes are higher than Apt_Boy

And personally I like stopping at Jamaica- i can change for the E or F and go directly to my office vs. having to go to Penn Station first and then changing for the subway to go back uptown.

Just my 2 cents.

5thGenNYer,

We are in the same spectrum. I was only using the 3 towns along the Port Washington line as examples.
South shore does have nicer beaches, but the towns up north are pretty urbany too.

Alright, time to catch my train and go home now. lol

"Nada, you know I have the highest level of respect for you, and for your willingness to disagree without name-calling, so I'll answer those questions very specifically in person if you really care."

Right, that was stupid of me. You are one of the few people on here that has no anonymity to anyone...

"For general consumption: I would advise most people to have a year's worth of housing costs in near-liquid reserves."

Yeah, I think that's too thin for most people and especially too thin for the OP with his highly-variable income. That year's worth of housing costs is like 6 months worth of living costs, and shit happens.

When an anonymous person give an advice on this board, it is implied that one should take it with a bucket of salt. However, when a named broker/financial advisor dish out advice/[opinion] with such sarcastic confidence, some might take it as an expert opinion instead of taking it with a truck load of salt because of the bias involved.

What about when an affiliate of another real estate board gives opinions on a real estate development without disclosing the person's affiliation within the context of the opinion of the real estate development? Is that unethical?

What about a lawyer who spews false accusations for the purpose of harassing another person? Is that unethical? You bet your law license it is.