Return on downpayment - buy vs rent calculations

Like the nyc jew laughing at anti semitism in jersey cause he thinks it doesn't affect him. Flmaozzzzz.

Yes let us drink to your 'smart' prepaying 30 yrs of rent when rents are about to get cheaper. Why stop at equities. Maybe you should have been in gold? Does mercer owner hate mercer couldve been rich buying gold playa?

Financial ninnies picking up a kumquats and thinking he is comparing oranges.

That a drop like this (or more) is to be expected. We've had a 100% rise since 2009, a 20% drop from a peak shouldn't catch anyone by surprise. A decent time to buy more IMO, and I certainly wouldn't mind it going down further: I know what I'm buying, the cheaper the better, and I've got a lot of buying to do over the upcoming years. I've got risk tolerance and will take stocks yielding at 6% smoothed out, plus long-term inflation+growth, over personal RE yielding 0.0-0.5%. If the recent drop has made you & your wife uneasy, then you shouldn't be buying any stocks. Just pay down your mortgage and return to being debt-free: you don't have the risk tolerance to earn more than the few percent.

Perhaps surprisingly, even in NYC the risk of buying real estate is primarily the risk of buying real estate rather than the risk of the stock market going up or down.

Real estate doesn't get more or less risky, or become more or less overpriced, when you decide that your alternative investment is Treasury bonds or Bank of America stock. That is why the imputed cost of your downpayment ought to based on the risk of your real estate purchase, not your "alternative investment."

Most projections of expected returns for NYC real estate result in a lower expected return for equity than the banks demand for debt on the same property. The loan is always less risky. So buying or holding NYC RE equity indicates that you believe you understand the risks of NYC real estate better than the banks (not a high standard) AND that NY RE rents and prices are more likely to rise than the banks believe. Or that you don't understand what you are doing.

--
So, to justify buying at current prices, the important story you should be telling is why the banks' projections are less likely to be accurate than yours.

You might, for example, argue that stock market and T-bill prices reflect the absence of profit opportunities for passive capital right now. The risk free rate is presumably lower than the Treasury bill rate, and T-bonds are earning negative real returns out to 10 years. So investing risk capital at an expected return of 2-3% might actually be a good deal -- the banks just haven't adjusted yet to the new reality that the world is so awash in capital that it isn't going to be paid anything significant. (But NYC jobs and therefore rents will be stable).

Or you might argue that the financial markets and therefore NYC rents, are now set for massive growth that retail real estate market buyers and sellers, but not the banks, have recognized for the last several years. With some explanation of why banks make systematic errors, or why the mortgage market is so uncompetitive that its pricing is too high, or something like that.

Or you might present numbers showing a significantly higher expected return on equity than current fixed mortgage rates for a similar term. Perhaps prices, expenses or interest rates have dropped, or rents risen, more than I imagine.

Or you might contend that you are more diversified than the banks and real estate is a smaller part of your portfolio, so you are a cheaper risk bearer than they (in which case you should be paying cash).

Does anyone have a drink? That cracker is so dry.

nada, you've converted me. Unfortunately, I think my risk tolerance with equities was closer to 300_mercer's once upon a time. I see that as an overreaction now. Many thanks for the perspective.

if the goal is to pay down debt on real estate to be debt free, that can be accomplished much faster by selling.

"Like the nyc jew laughing at anti semitism in jersey cause he thinks it doesn't affect him"

is it anything like a muslim immigrant from new york joking about burning down businesses owned by muslim immigrants in london? anything like that, would you say?

RENTER = SUCKER, REASON #23: 5 YEARS FREE LIVIN'
http://streeteasy.com/nyc/talk/discussion/27116-renter-sucker-reason-23-5-years-free-livin

OWNING COSTS 30% LESS. RENTER = SUCKER.
http://streeteasy.com/nyc/talk/discussion/26997-owning-costs-30-less-renter-sucker

Nada, What percentage cash do you keep so that you can buy on the dips. What min percentage correction do you look for before you buy more. At these levels, I may put some more money into the market for a short ride of 7-10% - I do not believe in stocks for the long run as valuations can have serious disconnect from value for a long time.

I found this rather interesting aborted discussion:
http://streeteasy.com/nyc/talk/discussion/21859-mother-kills-kids-apt23-is-on-mothers-side

I"m going to have to agree with communistguy. Er ... financeguy.

I haven't advocated anyone buy a property. But I'm shocked to see repeated justifications for renting because one can use the down payment and home equity instead to invest in equity markets. Equity markets, I do believe, can play a role in people's portfolios, depending on wealth, risk tolerance, and age, but if you merely view buying as capitalizing your housing expense, and then you say you ought to put that money into the market, I think that is irresponsible.

Buying should be looked at in context of renting, and liquidity.

As a fraction of my net worth, I have about in 10% cash at the moment, 65-70% in equities, and the remainder in other (mostly illiquid) investments. In the past few years, I've had anywhere between 20% and -10% in cash. The -10% was late 2008 / early 2009. My income adds around 20-30% to my net worth annually, no plans on doing anything with the money really. So that's the context.

I don't really have any sort of set rules. If we dip down to 1000 in the next month, I'll probably move to 0% cash rather quick. Take it to 900, -10%. I doubt we'll get there, and if we do I'm sure I'll change my mind somehow. But that's what in my head at the moment.

I have no opinions on the short run, just doing things in the context of the long run.

Oh give us a break. You and w67 are masters at bragging about your income and cash flow.

Interesting. My partner is exerting significant pressure on me to go long equities. I'm thinking that there will be plenty of time to buy in, once the wild see-saw-ing has stopped. We missed the buying opportunities of spring '09, but I'm thinking that there will be time to buy again, and like the last time, we'll have a couple of months of opportunity.

Excluding RE, we're 50% laddered munis, 30% various "global allocation" funds, 5% GLD, 15% cash.

You can't time the market. End of story.

>You can't time the market. End of story.

Long term, no. Timing = luck.

But you can look at today's market, down X% from the peak, and buy today.
Or you can look at today's market, up X% from the 2009 lows, and say it is too expensive.

Sure you can, idiot.
If you sold after the downgrade, you saved a ton of money.
It's not rocket science.
And yes, I already bought back in.
So, yes I timed it, AND got back in.
Saved a shiit load.

perfect, dumboy!!

if it's all so easy and obvious to you, why are you such a loser, and not a billionaire?

dumboy!!

Wbuttocks!

How has 300's non-risk tolerance worked out?