Rent vs. Buy vs. Keep Saving

I kinda doubt it's smart to buy an investment property and become a landlord in your situation -- you'd tie up a big portion of your net worth in the apartment and then have to manage it. For pure investment purposes, sticking with a more liquid asset (like the mutual fund) is probably smarter.

Buy-for-yourself vs rent-and-save is a little tougher. I'll leave the hardcore financial stuff to others -- just remember there are qualitative angles too. Do you prefer living with roommates, which it seems you couldn't do if you bought? Can you get a better apartment if you buy? (Whatever 'better' means to you -- neighborhood, building, amenities, neighbors, views, fancy kitchen, ability to paint it funky colors, whatever...) Are you itchy for a sense of permanence and ownership that you can't get in a rental?

Buying is two different things simultaneously -- it's a home with a monthly cost that you can compare to rental costs, and it's a big personal asset with an investment and financial return aspect. Don't forget the former even as you consider it from a long-term investment point of view.

Borrowing for 30 years at 4% may seem like the deal of a lifetime in a few years. Having it be the flexibility of a condo that you could rent out should you decide to move on is a smart move. NYC condo prices may correct downward if mortgage rates ratchet higher as I suspect they will eventually. But the reality is you might not be in a position to buy when/if prices adjust to lower levels due to job insecurity or mortgage scarcity. The best gauge on whether to buy is: can you see yourself living in the home for at least seven to ten years?

RENY says you should buy housing stocks. ..

The return from stocks is uncertain, so the potential to save via investing in equities is not a guaranteed proposition by any stretch, but we do know that mortgage rates means you can borrow for 30 years at what is very likely to be below the rate of inflation and that's before the mortgage interest deduction.

You say you are renting with room-mates, so buying will not come out cheaper vs continuing that arrangement but you may wish to go ahead anyway, since living with room-mates is not something one likes except when first starting out or due to financial necessity.

My take is that if you can swing the home payments without spending to much of your monthly income you should go ahead. Besides stocks seem to gown 50% every six years now-days and you can't live in a stock.

First of all, buying a home is not INVESTING, so you need to stop comparing it as an "investment" with stocks and other investments.

Before you buy, some important things to consider:

-- How secure is your income (job situation)?
-- Is there a chance you might have to leave New York City within the next 5 to 7 years for personal or financial (career-related) reasons?
-- Are you seeing anyone? Is there a chance you might be settling down with someone and possibly starting a family?

If your employment situation is solid and you're going to be in NYC for the foreseeable future, I'd absolutely recommend buying. Interest rates are crazy low, and the mortgage tax deduction gives you such a serious windfall each year it's actually crazy NOT to own. (And please, people, spare me the comparisons with "other" potential investments with his down payment -- again, we're talking HOUSING dollars here, not INVESTMENT dollars.)

HOWEVER -- and this is something several of my friends (and myself) have regretted -- do NOT buy a one-bedroom if you can avoid it. If at all possible, stretch yourself (not financially, but in the other direction -- into a less "nice" building, neighborhood, etc.) and get yourself a proper TWO bedroom (preferably with at least another half bath). Reason? You just never know when you might need to take in a roommate to help you pay the mortgage. One bedroom apartments are nearly impossible for roommate situations, and even become quite tight in "couple" situations.

I have a television industry colleague who bought his two-bedroom apartment in one of those new income-restricted HUD buildings in East Harlem (GORGEOUS place, horrible neighborhood, but I was JEALOUS JEALOUS JEALOUS because his place has two big bedrooms and two full baths, and I was disqualified from the building because I made too much money). I can't remember what he paid, but it wasn't a stretch for him at all. Until he lost his job. But because he had that big second bedroom -- WITH ITS OWN BATH -- it was the perfect setup to bring in a roommate and command a $1000/month rent, which nearly covered his entire nut. He was unemployed for more than a year, and was ultimately able to accept a much lower-paying job because he now had that roommate in place. He's still trying to get his career back to where it was, but because of that second bedroom and that roommate, he's not under pressure to rush things along.

My two cents.

Buying apple at $10 is smart. Buying apple at $700 is not so smart.

Buying or renting a ''home' is an expense. But sometimes one can 'buy' a put option for apple for $1 for a year with a strike price of $800. At that Point even if I were bullish on apple, I'd buy the put.

My $1mm advice to your two cent Washington heights coop prez outlook.

Amen to what Matt just said. The ability to take on a roommate can save you in the event that life throws you a financial surprise. I actually think that's a better "cushion" than having a year's worth of liquid expenses. Unless you're pretty wealthy, it usually means looking outside prime neighborhoods, but there are many underrated areas in this city. Sometimes I wonder if those places get sidelined because they're truly inconvenient or if it's really because there's a snobbery about Manhattan neighborhoods.

Twice I agree with Matt today. Housing dollars and stock market dollars are NOT the same.

You cannot buy AAPL stock today for $10, as it's last trade yesterday was $545, A one-year put with a strike price of $800 for AAPL stock, if it existed today, would probably cost at least $400, not a $1. Most important, you cannot buy a put on you housing cost, even if you wanted to, but owning verses renting is effectively a call on housing your housing cost. As is typical, W67, shows us that he is just a jokester with no practical advice. His landlord is thankful every month.

No but you could have bought sprint at $2.40 a month ago..... Flmaozzzz.

$2.89 is an option price on the 3rd largest wireless carrier in the US. On a risk adjusted basis it had a higher payout than hoping manhattan re reflates to 2007 bubble prices.... Hahahahaaaaa.

PMG. Im buying more sprint on Monday. R u buying more manhattan re? I don't think so. You fking self serving bubbler.

In one year when sprint $5. I'll sell my 160k share sprint position for $10. Yes $10 transaction fee and pay my LT cap gain tax as u dig your bubble thumb further up your rectum whilst u wait for the good ole days. Haaaaaaaaaaaa

Haaaaaaaaa
Haaaaaaaaa

"A one-year put with a strike price of $800 for AAPL stock, if it existed today, would probably cost at least $400"

PMG, they do exist and cost $260.

So now the solution to everyone's investment problems is to buy Sprint, the carrier that had to sell it's soul to get an iPhone contract. The carrier whose board of directors recently rejected an acquisition deal supported by the CEO. Board and CEO don't agree on strategy ... no problem. I have no idea where Sprint will be trading in one year, but I certainly wouldn't tell someone to buy the stock except as speculative piece of an otherwise well diversified portfolio.
Oh, look, Rick Santorum is projected to win Kansas ... who said the world is predictable?

why

exactly

why

precisely

why

Thanks all for your perspective.

NYCMatt and PMG:

1. My job situation is secure right now, I've been at this job for 4.5 years and make 80k but in the near future I will most likely be in a more freelance position. I'm not too concerned with being able to make the payments when I make a job change as it looks like I can get my mortgage, cc, and tax payments around $1,200/month and I will be able to make that. I'm more concerned with waiting to buy a place until I leave this job and banks seeing my freelance situation and not lending to me.

2. Yes there's defintely a chance that I will leave NYC within the next 7 years which is why I am considering condos instead of co-ops (the future flexibility of renting it out). It seems like even if I were to pick up and leave in a year, I would be able to rent a 1 bedroom condo I would buy for $1,200 or so to break even with my mortgage, cc, and tax payments. With his flexibility should I still be concerned with living there for 7 years to make it worth it?

3. Yes I'm seeing someone but I don't plan on having kids in the immediate future. Of course that may change but again it seems like I could rent the condo out and break even if this happens.

You can't buy a put on housing, much to Schiller's and S&P's dislike, but you CAN on all sorts of residential real estate related stocks and ETFs.

Fail!
The correlation between a bunch of home building stocks and the value of one's home is not that great. And the tracking error is equally bad.

not according to RENY