I hate those "Rent VS. buying calculators!

You cannot afford this apartment.

On your salary you should be looking at apartments -- at best -- in the $300K range.

Your "problem" is that you have a wonderfully cheap rental alternative to buying. It shouldn't be a surprise that buying can't top this.

So.... You're mad at the calculator because it's correctly telling you that your anomaly of an apartment rent cannot justify buying the "comps" that you use? Also, is you $1080 apartment really comparable to the new construction your are considering. It doesn't matter if that's what you're paying now. You have to conpare apples to apples.

I think I can offer this apartment. My salary is around 110K and my credit is excellent. But, I am not sure that I want to do it...
Most of the calculators are good but appreciation which is the most important number is impossible to assess. Therefore they can give you very different scenarios in function on which rate you enter. A $235k home becomes worth $485k at 3% appreciation after 30 years, but it becomes worth a whopping $649k at 4% appreciation.

if you sell after 10 yrs, let's just say, you cannot expect much appreciation. part of your initial payment is going towards the reduced tax burden. by the time you will be selling, the reduction will be significantly less and you will be selling something that will have monthly outlay of $1000 or so per month. it's just like looking at 2 coops where one has maintenance of $400 and the other at $1000. you will definitely be willing to pay more for the one with lower maintenance.

you need to review the docs to see what your total tax burden will be after the abatement is over. you should also expect your maintenance to spike within a year or so. most sponsors subsidize the maintenance for the first few years to make the purchase more attractive. once that subsidy is gone... well, you know.

If you want a calculator that doesn't use constant appreciation assumptions, try this one:

http://www.clevelandfed.org/research/data/rentvsbuy/index.cfm

This uses probability distributions for price and rent changes. You feed in the min and max you expect (separately for the short- and long-runs) and it generates lots of future scenarios, giving you a probability distribution for where you could end up.

I put your numbers into the calculator and used its assumptions for other factors, and it says "don't do it." Specifically, it calculates that you'll come out at least $250,000 ahead if you continue to enjoy your nice inexpensive rental.

"I think I can offer this apartment. My salary is around 110K and my credit is excellent."

I think you mean *afford*. And no, you really can't.

Financing $330K on a $110K income puts you at about an $1800/month mortgage payment, plus your $500/month maintenance. $2300/month would be extremely tight on only $110K.

I don't have any debt. I have $5200 a month to live be $1300 a week. I don't have a car. It should be enough, no? I think I could afford it.

Too many variables in these calculators that are ignored. I exceled the sheet out of my purchase decision and being in finance, made my own calculator with all sorts of variables - common charge, property tax, home value annual increases, time horizon of comparison (when do I intend to sell the apt, 5 years? 30 years?. Tax deduction of mortgage interest, closing costs. The increase of the stock portfolio that you would be investing in the difference (decision is either to Buy or RENT And Invest the Difference into stocks). Then compare NPV and IRR over the course of your decision.

I did this in 2008. Model worked. Of course, the variables were totally wrong. Appreciation was not the 3% I estimated. And the stock portfolio did not return 7%. Garbage in, garbage out. Model's only as good as the date you enter.

"Too many variables in these calculators that are ignored. "

I have seen EVERY ONE of the variables you list and more included in most of these calculators. Especially if you click on the advanced version.

NYCMatt -- i completely disagree. A $110k salary w/ appx 30% taxes gets you $6400 take home per month. Sure $2300 of the $6400, or 36%, seems a little high (though debt to income is done on gross income not net), but then again $4100 of discretionary spending per month seems like plenty. Not everyone has kids/cars/private school/student loans/high spending habits.

What exactly is your point? Every calculator needs to have some sort of assumptions built in, no matter how hard it is to assess. Of course one percentage point makes a difference over 30 years. If it didn't people would just stick their money in a mattress rather than investing it.

If this were a co-op he'd be turned down.

I don't think so.

NYCMatt, that's quite a general statement. Your math is extremely conservative. Even based upon income requirements for large Manhattan landlords, someone can afford to pay $2,750 per month on a $110k annual salary.

Okay, he can probably afford it, but is it a good move? I'm with Matt, and I don't think you have to be very conservative to get to that decision.

I would have to live with about 600 a week, which is more than enough for my style of life. I made all the calculations and of course I could afford it, and even pay the mortgage much earlier. I disagree with NYCMatt: if this were a co-op, I would not be turned down but it is not really my concern today.
Now, I agree with Eric_14: after thinking over and over and although I really like the place, it is not a good move and I have decided not to buy it. I think this apartment is too expensive, and I wish that the owners would have been a little less greedy. I have learned that in many cases, it is not often a good idea to buy in NY. Thanks for all your help and valuable inputs

I have seen EVERY ONE of the variables you list and more included in most of these calculators. Especially if you click on the advanced version.

Perhaps, but your own model allows you a ton more flexibility. You can see stats year over year. And what if your condo had an abatement that made your common charges increase $1k in year 5? Can't enter that into a fixed online calculator. And what if you wanted to pay down principal on the mortgage $10k per year for instance? Not knocking online calculators. They're great. Ultimately, it boils down to your assumptions and variables.

I too think that he can afford it.

My situation is about the same. I'm looking to buy a 1.1mm home and I make $335k. So same scenario except everything is about tripled. Money's tight as heck, and worse, my total comp is split 50/50 between bonus and salary. In other words, if I don't get a bonus next year, I don't eat that year. Only reason I'm willing to go through is because the 1.1 is a great deal for that particular building. And we have a good family support structure where I can borrow enough to support the mortgage for at least a year if I lose my job. Life is risky - now's a good opportunity to buy - low interest rates, low home prices.

Oh yeah, that's a great plan -- family support structure.

This is why God created co-op boards.

Oy.

"Oh yeah, that's a great plan -- family support structure. "

Actually, this is a fairly common tactic for buying a home, especially amongts immigrants and others with bad/spotty/little credit history. And amongst the children of the 1%. I probably know more people than not who have borrowed from relatives to buy.

The fact that Steve is 51 years old would make his decision a little interesting. He has not mentioned anything about his wife's income or have kids. Can we assume Steve to be single and preparing for his retirement as a single person as well? He probably would choose not to invest too much in higher risk investment products that he may not have time to recover from a loss. Although an apartment may not appreciate more than a stock in 10-15 years, he can hedge by living there.
Furthermore, for a person in this group, can we assume that he would not over spend on clubing, clothing, etc.? So, probably his $6.4K take home income minus $2.3 mortgage and maintenance fee of $4K per month would not be tight at all. He probably would get meaningful tax benefits with his tax bracket than those paying above AMT.

In 10 to 15 years, he will retire. He can then decide to whether cash in on the equity from his apartment and live in a cheaper place.

JWL is not talking about borrowing from relatives to buy. He's talking about using them as a buffer for when the least little thing goes wrong and he can no longer afford to pay for the apartment he can barely afford even on a good day -- rather than buying something he can actually afford.

So the monthly expense (interest + maintenance) is about $1300 a month plus a few hundred to principal. I see the principal as paying yourself interest on the downpayment. Is the new place worth a few hundred bucks more expense a month to you?