Dear Friends: Here's the situation - I am looking to buy a lux. 650 sq ft. 1BR condo (approx. $1000/sq ft) over the next couple months. Due to the nature of my job and my company's growth plans in India/China, there is a very strong chance I will have to go there (either of India/China) after 18 -24 months, for an extended period of time. So, I am looking at 2 possibilities - either I rent... [more]
Dear Friends:
Here's the situation - I am looking to buy a lux. 650 sq ft. 1BR condo (approx. $1000/sq ft) over the next couple months. Due to the nature of my job and my company's growth plans in India/China, there is a very strong chance I will have to go there (either of India/China) after 18 -24 months, for an extended period of time.
So, I am looking at 2 possibilities - either I rent (Manhattan only) for the next 2 years @ $2.5-$3K/month ($60,000 - $72,0000 over 2 years) or I buy the aforementioned condo.
I ran some prelim. numbers and buying and selling after 2 years does not make sense since I end up in a loss (assuming yearly appreciation of 2%-3%). I know that leasing out my place is another option. But having never done that before and being so far away to deal with tenants(unless I have some property management company look after it) seems daunting. I am looking for some advice if you have any experience or been in a situation like this. What are the tax benefits if any, if I end up selling the condo in 2 years for a loss? The aim is to determine (realistically) which of the 2 are greater expenses - spending $60k+ on rent for the next 2 years or taking a potential loss in selling the condo.
I really appreciate your insights and many thanks in advance, cheers.
[less]
Response by West81st
almost 18 years ago
Posts: 5564
Member since: Jan 2008
baabamaal: As the economy globalizes, more and more of us will face similar choices. Unless you are a pure quant - and a bit of an automaton - I think you have to trust your gut a bit more than the straight numbers. To me, that means rent - and spare yourself the distraction of dealing with property management while your own path is so far outside your control. It might cost you a bit of net worth three-four years from now, but I think every financial return needs to be risk-adjusted, and perhaps anxiety-adjusted. Good luck.
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Response by eric_cartman
almost 18 years ago
Posts: 300
Member since: Jun 2007
If your horizon is 2 - 3 years, the case is clear. just rent.
- you do not know what the condo price will be in 2 - 3 yrs from now
- 6% broker fees in selling it
- approx 6 months on market while selling it (empty)
For me personally, in these times, I wouldnt feel comfortable with holding horizon of less than 8 yrs.
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Response by cliff702
almost 18 years ago
Posts: 182
Member since: Apr 2007
Will you make money by investing the money you would use for down payment and closing costs?
Or, is your income such that the tax benefits of mortgage interest and tax deductions are important?
West81st gives you good guidance.
Here's some real life drama to go with it. We like 350 West 50th - World Wide Plaza.
Check out the sales and rentals, some of which are the same.
Look at 2G and 6g, $995,000 and $1,095,000 respectively. Both are empty, 6G had been rented and its condition shows it. 2G owner paid $563,000 and, according to the broker, has had to leave the USA and go back to his own country.
6G paid $1,050,000 - and the listing is old. He just changed brokers after his listing expired, but didn't lower the price.
If you project yourself into either of these scenarios, how uncomfortable might you be if you buy and get in the situation of paying mortgage, taxes and maintenance when you don't live there? Or are you comfortable gambling that this is the low end of the market and you'll be OK in two years?
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Response by malraux
almost 18 years ago
Posts: 809
Member since: Dec 2007
I know this is strictly an emotional argument I'm making, but trust me - the pure agita of buying and selling precludes me from telling you anything else based on your described horizon other than to rent. Don't buy, and then sell, within two years (+/-), unless you're gonna make ALOT of money. Rent instead.
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Response by manhattanguy
almost 18 years ago
Posts: 152
Member since: Mar 2008
Renting is prudent in your situation.
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Response by ccdevi
almost 18 years ago
Posts: 861
Member since: Apr 2007
agree with malraux, even if the economics marginally favored buying, which I can't imagine they do in today's market, for a 2 year span, renting is the only option.
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Response by starfish
almost 18 years ago
Posts: 249
Member since: Jul 2007
We bought two years ago and are now selling b/c we need more space, so have some relevant experience. I agree that you should probably rent for now, unless you know you can hold onto the place while you are gone. If you only leave for a year or two and return to the same apt. then maybe it works. We are selling and then renting b/c we don't know how long we will stay in the next apt. Buying and selling are both a huge pain, so I would only do it if you know you can hold on to the apt. for 5 years or so. Good luck.
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Response by kylewest
almost 18 years ago
Posts: 4455
Member since: Aug 2007
Being a long distance landlord is one of life's horrible experiences to be avoided if possible. Others have mentioned some of the transaction costs, but there are others you may not have considered. There are real property transfer taxes at the state and local level to add to broker commissions. You may have income tax consequences as well from renting the unit out depending upon your particular overall finance situation, although it is unlikely unless you are making a profit by renting it out which I doubt you would.
Rent or buy for the next 2-3 years is a real tight call, and given that, I'd omit all the headaches and potential risk and just rent which is essentially risk free.
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Response by front_porch
almost 18 years ago
Posts: 5321
Member since: Mar 2008
Take it from someone who would be happy to sell you a condo, you are a perfect renter.
Don't buy unless you can stomach a five-year time horizon if you have to.
ali r.
{downtown broker}
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Response by echoecho
almost 18 years ago
Posts: 8
Member since: Apr 2007
Loss on a sale of a personal residence is not deductible. So it is definitely not something you can recapture. You can not offset gain with it. It is lost forever.
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Response by baabamaal
almost 18 years ago
Posts: 37
Member since: Mar 2008
All:
Many thanks for your feedback. This was really helpful to me. Good luck.
cheers,
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Response by houser
almost 18 years ago
Posts: 331
Member since: Apr 2008
baabamall please hold off until you hear from stevejhx for his advice is much better than anyone else.
baabamaal: As the economy globalizes, more and more of us will face similar choices. Unless you are a pure quant - and a bit of an automaton - I think you have to trust your gut a bit more than the straight numbers. To me, that means rent - and spare yourself the distraction of dealing with property management while your own path is so far outside your control. It might cost you a bit of net worth three-four years from now, but I think every financial return needs to be risk-adjusted, and perhaps anxiety-adjusted. Good luck.
If your horizon is 2 - 3 years, the case is clear. just rent.
- you do not know what the condo price will be in 2 - 3 yrs from now
- 6% broker fees in selling it
- approx 6 months on market while selling it (empty)
For me personally, in these times, I wouldnt feel comfortable with holding horizon of less than 8 yrs.
Will you make money by investing the money you would use for down payment and closing costs?
Or, is your income such that the tax benefits of mortgage interest and tax deductions are important?
West81st gives you good guidance.
Here's some real life drama to go with it. We like 350 West 50th - World Wide Plaza.
Check out the sales and rentals, some of which are the same.
Look at 2G and 6g, $995,000 and $1,095,000 respectively. Both are empty, 6G had been rented and its condition shows it. 2G owner paid $563,000 and, according to the broker, has had to leave the USA and go back to his own country.
6G paid $1,050,000 - and the listing is old. He just changed brokers after his listing expired, but didn't lower the price.
If you project yourself into either of these scenarios, how uncomfortable might you be if you buy and get in the situation of paying mortgage, taxes and maintenance when you don't live there? Or are you comfortable gambling that this is the low end of the market and you'll be OK in two years?
I know this is strictly an emotional argument I'm making, but trust me - the pure agita of buying and selling precludes me from telling you anything else based on your described horizon other than to rent. Don't buy, and then sell, within two years (+/-), unless you're gonna make ALOT of money. Rent instead.
Renting is prudent in your situation.
agree with malraux, even if the economics marginally favored buying, which I can't imagine they do in today's market, for a 2 year span, renting is the only option.
We bought two years ago and are now selling b/c we need more space, so have some relevant experience. I agree that you should probably rent for now, unless you know you can hold onto the place while you are gone. If you only leave for a year or two and return to the same apt. then maybe it works. We are selling and then renting b/c we don't know how long we will stay in the next apt. Buying and selling are both a huge pain, so I would only do it if you know you can hold on to the apt. for 5 years or so. Good luck.
Being a long distance landlord is one of life's horrible experiences to be avoided if possible. Others have mentioned some of the transaction costs, but there are others you may not have considered. There are real property transfer taxes at the state and local level to add to broker commissions. You may have income tax consequences as well from renting the unit out depending upon your particular overall finance situation, although it is unlikely unless you are making a profit by renting it out which I doubt you would.
Rent or buy for the next 2-3 years is a real tight call, and given that, I'd omit all the headaches and potential risk and just rent which is essentially risk free.
Take it from someone who would be happy to sell you a condo, you are a perfect renter.
Don't buy unless you can stomach a five-year time horizon if you have to.
ali r.
{downtown broker}
Loss on a sale of a personal residence is not deductible. So it is definitely not something you can recapture. You can not offset gain with it. It is lost forever.
All:
Many thanks for your feedback. This was really helpful to me. Good luck.
cheers,
baabamall please hold off until you hear from stevejhx for his advice is much better than anyone else.