Rent or Buy- Just posted. You do the math.

They will try anything, won't they:

http://www.streeteasy.com/nyc/rental/359720-condo-261-west-28th-street-chelsea-manhattan

It's listed for rent here at $5,950, not $4,950 as it is on corcoran.com.

Price History

02/14/2008 Listed in StreetEasy with Core Group Marketing at $1,375,000
02/22/2008 Price decreased to $1,295,000
02/28/2008 Listing no longer available

A standard 80/20 30-year mortgage at 7.5% will give you:

Down Payment: $259,000
Mortgage Amount: $1,036,000
Mortgage Payment: $7,244
Total Monthly Payment: $8,373

Of course that has a tax abatement so it will go up over time.

Let's see - $4,995 a month to rent versus $8,373 per month to buy...

Damn! I keep on forgetting the tax benefit (of course applied at my marginal rate because it makes it look like a better deal) and the very lucky fact that I can write off the loss!

Who said there were no flippers in Manhattan real estate?

Poor flipper, can't even break even:

05/16/2008 #9C $1,250,000 -3.5% $1,295,000 1 bed 1.5 baths 911 ft²

See why owning real estate is so risky? This person has LOTS of payments to make, or might ask the bank for a short sale.

Sneaky, I didn't make the initial post - dco did. So nanny nanny boo boo.

But here's your challenge, such you think you can find ways to make money in this market: how do you make money off this posted deal? It is, on a cash-flow basis, 67% more expensive to own than it is to rent. Add in that $1,000 tax bill when the abatement ends it becomes - as almost any property in the city is - nearly twice as expensive to own as it is to rent.

As the savvy real estate investor you are, you know that for cash-flow purposes banks will only allow you to use 11 months' rent flow not 12, since apartments are empty for some of the time. So take 11/12 of the rent to be what you would actually be allowed to use and the allowable rent for financing purposes if $4578 IF they can get the $4,995 a month (meaning they have to find a renter who makes at least $200,000 a year).

How do you make money on that deal?

I don't think the sale and rental are the same. The sale mentions "Two private terraces! Amazing 1BR + 1.5bths DOUBLE GLASS CORNER unit" whereas the floorplans of the rental clearly do not reflect that.

thats right you didn't make the initial post. dco made the initial completely uninteresting why are you wasting cyperspace post. You only felt so inspired by it that you responded. and then responded to yourself. and then responded to yourself again. and you're saying the same thing you've said a 100+ times on this board. you really don't see the problem here huh.

For a better, current example, here is unit 9B, for rent and for sale:

http://www.corcoran.com/property/listing.aspx?Region=NYC&listingid=1273699
Rent $7,000

http://www.corcoran.com/property/listing.aspx?Region=NYC&listingid=1218112
Price $1,700,000
Maint/CC $1,165
Taxes $105 (monthly)
Down 10%

It's the same apartment, they are both 911 square feet. As you point out, the one with the double terraces is for rent at $7,000.

http://www.streeteasy.com/nyc/rental/349307-condo-261-west-28th-street-chelsea-manhattan

This is Core Marketing - don't believe a word they say.

And this is what it would cost you per month to buy that unit:

Your Payments
Mortgage Amount: $1,360,000.00
Down Payment : $340,000.00
Mortgage Payment: $9,509.00 per month
Total Monthly Payment: $10,779.00 (with maintenance & taxes)

Which goes up once the abatement expires. So again, you're paying nearly $11,000 (probably $13k without the abatement) a month for an apartment that you can only rent out for $7,000. Since the tax and maintenance will stay the same, your monthly mortgage could only amount to $5,740 for you to break even. That gives you a purchase price of $1,000,000 with a standard 80/20 30-year mortgage at 7.5% (monthly payments of $5,600).

Meaning that for the property to cost the same to buy as to rent, the price would have to fall from $1.7 million to $1 million, or 58% to break even on a cash-flow basis. Add back in the tax abatement, and the fall would be even more.

So, ccdevi, Sneaky Pete, how do you make money on this transaction?

you don't, so what? why is this worth a thread and 5 posts and counting from you?

The current owner of this 9B apt bought it from the developer for 1.425mm and he is asking for 1.7mm. He would have to sell it at about 1.6mm to cover he transfer tax and other fees he paid as a buyer and the 6% commission and other fees he will have to pay as a seller. If you were him, what would you do? Clearly most people nowdays thinks $1.7mm is crazy for his crib. Sell at a loss right away to a savvy Streeteasy reader or bleed a few Gs per month and hopefully an European/Arab/etc comes along and lift his offer?

"and hopefully an European/Arab/etc comes along and lift his offer?"

Are you serious?

Has anyone actually seen this building lately (The Onyx)? It is still a mess outside. Disgusting corner, building appears nearly vacant. I saw one apartment or two with window treatments--all others were construction looking or had huge sheets of paper taped to them. There is a HUGE sign next to the entrance that says: RENTALS!

Of course I am not serious. But renting it out is the best thing a seller can do these days if they can't/won't sell.

This looks like the Jasper, great building (atleast the model apartments looks nice) but it is situated right next to a homeless drop. BTW, Jasper cut down the prices twice already since March. I don't think they are doing that well with sales.

Price cuts are good. Charleston cut prices aggressively and I think almost the apts listed by the developer are now in contract.

Reality starting to sink in? Clearly, out of whack and not in equilibrium.

Either rents go up, or prices come down.

If you had a gun to your head, which would you pick?

That's right- prices coming down. Unless you are suicidal.

Slee, thank god you're not serious!

Personally, I'd take the hit and sell for what I paid, because if prices go even lower (and they will) you'll be doubly screwed.

Or, if you bought it as an "investment," sell the place you're in (and maybe have positive equity) and move into your money pit.

MMAfia, no chance at rents going up. Who is going to pay them?

Sometimes it seems to me that I'm the only one left in my building with a job (which I kind of ignored today 'cause posting was so much fun!).

Oh, did I mention: I also know that 99.1% of all dwellings in New York County are NOT single-family homes, and therefore do not figure into Case Shiller.

Just FYI.

Of what group am I am member?

You are the last surviving member of the spunky, juiceman, sneaky pete, ccdevi group, whose only rebuttal to real argument is:

a) "Please don't post anymore because we're tired of you," or

b) "You don't know what you're talking about but I can't tell you why."

So, tell me why.

No, I've been very explicit telling you why.

I didn't think so, vverain.

Telling. "I've been very explicit telling you why."

Then just give me the url, & I'll reconsider.

LMAO.

OMG Steven I can'believe you said that. You are such a really bad homosexual for yourself.

LOL, he's more than just a bad homosexual, but you can start there.

I'm an EXCELLENT homosexual. I've been at it for years.

But I'd like to see vverain's "explicit" explanation about leverage, which doesn't exist.

here's my 4th posting of tabulating Steve's posts. i'm up at 1.55am.

i've taken a second to tabulate steve's responses on this thread, the "case schiller april report just released" thread, the "23% of Manhattan List Prices Reduced in the Past 60 Days" thread, and the "ignore this person link" thread. as of 1.55am, steve posted at the following times:
18 hours ago
17 hours ago
15 hours ago
13 hours ago
11 hours ago
10 hours ago
10 hours ago
10 hours ago
10 hours ago
9 hours ago
9 hours ago
9 hours ago
8 hours ago
8 hours ago
7 hours ago
7 hours ago
7 hours ago
7 hours ago
6 hours ago
6 hours ago
6 hours ago
6 hours ago
6 hours ago
5 hours ago
4 hours ago
4 hours ago
4 hours ago
4 hours ago
4 hours ago
4 hours ago
3 hours ago
3 hours ago
3 hours ago
3 hours ago
3 hours ago
2 hours ago
2 hours ago
and that's the last one, which comes to about 15 hours of continuous posting, and puts him in bed at approximately 11.30pm.

my question is: who the f is this loser that is POSTING pretty much ALL DAY LONG. i haven't even counted the OTHER threads he's posting on. so this guy seems to be on here ALL friggin day. STEVE, what do you do? are you a student? do you have a job? do you have a life? do you have any friends? do you have a clue? do you have any sense of what a loser you are? do you live all day on your soapbox? do you have a mother? do you spend all your days locked up in your fire island mansion eating spam and eggs? what the hell are you? are you like charles dickens -- paid by the word? are you human? do eat babies?

please refer to the new thread "Stevehjx posts all day long.........................."
for a full update.

Steve - bravo! i think the truth is hurting the other people on this post who, if I could take a wild guess...are either 1) brokers who's job relies on people continuing to make stupid decisions and buying in this overextended market 2) people who have already bought, and hate to think that maybe they made a mistake and deep down inside wish they had rented!
keep posting steve, nice to hear from someone who's actually done their homework and understands the numbers, and doesn't just listen to the myth that brokers have been propogating : "why pay away rent when you can own (and give me a commission)"

dumber (great handle, BTW): "i'm up at 1.55am."

And I'm compulsive? I was sound asleep.

dumberthanyou, Are you competing with Steve, or something? At least Steve has content, not just a list of someone else's comments.

Steven you can't be an excellent homosexual, that is so funny you could say that but very untrue for anyone who tries.

BATMAN: Falcone sent them to kill you.
RACHEL: Why?
BATMAN: You rattled his cage.

archuleta, adios. c u as another username.

With some apartments (condos for the most part) now on the block for either a rent or sell - it makes the comparisons easier. I've been running some figures through the NY Times rent v. buy calculator - and while not perfect - it does show that for my own personal situation renting is better. I'm sure I'm going to get some "you're an idiot - buy now or forever be locked out" - but it seems to make sense right now. I'll see what happens in the Fall and next year.

It's called a metaphor.

smart decision october

rent

Renting is a smart decision for the short term only.

Renting over the long-term as a favorable situation is one of the worst fallacies out there, and is destructive to the individual who doesn't take advantage of all of the benefits and discipline of owning.

DaBulls - I plan on buying - just not this year.

Just saw this on Yahoo! Stevejhx will be vindicated.

http://promo.realestate.yahoo.com/rent-dont-buy-your-home.html

I'm going to buy when the 50% for sale sign goes up as steve says it will. Just let me know when we get there.

Here's the article. This could've been written by Steve. Only difference is the comment "give this market correction another 18 months, and it may not be true anymore" referring to owning trumping renting. After another 18 months of correction, it'll be prime time to become an owner.

Rent, Don't Buy, Your Home

By Justin Ewers, usnews.com

Jun 26th, 2008

Real-estate agents have been pushing the virtues of homeownership since homes were invented. Or since real-estate agents were invented, anyway. Paying a mortgage, they insist, is a can't-miss investment (the tax breaks, the appreciation, the thrill of fixing your own roof!). Renting is for simpletons who don't like keeping their own money.

But does owning a home really trump renting? With the economy stumbling, house prices falling, and credit tightening, many housing experts are questioning the conventional wisdom. "Over the last decade, it may have been true," says W. Van Harlow, an economist at the Fidelity Research Institute. "Clearly, there are periods where [the housing market] will dominate. But give this market correction another 18 months, and it may not be true anymore."

Not so hot. The housing boom produced endless stories of homeowners getting twice what they paid for their homes. But "prices don't always go up," says Jay Butler, director of realty studies at Arizona State University. Even a boomtown like Phoenix has seen median rates of appreciation climb only 4.6 percent a year since 1981. According to a Fidelity study published this year, the return on a dollar invested in real estate in 1963 barely beat that of a low-risk treasury bill.

When the housing market slumps—as it has every 10 or 15 years for the past several decades—homeownership becomes little more than renting, from a bank. Without appreciation, buying a $400,000 house—instead of renting the same property for, say, $2,000 a month—can turn into an expensive, potentially money-losing proposition. Assuming home prices come out of their death spiral (prices fell 4.5 percent in the third quarter compared with last year), they would still have to appreciate at 4 percent every year for a decade—even if rents climbed well above the rate of inflation—before a family would save more owning than renting. An $80,000 down payment could be invested instead in a mutual fund earning 8 percent, and housing comes with myriad other expenses, from maintenance to insurance to taxes, none of which build equity. Tax breaks do ease the pain. But with the average family staying in a house only six years, homeownership during a slump (especially in foreclosure pits like Las Vegas and Tampa, where prices have dropped more than 9 percent since last year) can look less and less like the American dream.

Renting, meanwhile, has its virtues. It's cheaper in the short term, it offers maximum flexibility, and it pushes the headaches of maintenance and taxes onto landlords. It can also be a sound long-term investment. According to Fidelity, if renters save even $300 a month—the difference, say, between their rent and a monthly mortgage payment—that money, invested in stocks growing at only 4 percent, could add up to $114,000 in 20 years. (And that's on top of earnings on a down payment that never had to be made.) "Over long horizons, if you reinvest the savings," Harlow says, "you're probably not going to find that much difference between renting and buying." Saving hasn't proved to be the national forte, of course. But with the bloom off the homeownership rose, it may have to be soon.

"Renting over the long-term as a favorable situation is one of the worst fallacies out there, and is destructive to the individual who doesn't take advantage of all of the benefits and discipline of owning."

Actually, it's the value of buying that's a fallacy. All you need is an affordable place to live, regardless of whether you own it or rent it. If it's cheaper to own, then own. If it's cheaper to rent, then rent. If you're expected a large return-on-investment from owner-occupied residential real estate, you will be sorely disappointed, because prices cannot go up more than incomes and leverage allow.

Unless, O DaBulls, you can demonstrate to me how.

"is destructive to the individual" = a truly bizarre statement.

"all of the benefits" --> there are none if you pay, amortized, more to own than to rent.

"discipline of owning" --> what's the difference in discipline between paying a mortgage and paying rent?

DaBulls, dem statements a yurs, so eloquently crafted, are nonsense.

lol

Renting vs owning is all about affordability. If you can afford to own, you will own. If you can't afford to own, you will rent. End of discussion.

well, there is an overgeneralization if I ever heard one. i rent but could afford to buy.

Lady..so not true I rent because I choose to.

would echo the above---i could afford a more expensive car but think its a waste of money.

"Renting vs owning is all about affordability. If you can afford to own, you will own. If you can't afford to own, you will rent. End of discussion."

What a dumb ass response. As people have demonstrated on this board time and again, there are apartments BOTH for sale AND for rent where the price/annual rent ratio is 40X, others 30X, other 20x, while the NYC historical average is like 15X. Sometimes their are IDENTICAL units in condo buildings for rent and sale at different ratios. So for example, both for sale for $1.2MM, with one for rent for $4500 a month and the other for $3500 k a month. Surely its more economical to rent the cheaper unit than to buy either, ESPECIALLY if you think you will move again in a few years.

"Renting vs owning is all about affordability. If you can afford to own, you will own. If you can't afford to own, you will rent. End of discussion."

This is why most Americans are lousy investors. End of discussion.

From the WSJ

There's the usual talk about what the latest Case-Shiller house price data mean for the next short term move in the real estate market. Has housing bottomed? If not, has the rate of decline slowed? And when will we see an upturn?

Human nature likes the short term. Which is why so little attention is paid to something that is probably more important, if less urgent: What the latest data show about the long-term of the real estate market.

And it's startling.

We have just been through the biggest boom in real estate in American history. The subsequent bust surely hasn't finished.
[Is Your Home A Good Investment?] Bloomberg News

Dropping home prices are only one of the factors that keep the annual returns on homes low.

Yet look at the numbers. Since 1987, when the Case-Shiller index of 10 major cities begins, it's risen from an index value of 63 to 151. Annual return: Just 4.1% a year. During that period, according to the Bureau of Labor Statistics, consumer prices rose by 3% a year. Net result: Home prices produced a real return of just 1.15% a year over inflation over that time.

Critics may point out that the analysis is unfair -- after all, it starts counting near the peak of the 1980s housing boom. Fair enough. Look at the performance since, say, early 1994, when home prices were near a historic trough. Surely someone who bought then has made a bundle.

Not necessarily. Since then the ten-city index has risen from a value of 76 to 151. Annual return: 4.7%. Inflation over that period: 2.5%. That's still only a real return of 2.2% a year above inflation.

You can often do better on long-term inflation protected government bonds.

And real estate often costs 2% or more a year in property taxes, condo fees, maintenance, insurance and the like.

Conventional wisdom long held that home ownership was a route to wealth, and the imputed rent -- in other words, the right to live in your home -- was just part of the value you got from it. Under that widespread view, the recent housing bust was simply a temporary, though deep, pothole.

Yet for very many people, even over the past 15 or 20 years, the imputed rent may have been all, or nearly all, the real value they actually got from their home.

Yes, it's only recent data. And it's only ten cities. But there's some reason to suspect these numbers may, if anything, flatter real estate performance. After all, it's hard to look at the data and figure the bust is now over. And if they fall further, those long-term return figures will fall too.

Prices weren't just down 19% over the past year. They fell 2% just between February and March. And it's not the worst-hit markets that worry me the most -- Phoenix is down 53% from its peak, Miami 47%. That smells of capitulation. It's the other markets. New York and Boston are only down 20%. Denver's only down 14%.

Overall the ten- and 20-city Case-Shiller indices are merely back to mid-2003 levels. After the biggest boom and bust on record, history suggests things don't stop getting worse until they've gotten a lot worse than that.

The only problem with the WSJ article as it applies to the average person: no one will lend you a million dollars with taxpayer subsidized, artificially low interest rates in order to buy bonds. I can't buy $700K in bonds with $35K down and a 4.5% tax-deductible interest rate.

Don't get me wrong....I've been an owner and I'm currently a renter (UWS) and right now I'm loving being a renter.

But I think the above WSJ and Bloomberg analyses understate the value of imputed rent in the returns from owning if you manage not to buy at a peak.

Even if your return is "only" 2% over inflation (which isn't so bad to start with), the ability to live in your investment for free is a very big deal. The key is to not buy at a market cycle peak....or if you do, make sure you don't have to sell into the next market cycle trough.

Please edit this discussion so we can talk just about renting and buying.
Inappropriate and lewde comments from
jasonkyle
EsueCho
Beyondce
Vverain
Stevejhx
petrfitz

are you kidding? i am asking someone if they are being a bigot or just a prude. it's not lewd to restate a prior post to ask about its intent. nor is it lewde for the old english speakers on the board.

All of this is inappropriate Jason. There's no reason for you to be cursing just because someone else cursed, nor do you need to draw out someone's bigotry and ask them to be re-bigoted just to confirm their original bigotry. And if someone is prude, you don't need to be making fun of it.
Peace

ESueCho, it so disturbed you you needed to bring it up again. Oh, don't let me see, oh I must peak, OOOOOOOOOO.

OK back to the real estate discussion: mjsalisb's point about imputed rent is exactly why you have to buy an apartment. You don't want to be renting when you're 60 years old, paying $15,000/month for a 2 bedroom. This is where rents will be in 20-30 years assuming normal inflation rates. Capital gains on apartments are the 'gravy on top.'

Ye olde lewde comments

Drink-soaked, former-Trotskyist popinjays.

Hey! I've been keeping the word "Trotskyite!!!" on hand for use at the appropriate time. I don't think we're there yet.

And I have more of a right to use it than you do, because I live in a Stalinist housing bloc(k).

You can have "popinjay", which is a great word also.