Obsessed with wanting to purchase Apt in Manhattan

How far are you from accumulating enough cash to be able to afford something you'd like?

Depending on the price point and the neighborhood, now may be as good a time as any to buy. With interest rates sneaking higher, it is possible that you may not see much appreciable price increases in the near future, but the net cost to you could be considerably more due to higher interest rates. Also, end of year is typically slower, and sellers who need to move are typically more receptive to lower offers at this time. You can check out our buyer survey on RealDirect.com as well as our closing cost calculator to get a sense of what you can realistically afford. We also offer a buyer rebate on each property which can also help.

Petersons, You can buy and rent it out if you definitely want to buy. That way you can implement your view on property prices going up. If you friend wants his apartment back, you can always rent elsewhere.

Or ask your friend if he wants to sell the apartment to you.

If you're renting for 1/4 the going market rate I hope that 'aggressive saving' means that you are putting the entire difference (plus some) in an interest bearing account. Your monthly expenses are also so far below what you would be paying as an owner or renter that the savings probably offset the increased costs due to higher interest rates (you won't be able to close before the expected .25% hike at the end of the year). It's good that you're researching options for the eventual day, but if you have no indication that he wants the place back, and are certain he will give you reasonable notice, you're probably fine continuing with saving and occasionally checking what the market is up to.

If it's a good friend and you expect to be able to continue paying 1/4 market rent ... then obviously by all means continue to rent! Keep in mind there are unexpected costs to home ownership like repairs, maintenance, assessments etc. Plus rates are now going up.

With that said, if you're hell bent on it then definitely keep saving and investing for a downpayment. Then when you're ready to buy make sure you reduce your closing costs (http://www.hauseit.com/closing-costs-nyc/) as much as possible with a broker commission rebate.

Ideally try to keep it under $1 million (avoid Mansion Tax), and if you buy a co-op with a loan you won't have to pay the Mortgage Recording Tax. Get 1% of the purchase price back from your buyer's agent in a rebate. Lock in a good rate (hopefully they drift back lower with demographics).

First, you should have a frank conversation with your friend to get a realistic idea of how much longer you will be able to reside in his apartment with a sweetheart deal. Be clear that you need to plan (buying an apartment takes a while) and would like to rely on his statements. If your friend is non-committal, you should at least tell him that you need as much notice as possible (if he’s your friend, it’s unlikely he will show up one day at your front door and demand his apartment back). If you will be able to continue paying significantly below market for a period of years and you do not need to move for any reason (i.e., unit is too small, kid on the way, need an extra bathroom, etc.), then it is a no-brainer – stay and be thrilled that you are among the lucky few NYC renters with a sweetheart deal that enables you to actually save money.

If your friend realistically needs to take the apartment back in the near term, then you should perform a quantitative rent vs. buy analysis to see, realistically, what will make the most sense for you when the time comes. There are several of these available online, but I use my own form which is fully customizable and takes certain things into account that the online models don’t.

Dan Gotlieb
Digs Realty Group
www.digsrealtynyc.com

I think you're in a good position. You're renting from an out of town friend 25% below market. Your friend doesn't seem to need the apartment to live in or to sell right now. If his life is no longer in NYC, it's a good investment for him right now and a good deal for you.

Since you say housesitting rather than subletting, do you have a formal lease? It's been 5 years. You may want to consider a new lease. How long are you both willing to commit to each other? Determine the lease length term and ask for a first right of refusal rider to buy option. If he decides to sell during the term you get first right of refusal.

Do you love the apartment? Often the best real estate deals in NYC come from patience or a coveted rent stabilized apartment? 3-4 hours a day searching listings and attending open houses every weekend is a bit intense. It can be inundating. Aggressively saving is a good thing.

Over the long term Manhattan prices rise but not always straight up. The last few years was a strong sellers market. The market is turning. The high end luxury has been soft for some time. New Buildings are giving discounts. I think as interest rates rise prices will decline throughout 2017. Manhattan prices don't fluctuate drastically. They come down during corrections and then go higher the next boon. You have options.

Have you seen anything that you like much better then the apt you are in? If you really like the apt you are renting keep an eye out for something else but stay as long as you can and keep savings.

If you're qualified to purchase now either the apt you're in or comparable apts providing your income remains and you continue saving you will also be able to afford in a few years too. It's not the price you should focus on but how much it will cost you to live there. The more cash you can put down the less your monthly payments will be.

Mitchell Hall
The Corcoran Group

Keep saving money, you have the luxury of waiting for the next correction. It will come, it always does. It's like black Friday, a big temporary sale. If you are miserable where you are, hate the uncertainty, then buy and move into your new place.

Happy Holidays!

Keith Burkhardt
TBG

@Keith Burkhardt

It says alot about you that you are not talking your book!

That being said, I am assuming this analysis may be data-based. If so, when do you expect the next sale? End of 2017/Early 2018? That is what my guess is based upon inventory. On the flip side, I think the post-Trump tax effect may change the demand side of the equation in a way that I don't know how to calculate.

At this point it's difficult to calculate the post Trump tax effect since elimation of the mortgage deduction is on the table. Of course this elimination should not affect high priced properties, but properties in the price range of $2-3M or less.

As far as buying now or later, one cannot time the market, no one knows when a correction will happen. Actually in the early 1990's the Manhattan real estate market crashed, drastically, far worst than the 2008 financial crises. My advice is to buy if you can afford and you feel excited about owning.
Spending 3-4 hours a day on real estate sites does reflect concern, conscious or unconscious about your friend showing up.

That said I as a broker offer a substantial rebate. I am also a mortgage broker. Some of my lenders will do an income analysis for a prospective buyer before purchasing free of charge. Then when you go to contract the lending process is quicker and easier. Of course you are not obligated to use the lender.
I just closed a loan for one of Dan's clients and the buyer was very pleased with my services, not to mention that the loan closed in less than six weeks which is unheard of in the lending environment we're in.
Best of luck to you.
Ellen Silverman
Real Estate Broker since 1987
Mortgage broker NMLS#60631
esfundingco@aol.com

@nyc1234 I have no idea when there will be a correction. I don't think the current trajectory of interest rates will derail the markets any time soon. A serious real estate market correction usually correlates to some 'black swan' event and real estate becomes a side effect of such an event. So, the question is, whats next? If I knew I would not be pecking away here on my Chromebook :)

If anyone knows please shoot me an email so I can finally buy that gentleman's organic farm in Sebastapol; Fruit baskets for all Streeteasy alumni every holiday for life!

The funny thing is you never think it will happen again....

Keith Burkhardt
TBG

If you need and/or want to live in NYC, it's significantly cheaper to rent than to buy in Manhattan. Why dump all of your cash into a low yielding asset (the rent you are saving), when you could invest it in properties in other areas of the country with higher yields or put money to work in other investments?

At the end of the day, if you are dead set on buying I would look in the less expensive areas in Brooklyn / Bronx / Queens that still have good subway access and obviously request a commission rebate to save on the purchase price - hauseit, etc.

"If you need and/or want to live in NYC, it's significantly cheaper to rent than to buy in Manhattan"...Tony or Howard you can't just throw out a blanket statement like that without a whole set of calculations to back that up. That is just not accepted streeteasy etiquette. U just can't do it. Sorry Tony or Howard.

Be careful trading on location for price. A solid location will save you in a downward cycle and reward you in a bullish cycle. If hunting for value, do your homework and try and find a neighborhood that has all the tell tale signs of gentrification (ugly word, I know); Sunset Park, Midwood?? Sunnyside? It can be risky buying in a marginal neighborhood in a strong seller cycle, easy to over pay for something that will be dead wood if the neighborhood doesn't 'change' and the markets sours. However buying in such a neighborhood when the market is in a bearish cycle would be fine, as long as you'll be happy living there.Speculating on the next Williamsburg ain't an easy task!

Simply put, rent if you can't afford to buy a home that you will not only love living in, but makes financial sense.

It's an old cliche, Location, Location and Location.

Just my two cents.

Keith Burkhardt
The Burkhardt Group

I rented in Sunset Park for fourteen years. When I was ready to buy this spring, I was shocked by a. how expensive, and b. how small, apartments are. There isn't a lot of housing stock here. (We bought in Jackson Heights instead.)

@theburkhardtgroup

Agree that no one can predict future downturn. Always good to hear perspectives from people that have more knowledge about the market than I though. Thanks for your comments!