salary numbers + profile -- need advice

You can afford the 800k apartment, but probably won't have much left over at the end of the month to do much else (go out to eat, bars, vacations etc, that you'd have if you simply rented the same apartment) - whether or not you SHOULD buy it is a different question. Market is probably going to tank at least 50% in the next few years and by the time you close market prices will probably have gone down enough that you'll have already lost that 10% if you tried to sell it (80k down the drain)....Buying a second property at this point as an "investment" is not a very good idea. Rents are going down and so are prices. Are you sure this was a well thought out decision??? Any way you can back out of your contract? What are condos renting for in the building (an HONEST answer, not what people WISH they could get - you will VERY RARELY get more than $3200/month for a 1bd apartment in a perfect building/location. Fair price is about 10-14 times annual rent so if you could actually get $3200/month you shouldn't really pay more than about $530k for the place. Make sure you really think about this before you're underwater on the place. Certainly DO NOT buy a property as an investment right now.

Why not rent at 1/3 of the monthly cost and wait the credit storm out for a few years.

Following my general rule that you can have a mortgage balance of 2-3x salary, you are fine buying an $800K place on $335K in income.

However, I'm not sure what you're buying (co-op or condo?) and what you expect to put down in total. In this mortgage market, it's unlikely that you'll get a loan on an $800K place with 15% down, despite have a strong income and decent credit scores, so you want to be shooting for 20-25%. Obviously, if closing is 12 months away, you can just throw your gf's bonus into that pot.

As far as buying the second unit, NO. You will be stretching yourselves too thin. Even if you're buying a condo, and you think you can handle it, the banks aren't going to like seeing the second property.

Besides, while I realize it is a serious step to co-purchase a home with someone, you're not married, and you're entwining your assets a great deal for two people who don't have the legal protections of marriage. (I hate to sound schoolmarmish, but I have seen the downside of this). I would heartily suggest a pre-nup on that first home -- if things work out well, you can just tear it up later.

Regardless of whether you do that kind of agreement or not, don't forget to make wills in favor of each other. If one of you drops dead, they could be faced with the possibility of fighting the other's family to keep their home.

ali r.
{downtown broker}

it sounds like your in good shape for the first home. owning a second one, sounds like a mess waiting to happen. as for the response saying the market will "tank 50%" I really wouldn't worry about that, sounds foolish.

you will be fine, and dont listen to the 50 % tanking market etc....i wouldnt get into the 2 nd property at this point, just look forward to your new home and dont sweat it.

thanks everyone for your comments. a few other details i should have mentioned. the $800K unit is a condo in manhattan, which we've put 10% down, another 5% due in a few months, and at signing we were definitely shooting to put another 5% down to avoid PMI. also, we do not have a mortgage contingency on the unit. we're pretty sure that we'll be "down" by the time we move in, but this was not an investment purchase; strictly for consumption, and the boss(girlfriend) was willing to take up to a 25% hit because she loves the unit so much. (i personally would be sick if we lost so much, but that's another issue altogether.)

the second unit for $400K is in queens LIC, and is also a new development condo, which would not close till probably Q1 of 2010. this unit, however, we can get a mortgage contingency on. also, we have in no way signed anything yet. it's all in the decision stage. so, outside of putting the 10% down on the unit, i was wondering, when closing on our original $800K unit, would the bank even have to be aware of this $400K unit? i was thinking that we could get the mortgage on the $800K unit smoothly, and then deal with the $400K unit a few months later, where even if things didn't work out, with the contingency in place, all we'd be out is opportunity cost on our 10% down.

Ali, thank you for the wise advice on the girlfriend situation. it seems to be what everyone is telling us. but she really doesn't care about it (ie, the possibility of breaking up), and to be honest, i'm pretty nonchalant about the entire thing, too. so though it may be naive, we really are thinking of it as a non-issue.

lastly, in making out decision about this second unit, we are ok with the idea of being "tight", only because our lifestyles are fairly boring -- no bars, very rare dinners, and vacations to an already-paid timeshare.

for new folks, i would still appreciate further chiming in on even the first unit purchase given our financials. one can use all the comfort one can get!

oh shit. i just realized i put the wrong number up! our unit is $900K -- not $800K. sorry. let me know if that changes anyone's answers!

Where in LIC can you breakeven by renting a unit out? I'm looking for exactly the same investment and the numbers just don't play.

Dude, at 900k you're paying an absolute fortune for a 1bd (unless it is some huge loft with floor to ceiling windows in the west village) - and really stretching. What happens if the gf doesn't receive a bonus this year, or the following year?

How big is it and where is it located? Why do this to yourselves when you could rent out a really nice place for 1/3 the monthly mortgage payment, buy a much nicer place in a couple of years once prices correct and not lose 400k in the process? This market is seriously overpriced, buying a house right now is a sure way to lose a ton of money as the correction is just beginning. You already expect to be underwater, why are you going through with the purchase?? On top of the entire down payment which you will surely lose within the year have you added up all the thousands and thousands of dollars in closing costs? How much is maintenance on this place? If I were you I wouldn't just walk away from it, I'd RUN.

Let's see..

I agree with front_porch in that given your income level (assuming the guaranteed bonus and that your GF has no problems with her job), you could afford the mortgage. Not having a mortgage contingency clause is a bit risky in my opinion given the credit sh*tstorm going on.

Personally, I'd wait till the smoke clears and rent in the time being. We did just see the largest drop in sales transactions in Manhattan (Q2) in 10 years. That in itself would put the brakes on many potential buyers as a drop in sales transactions of that order of magnitude almost always precedes a price drop later on in the history of Real Estate.

You probably don't want to hear it, but I would be concerned. Not because you can't afford it now, but because you do not know what the future holds. I would absolutely NOT buy a condo in LIC for investment right now. Signed, Owner of RE investment props on East Coast, in Mid West and in Canada.

Even if you think it is a "non-issue" you are going to have to decide how to title this, which means you are going to have to discuss and agree to such things as what percentage each owns or whether it has rights of survivorship. Along with that are the tax issues and how the tax and interest deductions will pass through to each of you. You are going to need a real estate lawyer to close; I would suggest you find one now and begin the discussion of these issues. You should also coordinate this with a tax man. You may find that (if the condo will allow it) you will end up with an LLC owning the unit with you and your girlfriend sharing ownership of the LLC.

I would concur with others that thought things looked tight for the investment unit. So many things can go wrong in life that will blow you up financially if you live too close to the edge (imaging a non-paying tenant that you will have to evict). I am also skeptical that you can buy rental property at a cap rate that will carry the property in this market. If you are inclined to go ahead anyway, I would suggest watching the market to see where it is going before jumping into an investment. I am somewhat bearish, but I don't expect prices to fall 50% and I wouldn't discourage someone from buying a beautiful new 1BR apartment at $1400/ft if that is the way they want to and can afford to live.

Dumberthanyou--

start finding a mortgage broker or lender that you're comfortable with now. If you're putting 20% down on a $900K unit, you're taking out $720K, which is a non-conforming loan of more than twice your joint unmarried income. I think you can certainly afford it, but I'm not sure you understand how tight credit is out there now. It's going to be a tougher mortgage to find than you think it will be, especially if you want a sub-7% rate. Many lenders are going to try to push you to 25% equity.

ali r.
{downtown broker}

Agree 100% w/ front_porch. This is perhaps going to be your biggest risk.

Dumberthanyou, the investment unit makes zero sense right now. Sounds like you are falling in love with an idea without really knowing what you are getting into. Since you have already put 10% down on a condo (soon to be 15%) I would focus all of your financial efforts into getting mortgage on the home you are currently LOCKED into. Do you realize if you don't come up with a mortgage you will lose this 15%? I would be shitting bricks if I were you and doing everything I can to make sure my financial (and relationship) situation is sound before doing anything else.

Also, your plan of "dressing up" your financials with your parents money is a bad one. Banks look at historical balances and will question deposits that "fall from the sky" and most likely, will disregard anything outside the range of normal.

Dumberthanyou, I am not saying this to be nasty but after reading your posts I feel that you and your girlfriend are being fiscally irresponsible in your decision making. These are big decisions and a lot of money is at stake. It may be time for a wake up call.

I agree with every thing frontporch said. I would also emphasize again that you should no be looking at the second property at all. You are just making it as is with one property. Don't get greedy.

I have to agree with several of the posters- jrd, Front_Porch, Juiceman, etc.

I get the impression as well you are only first discovering the risks- and to consider an investment unit at this point highlights precisely the question at hand- will you be able to sleep at night. With the primary unit you have multiple concerns that I would be losing sleep over (at least until closing)...but add an investment unit into the mix is an explosive combination. Forgetting the investment unit, let's just focus on the primary home and those issues.

From an affordability of monthly mortgage payments aspect- you fall right into a reasonable range. The concerns are:
- Mortgage approval with only 15% down, even 20% in this enviromnent is being questioned...25-30% would be much better in this environment.
- Lack of a mortgage contigency- potentially losing 15% down payment
- Credit scores- yours is fine, but gf's is not...and might put pressure on getting a mortgage (have her spend the time between now and closing working on fixing this)
- Buying as two singles doesn't have the same legal protections as a married couple...and might have an impact on obtaining the mortgage
- Rather than use the parents money for window dressing, perhaps it would be better if they could help to contribute toward the downpayment, and pay them back as a first priority.
- It sounds like this is a new construction apartment which brings about unforeseen cost questions
a) not all new construction is equal- many buildings are poorly constructed and you might face massive costs fighting with the developer
b) monthly common charges could be skewed toward selling the building...you could face massive increases in your monthly expenses if the projections aren't realistic or keeping up reserves or inflation.
- The fact that your girlfriend works in investment banking at this compensation level without understanding these risks and explaining them to you is worrisome in my mind. I can understand if you work in a non financial function- but I remember on my first day of my first finance course in college that the professor made a statement that the core of finance is about understanding risk and reward.

I actually applaud your efforts to educate yourself before moving forward with even greater risk.

i sincerely thank everyone for their comments and input. don't worry, i have a thick skin and can take harsh words if that's what you think i need. (i'm not posting on here just to hear sweet reassurances.) ... but with that said, i must admit that i'm very tempted to get into this second unit.

a few more details: the $900K unit was signed and sealed practically 6 months ago, at $1050 psf, luxury prewar loft condo conversion. (i'll let you guess at which project this is.) at the time, we put our 10% down knowing full well that things were gonna get worse, but hey, what can i say? the gf fell in love with it, and in the end it was more "consumption" than "investment". with that said, at the time, i think the sellers still had an upperhand, and we just couldn't negotiate a mortgage contingency. so we're exposed to that. just so there's no confusion from some readers: this $900K we're already in and cannot (and do not wish to) back out. as i mentioned, her job is pretty much guaranteed. i didn't mention that her bonus of $100K is a min, and that it is in writing as "guaranteed". not sure how banks will look at this guarantee, but i'm well aware of the article from the other day about bonuses being severely cut insofar as banks not using 100% of them in their calculations.

when i mentioned the cash infusion from my parents, what i meant is that they could help with additional down payment, if it was necessary. i was not aware of the 25-30% downpayment trend, so thank you for that info.

from what i can tell, it looks like this $900K unit is definitely within our means, and that we should definitely be prudent from here on in in trying to buttress our assets and credit scores, etc. thanks for the advice with that.

now, about that other $400K property: a $360K mortgage (assuming only 10% down) at 7.0% comes to $2400/month, plus fairly low common charges, puts us at $2700/month. i believe the place could be rented out for $2200-2500/month. that puts an extra $500 or so extra cash outflows each month. if need be, again, we could come up with some extra cash to put down on the unit from my mom and dad. but really, i'm not too worried about an extra $500/month cash outflow. perhaps that sounds naive to some?

perhaps it's important to note that our lifestyle is really not that lavish and so we don't burn through cash the way "typical" folks do. i understand that this is hardly something that a bank will take as reassurance, but we've always thought for ourselves that we could handle paying over 80% of our aftertax takehome pay towards the mortgage, etc.

ok folks, feel free to chastise me again. some people need tough love. ...
p.s. for what it's worth, we are relatively young, and my guess is that our risk tolerance is higher than most.

Don't take the 2nd unit! It makes absolutely no sense and when the math is done, you actually can't really afford it. Further, as people have noted - the days of 10% down for that 2nd unit are over. More will be required. You are jeapordizing the mortgage which is a year out for the place you want to live by attempting to take on more debt and purchase the 2nd place. If you don't get the mortgage for the 1st place you can lose your downpayment on the.

400+900 = 1.3million. Your income doesn't support that well when we are talking about being cautious with 2-3x. You are really overreaching and a tenant is not guaranteed at the price you are saying. LIC will be hit with a large amount of supply due to other people trying to do what you are doing. I am really shaking my head!

OH, last thing. please let me know where i am wrong in my logic in making the following statement:

because of the timing of the $900K vs $400K units -- that is, i'd close FIRST on the $900K unit -- taking on the $400K unit will not affect my getting a mortgage on the $900K unit. (is this true?) if that is the case, then there's no risk for our "main" unit where we will be living. now we can consider the $400K unit. getting a mortgage on the $400K unit a few months later may be difficult because of the $900K mortgage that will obviously be on our books by that time. but because we will have a mortgage contingency on that unit, we can essentially back out cost free. if that's the case, the only true cost to me today of putting down 10% on the $400K unit is the opportunity cost of deposit. to put it a different way, is this not essentially a (practically) free call option? (whose expiration date is in 2010.)

I think you need to talk to a real estate lawyer and understand the terms under which you will go into contract with the mortgage contingency. There are situations where you can lose your deposit (or have to wait a good while to get it back, or end up litigating) if it looks like you deliberately did something to get refused a mortgage or if you misrepresented the facts. Do you really think that in all the legalese that your are going to sign these guys are writing you a free call? It's possible that they have lousy lawyers and business sense, but I would guess not.

Dude you are choosing not to listen to very good advice being given to you so why bother asking in the first place.

go right ahead by the second unit.

Dean

A denial for a mortgage will reflect poorly on your credit score so you won't be able to get that HELOC or an auto loan later on. It's not a game to purposely have a bank deny a loan in your name.

deanc -- i'm listening! i'm not trying to waste your time and mine. i didn't post all this info about myself just because i was bored. i'm trying to get as many opinions as possible and trying to give you as much information about what i'm thinking as possible. just trying to make an informed decision here. i'm not a stubborn fool that is gonna just do whatever i feel like doing in the end.

I mentioned in my previous post about some cost variables after closing, that I feel should be elaborated on further. I bought a new construction condo, my friend bought a renovated building condo conversion. In both cases we have seen our common charges increase by 30% or more within the first year or so of buying. I wouldn't be at all surprised if you experience this in both apartments- so that needs to be factored in. In the case of my building, the builder didn't construct the roof correctly (I have heard of other problems in conversions that mirror the cost magnitude) and refused to fix it. We were lucky that all the owners were able to organize and unite and got the developer to cave in. If we didn't we were looking at a potential assessment of about 25k per apartment payable over a very short period to cover litigation, inspection and reconstruction costs a year after moving in. An example like this (or worse) could swing your entire equation far into the red on either or both apartments.

I can understand being young in both of your career's- and thus, less adverse to risk, but I do want to make sure you have a full understanding of the risks.

Lets talk about the mortgage on the second apartment. As an investment and even if your numbers look good for both purchases, you will be lucky to get a mortgage with only 25% down. It will probably be a minimum of 30% and could easily go to 40%. I know because I am in the middle of this now and have top credit.

Good luck with the first. However I find it hard to believe that people with your "resumes" can't see the problem with the second property. Quite frankly I can't believe that you would even buy the first. Are you guys in the financial field? Do you understand the credit crisis. I mean you say you had no idea that many banks are now requiring over 20%.

Here is the real problem as I see it. You guys make $400,000 and still need Mommy and Daddy to co-sign or give you money for a down payment, I'm sorry but that's pathetic and I would advise you guys to stop thinking about buying anything until you get your act together. You said you had tough skin, lets see how tough you actually are. I actually can't believe that no one else see the problem with your decisions or ideas.

jrd -- i do not know the precise legalese that would be in the contract, and i would definitely have my lawyer give it a good read. the salesman we talked to said that when closing comes, if we got denied a mortgage, they would be glad to take the unit back because they are quite sure that, it (the unit) being the lowest-priced unit in the building, that it would be easy to put out there to be sold. now, i understand that they've all got their own agendas and must be taken with a big grain of salt; i'm just telling you the nature of the conversation. in any case, thanks for the advice; would definitely make sure the contingency was airtight.

semerun -- wow, that does not fare well for me. i did figure that common charges would be going up by 25% or so, but i have not thought about the kinds of screwball cases that you've described. yes, that would definitely be a damper on things.

csn -- is this hyperbole? really? it could go up to 40%? that sounds extremely high to me. though i admit that since we put our downpayment down a few months ago, i haven't been keeping up with the news as much as i should lately. (after all, it's a done deal. why lose sleep over it? just do the best i can to save and don't stress over factors i have no control over.) .... .... but really, 40%??

"You guys make $400,000 and still need Mommy and Daddy to co-sign or give you money for a down payment, I'm sorry but that's pathetic"

We don't agree on much dco, but you nailed this one.

actually, given the numbers that i've stated, i don't think it's so much that we *need* mommy and daddy to help out, but it's just been a nice cushion to know is there just in case things turn uglier than the scenarios we had mapped out. sorry i'm pathetic. (that's not news to me.) we only strive to be as "with it" as you are. just trying to make a living and enjoy life here. ... but seriously, you're saying that we shouldn't even buy the $900K unit? we're beyond our means? what should we have to buy such a unit? (i'm quite serious, and am not being sarcastic. i know how these threads can turn into silly shouting matches among some of you. can we try to keep it all productive?)

The up to 40% is for the investment unit. I am being quoted 25% and 30% and I could buy my units for cash. But I have seen quotes over 40% for investments, not primary residences. Those are now basically at 20% down.

I think it's great that you've sought advice and have laid it all out there. Ignore those who turn sour when their precious advice is merely considered rather than taken as fact. There are many people who would and have bought both units with your financials. And yes, many of them probably had to come up with another 5% at the last minute. There's certainly nothing wrong with your parents having the means and the desire to help their kids if they need it. Some would see appreciation in one or both units. Some would end up in a mess, because their relationship and the market went south. It sounds like you're both doing well enough on both fronts to handle that, if you're willing to stomach the risk. I'm not saying that you should buy both...it seems like a bit much risk to me. This is especially true if your girlfriend doesn't share your determination to buy the LIC unit.

dumberthanyou - you should really look into your financing options. Although you shouldnt have any problems qualifying with your combined income, guidelines have changed in regards to down payment. You should be fine with 20% down however who knows what will required in a few months. 15% down may not qualify you for the mortgage at 900k. If fannie mae decides to extend the agency jumbos then you should qualify for that program at a 30 year fixed. How long do you plan on living in the unit? Right now, the 30 year fixed mortgage is the way to go. Unless you have a completely legitimate reason to take an ARM. We offer long term locks up to 2 years if rates are a concern for you. It gives you a free float down option if rates drop. I think you should be thinking a minimum of 20% down. More the merrier. Gifts are allowed from any source as long s 5% is your own funds. As far as the investment property, you will need to put a min. 15% down at 400k purchase with a min. of 720 fico (bc its conforming). You mentioned that rent ill cover the mortgage but youre assuming that youll rent out the unit right away. You will probably qualify for both mortgage granted ou make the minimum down payment required. But you should really think about the investment property over several more times. Will you be cofortable with the combined mortgage payments if you are not able to rent out the investment unit? sunny_hong@countrywide.com

If you use all your savings and stretch yourself on both properties, you will have little left for emergencies, furniture etc. You are pushing it tight. With that login name, you are making it easy to make another joke too. Pls calm down with all this buying. Buy one property now and leave it at that. You have never even done this before - real estate is truly illiquid. I am still astonished at the cavalier nature you are taking with the joint ownership without any pre-nup too. . .but that's just me. Things can go both south on both the properties and your relaltionship. I'm in finance too - and i'm really surprised by your girlfriend's behavior given she works in investment banking. To be fair, I'm on the buyside - which means I regularly make principal investments. . .maybe that's the difference.

dumberthanyou, it appears that you are out of touch with the current dynamics of the mortgage market. things are literally getting more challenging by the hour.

this rapidly changing dynamic has sucked in many deposits of people who did not take the time to cross their Ts and dot their Is with mortgage contingency clauses with their lawyers.

as i said earlier in this thread, that is the highest risk for you. not only for your second "investment" purchase, but also for you primary residence purchase.

and to top things off, you aren't even married to the person you are planning to enter these purchases you are thinking about.

very risky indeed.

If you plan on living in the $900k unit for more than 3 years, and you (or your gf) absolutely love the place, then buying now is not a mistake. You'll benefit from owning and even if the market swings a bit short-term, in the long-term you will do well to own it. As for the second property, I agree that you should hold off. One thing at a time, you can always look at investment properties after you move in to the first place.

Dumber: If you buy this condo without an agreement between you both given you are unmarried, if your g/f should die, your g/f's assets will go to her parents by law unless she has a will. Therefore, they will own half that apartment and can force you to sell the apartment and get their share (or of course you can "buy them out" but it doesn't seem like you have the money for that).

Same thing if you break up. She can immediately sue you to force you to sell the place or buy her out immediately.

Please talk to your real estate lawyer about drawing up some papers just to make sure that you are BOTH properly covered. Life can come at you in the strangest ways and it's nice to know that things are planned ahead of time.

I am always shocked how unmarried people buy property together and have no written agreement between them. Also, if she has alot of debt, her creditors could attach to the apartment and force her to sell her share to get paid. This could not happen if you were married if it was just one person who has the debt. Again, there are alot of things to think about to protect your most expensive asset. Do a little planning and you won't be sorry.

everyone, thank you for your comments. i'm a little surprised that everyone is focusing so much on our unmarried status. but after reading everyone's advice, i'd like to announce that... .... you are all invited to our wedding. :) hahah, ok, just kidding. but seriously, it is quite comic to have the both of us lying in bed reading this thread, and having the conversation of marriage (which we have always been against) come up as a possibility because of the advice of you anonymous people! seriously, i understand the concern, but really in the grand scheme of the decisions we're trying to make, we just didn't feel that this was the clincher. reader, you will have to take my (our) word for it that our relationship, though not officially sanctioned by a state, is de facto more solid than most marriages, though obviously not de jure. with that said, we are now thinking of talking to a lawyer about the pros/cons of marriage.

LICComment, yes, i should have mentioned that we definitely do plan on living in the 900K unit for 5 years. she's in love with the place.

jdas, thanks for the encouragement. btw, my gf does share the enthusiasm for the LIC unit.
shong, i may end up emailing you soon.

girlygirl, i can't really speak for my gf. but cavalier is just the way she is, i suppose. :)

babsie, we don't plan on dying. (that's a joke.)

well, it looks like from a canvasing of opinion here, that it is pretty much unanimous that the second unit is a bad idea. strange. the different scenarios that i've mapped out in my amortization and sensitivity tests shows that we could handle the second unit at a 7% interest rate (for both units) even if we couldn't rent it out for a few months. but the overwhelming response leads me to believe that there's something in my calculations that are off. (though i'm not sure what.)

so..... i think we are backing away from the LIC unit and i guess concentrating on waiting for our manhattan condo to finish -- which btw, is kind of like standing over a HUGE pot of water waiting for it to boil. could time go any slower?

thank you all for your valuable advice. (i also commend everyone for keeping this thread so cordial and informative. breath of fresh air.) please feel free to keep posting advice/opinions about our situation because i'll be visiting this thread for at least a few more days for updates.

two questions about heuristic ratios that i've picked up on streeteasy:

1) the 28% of gross income rule: i've read somewhere that it is rule of thumb that your monthly payments (mortgage, cc, taxes) should not exceed 28% of your gross takehome. for the $900K unit, 20% down, 7.0% interest rate, 30 yr fixed, that comes to about $6,500. our gross takehome for a month is about $25,000. this comes in at 26%. has this 28% rule changed recently? why are some posters nervous about even our primary unit as being tenuous?

2) the 12x-15x PE rule: this one i read from Stevejhx. the price of a property should not exceed 12-15 times its annual rent. for the LIC unit we've been discussing here so far, if i assume a $2300 monthly rent, that would be 2300 X 12 X 15 = $414K. actually, if $2300 were indeed an accurate rent number, that would put the unit at about a 14.5X ratio. that makes me think that the unit (selling at $400K) is actually "priced well". comments? (i understand that it being priced well, and me being able to handle the additional obligations are two different questions.)

dumberthanyou, good luck with your condo. The best part is that you are so excited about it and when you move in, you will have many years to enjoy it. After reading the thread, I don't think people are against the investment unit as much as against the timing in which you are considering it. Get your own living situation in order and then consider an investment property. It is more about timing than anything else. Also, I would consider changing the dumberthanyou handle. You are far from dumb and have asked very intelligent questions on this thread. Maybe you should consider never_marry or cant_wait_for_unit? Best of luck.

I agree with many of the comments that with this kind of income you have so little saved. I would NOT buy the second one. Being a landlord is a pain in the a**. You're better off just saving it (to say nothing of the possible price drops). If you really like the 900K unit, go for it, but it sounds pricey for a 1 bed.

About buying property if your not married, some of the people on this board don't know what they're talking about--it's no big deal. Get the unit titled as joint tenants with rights of survivorship (or just wait till your married). How the deed is titled overrides the will anyway (if there is one). I've bought lots of properties with my partner and it's not really an issue.

dumberthanyou:

As far as harping on the unmarried co-purchase: BTDT, and unwinding it SUCKED. We bought as engaged co-purchasers, and in the process of becoming un-engaged and selling the apartment, we discovered that what we were going through was actually a somewhat common experience. The fabulous rapport we had established enabled us to behave equitably towards each other without having a written guideline, but in retrospect, how hard would it have been to do what our attorney advised and have a written guideline?

I believe you when you say "solid", but at least try to have the conversation -- "if in two years we have to sell and it's gone up, this is how we split the profits, and if in two years we have to sell and it's gone down, this is how we split the pain."

If you never refer to the conversation again, fantastic. If you end up getting married and referring to that conversation only ironically, even more fantastic.

Of course many many married people end up unwinding co-purchases too, but there's a whole divorce protocol that establishes how that goes down. The point is that with any large asset purchase you cannot eliminate the element of risk, but you do your best to anticipate it so that at least you're not surprised.

And on that note: back in the old days when banks were actually conservative, the rule of thumb on an investment property was rent x 0.75 -- the assumption being that a rentable unit would be vacant three months out of every twelve.

So to be conservative, you should estimate the LIC unit's annual income at $2,300 * 9 = $21K.

ali r.
{downtown broker}

ali,

fair enough. i'm going to have a conversation with the girlfriend soon about our manhattan unit. the conversation is going to start like this: "the people on streeteasy think we should get married..." ...

lol, just typing it makes me laugh. :) but seriously, we'll have the conversation. maybe i'll even report the results of the conversation for you all.

but seriously, do i really have to talk about what happens if i DIE? i understand that it's the prudent and rational thing to do, but at this point in my life, the entire thing is a bit morbid. if death is in the equation, the truth of the matter is that my dear mom and dad will be so wrecked (i'm a mama's boy, in the end) that a stupid condo will be the last thing they're thinking of. don't worry folks: i do understand how naive this all sounds. regardless, let's just leave my death out of this.

btw, i still think we got a decent price on our manhattan 1BR given that it's prewar loft condo purchased 6 months ago at $1050 psf and a larger-than-average private terrace. don't get me wrong: i'm not saying that we're way ahead, but that we're not as "in the hole" as folks that paid $1300 psf. and then there's the intangibles of "omg, this is the apartment for meeeeeee!", which really, to rip from mastercard, is quite priceless.

now excuse me as i go surf the nyc website for city-hall weddings...

Good luck dumber, and keep us posted on how things are going for you in the coming years.

DTY,

There was a quote in Time magazine a few weeks ago from an English near-billionaire who attributed his wealth to "never buying, always renting anything that flies, floats or fornicates". You may wish to consider his sage advice as you move forward in life. Seriously, if you consider the per usage cost of matrimony , it makes $1300/sf seem like a steal!

lol, raddoc thanks for the laugh :)

but you know, "always renting ...fornicat[ion]" only supports the idea of buying in LIC near all the prostitutes, haha.

Are you bringing up Arris again?

I agree wholeheartedly with the other posters who suggest backing away from the investment property. Now is NOT a good time to take on two properties, given what you've told us about your finances, and considering the current economic volatility and general market concerns. Also, have you ever been a landlord before? Believe me--it's no cake walk.

You say you currently live frugally--that's great. But that's TODAY. What happens if your expenses go up unexpectedly TOMORROW? You simply never know what the future holds. Sorry, but NO ONE'S job is 'guaranteed'. The only people who can make the argument that their incomes are 'guaranteed' are trust benies who receive dividends and adjustable principal payouts. Unless that describes you and/or your girlfriend, you have to operate under the assumption that one of you *could* lose your income source somewhere along the way.

All this to say--don't overextend yourselves. If something (the investment property, for example) feels like a squeeze now, it'll get a whole lot worse if you run into trouble at some point down the road.

One last thing--you need to think seriously about getting some legal documents in place BEFORE jointly purchasing any real estate. A will is absolutely mandatory, especially given that you and your girlfriend are not married. Life insurance is an absolute must. It's wonderful that your GF and you have a strong relationship, but home ownership, from a purely technical standpoint, is a legal matter--romance plays absolutely no role.

"but home ownership, from a purely technical standpoint, is a legal matter--romance plays absolutely no role."

Words of wisdom from experience.

lights go off, i jump in bed. we lie there together, on our backs staring at the blackness of the ceiling. in the background, noise of the M15 bus passing by. ... then silence.

me: people on streeteasy think we should get married. ...

girlfriend: show me the tax benefit for getting married, then i'm all for it.

[pause]

me (jumping out of bed to get to my computer): i have to tell them your response.

My advice to anyone considering marriage is don't get married just because of the real estate. Forget the real estate, you have bigger issues.

DTY--If you and your GF are not ready/don't want to get married, you should NEVER do so just for 'tax benefits'. By all means, speak to your attorney. But I'd focus on what you can now, as an unmarried couple, to protect both your interests in this major purchase, which is a legal partnership in its own right.

You mention in one of your posts that you'd prefer not to think about what might happen if you die. Well, grow up and get over it. Get a will (you'll only have to 'think' about it for a couple of hours at the lawyer's office--believe me, it's practically painless). Get life insurance. That goes for your GF as well. This way if, god forbid, one of you were to die, the other will be protected and won't be forced to give up the property.

I didn't say you should get married, I said you should talk about what happens if you two sell the property earlier than anticipated.

Being married is fun though.

ali r.
{downtown broker}

why anyone would buy an apartment with their girlfriend is beyond me. Unless you've put your exit strategy in writing, I would never do it. Its bad enough acquiring property with a business partner without a writing, let alone a girlfriend. Just not a prudent thing to do.

dty, you really sound naive. Nobody is saying you should get married, but if you don't want to consider the legal/finacial implications if one of you dies (or something else happens) then you don't have the emotional responsibility to make this type of purchase.

If one of you can swing the mortgage/maintenance/taxes/utilities, etc. alone, that would be a different story. But two young people relying on each other financially to purchase a near- million $ asset isn't chump change.

Listen, Dumber, you think you're cute & everything is amusing just now but if the market and/or the relationship go south, it won't be so funny. Ali says to at least have the talk; I say, GET IT IN WRITING, STUPID! Anything could happen - and the biggest cause of conflict in relationships is MONEY$!
You're the one with the larger income & the better credit score (the bonus means $hit until it's cashed & in your account)yet the boss(girlfriend) is leading you around on a leash. You're obviously going to do just as you want & I truly wish you the best of luck but HELLO, IS ANYBODY HOME?

Btw what business are you in - with almost perpetuity-like salary? I just re-read the starter. . .

hi folks. i'm back.

NYRENewbie, totallyanonymous, uptowngal, drdrd: it's strange how this conversation has morphed. my last post about the conversation between my gf and me was my attempt at humor -- actually, maybe we should call it *her* attempt, since it came from her mouth, with a smirk on her face, tongue in cheek. here's the point re: gf and marriage. we are happily in a serious relationship and we just happen to view marriage as something of a bother. but just because we are not married does not mean we are not as committed as married couples. please try to expand your views on this one. also, i get that i can come off a bit aloof in my writing, but please be assured that i did not just walk into this joint purchase (of the $900K unit) in some ignorant bliss: it was well thought out, and if i thought for a second that our relationship was in any way tenuous, i wouldn't have gone through with the transaction. (it seems that moreilly is the only one that understands this point.) anyway, my understanding of marriage is that it isn't exactly the panacea that everyone makes it out to be. in any case, we had something of a lukewarm conversation about marriage, and the idea was nixed pretty quickly.

bramstar: life insurance (and i guess marriage, as well)... i'm sorry if all this comes off so sophomoric. but insurance of any kind is a function of each person's risk tolerance (as well as the steepness of their loss function). it just so happens that my gf and i (being of a certain younger demographic) have a bigger appetite for risk, and therefore don't really see life insurance as an attractive purchase. you can poo-poo it all you like, but to insist on my getting life insurance is imposing your particular risk preferences on me. it's a silly analogy, but it would be something like a paranoid person chastising you for not getting hurricane insurance here in new york -- i suspect that your tolerance for hurricane risk is quite high (and your assessment of its probability quite low). but if the paranoid person is very risk averse and wants to get such insurance, then hey, more power to him.

uptowngal: i'm pretty sure that neither of us can swing this mortgage alone. if anyone thinks otherwise, please let me know; but i really didn't think that would work 6 months ago when we made the purchase, so i'm inclined to think it's less likely now.

drdrd: it's true that i have a larger income, but mine is quite stagnant (very unlikely to go up much), while hers has a huge call option attached to it. i should further note (and i understand how crazy this sounds) that her employer has written a guarantee on her bonus; moreover, the bonus does not come in at the end of the year, but comes in "real time" -- as each deal is closed, she gets her prorated share within weeks. ... and no, there was no nepotism involved in getting the job :)

girlygirl: i am a professor at a local university.

everyone: i really do appreciate your comments. it's given me much to think about. what's very clear now is that the 2nd potential investment unit is a big NO NO. you've all decided that we'd be quite crazy to go through with it. and i am very gratefully taking your advice. ... i hope i do get some credit for the very act of posting on here to ask for advice! the act in and of itself should show you that i wasn't quite sure about it and was proactively seeking advice from people more knowledgeable. feel free to share more with me!!

last bit: it just struck me that i've left out a piece of info that some of you might find important. currently, my gf and i live in a rent stabilized apartment. it's a large 2BR unit that was handed off to me from my parents that got it 20+ years ago. we currently rent out the other bedroom, and essentially live for free (i.e., the rent from the room more than covers the apartment's entire rent). (i hope this doesn't steer the conversation towards the unfairness/inequity of rent control, etc., because that really is another conversation altogether) ... so, earlier, when i said that we live quite frugally, i meant that we essentially have zero cash outflows, outside of meals and cell phone bills. ... this should change everyone's calculations about our financials since you were all implicitly considering the typical case of rent outflows from now until closing.

i gotta tell you: you now know more about my life than any of my closest friends. :)

you miss the point. Nobody cares whether you and your gf are married. The point is that there are legal implications of jointly owning a home that you should be aware of, and these are different if your co-owner is not your spouse.

[The fact that you both rely on each other financially] + [resistance to considering some written agreement]= high probability of expensive outcome

You might claim you're risktakers, but consider the time & cost of having an attorney write up a joint agreement (1-2 days, $1500? maybe work out a deal w your RE atty who can do it) vs. the hundreds of thousands of dollars one of you will be on the hook for if you break up or die, not to mention add'l legal fees.

Think of it as an insurance policy.

Nobody wants to think of these things when they're young and in love, but then again, many young people don't think about buying expensive homes together.

dumberthanyou... just so you know, what you're doing is illegal. You can't rent out a 1 bedroom in a stabilized 2 bedroom for any more than 50% of rent plus a couple of things (s couple percentage points for furnished, etc.). If your "tenant" took this to court and showed he was paying 100% of rent stabilized rent (which is a matter of government record), you would have to give him his other half back x 3 for all the months he's been living there...

Second, if you have that, I'm not sure why on earth you'd be buying NOW. The crash only just started, and if you have a cheap place to wait it out on, that would keep you in a good spot.

If closing is 9 months away, sounds like building is under construction. If there are delays, your contract probably has out clauses. USE THEM.

Look, you don't have to get married but you really should speak to a lawyer & get all of the 'what ifs' ironed out & written into a contract so that each contingency is covered. What if this time next year the gf thinks you're the biggest jerk she ever met (or vice versa). 'Committed relationship', terrific,
but you don't seem to allow for the dreary fact that people fall out of love every day. What if one or the other of you falls on hard times & is using the mortgage money to live on rather than paying on the loan? What if.........? What if.............? There are a gazillion what ifs & you don't have a contract on a million dollar real estate deal. Brilliant! The sky isn't sunny every day & that's how this country has gotten into the mess it's in "'cause real estate just keeps going up & UP!" Hope for the best & prepare for the worst but it seems like you're really not taking this at all seriously which makes me think that you are VERY young. Again, Good Luck!

Why on earth would you buy now?? Think of this as a business decision. Are you making the right one??