Anyone hit the open houses this weekend?

"who cares if other people you don't even know consider it smart or dumb?"

I like to learn about my investments. I have learned quite a bit from Streeteasy. If it turned out that I realized it was a bad investment and only going to get much worse, I'd do something about it.

You questioned my analysis, but you didn't see the actual math. Here's a copy/paste of where I calculated it in another thread. Tell me what part of the math you disagree with (I used 8% stock market gains vs your 10%)

Here's a rough 20x support: Rental costs $1/year, purchase costs $20, annual maintenance $0.40 (scale up figures appropriately, of course). $4 down payment, $16 mortgage, at 6% (I never unsubscribed from Manhattan Mortgage's daily rate emails, and thats roughly what they quote for an agency-conforming coop loan, up to about 700k loan value I think).

Annual interest on that $16 is $0.96. Lets say half the maintenance is tax deductible, for a total annual tax deduction of $1.16. At roughly 40% marginal taxes (federal and local), that's really only $0.696/year out of pocket. Ignore principal payments as that all adds to equity. Add in the $0.20 maintenance that's not deductible, you're at $0.896/year. Add in the opportunity cost of the down payment - I personally use 8%, taxed at 25% (15% federal cap gains, 10% local) and you get $0.24 opportunity cost, for a total cost of $1.136. 13% more than renting. Keep in mind my opportunity cost is probably on the higher end of what others use.

Bring the ratio down to 18x, and you're doing just fine.

juiceman,

if two people are looking at the same apartment and one says it makes sense to own it, and rent it to the other one, and the other says it makes no sense to buy it, but he'd happily rent it from the other one, and they are both in the same tax bracket, have the same taste in apartments, and can achieve the same investment returns, how can they both be right? they can't. same here. if we both look at the same housing market, and one of us says "wow, it's a great time to buy," and the other says "wow, it's an awful time to buy," how can we both be right?

"if two people are looking at the same apartment and one says it makes sense to own it, and rent it to the other one, and the other says it makes no sense to buy it, but he'd happily rent it from the other one, and they are both in the same tax bracket, have the same taste in apartments, and can achieve the same investment returns, how can they both be right?"

The rent that the second guy pays to the first guy is taxed as income. The rent the first guy "pays to himself" by living there himself is not taxed at all. It all comes down to the same thing - property's benefit all boils down to tax advantages.

techguy, you own your apartment. you are happy about it. you think it was the best financial decision since warren buffett invested in coca cola. fine. we get it.

What I don't get is why you refuse to discuss numbers with me.

"both in the same tax bracket"

It seems you have realized the error of lumping all scenarios together no?

"wow, it's a great time to buy,"

Who is saying this? All I've done here is try to get you to realize that one size fits all ratios are silly.

"you think it was the best financial decision since warren buffett invested in coca cola. fine. we get it."

But tech_guy is not incorrect is he? Why the sarcasm?

i have discussed the numbers with you ad nauseum tech_guy. as i have said, since you won't tell us what you paid for your apartment or what you think it would have rented for, i cannot definitively state that i would have considered your purchase a bad investment. what i can say is that i consider paying 18, 25, 30 and 50x yearly rent to won an apartment a poor allocation of capital. i certainly understand that the mortgage deduction is a valuable tax benefit, but its value is limited and defined. it cannot transform a poor investment declining in value into a brilliant financial windfall.

i don't have any interest in convincing you that you made a bad decision. if you are a happy with your place, so much the better. but i don't understand why you are so interested in convincing me that i should run out and buy. until i can do so for a lot less than i can right now, i am not going to.

juiceman, enough. clearly i think techguy IS incorrect. you think he is correct. fine. enough. you are convinced that owning is great, so go ahead and enjoy your apartment.

"but i don't understand why you are so interested in convincing me that i should run out and buy. until i can do so for a lot less than i can right now, i am not going to."

happyrenter, I think you are confused. Here is a quote from tech_guy from this very thread. Doesn't sound like he is trying to convince you to buy:

"tech_guy - It may be an "okay" time to buy, it may turn out to be a terrible time to buy. If rents go down significantly, the rent vs. buy math goes out the window. If someone doesn't have a good safety cushion, they have no business buying in this market."

"you are convinced that owning is great, so go ahead and enjoy your apartment."

Again happyrenter, I think you are confused. Ownership is great for me, but it may not be for you. My point was only to make sure that you understood that it could be both. Do you understand?

actually, no. unless you are in a higher tax bracket than i am (which is impossible) or plan on staying in NYC longer than I do (which is impossible) or have access to a universe of miraculously cheap apartments, then no, it is not possible for ownership to be great--financially speaking--for you and awful for me. it MAY be the case that you love owning so much that money-be-damned, you are going to own and be thrilled about it. so more power to you. but financially, no, it is not possible.

"but financially, no, it is not possible"

Based on the fact that you are in the highest tax bracket and are going to be in NYC forever, than you have chosen to try and time the RE market for your financial benefit. Since you own a hedge fund, this is a comfortable approach for you and may work out well. However, if you would have held the apartment you bought in 03 for the long term, you would still have come out way ahead over renting. You chose to cash out in 07, and now you can play the future market to your best financial advantage. That's great, but it doesn't change that buying in 03 was a better decision over renting. Somehow, you are confusing the question of owning vs. renting with trading real estate as part of your personal portfolio. Whether my situation is different than yours is irrelevant.

My point was that there are different situations for owners that make sense whether you chose to acknowledge them or not. Based on your logic, everyone should sell tomorrow, wait for the market to correct and then buy. Good luck with that.

"as i have said, since you won't tell us what you paid for your apartment or what you think it would have rented for, i cannot definitively state that i would have considered your purchase a bad investment"

It was around 18x, which I defended with math above. You haven't refuted this (though if you do, do it in the other thread that's specifically about that. This one supposedly is about open houses). I won't get more detailed since I'm not trusting enough to share that with every reader here.

Lame thread alert.