Have I made money by buying in Manhattan in the summer of 2008?

You've made money since purchasing power doesn't track exchange rates perfectly - the pound may be down nearly 30%, but it doesn't buy 30% less in the UK than it did bin July 2008, yet. If you sell and then keep the money in the bank for some time then in all likelihood you'll have made no money in the long run since purchasing power will adjust to exchange rates.

This is, of course, ignoring the 15-25% price hit, closing costs and brokerage fees that will likely wipe out any profit in pounds.

how did you find a one bedroom that was on the market at $700k and you paid $500k...did you negotiate it down $200k or did the seller drop the price before you entered the picture.

"If I sell, would I have made money, simply on the currency conversion? Of course I do realise that depends on how much I can sell it for."

this is an exercise in futility. since it does depend on what you can sell it for, why ask? sell your place and you can figure out your profit in pounds. and if it does turn out you were able to make some money it will be because of your currency appreciation and DESPITE your real estate losses. you could have bought US treasury bonds and made appreciation on the asset AND the currency.

Assume fees and expenses of about 10%

Julia,
I saw a couple 1BR in 399 E. 72nd that were listed at $700k in early '08 and eventually sold for ~$580k. And those were pretty large 1BRs on high floors with non-ridiculous maintenance so a 1 BR for $500k is not out of the question. That it was listed at $700k is indicative only of the lunacy that was going on.
tjs

hmmmm.... let's see you took fx risk... then multiplied it with leverage... added in an illiquid asset class... and you "might" have made let's say 50%... ever hear of risk adjusted returns... LMAO... .when your broker tells you RE is a great asset class just remember you are comparing apples and manure... most studies assume no leverage.... alrighty nothing else to look at here ... move along...

Special_K - You have regurgitated an answer from my question without adding anything of interest. I could have bought treasury bills but I also wanted a pad in Manhattan. I didn't expect such a huge currency fluctuation. As I'm not in finance or banking I wanted to see what the FX traders and others had to say about it.

Julia - The big drop in price was before I entered into negotiations although I talked down the price by about $30K. The banks were happy to lend a potential 'risky' client (as I have no previous US finance records) as they valued the property at over $600K. I know that the value of the property will go down over the next couple years which is of course a concern to me but in addition the currency £/$ is equally of interest to me. For me, when I bought, Manhattan was the only place I would invest in in the USA and certainly now I would not consider it.

Zizizi & Manhattanfox - Yes, I will off course not forget about fees and expenses. I probably haven't made that much cause of the expenses you guys mentioned but I will be watching closly how the £ will be doing in the near future. Will the £ drop further is the question.

This is a simple attribution analysis.

You made money on the currency conversion.

You presumably lost money on the actual real estate transaction.

And net - you made money - assuming you have a UK reference point.

ok brainwashed, you want an answer? here it is... i assume you put 20% down on your apartment. Let me know if that is not correct. So you put down $100k, which equates to £50k. Further, let's assume you have no closing costs. You signed the contract in July. Since it was a 1 bd for $500k in the UES at THAT time, I would assume its a marginal property. Not saying its bad but either its small, on york, above 90s, 5th floor walk up, whatever. That type of apartment is now easily down 15-20% in today's market. Let's do the math in your favor and assume down only 15%. So its now worth $425k. Lets assume you sell now, with a 5% broker fee and a couple more % in other closing costs. So your net proceeds are $395k.
And here's the catch. Your mortgage is in US$! So you net out from your proceeds the $400k you borrowed and guess what!! You are completely wiped out and owe the bank $5k! It doesn't even matter what the currency movements have been in large part because you borrowed on a mortgage that was also in US$....
There's reality for you.

Sp K... but it's a sure thing :) and I got to hang out in NYC 2x... once to buy and once to sell... :(

brainy... next time just get a hotel room... it's give you great flexibility if a nuke goes off in NYC......

and if you have another potato famine ... pls send the masses to China... we r full up on Irish carpenters at the moment :)

You would have made a lot more money if you just bought dollars -- the real estate play was a drag

"you made money - assuming you have a UK reference point" LOL

Christine Toes on Urbandigs is saying that bids are coming in 15% under summer 2008 comps, which means half the downpayment is gone, even before transaction costs. The currency translation is not going to save brainwashedconsumer. IMO, it is unlikely that any buyer gives you credit for a bank appraisal value, when the apartment traded for $500k.

wasn't this the christine toes who wrote a big long thing on how the market would not decline?

If she's saying down 15%, we're probably down 30%

Without getting into specific numbers, I think Special K is right. Unless you put a ton down, the combination of leverage and your mortgage in US$ kills you.

Caveat - I'm not going to add much to this thread.

As someone who is not in finance/banking, why did you decide to purchase a property in NYC? Because it's a "cool" place to live/visit? Do you have regular business there? I seriously don't get why a Brit who doesn't travel there often would make such a move. w67thstreet hit the nail on the head when he talked about risk adjusted returns...

As a Brit myself, with a wife from NYC and plans to move back, i have been studying the market for the last few years and decided some time back that - just like London - we were on for a big hit and we purposefully stayed clear of the market.

I think the OP post is systematic of where we are today - someone with no financial records in the US able to get a US backed loan for a mortgage on a $0.5m property...

krosfyah - Please email me on creativeproperty@yahoo.com and I shall answer your questions in private. Cheers mate!

BWC

Correction. Actually in my example the benefit of the strong dollar doesn't benefit you at all. In fact it hurts you. You owe the bank $5k. In the old exchange rate of 2 (rounding here), that's £2.5k. Now at 1.4 exchange rate, you owe £3.57k. Put another way, not only do you get creamed on the apartment value, but since you have a net liability, you get hurt again on currency.

The moral of the story is: don't buy real estate at the peak of the bubble, regardless of where it is.

I've got nothing but love for foreigners, but seriously brainwashed, you are sort of reinforcing a stereotype here of how smart foreign real estate money is...

Hi Special_K,
you make many excellent points and I thank you for taking the time to give me your insight. I put 30% down and the apartment is on 63rd and just west of 1st. Its a nice enough condo on the 10th floor and it has a doorman and I have had some builders paint and decorate it for now. It was tricky getting a mortgage but it all worked out in the end. I plan to rent it out for the short term unless I move to NY. I originally planned to hold onto it for around 10 years actually, so as long as the market picks up in 5 yrs then I don't mind what happens. I didn't realise there was a stereotype, but as I don't believe the stereotype about Americans so I beg you not to believe the stereotype about 'foreigners'!!! :)

best wishes
BWC