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Where are you finding anything in NYC below $600-700k? Even a studio? Please share.
Also, if you ever plan to rent it out yourself make sure you can pay the mortgage if your tenants stop for an extended period of time. Tenants in New York have so many rights here it can take years to evict someone
Queens
Genuinely curious if you build equity at a meaningful rate accounting for mortgage interest, taxes (SO. MANY. TAXES), and insurance, compared to just paying rent and investing the rest in the stock market...
This. Add in HOA fees even for bldgs with zero amenities.
I’m willing to answer your questions. The reason why people don’t do it is because:
1) it’s a lot of upfront capital. 20% down + 12mths cash liquidity is not achievable for many people in nyc
2) exit costs are high (look into this yourself with a quick google)
3) there’s no capital appreciation for studios in that price range. These are known as entry level apartments and their value fluctuates within a tight range. Don’t bank on capital gains when exiting
4) you’re likely not going to live in it long term - it’s a studio after all, and you’ll grow out of it, either in income or in lifestyle. Buying means you’re locked into a way of living that you’ll grow out of quickly, compared to the flexibility of renting
5) 75% of the NY market are coops. Lower priced apartments are coops. Therefore you’re likely to buy in a coop. Coops often have sublet restrictions which means you won’t be able to hold on to the apartment as an income-generating asset for too long
6) points 2-5 combined make this a poor financial investment
7) it locks up your capital. While there are leverage benefits, there is still an opportunity cost
Bottom line is: you’re not hacking the RE market or seeing anything no one else is seeing. Look up the NYT rent vs buy calculator and play with the numbers
OP, I’m not sure #5 is as relevant to suburban Queens. It’s not a market I know we’ll. LIC is full of condos, but they’re newer developments and out of your target range likely. All the other bullets remain relevant.
Buying here isn’t the same as buying elsewhere. You’re young. Not sure that you’ll want to strap yourself to the same part of the city for a long time. Rent is so low now that it usually will beat out the monthly cost of ownership. If you’re not planning on holding for at least 5-6 years it’s most probably not worth it. I also don’t see property values changing much. Taxes, HOA, interest will be most of your payment. Yes, you’ll build a little equity but at a high opportunity cost because of the large amount of capital needed. A lot of people don’t understand how to weigh all this out in a HCOL city. Trust me. Buying isn’t always the end all be all solution. It’s just what everyone thinks and what many have been conditioned to think. I’ve been trying to rationalize the numbers for this for awhile but it’s tough in NYC.
Also there is no way you’re seeing $300K - 400K. And to make sure I wasn’t crazy I did a Street Easy search for all of Manhattan minus Upper Manhattan - 0 results. You’re mistaken.
You can see 3-400k, but the hoa fees are probably like 2k a month. Have seen quite a few listings where on the surface it seemed like a good deal until you look at the monthly fees
Chief
Buy OP! I’ve never seen the value of renting and throwing money away when you can buy and keep/build your equity. My whole adult life I’ve only lived in places I’ve purchased, and it’s worked out great. Go for it
Real Estate is up there with the riskiest investments you’ll make. It’s highly concentrated, illiquid and has large entry/exit costs...
Hi op, feel free to dm me. I bought a place over a year ago and also am in my 20s. Best decision I ever made. I did all my research to ensure that I wasn’t over paying. I’m single too so my studio def works out for me since it’s just me
My advice based on personal experience is that if you're going to buy in NYC you should definitely look at return on investment - location, building and unit quality, coop vs. condo, etc. Don't just buy a cheap place so you can pay mortgage instead of rent. You can rent a cheap place and save for a bigger down payment for a better place with good resale value. Think long term.
Continued: to put things in perspective, based on rough calculation, my monthly mortgage and other expenses would only be slightly higher than if I was renting a decently luxurious place in Queens or just a regular place in nice Manhattan or Brooklyn neighborhoods. The upside is I get to build up equity. The cons are I can’t imagine many people are willing to fork over that kind of money for a tiny apartment and I want to be able to sell it. So what’s your take?
Was thinking the same myself. Not from the US, renting at $3k / month now (probably will be 3.5 after covid), I’m sure there are places where I can get a mortgage with the same monthly payment (+I’ve heard there are some tax benefits like the interest is deductible).
So essentially instead of throwing $40k out of the window I’d be saving it by building equity.
AP1 and C1 are right, as I was doing my research I realised there are many details to consider:
1) Opportunity cost of the 20% you’re putting down
2) Broker fees
3) Any added costs associated with ownership, e.g. maintenance fees
I’m planning to create a financial model to play out my parameters but if someone’s seen a ready-to-use one that’d be super helpful if you could share.
It’s mostly broker fees and maintenance fees that break the math down...
300 to 400 k is cheap to buy anything in NYC.
I have a friend who inherited a place not far from Grand Central. It is a single bedroom with tiny living space and grotesquely outdated kitchen and fixtures. The building would be undesirable anywhere else. It's kind of a dump
Still, the unit is worth several million dollars.
That is the market you're talking about.
Late 20s. Family in NYC or NE region.
Bought a 1 bedroom coop that was under market and still swing back and forth on whether it was a worthwhile investment. Grass is always greener on the other side.
Very helpful, thanks. Definitely a catch 22. I’ll keep a look out for the junior 4s
OP I’m in a similar boat, getting tired of feeling like I’m throwing $$ out the window for rent, but as AP1 and C1 have said the numbers are totally different here than almost anywhere else in the country. If you are from a low COL place it can be frustrating to see friends buying real houses with yards or having family members tell you about the long-term benefits of building equity and deducting mortgage interest, but it’s more complicated than that here. Also $300-$400k seems unlikely for something you would want to live in for 5-6 years, even in Queens. Maybe I’m just overly risk-averse. Of course, if you have $100k+ cash to spare without zeroing out your savings, then we are not in the same boat 🙃
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