Renting vs. buying a 2 bdrm apt in NY
Hey guys—I’m gonna be a first year analyst in NY after I graduate next year. Know it’s early, but have been doing some research into renting vs. buying a 2 bedroom in NY. Thinking something in Hell’s Kitchen. Assuming $5.5-6k per month x 36 months (assuming I’m in NY for 3 years) = $200k+ equity in the apt/condo—$750k-1m in total value. Parents would help take out mortgage, and eventually plan is to sell the place when I move out of NY. Any advice?
So buy a place for 3 yrs and sell? Seems like a bad idea. Things to consider:
1) mansion tax if over $1mm (1%)
2) mortgage recording tax if condo (1.9%)
3) realtor fees when selling (6%)
4) HOA fees, etc
5) the fact that those 5-6k monthly payments will be heavily weighed toward interest.
Let’s say you find a place for $999k (so you avoid the mansion tax). If a condo with a mortgage you pay closing costs of ~20k (recording tax, attorney, title, etc) potentially more.
Then if you can sell it for the same price in 3 years you will pay $60k in broker fees.
So you can do the math on your breakeven, you start ~$80k in the hole, then your pros are: whatever equity you build up, mortgage interest tax benefits, and appreciation and of course the cons are: fees, taxes, HOA, etc.
Just net those out and figure out what appreciation you need in order to have this be worth it (and factor in the stress/time of listing the apt, etc).
Also need to consider that, if you’re buying in the 1mm range, there will be very few people who will be willing to pay much more than that for your crusty old condo in 3 years. There are always newer shinier units in that price range going up so you shouldn’t expect too much appreciation. Those glory days are over imo
Man HOA fees are fucking killer. Here I was thinking a senior As or junior VP could buy a 1bdrm overlooking the park just based on monthly payment. Then I saw the fucking HOA fees.
jesus agents make 6%? we're in the wrong business
6% would be pretty high, usually in the 2-3% range.
Seller pays both buyer and seller agents
Nope, 6% is fair. Usually buyside agent 1-2.5% and sell side agent 3-4%.
Hey, in this same situation, parents are willing to pay the down payment on a place for me in NY. One thing to note I guess is that your mortgage payments are tax-deductible are something like that, so that's something to consider. Following for other's thoughts on this
Here’s a helpful tool. If you need further analysis literally model it out
https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
https://www.adventuresincre.com/library-real-estate-excel-models/
Big issue left out is the potential hassle in owning while you're working a lot of hours. What happens when the roof leaks, the plumbing backs up, the X. All of these things will happen at some point and they can not be ignored which means you the owner need to either fix or pay for a pro to fix. Money isn't the issue really, but rather the time and being available.
If you were going to be there long term I would think differently, but for three yrs, you can avoid a lot of hassle by renting. Not everything is about money and profit. Convenience is a luxury you'll be able to afford.
I'd re-run the numbers. You need to take into consideration taxes, closing costs, HOA, maintenance/repairs, interest, etc. Look at it like this, if my fridge breaks, I call my apartment and say fix it - I have a new fridge the next day. If you own the unit, you are having to go out, find a fridge, schedule delivery, all out of your pocket. If you're a first year analyst, do you really want to be worrying about your fridge? Also, if you only plan to live there three years, the majority of your mortgage will go to interest, so your equity will be substantially lower than what you'd expect.
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