Buying a condo in NYC with parent support - worth it?
My parents who live abroad (where real estate can't be relied upon as a safe source of income) are suggesting that I purchase a condo in NYC. They want a steady stream of cash flow (aka rent) and want to take advantage of the NYC market while I'm here. They also think paying off mortgage is better off than paying rent to a random landlord (which I agree)
I know renting vs. owning is a heated debate with consensus slightly towards renting, but assuming I get ~$500k downpayment support from them, would it be worth it then? I don't plan on staying in the states forever (would like to go back home in ~7 yrs) and even with the support, can't figure out if it's a good decision to purchase given tax, HOA fee, closing costs, high mortgage rates etc.
I'll give my $0.02 since I'd also want to do this in a few years. Disclaimer: I'm still a student and have taken one real estate finance course lol
Anyways, we learned about this idea of annual Cost of Ownership, where in theory, Rent = Price * User Cost.
The model pretty much shows you how much rent you would charge yourself to live in your home and if there's a disparity between the price and rent than you would see which one is more "worth it". Transfer taxes, title insurance, appraisal fees, mortgage preparation, moving costs, and realtor fees aren't included in the model but you might be able to amortize these over expected stay. Also HOA and other stuff too. This formula will give you your net yearly cost, but then you divide by 12 to find your net monthly cost.
UC = P * [(1-t)LTVr^m + (1-t)(1-LTV)r^1 + (1-t)t^p + 8 + y - g^e]
1. P: Price
2. +(1-t)LTVr^m: after tax interest paid
3. +(1-t)(1-LTV)r^1: after tax interest you could have earned on your downpayment (or later years, your equity position)
4. +(1-t)t^p: after tax property taxes
5. +8: maintenance and depreciation
6. +y: risk premium
7. -g^e: expected capital gains
Essentially:
+ After tax payments of 1st yr interest payments & property taxes
+ Alternative investments: P*(1-LTV)*discount rate
+ Maintenance & depreciation: (usually a percent * Price)
+ Risk premium: (Rp * Price)
- Appreciation: (P * Appreciate)
**In class we calculated 1styr interest payments as r*balance but if I were doing this myself I would probably set up an amort table so you can get a more accurate number.
*edited to include second half
Numquam qui esse suscipit. Dolor omnis esse qui qui molestias. Sed voluptate rem fugiat perferendis.
Velit sit est itaque eum. Ut aut in sequi quia. Quas eveniet quo iste et molestias nam. Voluptatem voluptatum nemo aliquid quos. Et dolor officiis laboriosam consectetur natus. Esse libero consectetur quidem voluptas ipsam perspiciatis. Ut neque laboriosam hic et.
Architecto sapiente et ab alias incidunt aliquid. Suscipit laudantium eveniet et et praesentium quia aut aut.
Consectetur sed exercitationem nostrum placeat quas sed nesciunt. Deleniti velit quia distinctio nobis ab qui harum. Deleniti sit sapiente itaque ut quos. Qui neque voluptatum porro est fuga.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...