1/27/10

Fellas,

Since I have landed (thankfully) a FT analyst position with a BB, I am now looking into what my options are for housing starting this summer. Obviously, I can be like the majority and rent as close as possible to my building in Mid-town, however I was thinking about purchasing a place instead. Call me crazy if you may - but I have been looking into possibly purchasing a place in HOBO, Jersey City, or Murray Hill just to avoid having to rent and waste all that money.

Here's what I'm thinking: Based upon a 70k salary, 15k savings, and 40k bonus I will have approximately 125k (Pre Tax).

Buy a 2BR condo for 250k and have a roommate pay monthly rent of $950.

With a 6% - 30 year mortgage my payments including maintenance fees would be around $2,200. So, Instead of renting in Mid-town or Murray Hill for around $1250 a month, I bite the bullet and buy a place where I have some equity at stake. Also, assume I will live frugally and only purchase necessary expenses (food, utilities, clothes, and the occasional social events)

Please let me know your thoughts and possibly any experiences you guys out there might have had/or knew someone in a similar boat. I know it may be a bit over my limit, but I'd much rather take this opportunity to purchase a small place while prices are at relative discounts, instead of pissing it away on rent every month then having nothing to show for it.

PM if you want more details or to talk personally.

Thanks for all your thoughts and insights

Comments (51)

1/27/10

250K for 2BR condo in murray hill? hahaha

Financial Modeling

1/27/10

Just rent. You could buy, but now you become a landlord, homeowner, new investment banker, etc. Do you really want to work all day and deal with all those headaches? Suppose your bonus sucks, roommate moves out, pipes burst, taxes increase, get laid off and have to move, etc. Just not worth the hassle at this point in your life.

Master in Finance Website

"We've always been at war with Eastasia"

1/27/10

Do you have family that would get in on it with you?

My family's purchasing a new 3BR condo for my sister and i... it's a lot easier if your parents can throw the downpayment on and u just do the payments.

1/27/10

I'm going to be a first year associate and am going through the same thought process. Is that how much condo's are in Hoboken/Jersey City? I would have thought they were more.

1/27/10

250k is not a realistic budget.

1/27/10

I laughed when I saw you didn't want to rent because you didn't want to "waste money." Well, in addition to tying up an assload of capital in the form of a down payment, the mortgage payments are mainly interest for the first few years of any loan and then property tax plus all repairs are your responsibility. No wasted money? You've got to be kidding me. You watch too much HGTV. Rent, son.

1/27/10
jhoratio:

You watch too much HGTV. Rent, son.

LMAO.

1/27/10

I made the big mistake of buying a house right out of college...in 2006. Rent.

1/27/10

No way you can buy a 2BR in Murray Hill for 250k my friend...

1/27/10

OK so assume you could find a place for 250. Finance most of it at 5% and interest alone is around 1000 a month. Since these guys think the place will be more than you'd pay even more in interest. Def rent!

Think about the opportunity cost of that cash too. Take out the loan and put it in the DOW and rent.

1/27/10

You are dreaming at $250k. So that $2,200/month you project is going to be a lot higher than that. Not to mention any HOA fees your building may assess. Also, as others have mentioned - being a homeowner is a pain in the ass.

Do you intend to stay in NYC after your analyst stint? Are you sure? What if you get offered a great position at a West Coast PE firm? If you only own it for two years and have to sell, that condo is definitely not going to be a moneymaking proposition.

In the words of jhoratio:

Rent, son.

- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham

1/27/10

I got my parents to put down 400k. The took a loan for 500k which is currently @ approx. 3% interest. Repaymensts are manageable and condo is sweet.

Hit up your parents my boy. Thats why you clipped all that grass all your life.

1/27/10

Since I already own real estate, I will tell you that in this market you will need two years of continous work history with the same company before you can even get approved for the loan. That should be enough to answer your question:

Rent, son.

1/27/10

Thanks for the comments.

To specify, Murray Hill is out because it is much more than 250k. However, I can find 2BR in Hoboken which are do-able but like most of the consensus here it seems more wise just to rent. I definitely agree with the majority and realize that working in IB is going to be enough of a hassle not to mention all the headaches with owing a condo/apartment.

With that said, my parents would be willing to help out but cannot simply drop 400k. Lets say they helped me with 50% of a 20% down payment, roughly 25k...still make much more sense to rent?

Thanks for the insight.

1/27/10
GetRichorDieTryin:

Thanks for the comments.

To specify, Murray Hill is out because it is much more than 250k. However, I can find 2BR in Hoboken which are do-able but like most of the consensus here it seems more wise just to rent. I definitely agree with the majority and realize that working in IB is going to be enough of a hassle not to mention all the headaches with owing a condo/apartment.

With that said, my parents would be willing to help out but cannot simply drop 400k. Lets say they helped me with 50% of a 20% down payment, roughly 25k...still make much more sense to rent?

Thanks for the insight.

You are still not going to get a mortgage without 2 years of continous work experience, unless your parents take it out in their name and have a great credit score and make about 150K-200K a year and do not have too much debt or too much left to pay on their own mortgage. No bank is going to give a kid straight out of college a $400,000 mortgage.

If you do get approved for a mortgage then PM me with the details and I can help you make a decision, because unlike many people that responded to this thread I would actually consider buying if you plan on staying in New York for more than a couple of years. This could be a great time to buy real estate.

But like I said, you will not get approved to take out a mortgage (nerd alert: actually the correct terminology would be: you will not be able to write a mortgage, since technically you are the one that is writing the mortgage and creating the security. The bank is buying it from you, so you are not really "taking out a mortage").

Financial Modeling

1/27/10

ya dude just rent...pay the rake on being a young professional. Even if your parents put down a large %, you would still need to contribute a sizable amount. Rent, take that money and put it in the market instead.

2/5/10

Condominium units have become a wise alternative to owning a home you would own. One of the advantages of condo is that it's less expensive to maintain, as its size is smaller than a home. Condominiums, just like traditional homes, offer advantages and disadvantages. For one, the mortgage on a condo might be half as much as a regular house, and the taxes as well, but that being said, it's still like living in an apartment. There are also Home Owners Association rules to contend with. #spam link removed by moderator#

2/5/10

Are you really gonna have the money to buy an NYC apartment as a first year? I'm assuming you'd be getting a lot of help from parents on that

2/5/10

rent.

Unless you can afford to buy the place of your dreams already.

You will probably have less $ to for over for a mortgage, taxes, fees, etc.. than you think. Plus, even if you can scrape by and get a place, in 3 years that place won't be what you want.

I've been out of school 3 years in Chicago and my apartment and standard of living have continually increased.

2/5/10

Yea you must be tapping that trust fund early if you think you can afford to buy. I bought a place after my 2nd year bonus but its just outside the city in the burbs.

2/5/10

Do not buy; too many uncertainties for you.

2/5/10

If the uncertainties weren't there, say i know i want to stay in chicago forever, would you suggest buying or is renting still better? Are there any major benefits or costs (non monetary) to buying as opposed to renting

2/5/10

"If I could ever see myself moving THEIR/taking a job THEIR."

lol? learn 2 spell

2/5/10

The benefits to buying are slim, and the costs could be huge. Don't buy.

2/5/10

Buy only if you intend to stay for a long time. A house is most peoples largest investment in life, so why not get it out of the way. If you can't afford to pay for a 10-15 year mortgage I personally would stay away from buying.

We're running out of oil....sike!

2/5/10

my bad, there...there.... happy? i hate when people do that too but didn't u just use 2 for to...lol?

2/5/10

Different opinion here but if I were you I'd buy.

If your from Chicago you will be able to pay half your mortgage or more from the rent from a buddy. Rates are still low (historically) and if you end up staying in Chicago this will be a worthwhile investment.

Worst case scenario is that you move and fine friends to rent your apartment.

I'd buy.

2/5/10

It's not always a matter if you WANT to live in Chicago your whole life; it's not always that easy.

What if you're offered a better job in 2 years elsewhere? Do you want to be tied down?

2/5/10

Housing is the average persons largest expense. If you buy you will be able to one day live rent/mortgage free. I always felt renting was throwing money into the abyss as oppose to buying and building equity.

We're running out of oil....sike!

2/5/10

always thought that too but there are so many other expenses that come with buying which makes me wonder if i should wait a little... taxes, HOA fees, maintenance...etc

2/5/10

Houses are like women. In absolutely no circumstances should you commit to one before you're 30.

Those who can, do. Those who can't, post threads about how to do it on WSO.

2/5/10

Having expenses to meet is a double edged sword, and there are two general extremes that you have to clearly determine where you fall between. On the one hand, you work harder because you know you can't afford to slack off. On the other hand, you can become very risk averse because taking chances with your primary income stream is very scary/uncertain when you have fixed payments to make. Only you know where you fall on this spectrum.

Get busy living

2/5/10

Purchase is preffered, but unrealistic. Most analyst on this board will be starting in New York, not the midwest.

2/5/10

I'm starting in the south but don't have plans for staying there longer than the 2 years. Would it make sense to buy an apartment for 2 years then resell it after? I'd much rather be building equity with my housing payments than throwing it down the drain that is renting.

CompBanker

2/5/10

rent, investtment banking is a 2 year stint, after those 2 years you will most likely want to go to MBA, or move to NY to pursue your career, or do something else, at that stage of your career its not the best thing to do, since you'll pretty much be anchored to your house. You want flexibility.

Disclaimer: The post above has been made by someone who is not currently employed in IBD, and has not had an interview yet...

2/5/10

if you are in Charlotte for 2 years, you can buy an aparment that will have monthly payments not much more than if you rent. Afterwards, if you move, you can continue to rent it out. It's one of the areas of the country with highest growth and with so many people moving there, you will have no problem renting. So go for it.

Also, you save whatever % you pay in taxes if you pay a mortgage. So if you are in the 25% tax bracket and your payment is 1k in interest, you save 250 with the deduction. So that helps too.

2/5/10

If you're confident that later you can rent the condo for equal to or more than your mortgage payment and property taxes, go for it. BTW, here's a way to minimize your payment (esp if you plan to sell it later on): INTEREST-ONLY mortgage. Basically, you're required to ONLY Pay interest for the first 10 years of the loan, then it becomes adjustable or fixed rate or something. Anyway at that point you can refinance or sell the place. But the only disadvantage is that you won't be building equity unless you pay down principal before you're required to.

I believe you can deduct your property taxes too. But considering it's a condo and you don't own any of the land it's sitting on, that's not much.

"We are lawyers! We sue people! Occasionally, we get aggressive and garnish wages, but WE DO NOT ABDUCT!" -Boston Legal-

2/5/10
holymonkey:

If you're confident that later you can rent the condo for equal to or more than your mortgage payment and property taxes, go for it. BTW, here's a way to minimize your payment (esp if you plan to sell it later on): INTEREST-ONLY mortgage. Basically, you're required to ONLY Pay interest for the first 10 years of the loan, then it becomes adjustable or fixed rate or something. Anyway at that point you can refinance or sell the place. But the only disadvantage is that you won't be building equity unless you pay down principal before you're required to.

I believe you can deduct your property taxes too. But considering it's a condo and you don't own any of the land it's sitting on, that's not much.

An interest only is probably the best route if I can reduce the payments and save more money versus the amount accrued via principal/equity installments.... but the true benefit is within the condos appreciation value...

Did a little more research and purchasing seems do-able and actually cheaper than rent if I rent out a 2br to a roomate.

I don't think the MBA will be an issue, especially If I get into Uchicago or kellogg. Besides, what's the big deal if you need to sell your place? You sell at a gain and you boost your creditworthiness.

2/5/10

As long as you're not in NYC, absolutely buy if you can afford to. The earlier you buy, the better. Build equity... even if you do an interest-only loan, your property will appreciate and your loan to equity value will improve. Nothing strengthens your credit profile like owning a home. Tax deductions are great and you'll need them. Location, location, location. If you pick the right location, you will always be able to rent the condo. Buy.

2/5/10

I agree completely

2/5/10

If you are in the midwest or any other location besides NYC, SF or LA, then you can probably afford to buy some type of residence; however, the question you need to consider is if you can afford a place that can be easily rented (at close to the cost of your mortgage pmt) upon relocation for your MBA.

2/5/10

I'm buying a place... I'm on the west coast though.

2/5/10

rent for first 2 yrs

2/5/10

What do you all think about buying in NYC? Assuming I can afford it with an 80% or 70% or so loan-to-value mortgage, is this a good strategy? My concern is the hot NYC real estate market. I don't want to buy a place today that will be worth 20% less in 2 years (so I could've just bought it then).

2/5/10

Wow, you can afford NYC? Cool.

2/5/10
2/5/10
2/5/10

"We are lawyers! We sue people! Occasionally, we get aggressive and garnish wages, but WE DO NOT ABDUCT!" -Boston Legal-

Add a Comment