I'm sitting on some cash and have pretty good career trajectory within the bank I'm working at. I'm wondering if any of you who own a place in NYC could give some insight on the process, pros/cons etc.. I've seen some interesting deals in Midtown near the park that I could comfortably afford.
For reference, I'm looking at 1 bedroom apartments for $500 - $700k
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strong possibility of widespread recession in the US (and globally)..in particular hitting the cities as lots of layoffs going thru the system and starting to hit higher paying jobs (accounting, consulting, lawyers, etc..). That will slowly hit the NYC residential real estate market and within 6 months to a year, you might start to see some great deals. I would wait patiently at lest another 6 months before pulling the trigger and see what kind of bargains are to be had
What if you're moving next month? Think there will be rental deals to be had?
i would suggest renting a place for 1 year and just watch how sale prices progress over the next 6 months. Towards the end of your rental, that's when i would look to buy as sellers start to get desperate
second this - get a 6 month lease (cheaper rents) and stay on top of the new listings and you'll get it. If you want more growth and cash-flow look into buying condos in tertiary cities and just rent in NYC.
Yea, I saw those deals too - Central Park South right? There's a reason for it, and not just the pandemic (from what I've seen, most sellers are pulling listings, not taking haircuts, in hopes the market comes back).
Check the maintenance - it's something absurd like 3k+/month. Assuming like an 8% discount rate (a number I pulled from nowhere but seems about right long term if you're investing that cash in S&P ETF), it's like a negative $450,000 terminal value on that sucker (not even factoring in the fact maintenance is probably gonna get increased each year too).
IMO a 2bdr option in a slightly less luxurious area would be a better purchase for the long term
I would encourage to map out all of the closing / selling costs first. In a market like NYC, these are significant and you therefore need to stay in the place for a number of years (4-7 depending on a lot of factors including potential price appreciate) for the purchase to make financial sense. As a results, practically everyone around me that bought their place on their own (let's face it, NYC has a LOT of trust fund kids so not counting those) has waited until they were ready to get a "forever" place before buying, which generally meant waiting until their first kid.
Good point there. I'll be buying 100% on my own, and I'm a complete noob when it comes to NY RE (I was thinking about getting my RE Lic just to get farmilliar with the verbiage and contracts / monthly costs and closing costs etc). Nonetheless I have a lot of homework to do, thanks for the advice.
Do you not plan on getting married and having kids? Curious because I'd say a two-bed purchase might be a better play long-term, but I don't know your situation.
Single no kids for the foreseeable future.
Then I don't see why not. As long as you think you'll want to be in the city long-term. Although I would watch the market like others have said, and be ready to pounce on a deal in like 4-8 months when the sellers start to get scared.
For that kind of budget in that area, you won’t be able to get a nice one-bedroom apartment. You can probably get a small one-bedroom apartment in an old-construction building on that budget. I doubt that your budget will get you anything more than that.
I bought in January of this year (best thing about RE - no mark to market!). I did a ton of homework before buying, as should you. Prior to this past year, I'd been on the side of "buying in NYC makes no sense because of the ownership premium" (the rent multiple for Manhattan is consistently 25+ vs. a national average of ~16). What got me into the market were the ultra-low interest rates (10/1 ARMs going at ~2.75%) and the weakness of the market (NYC RE has been flatish for 3 years). Even with that, I looked at:
How long will I be there? You need to be in an apt for ~5+ years to offset the transaction costs
How much of your net worth will you put into the apartment? I wouldn't advise anyone to put 60%+ of their net worth into one asset (others may have a higher risk tolerance but I think this is a good rule)
Expected stock/bond appreciation (used historical rates for 1960-2018) - this is your opportunity cost
Expected home price appreciation - be conservative. My base case was 0% appreciation - I am not buying real estate as an investment, I'm buying it as my home
Is the apartment unique? I.e. is it something you can't get just by renting?
Using this and a lot of other info (maintenance, mortgage rates, expected repair/upgrade spending, etc) I built a breakeven model in order to compare it with renting. I used the NYTimes' model here: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html as the core. I then built a sensitivity table around it using various opportunity cost numbers and RE return numbers (RE returns based on Case-Schiller NYC from 1971-present). I only bought once the following conditions were met:
The apartment was something I couldn't get by renting
The sensitivity analysis showed that I would come out even or ahead in at least 50% of cases vs. renting
Even in a worst-case scenario (cumulative RE return of -25%) it wouldn't crush me financially - see above on too much net worth in one investment
I really appreciate this here. I’m going to start on my homework soon.
Super helpful article. Are you able to share the model you built?
Unfortunately I'm not sure how to share it without publicizing my identity, but you can start with the NYTimes' model above and work from there. The only major change I made was adjusting for the tax law in 2017 (I don't think the Times' model was updated to reflect that). Most of the work I did was around trying to get the inputs right - gathering data to make reasonable assumptions on home price increases, opportunity costs, transaction costs, upkeep costs, etc.
your budget seems like it can take you farther in Jersey City and also buy a nicer/newer condo
I need to be on the island for work
Just snagged my first place in NYC. 9 East 71st street
Epstein short sale
i have a good friend who recently bought an apartment in hoboken...800k for a 3 bedroom/3bath 1800 sqft...taking the path train into manhattan is similar to the subway...and the quality and space is no comparison...highly recommend
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