When did you finally buy a place?
How soon into entering IB (or your first out of college finance job) did you finally buy an apartment/house etc.? What were the main factors in your decision making? Where do you suggest for a first year analyst in NY (midtown office) to buy? Is Jersey City okay?
I don't think you should be worrying about buying a place in NYC as a first year analyst. You definitely are not making enough to buy anything in NYC.
Just rent for now.
Wouldn’t buy a place as a first year analyst (or any level analyst for that matter). You want to buy a place where you plan on staying for a bit (unless you want to try and be a landlord and rent the place out after you move). The costs associated with buying (and eventually selling) a place and the cash on hand to do this is usually too high for a junior person (20% down payment, 3% or so closing costs, 6% fee when you sell, HOA, etc).
While I had bought a place before (vacation type place) I didn’t buy an apt in nyc until I was making significantly more than a first year, mostly because buying an apt you will be happy living in for a while is expensive. Again, you might take the investment approach and rent a place out, but I wasn’t interested in that.
I'm assuming you mean renting. If that's the case, rule of thumb is 20 minutes away from you office location by transportation. For actual buying it, I plan to wait until I hit VP or MD level.
I was 29 and bought a place 6-10 years ago. Still in it but now looking to trade up.
My old boss (CIO of big well known hedge fund) still believes (likely rightfully) that everyone should rent until they have a much narrower funnel on the outlook for life earnings, maximum amount of space you’ll need, where kids will go to school (If applicable) etc. Basically don’t buy until it’s a forever home.
I would assume that excludes buying real estate as an investment?
You don’t know for sure when you made this purchase?
I was purposely being a bit vague to not specify my exact age.
Same. Never understood the appeal of buying a starter home.
came here to say exactly this. bien dicho
I am 29 now and basically everyone around me is buying. Don't really understand where the urgency is coming from and think Covid/Quaratnine just made a lot of people bored.
You should pretty much never buy in NYC, the economics don't make sense. There is like 10 years of condo supply overhang. It's way too cheap to rent on a yield basis now.
If you want to buy and lever, buy somewhere and rent it out. Places with low taxes, better supply dynamics, and rental potential are ideal. Vacation places are fine
I mostly agree, although I ended up buying in nyc because I was tired of dealing with rentals (landlords, poorly kept buildings even when expensive, forced out of move if a condo with rules, etc) and wanted to place I can live in for 10+ years with a family.
It is a convenience thing not an investment. Additionally, in a time like this I do appreciate having a private space, not having to worry about leases, etc - although I don’t recommend planning your life around global pandemics.
What about buying out some bank owned property in JC/Hoboken/outer boroughs and renting them out to section 8 tenants for the guaranteed monthly rent check from the government on the tenants behalf?
This sounds incredibly hypothetical. Let me know when you do it. Much of JC is likely not the place and Hoboken is certainly not the place for it.
Can you elaborate on this? Do you mean it's better to buy in say Hoboken/JC if you're working in NY?
If we are just talking about value, yes. NYC has really bad supply/demand dynamics and headwinds for many years (supply glut, commercial in a precarious position, net outflow of people accelerating) I also think you want to be away from nyc for a bunch of reasons related to financial and social stability going forward. All those shootings in Brooklyn really not helping long term property valuations a mile or so away in the gentrified parts.
Jersey City is probably only OK around the harborside area which is getting a whole foods (that area is hilariously like 50% asian). There are also some town houses down by where the GS back office is. The bigger issue with JC is that it is huge, has crime in a lot of areas, bad demographics, bad schools, and they keep raising real estate tax in the rich portions to pay for stuff. Given your options and pricing, Hoboken seems like the no brainier. Demographics are significantly better. As much as the younger people will sht on it for being a bro culture place, the reality is that it's perfect for a lot of young millenial families who don't want to do suburbs and still want to be close to nyc. It's clean and mostly safe/quiet. I own a couple of buildings there on this thesis.
Buying as a first year analyst is insane. You're more likely to be able to afford Brownsville, Staten Island or Trenton than JC.
Seriously, especially if life is up in the air, rent. It's a lot easier to leave a rental than someplace you own.
Regardless of this, JC (downtown or the heights, south JC gets nasty) isn't a bad choice. You get out of the ~3.5% city tax by living in NJ. The PATH is a bitch in normal times during rush hour, and a lot of friends would take the ferry instead.
Mid-20s PE professional in MCOL with long-term SO who also makes six figures, and while still young I don’t see us buying in the foreseeable future.
The capital lockup and lost flexibility don’t make sense to me, even with interest rates where they are. It’s a concentrated leveraged bet that’s done well as interest rates have fallen over the past 40 years, but unless you luck out and buy in an area that becomes hot I’m skeptical that market continues over the next 40 years.
It’s a highly personal decision, and there are great nonfinancial reasons to buy, such as pride of ownership or customizability, but these don’t matter to me personally, and I value limited liability and extra flexibility very highly - especially as you start your career and don’t know what the future holds.
I looked really closely at buying when I started my first job out of school because I had enough for a down payment and thought it would be smart to accelerate a rite of passage, but looking back now (with a higher paying job in a different part of the country), I’m really glad I didn’t.
Do you plan on relocating to a different city anytime soon? If you’re comfortable why not build equity?
Building equity only happens if value is flat or up. And ignores T-costs.
Transaction costs are 7-8% round trip. If you buy a “starter place” then you basically need it to go up 1-2% per year over 5 years to break even on that. Let alone maintenance, etc.
Tax savings has gotten smaller too.
No plans to do so, but I like having the ability to consider those options when they arise. I am building equity - in liquid assets with no transaction costs / maintenance and a history of outperforming real estate prices. Cheap leverage (with less volatility) and tax shields are definitely a benefit for owning, but not enough to move the needle for me at this point
Been contemplating this as well, First thought that at worst it would be an okay investment but when you run the math on how much cash you are tying up in an apartment vs. you could earn a return elsewhere, the own vs renting dynamic seems to be entirely dependent on what monthly rent you would otherwise be spending (is your lifestyle more a renting a $4-5k luxury high rise or a more modest $3k 1-2 bedroom) vs. how many millions (1 / 1.5 / 2 / 2.5+) would you take a mortgage on a "nice enough" apartment
If you are contemplating a 3k 1-2 bedroom rental vs. a $1.5 million apartment w/ $1.5k monthly condo fees, the math seems to very nominally favor owning but math can break easily if you buy a more expensive apt (what is the equivalent cap rate convert rental price to buy price? 3-4%?), aren't eligible for cheap mortgage (rates > 3-3.5%), or can eek out a nice investment return elsewhere (i assumed a conservative stock/bond/CD mix that earns 4-5% annually on cash not tied up in apt but maybe more reasonable to assume 5%? who knows with chairdaddy powell)
Anyone have any insight buying/renting in LA? I’m at a loss when factoring in traffic, home value appreciation, zoning, and the napkin math on rents in this city.
i was 23 or 24 i think and we bought a duplex lived in half rented out half i still own that house it cash flows like two stacks what you should do it rent a spot with the most bedrooms you can find and rent it out by the room so you break even or preferably cash flow and save all your money and then invest in places that cash flow or buy companies or stocks or whatever your plan to fuck out the rat race is. you do have one, right?
2 years out of school, just about, and just closed the deal on my second place. one rental and now one to live in. sure in a goofy place like NYC property is kinda dumb unless you’re super rich, but in most parts of the country, you’d be foolish to not buy especially when you can secure sub 3%. On track to be 30 and have two places 100% payed off. FTW
At this stage, you want flexibility. There's no way in hell you know where you're going to be in 5yrs, wait until you're at least 30 before buying. If purely for investment purposes, then you can buy earlier but real estate has shit yields even vs. buying an equity ETF, so not sure why you'd go the former route when you're so young....makes sense in your late 30s and beyond but until then direct most of your money towards equities
with apologies for reviving an old thread - when is a good time to buy? I check a lot of boxes on paper that would make it reasonable for me to buy - I'm a mid level VP at a big fund making $750K+, several million more in (very theoretical) carry, no debt, $1mm+ in liquid savings. but every time i look at apartments, i do the math and transaction costs and HOA fees / taxes just make it seem like such a pain. Am i dumb for not wanting to tie up a massive amount of my liquidity in an apartment that while nice, is not really that different from the just as nice luxury rental building i live in now? basically - is there a point at which you should really think about buying?
It is just personal preference. Is it dumb not to tie up liquidity like that? No. As I mentioned above in another post, I did it because I wanted the convenience of having a “home”, especially as we consider having a family. We were able to find what we wanted as a long term apartment and not worry about having to move around, etc. If we make anything once (and if) we decide to move that’s just a bonus.
That's fair - thanks for that. I think i keep feeling like I'm missing out by not buying, but there hasn't been a clear reason for me to buy (yet)
I know people in better financial situations who still rent. If you were in Houston or equivalent, buying would be a no-brainer. But the ownership costs in certain cities are just insane. You should make a "rent versus own" excel spreadsheet and see for yourself. The math only works if you're a long-term holder, there is serious price appreciation (or you rent it out occasionally), there are minimal capex needs, or your outside investments perform very poorly (in which case its good you have capital tied up in RE)
Yep you're right, i think you're sort of dependent on some degree of appreciation (unless i am very bad at my other investments). the headache of dealing with all the transaction costs / maintenance etc makes me always lean towards renting
Have you thought about finding a simple/modest place and have the capital gains from your investments cover the mortgage? That way you still have high liquidity in case of an emergency and if your liquidity is wiped out somehow you can still cover the mortgage from your income from your job.
Yes this advice is gold.
This is exactly what I'm planning to do in the next few months. Note that in I'm in continental Europe though. So a lil beat cheaper than London and I get close to 95% LTV mortgage at 2.1%. The properties I'm looking at have a rental yield that would cover the yearly mortage and property manager costs at around 11 month occupancy a year. The way I see it, I'm just gaining free equity on the house year on year.
Should I consider anything else in regard to this?
Mid-20s and looking to buy a condo downtown in a T2 city in the $500k-650k range currently (flex). I made stupid money during the pandemic off of trading so I'm hardly the norm. Jersey and NYC both suck ass (lived in Brooklyn for a bit and that was pre-pandemic, it's only gotten worse) so best of luck to you.
Yeah a $500k condo in a T2 city is a massive flex
Edit: he literally removed the part of his comment saying he was flexing with this condo purchase
Median home price is under $300K. Median age of buyer is over 40.
This is a flex. Get out of your bubble.
Edit: T2 Might mean Washington DC, Chicago, Houston, etc. Hardly shitholes.
This year but I just bough it b/c I'm in a cheap city at the moment and a lot of our portfolio companies are here. I'll probably just rent it out when I leave
Looking to buy @25ish, two bedroom/bath in London if housing prices tank (I an expecting it to happen), live & rent. If I am able to move to Madrid / tier 2 city will buy two apartments there, one for the cash flow & the other for living. Would like to have 4-5 paid off mid-tier apartments by the time I am 35.
Live in one of least affordable markets in the world, and bought a little over a year ago. Hard disagree with most of the comments supporting renting. Based on the math I did, a 5-year hold is ~23% IRR and a 10-year hold is 14% IRR. Granted a lot depends on how you structure it (size of your initial cash deposit). Even if I use the boiler plate scenario for how you are "supposed" to buy property, I get a 10% & 8% IRR for a 5- & 10-year hold respectively. This includes property tax rising faster than assessed value, and brutal psf strata costs.
Real estate is about getting access to leverage. Leveraged returns > unleveraged returns.
Are you talking about buying and renting it out? The only way you can get a 23% IRR on a home is if the price appreciates massively and you get a 95% LTV loan
Throw out some back of the napkin numbers because I’m one of those people who believes you should rent in your 20s, but would love to be proved wrong
Yes. I just assumed rent covers your mortgage payment but not strata or property tax. Obviously there's a question of where do you live in the meantime but maybe you get a 2 or 3 bed so you can live there, or maybe you rent in a 2/3/4 bed to keep your costs low.
The 23% is a bit of a cheat as I didn't put down solely straight cash for the deposit, hence the structure point. You're right in that my LTV is higher, but its two securities. Mortgage for 80% to get a good rate + Bank of (insert family member here) for 10%. That way I'm only in it for 10% cash, and yes I am on the hook for the monthly payments on the "2nd" loan, but I'll pay it out at close and/or slowly over the 5 or 10 year time horizon.
Real Estate is expensive, so its a challenging purchase to make, regardless of your financial position. I would rather jump in early and be "poor" in my 20s/30s with a mortgage over my head, as opposed to first buying a house at 40 and having a $1M mortgage to contend with every month. I will be slowly building equity via the access to leverage from the bank. I was always under the impression that people rent simply because its tough to come up with such a large lump sum for deposits (again, talking tier 1 or 2 cities here), while renting out an apartment. But in some cultures financial support and/or keeping the wealth in the family is a key differentiator.
I am in the process of buying a house now. I am mid-20s and about 4 years out of school. I know that I will be in this location for 5+ years or else I would continue to rent. I also live in an area that is cheaper to own than to rent. I am also buying well below my maximum purchasing power (living expense will be under 20% of my gross pay). I looked at it like the comment above - I should easily double my money over 5 years assuming no major declines in the housing market.
Anyone have reasonable estimates for when someone who is starting to plan to buy a home in late 20s can afford to live in south Connecticut, New Jersey, LA or SF area? I'm estimating like 3-6 years to save for a down payment, does that sound accurate? Thinking the budget is at least $500K to actually find something that isn't a starter home? Does that seem realistic? Feel free to tear this apart
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