Why not buy an apartment instead of renting?
I'm still in college, but thinking about housing for next year after college in nyc.
Since rent is ~30k a year for most analysts-associates, why waste that much money on just rent?
Why not instead put a 15% downpayment on an 800k apartment (120k) with a roommate (60k each) from internship money, signing bonus and maybe a few months salary in the beginning, and use all that rent money over the next few years you were going to pay as equity in the house.
After your 4-6 years in nyc in banking/pe you and your friend should have almost 200k each in equity that you can pull out of the house (maybe more if the house appreciated) to use for something else.
Wheres the flaw in my logic here? If you're going to put all that money to rent why not have equity instead?
Homeowner fees are nuts in NYC, and property tax has to add into the equation. Unless you have a ton of roommates it would probably end up being a worse deal unless you held for a long time. Also, wouldn’t owning an apartment with roommates ruin the point of ownership? I think if you’re planning on staying in NYC for a long time it would make a little more sense if you can get together a down payment, especially since mortgage rates are awesome right now, but even then the property taxes and monthly fees alone probably add up to more than you’d pay in rent for a 1-2 bedroom.
Yes, but those property taxes, fees and mortgage rates (less money going into building equity) still probably equal less than rent you would be paying .
So you would still come out on top paying down the mortgage and building equity instead of "wasting" rent money
A lot of people are pretty enamoured with the concept of renting as a "waste" of money, but you're shielding yourself from a loss in the value of your asset and giving yourself the freedom to move around. Honestly, if you're just starting a job I would focus on renting. Plus, is $800K going to get you anything decent? And you really think you'll be able to afford that?
The flaw in your logic is that life isn’t stable in your early 20s. Things change constantly in drastic, life-altering ways. Just look at this year alone. Thousands have left the city, some permanently. Good luck covering mortgage payments on an apartment you might not live in or be able to rent out at a breakeven rate.
Aren't leases the same way though? On 1-2 year contracts?
You could probably find someone to rent your house out to at a below market rate which will go towards building your apartments equity (even if you have to pay a couple hundred to make up for the below market rate, its still going into your equity so your money isnt really going anywhere)
1. Closing costs alone will be another 20-30k out of pocket
2. monthly payments will be equal if not more than your rent (esp. when rent is rock bottom rn)
3. You just tied down 100% of your assets down into an illiquid asset...great
4. Co ownership of a property with another person that is also not comitted to NY long term seems risky in general
Oh and one more thing. Good luck buying any decent place at that price and also 15% down
Oh don't worry, one of the other college kids above found 3% financing on $1mm to buy an apartment in NYC.
You better have a good friend. What happens when you get into a long term relationship?
How would you have $200k each in equity ($400k total which is 50% of property value) in 4-6 years? Remember that almost all of your mortgage payments for the first 4-5 yrs go toward interest.
As others have noted:
1) HOA: $800 or so a month
2) taxes: $1k or so a month
3) closing costs: $30k or so
4) good luck getting a bank to accept a 15% down payment
You seem a bit delusional to think a 1st year analyst will have $60k laying around post-internship and a few months on the job..
Here's how to buy in a coastal city:
Your goal is to get (1) what you would pay for rent to equal (2) property tax + interest + HOA as fast as you possibly can. At that point, it's a tradeoff to own vs. rent (I'm ignoring maintenance costs, insurance, etc. but you could always add another ~$200-300/month to cover that I suppose).
To get (1) = (2), you need to rely on making either a huge down payment (>25%) or large pre-payments over the first 1-3 years. That means you have a few hundred thousand lying in a bank account.
Don't stop when (1) = (2)...your next goal is to make large pre-payments so that (1) becomes less than (2). At that point, you're coming out ahead.
Notice that, until (1) is less than (2), it doesn't make sense to invest in real estate elsewhere unless you're 100% sure that you'll see capital appreciation in that new investment.
All that takes a lot of money and a real commitment to NYC in the long-term (5+ years). This is a lot for an analyst to swallow. Best to wait until the next step before making this kind of commitment.
Real estate is such a dumb place to put money if you're financially literate and haven't made real money yet. It makes sense when you have substantial liquid assets and need to use it as a supercharged savings account but if you're fresh out of school or under 25...fuck no.
If you have the money for a down payment then sure
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