Buying a home in NYC with student loan debt Forum

[UnfrozenCaveman]

This is happening again. Keep at it.

[QContinuum]

Guys, let's please keep discussion on OP's question of whether it's a good idea to buy a home in NYC with student loan debt. Let's not turn this into yet another NYC vs. Houston thread, unless and until OP indicates they are now interested in relocating to Houston and would like to hear the pros and cons.

If y'all would like to keep going on the NYC vs. Houston discussion, please feel free to make a new thread in the Lounge to do so.

[SFSpartan]

OP, I wouldn't buy a home if I were you - you're getting to the point of your career where you could get shitcanned, and you have too much debt and too little savings. Get that loan balance down to less than $100k and put about $40k more in the bank - then buy.

[TheoO]

I'm a second year who just bought a place in NYC with my SO. I currently have about 160k in debt (paid about $30k last month). My SO makes close to a first year salary, and has zero debt. That really made me feel safer about the purchase. Depending on where you look, especially at places deeper in BK that are up and coming (aka, gentrification in-waiting), you can find some really nice new builds for a solid (NYC) price. I think the monthly split between the two of us made it feasible: my current half of the monthly mortgage is just about where my current rent was (and I was actually more conservative when it came to a place--had a roommate, and left Manhattan). So I think it's definitely doable.

However, I initially thought I would do biglaw for maybe 3 years max and then leave. Now I'm thinking closer to 5 years. It definitely hasn't come without a loss of a certain sense of financial freedom in that sense. But the way I calculated it, even if one of us gets shitcanned from our job, the other can maintain the mortgage on their own for at least a year (albeit not easily).

[Clytemnestra3]

If you really want to buy a home in NYC with your level of debt without compromising your financial security, find a place where you could rent it out and have the rent cover the costs. Ideally, you’d achieve this state when you purchased, but you could also achieve this after throwing a year of biglaw savings towards your mortgage. This way, if you lose your job or choose to relocate, you can still keep the property.

In reality though, finding a property in NY that meets this criteria will be hard. You may want to look somewhere in NJ that is reasonable commuting distance or less established parts of NYC.

[Anonymous User]

Hi, I am in a bit of a quandary here and was hoping the wise financial gurus here at TLS could help out.

I am currently working as a SA in NYC, and my parents have suggested that I buy a house in NYC when I return next year. They see it as a good investment for me and my SO, and are willing to cover the 20% down payment (combined) for a $1.2M apartment, which would be around $240K. There are a few reasons why I am hesitant to buy a house, however.

#1. Student loans - by the time I graduate, I will have around $70K in debt. While I am grateful for the offer to cover the down payment, a part of me thinks better to cover my loans first and use the remaining + portion of salaries to buy an apartment in my second or third year. My parents, however, see student loans as more long-term, and insist that it is better to buy apartments ASAP so that none of the money is wasted on rents.

#2. Payment - I have run through some calculations, and even if my parents cover the mortgage, I would still need to pay around $6,000 / month for 30 years. I don't fully understand how that will be sustainable, especially considering my SO is currently doing a PhD and will not earn significant income (other than stipends) for at least 3~4 more years. Add the student loan interest payments, and I'm not perfectly sure if this can work.

#3. Future - both me and my SO's future are uncertain at this point. The plan is to stay in Biglaw for 2~3 years (around the time my wife would finish her PhD) and move onto next steps. We certainly are thinking of other cities (my plan is go in-house), although NYC is also among the candidates. This situation might mean that it is unwise to buy an apartment in NYC - however, on the other side, the "investment" (and it does look like a good one, although I confess I don't know too much about the future of the housing market) would still generate income even if we decide to move elsewhere, or else we could choose to sell the apartment then and gain some of the upsides (if any).

Just for clarification, my parents aren't uber wealthy; they genuinely see buying an apartment now as a great investment opportunity for us and that the NY housing market will only increase in price in the future. The apartment is in downtown Manhattan and is a pretty new development and I do see the value appreciating in the future (barring a terrible financial crisis). However I am still wary for the reasons outlined above.

Thank you so much for your help!

[ClubberLang]

Hi, I am in a bit of a quandary here and was hoping the wise financial gurus here at TLS could help out.

I am currently working as a SA in NYC, and my parents have suggested that I buy a house in NYC when I return next year. They see it as a good investment for me and my SO, and are willing to cover the 20% down payment (combined) for a $1.2M apartment, which would be around $240K. There are a few reasons why I am hesitant to buy a house, however.

#1. Student loans - by the time I graduate, I will have around $70K in debt. While I am grateful for the offer to cover the down payment, a part of me thinks better to cover my loans first and use the remaining + portion of salaries to buy an apartment in my second or third year. My parents, however, see student loans as more long-term, and insist that it is better to buy apartments ASAP so that none of the money is wasted on rents.

#2. Payment - I have run through some calculations, and even if my parents cover the mortgage, I would still need to pay around $6,000 / month for 30 years. I don't fully understand how that will be sustainable, especially considering my SO is currently doing a PhD and will not earn significant income (other than stipends) for at least 3~4 more years. Add the student loan interest payments, and I'm not perfectly sure if this can work.

#3. Future - both me and my SO's future are uncertain at this point. The plan is to stay in Biglaw for 2~3 years (around the time my wife would finish her PhD) and move onto next steps. We certainly are thinking of other cities (my plan is go in-house), although NYC is also among the candidates. This situation might mean that it is unwise to buy an apartment in NYC - however, on the other side, the "investment" (and it does look like a good one, although I confess I don't know too much about the future of the housing market) would still generate income even if we decide to move elsewhere, or else we could choose to sell the apartment then and gain some of the upsides (if any).

Just for clarification, my parents aren't uber wealthy; they genuinely see buying an apartment now as a great investment opportunity for us and that the NY housing market will only increase in price in the future. The apartment is in downtown Manhattan and is a pretty new development and I do see the value appreciating in the future (barring a terrible financial crisis). However I am still wary for the reasons outlined above.

Thank you so much for your help!

Spending 6k/month on essentially a first year biglaw income is insane. You'll have like 3k/month left for everything else. Buying is a terrible idea, especially if you aren't sure you want to stay in NYC.

[TUwave]

Hi, I am in a bit of a quandary here and was hoping the wise financial gurus here at TLS could help out.

I am currently working as a SA in NYC, and my parents have suggested that I buy a house in NYC when I return next year. They see it as a good investment for me and my SO, and are willing to cover the 20% down payment (combined) for a $1.2M apartment, which would be around $240K. There are a few reasons why I am hesitant to buy a house, however.

#1. Student loans - by the time I graduate, I will have around $70K in debt. While I am grateful for the offer to cover the down payment, a part of me thinks better to cover my loans first and use the remaining + portion of salaries to buy an apartment in my second or third year. My parents, however, see student loans as more long-term, and insist that it is better to buy apartments ASAP so that none of the money is wasted on rents.

#2. Payment - I have run through some calculations, and even if my parents cover the mortgage, I would still need to pay around $6,000 / month for 30 years. I don't fully understand how that will be sustainable, especially considering my SO is currently doing a PhD and will not earn significant income (other than stipends) for at least 3~4 more years. Add the student loan interest payments, and I'm not perfectly sure if this can work.

#3. Future - both me and my SO's future are uncertain at this point. The plan is to stay in Biglaw for 2~3 years (around the time my wife would finish her PhD) and move onto next steps. We certainly are thinking of other cities (my plan is go in-house), although NYC is also among the candidates. This situation might mean that it is unwise to buy an apartment in NYC - however, on the other side, the "investment" (and it does look like a good one, although I confess I don't know too much about the future of the housing market) would still generate income even if we decide to move elsewhere, or else we could choose to sell the apartment then and gain some of the upsides (if any).

Just for clarification, my parents aren't uber wealthy; they genuinely see buying an apartment now as a great investment opportunity for us and that the NY housing market will only increase in price in the future. The apartment is in downtown Manhattan and is a pretty new development and I do see the value appreciating in the future (barring a terrible financial crisis). However I am still wary for the reasons outlined above.

Thank you so much for your help!

Spending 6k/month on essentially a first year biglaw income is insane. You'll have like 3k/month left for everything else. Buying is a terrible idea, especially if you aren't sure you want to stay in NYC.

Yes $6k on a first year biglaw salary is super steep. Tough call though because Anon will immediately have significant equity in the property. Will Anon be able to keep that money when they sell and use it on the next purchase? Because if so they kind of have to do it.

[kaiser]

Short answer is that I certainly wouldn't do it if I were in your situation

[Elston Gunn]

...can’t your parents help you buy an apartment that is actually in your price range instead??

[QContinuum]

...can’t your parents help you buy an apartment that is actually in your price range instead??

My thought too. Why is it a binary choice between "wasting" money on rent vs. buying a $1.2m new-build luxury apartment?? What about buying, I dunno, a $700-800k apartment? Maybe it wouldn't be in the Village and maybe it wouldn't be brand spanking new but it would be much more financially prudent than going all in on that $1.2m pad.

[Anonymous User]

...can’t your parents help you buy an apartment that is actually in your price range instead??

My thought too. Why is it a binary choice between "wasting" money on rent vs. buying a $1.2m new-build luxury apartment?? What about buying, I dunno, a $700-800k apartment? Maybe it wouldn't be in the Village and maybe it wouldn't be brand spanking new but it would be much more financially prudent than going all in on that $1.2m pad.

OP here. The main issue here is that my parents (and my SO, as well) see the apartment as a long-term investment, and so it makes sense that we buy as new an apartment as possible so that its value is most likely to increase (or at the very least, keep its value).That is why they also think it doesn't really matter whether or not I stay in New York - by renting the apartment out we'll be able to recoup most of the mortgage.

Furthermore, if we DO decide to stay in New York long-term, raise kids and whatever (it's honestly 50/50 at this point), then they think it better that we get a great apartment instead of an average one so that we don't have to go through the hassle of having to sell and buy again in NYC. This point I agree with, although I'm open to criticism.

Is this argument unreasonable? My wife has told me that she will make around $40K next year (my first year as an associate) from teaching positions.

[omar1]

What kind of apartment would this be (location, bed/baths etc.)? If you're not sure whether you want to stay in NY or not, I would not buy an apartment. If you REALLY REALLY want to buy an apartment, I'd buy something of up to 750k (that's including the downpayment from your parents). If you want an investment, buy a 2-family house in Queens or Brooklyn for 1,2-1,4M, you'll have tenants significantly reducing your monthly mortgage payments, will help you with taxes and you can rent/sell it if you decide to move.

Another thing to consider is, whether if you don't buy anything now, your parents will give you the money in the future- x years from now when you do decide where/what to buy. If not, I'd buy now but something that you CAN afford easily and not something that would cost you 6k a month.

[jkpolk]

...can’t your parents help you buy an apartment that is actually in your price range instead??

My thought too. Why is it a binary choice between "wasting" money on rent vs. buying a $1.2m new-build luxury apartment?? What about buying, I dunno, a $700-800k apartment? Maybe it wouldn't be in the Village and maybe it wouldn't be brand spanking new but it would be much more financially prudent than going all in on that $1.2m pad.

OP here. The main issue here is that my parents (and my SO, as well) see the apartment as a long-term investment, and so it makes sense that we buy as new an apartment as possible so that its value is most likely to increase (or at the very least, keep its value).That is why they also think it doesn't really matter whether or not I stay in New York - by renting the apartment out we'll be able to recoup most of the mortgage.

Furthermore, if we DO decide to stay in New York long-term, raise kids and whatever (it's honestly 50/50 at this point), then they think it better that we get a great apartment instead of an average one so that we don't have to go through the hassle of having to sell and buy again in NYC. This point I agree with, although I'm open to criticism.

Is this argument unreasonable? My wife has told me that she will make around $40K next year (my first year as an associate) from teaching positions.

Bold and U/L above is a very questionable assumption. lots of ppl think theres a bubble in new build "luxury" apartments rn. Speculating on low cost in interesting parts of the city probably a better play tbh.

[nixy]

Yeah, that was what I was going to say. An apartment’s not like a car - age isn’t that pertinent wrt value or maintaining value. (Plenty of NYC ads tout “pre-war building!” as a plus.)

[dabigchina]

"they genuinely see buying an apartment now as a great investment opportunity for us and that the NY housing market will only increase in price in the future."

No asset class can "only increase in price" in the future. Your parents probably understand a lot less about biglaw and the housing market than they think. Go with your gut on this one

[Anonymous User]

OP again. Thanks all for your advice. Would it be better investment-wise and lesser risk to buy a 800K apartment in Brooklyn, then? The apartment is older, but the rooms are more spacious and my monthly cost would be less than $4,000. I go to a downtown firm (FiDi) if that helps.

And furthermore, who would be a good person to speak to real estate investment-wise? Obviously realtors would be biased, but would speaking to an adviser be useful or even worth it?

Thank you for all your help!

[Anonymous User]

Another thing to consider is, whether if you don't buy anything now, your parents will give you the money in the future- x years from now when you do decide where/what to buy. If not, I'd buy now but something that you CAN afford easily and not something that would cost you 6k a month.

TBH I've been rather hesitant to ask my parents that question - they are talking in terms of it being an ultimatum in lieu of inheritance. While grateful this has put me at a difficult position in having to persuade my parents that the investment they want us to make isn't going to be worth it. Forgive me if this sounds a bit douche.

[abl]

The main issue here is that my parents (and my SO, as well) see the apartment as a long-term investment, and so it makes sense that we buy as new an apartment as possible so that its value is most likely to increase (or at the very least, keep its value).

Why do you think that demand for new apartments is likely to increase at a greater rate than demand for used apartments? (That's the assumption inherent in your above comment.) If anything, your comment shows why that is unlikely to be true and why new apartments may instead be relatively overvalued: like with cars, there may be a premium for 'newness' in this context that is lost the second an apartment is no longer 'new' (or, maybe, after [x] years.) It's going to be relatively more difficult to recoup your apartment value if the second you buy it (or within [x] years of buying it) it becomes devalued due to no longer being 'new.'

TBH I've been rather hesitant to ask my parents that question - they are talking in terms of it being an ultimatum in lieu of inheritance. While grateful this has put me at a difficult position in having to persuade my parents that the investment they want us to make isn't going to be worth it. Forgive me if this sounds a bit douche.

As another possibility, what about considering buying a house with >20% downpayment? Buying a $750k apartment with a $240k downpayment will give you the exact same equity benefits without committing you to nearly as high of monthly expenses. You'll have to think about how you'll want to pitch this to your parents, but I'm sure there's a way to frame it that seems entirely reasonable and prudent (and doesn't just seem like you're trying to milk them for as much as you can). Taking such an approach also entails being less leveraged on the house, which is a lower risk investment strategy (to lose all of your equity on a $750k house, the market would needs to decrease by 30%; to lose it on a $1.2 million house, the market needs to only decrease by 20%*), which might be good for your personal situation.

*This is also obviously lower-reward. If the market increases by 30%, you'd gain more on your $1.2 million house than you would on a $750k house.

[omar1]

And just to add something to keep in mind if you're not certain whether you'll remain in NY in 2-3 years. The closing costs on a 1,2M apartment will be HUGE and you'll also have to pay a luxury tax I think (someone correct me if I'm wrong, since it's above 1M), which is 1% (12k out of pocket), both of which you're not going to recover if you sell the apartment after 2-3 years if you decide not to stay in NY.

[ClubberLang]

If your parents think that its such a great investment and want to give you some kind of gift, why don't they just buy it and you can pay them reduced rent?

[Anonymous User]

OP again. Thanks all for your advice. Would it be better investment-wise and lesser risk to buy a 800K apartment in Brooklyn, then? The apartment is older, but the rooms are more spacious and my monthly cost would be less than $4,000. I go to a downtown firm (FiDi) if that helps.

And furthermore, who would be a good person to speak to real estate investment-wise? Obviously realtors would be biased, but would speaking to an adviser be useful or even worth it?

Thank you for all your help!

Yes.

That said, talk to parents. I knew someone in similar situation that ended up with parents pitching in 1000/2000 a month for at least a few years. Some parents really just want to make sure their kids have it made and genuinely rather spend money on kids than on themselves (I know a lot of Chinese parents like this.) Just tell them you can only comfortably afford like 4K a month and have to plan accordingly and see what they want to do.

That said, don’t wait too long. I know people that waited only to have their parents blow the money on something silly like a luxury RV or a “time share.”

Investment wise, there are a lot of condo/apartment buildings managed by a handful of companies that will manage/rent your units for a fee.