Renting v. Buying in NYC Forum

[Anonymous User]

So at first this seems crazy to me, and admittedly I'm VERY ignorant on this subject, but please hear me out (and I'd appreciate some advice):

3L, about to start a biglaw job in Sept/Oct paying market. Due to the long hours I want to be within 10-15 min of my office so I can visit SO for dinner every night without it being a big deal with work (I know, I know)

Everything I've looked at that seems to be roughly 3,000 a month- factor in broker fees, and that's roughly 40,000 a year. Now with rent going up in subsequent years, etc, it seems like a fairly conservative estimate for 3 years would run in the 120k range.

Now I haven't looked to buy yet, but I've come across some 1 bedrooms that are ~500k. Assuming I can get a mortgage with my salary, does it make sense to buy outright and at least my monthly payments will go toward something? And hopefully if I end up moving out of NYC after 3 years (a distinct possibility) I can either sell it (and hopefully recoup most of my $, altho I know I'll have to factor in closing costs and agent fees, etc) or utilize it as an asset (rent it out and have that pay off the mortgage)

Does this make sense or am I missing something? Thanks in advance!!

[ArtistOfManliness]

So at first this seems crazy to me, and admittedly I'm VERY ignorant on this subject, but please hear me out (and I'd appreciate some advice):

3L, about to start a biglaw job in Sept/Oct paying market. Due to the long hours I want to be within 10-15 min of my office so I can visit SO for dinner every night without it being a big deal with work (I know, I know)

Everything I've looked at that seems to be roughly 3,000 a month- factor in broker fees, and that's roughly 40,000 a year. Now with rent going up in subsequent years, etc, it seems like a fairly conservative estimate for 3 years would run in the 120k range.

Now I haven't looked to buy yet, but I've come across some 1 bedrooms that are ~500k. Assuming I can get a mortgage with my salary, does it make sense to buy outright and at least my monthly payments will go toward something? And hopefully if I end up moving out of NYC after 3 years (a distinct possibility) I can either sell it (and hopefully recoup most of my $, altho I know I'll have to factor in closing costs and agent fees, etc) or utilize it as an asset (rent it out and have that pay off the mortgage)

Does this make sense or am I missing something? Thanks in advance!!

where the eff are you finding one bedrooms that are 500K? all the ones i've been looking at within 10 to 15 minutes walking of midtown are 1M for a decent one bedroom.

also, you're going to need 20% down for most mortgages... maybe you can go as low as 10% down if you buy mortgage insurance, which costs a pretty penny.

[dabigchina]

You're prob going to need 100k in downpayment for a 500k condo/coop/whatever.

Granted, there are ways around this, but it's a fairly big chunk of change either way what with loans, etc.

scooped

[Anonymous User]

So at first this seems crazy to me, and admittedly I'm VERY ignorant on this subject, but please hear me out (and I'd appreciate some advice):

3L, about to start a biglaw job in Sept/Oct paying market. Due to the long hours I want to be within 10-15 min of my office so I can visit SO for dinner every night without it being a big deal with work (I know, I know)

Everything I've looked at that seems to be roughly 3,000 a month- factor in broker fees, and that's roughly 40,000 a year. Now with rent going up in subsequent years, etc, it seems like a fairly conservative estimate for 3 years would run in the 120k range.

Now I haven't looked to buy yet, but I've come across some 1 bedrooms that are ~500k. Assuming I can get a mortgage with my salary, does it make sense to buy outright and at least my monthly payments will go toward something? And hopefully if I end up moving out of NYC after 3 years (a distinct possibility) I can either sell it (and hopefully recoup most of my $, altho I know I'll have to factor in closing costs and agent fees, etc) or utilize it as an asset (rent it out and have that pay off the mortgage)

Does this make sense or am I missing something? Thanks in advance!!

where the eff are you finding one bedrooms that are 500K? all the ones i've been looking at within 10 to 15 minutes walking of midtown are 1M for a decent one bedroom.

also, you're going to need 20% down for most mortgages... maybe you can go as low as 10% down if you buy mortgage insurance, which costs a pretty penny.

OP here, did some quick browsing on streeteasy, and there are some VERY nice condos for sale around the 525k range (i.e. MUCH nicer than I'd be able to rent for 3k a month)

Admittedly the 20% down mortgage is a very real issue, perhaps I'd wait a year before putting down the money? I'd be very interested in any wisdom you guys could provide

[zot1]

As others have pointed out, you'll need a big chunk of change for a down payment. Also, you need to pay for closing costs... with cash.

The biggest problem with buying in NYC, in my humble opinion, is the fact you'll be relying on your biglaw salary. Although it doesn't happen often, layoffs and forced outs still happen. Would you still be able to come up with your mortgage payment if you get pushed out and don't get another job right away?

What if you go into biglaw and you find out you can't hang in that job for more than a couple of years? Would you be willing to keep working through your misery so you can get your bills paid?

[Anonymous User]

Also many places in NYC that are co-ops (tend to be on the cheaper side than condos) will require proof of post-purchase liquidity, sometimes over 12 months worth of costs (mortgage, tax, admin fees).

http://www.brickunderground.com/blog/20 ... sing_costs

So to buy a place for $500k you need 20% mortgage (and expect to be scooped by an all cash purchaser on many of the places you'd bid on), closing costs ~5-8k, plus liquidity so another ~60k?

So unless you have $200k saved from law school, you'll need to rent for a few years at least before entering the market.

[ArtistOfManliness]

Also many places in NYC that are co-ops (tend to be on the cheaper side than condos) will require proof of post-purchase liquidity, sometimes over 12 months worth of costs (mortgage, tax, admin fees).

http://www.brickunderground.com/blog/20 ... sing_costs

So to buy a place for $500k you need 20% mortgage (and expect to be scooped by an all cash purchaser on many of the places you'd bid on), closing costs ~5-8k, plus liquidity so another ~60k?

So unless you have $200k saved from law school, you'll need to rent for a few years at least before entering the market.

What is the deal with co-ops anyway? I don't understand how they're markedly different from regular condo associations.

[dabigchina]

Also many places in NYC that are co-ops (tend to be on the cheaper side than condos) will require proof of post-purchase liquidity, sometimes over 12 months worth of costs (mortgage, tax, admin fees).

http://www.brickunderground.com/blog/20 ... sing_costs

So to buy a place for $500k you need 20% mortgage (and expect to be scooped by an all cash purchaser on many of the places you'd bid on), closing costs ~5-8k, plus liquidity so another ~60k?

So unless you have $200k saved from law school, you'll need to rent for a few years at least before entering the market.

What is the deal with co-ops anyway? I don't understand how they're markedly different from regular condo associations.

you don't own your unit in a coop. you own a share in the entire building.

[Anonymous User]

Fellow incoming biglaw associate with no experience in the housing game. I'm a a veteran eligible for a VA home loan, which means I'm not required to make a down payment and don't have to pay most closing costs. Good credit and very little debt. Would it be dumb for me not to buy a house? I want to stay in this (non-NYC) market long-term.

[favabeansoup]

I think all of you incoming biglaw associates need to realize that your probably not going to be at this job/income level for more than 4-6 years. Sure, some people stick around, but a decent, decent chunk do not.

It's ok to pay more in rent for a few years rather rushing into the biggest financial purchase of your life.

I know a lot of people who rushed into big purchases with their big salaries (homes/car/etc), and now they desperately want to leave but can't because their expenses are too high.

[Anonymous User]

The biggest problem with buying in NYC, in my humble opinion, is the fact you'll be relying on your biglaw salary. Although it doesn't happen often, layoffs and forced outs still happen. Would you still be able to come up with your mortgage payment if you get pushed out and don't get another job right away?

The received wisdom on TLS used to be you have 2-3 years at a firm and after that there is a good chance of being forced out. Based on my firm this no longer seems to be the case (as you say). It seems like it is very possible to stay 4-6+ years and then obviously if you don't make partner (the most likely situation) you have to leave.

[zot1]

The biggest problem with buying in NYC, in my humble opinion, is the fact you'll be relying on your biglaw salary. Although it doesn't happen often, layoffs and forced outs still happen. Would you still be able to come up with your mortgage payment if you get pushed out and don't get another job right away?

The received wisdom on TLS used to be you have 2-3 years at a firm and after that there is a good chance of being forced out. Based on my firm this no longer seems to be the case (as you say). It seems like it is very possible to stay 4-6+ years and then obviously if you don't make partner (the most likely situation) you have to leave.

Dude, at the end of the day, you are an at-will employee. Your firm can be doing well financially, but things can change. Or you could be a really sucky associate. You don't know that yet. If you don't want to take these things in consideration before making a large financial investment, more power to you.

[Anonymous User]

The biggest problem with buying in NYC, in my humble opinion, is the fact you'll be relying on your biglaw salary. Although it doesn't happen often, layoffs and forced outs still happen. Would you still be able to come up with your mortgage payment if you get pushed out and don't get another job right away?

The received wisdom on TLS used to be you have 2-3 years at a firm and after that there is a good chance of being forced out. Based on my firm this no longer seems to be the case (as you say). It seems like it is very possible to stay 4-6+ years and then obviously if you don't make partner (the most likely situation) you have to leave.

IME, even if you do not stay 4-6 years at one place, it seems relatively common to lateral after 2-3 years and get another few years of biglaw salary. But year 7 seems to be the last stop for most.

The main factor in whether you make it 2-3 or 4-6 years seems to be whether you can take the lifestyle.

[jarofsoup]

If you can swing it the tax write off will be helpful. Also it would be a pretty great rental property down the line. You should avoid co-ops though because you cannot rent those out later.

[Anonymous User]

Our gen is fcked. We wont be able to buy nice homes in the same number as our parents; we'll have many more jobs in our lfietime and we will be required to move often. Usually buying a house is not worth it if you move within 3 years. Thanks Obama.

[cheaptilts]

Our gen is fcked. We wont be able to buy nice homes in the same number as our parents; we'll have many more jobs in our lfietime and we will be required to move often. Usually buying a house is not worth it if you move within 3 years. Thanks Obama.

Yeah but your parents didn't have Chik Fil A,or iphones, or pre-Kim-K Kanye West.

Life prior to like 2006 was pretty shitty; you can't just look at a trivial factor such as home ownership

[IguanaDon]

Possibly a stupid question: People here seem to be assuming that you have to put 20% down. I believe you can put way less down, if you're willing to pay for mortgage insurance. For people with law school debt that can be paid off in a year or two, might it not make sense to put a lot less than 20% down and just pay the mortgage insurance for a few years (until you're able to throw extra money at the principal to remove that requirement)? I get that mortgage insurance is throwing money away, but if the alternative means five extra years of rent payment and no mortgage interest deduction while in big law, I'm not so sure that renting is plainly the smart move.

[ArtistOfManliness]

also... interest rates are jumping up post-election (used to be 3.5, now they're more like 4+), so we might be a year too late on the whole buying thing.

[kalvano]

Also many places in NYC that are co-ops (tend to be on the cheaper side than condos) will require proof of post-purchase liquidity, sometimes over 12 months worth of costs (mortgage, tax, admin fees).

http://www.brickunderground.com/blog/20 ... sing_costs

So to buy a place for $500k you need 20% mortgage (and expect to be scooped by an all cash purchaser on many of the places you'd bid on), closing costs ~5-8k, plus liquidity so another ~60k?

So unless you have $200k saved from law school, you'll need to rent for a few years at least before entering the market.

Fucking LOL at New York real estate.

[dixiecupdrinking]

Possibly a stupid question: People here seem to be assuming that you have to put 20% down. I believe you can put way less down, if you're willing to pay for mortgage insurance. For people with law school debt that can be paid off in a year or two, might it not make sense to put a lot less than 20% down and just pay the mortgage insurance for a few years (until you're able to throw extra money at the principal to remove that requirement)? I get that mortgage insurance is throwing money away, but if the alternative means five extra years of rent payment and no mortgage interest deduction while in big law, I'm not so sure that renting is plainly the smart move.

In NYC you are lucky to get your offer accepted on a place if you are ONLY putting down 20%. Desirable apartments get scooped up by all-cash buyers.

Putting all that aside, it's quite often cheaper to rent a comparable place in NYC. Common charges or maintenance fees alone are frequently $1000 a month or more. You can't just look at mortgage payments alone and compare them to your rent.

Buying in NYC is basically a luxury for the rich. If you have the cash then by all means, but recognize that by even considering it you're in rarified company and you should generally expect to pay for the privilege.

There are exceptions for people willing to buy in inconvenient, uncool, and/or marginally dangerous areas in the boroughs, but the tenor of this discussion does not suggest anyone here is going down that road.

[Anonymous User]

Not in NYC, but I bought a condo right out of law school in LA. All in (including HOA fees and escrow account for property taxes), I pay just under $3,300/month for a completely renovated 2bed/3bath in a great area. Renting something similar in the same area would run $3000-$3400, so it was a no brainer to buy given that I can rent it out at the mortgage payment when I decide to move to a house in a 4-5 years.

Side note: Check out physician/attorney home loans. I got a 95% LTV mortgage at 3% with no PMI and a lender credit for closing costs, so I only had to put 5% down at closing. I also have $175k in student loans, but I still qualified. Obviously you need excellent credit to qualify, but many mortgage companies give very high LTV mortgages to high earners.

[Pomeranian]

Do you HAVE to be in NYC? Just outside city limits are much cheaper, and the NYC metro area has pretty good public transit (i.e. Metro North, LIRR, Path)

[FascinatedWanderer]

Not in NYC, but I bought a condo right out of law school in LA. All in (including HOA fees and escrow account for property taxes), I pay just under $3,300/month for a completely renovated 2bed/3bath in a great area. Renting something similar in the same area would run $3000-$3400, so it was a no brainer to buy given that I can rent it out at the mortgage payment when I decide to move to a house in a 4-5 years.

Side note: Check out physician/attorney home loans. I got a 95% LTV mortgage at 3% with no PMI and a lender credit for closing costs, so I only had to put 5% down at closing. I also have $175k in student loans, but I still qualified. Obviously you need excellent credit to qualify, but many mortgage companies give very high LTV mortgages to high earners.

Yes, but a 2 bed 3 bath in NYC would rent for about $6K and sell for at least 1.5M.

[ClubberLang]

Not in NYC, but I bought a condo right out of law school in LA. All in (including HOA fees and escrow account for property taxes), I pay just under $3,300/month for a completely renovated 2bed/3bath in a great area. Renting something similar in the same area would run $3000-$3400, so it was a no brainer to buy given that I can rent it out at the mortgage payment when I decide to move to a house in a 4-5 years.

Side note: Check out physician/attorney home loans. I got a 95% LTV mortgage at 3% with no PMI and a lender credit for closing costs, so I only had to put 5% down at closing. I also have $175k in student loans, but I still qualified. Obviously you need excellent credit to qualify, but many mortgage companies give very high LTV mortgages to high earners.

Sounds like you got a good deal on that mortgage, but living like this is not for everyone. Conventional wisdom here would be not to take out a gigantic mortgage with that much student debt. The thing to keep in mind with condos is that they may have rental restrictions, HOA fees go up, and property taxes go up. If you do this, you're basically a slave to your debt and if you don't like your biglaw job, too bad, you're stuck.

[1styearlateral]

Not in NYC, but I bought a condo right out of law school in LA. All in (including HOA fees and escrow account for property taxes), I pay just under $3,300/month for a completely renovated 2bed/3bath in a great area. Renting something similar in the same area would run $3000-$3400, so it was a no brainer to buy given that I can rent it out at the mortgage payment when I decide to move to a house in a 4-5 years.

Side note: Check out physician/attorney home loans. I got a 95% LTV mortgage at 3% with no PMI and a lender credit for closing costs, so I only had to put 5% down at closing. I also have $175k in student loans, but I still qualified. Obviously you need excellent credit to qualify, but many mortgage companies give very high LTV mortgages to high earners.

Yes, but a 2 bed 3 bath in NYC would rent for about $6K and sell for at least 1.5M.

Try at least $3 million.