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Hi All!

I noticed there was a thread about buying v. renting for an associate starting at biglaw. The general consensus I saw was:

Pros: Save 100K+ in rent (3k a month for at least 3 years in biglaw)
Cons: Golden handcuffs, nobody has enough liquidity available (need ~100k to do this)

HOWEVER after talking with some friends at firms, I've heard that some firms will offer you a loan for a down payment on an apartment (50k-80k) after you've been at the firm for a little (6 months- 1 yr).

Does this change the equation? Should you worry about being overleveraged? Will a bank not give you a loan if only say, 35k is your own and the other 70k is from another bank loan?

T.I.A.!!

Also interested if anyone could weigh in on this^

A bank really doesn't care as long as your debt to income ratio for the amount borrowed from them is reasonable. It isn't really worth considering unless you get approval for a mortgage from a bank.

Then it is a matter of being within your means. If you are relying on a big law income until the note is paid, then you're hosed. If you buy something reasonable, and save money on a low mortgage as oppose to renting, then sure. The NYT had a good analysis on the tipping point in which buying is better than renting.

It comes down to how long you want to live in the house, how much you are extending yourself financially, and what your projected financial picture is in 5 years. Homes are awful short term investments, considering how much money it costs to get out.

Civilservant wrote:A bank really doesn't care as long as your debt to income ratio for the amount borrowed from them is reasonable. It isn't really worth considering unless you get approval for a mortgage from a bank.

Then it is a matter of being within your means. If you are relying on a big law income until the note is paid, then you're hosed. If you buy something reasonable, and save money on a low mortgage as oppose to renting, then sure. The NYT had a good analysis on the tipping point in which buying is better than renting.

It comes down to how long you want to live in the house, how much you are extending yourself financially, and what your projected financial picture is in 5 years. Homes are awful short term investments, considering how much money it costs to get out.

Could you elaborate on why I'd be hosed if I'm relying on a big law income? From what I saw, a mortgage (plus maintenance) would be roughly the 3k a month I'd be paying for rent (for a 500k house, give or take $100 a month).

Also would it be mistaken to assume that worst case, after three years I could list the house for (roughly) what I paid for it? Even with the broker fees/closing costs, wouldn't I still be ahead of the 120k (or more) I'd be wasting on rent? Or alternatively, if I were to move out of NYC, couldn't I just rent it and have the rent pay my mortgage?

Wait, you wanna buy in or near NYC? Goooood luck!

I mean that you should live within your means, and save when you can. Again this is more of a question of personal finances than anything else. I would caution against looking at it purely from the perspective of equity replacing rent (throwaway money). There's the upfront money to get in, the money to get out, property tax, interest on the note, hoa if we are talking about a co-op or housing community, and being responsible for when things break.

If the numbers work then do it. I would particularly look at how the mortgage amortizes over 3 years, and seeing where your break even point is with all the other costs.

Anonymous User wrote:

Civilservant wrote:A bank really doesn't care as long as your debt to income ratio for the amount borrowed from them is reasonable. It isn't really worth considering unless you get approval for a mortgage from a bank.

Then it is a matter of being within your means. If you are relying on a big law income until the note is paid, then you're hosed. If you buy something reasonable, and save money on a low mortgage as oppose to renting, then sure. The NYT had a good analysis on the tipping point in which buying is better than renting.

It comes down to how long you want to live in the house, how much you are extending yourself financially, and what your projected financial picture is in 5 years. Homes are awful short term investments, considering how much money it costs to get out.

Could you elaborate on why I'd be hosed if I'm relying on a big law income? From what I saw, a mortgage (plus maintenance) would be roughly the 3k a month I'd be paying for rent (for a 500k house, give or take $100 a month).

Also would it be mistaken to assume that worst case, after three years I could list the house for (roughly) what I paid for it? Even with the broker fees/closing costs, wouldn't I still be ahead of the 120k (or more) I'd be wasting on rent? Or alternatively, if I were to move out of NYC, couldn't I just rent it and have the rent pay my mortgage?

Assuming you are putting down 50,000, and avoiding PMI, you have to assume taxes, insurance, about 5,000 a year in maintenance, and any sort of HOA fees (if its not a single family detached not in an association). Your costs are going to probably be about 3000-4000 a month. In three years, you'd still owe about 420,000.00 USD on the property.

Not a terrible plan if 4k a month is less than a third of your take home pay. If you've got student loans and stuff, it gets tricky. It can also be dicey if you might move before three years.

Renting the house out is a whole different calculation.

Anonymous User wrote:

Civilservant wrote:A bank really doesn't care as long as your debt to income ratio for the amount borrowed from them is reasonable. It isn't really worth considering unless you get approval for a mortgage from a bank.

Then it is a matter of being within your means. If you are relying on a big law income until the note is paid, then you're hosed. If you buy something reasonable, and save money on a low mortgage as oppose to renting, then sure. The NYT had a good analysis on the tipping point in which buying is better than renting.

It comes down to how long you want to live in the house, how much you are extending yourself financially, and what your projected financial picture is in 5 years. Homes are awful short term investments, considering how much money it costs to get out.

Could you elaborate on why I'd be hosed if I'm relying on a big law income? From what I saw, a mortgage (plus maintenance) would be roughly the 3k a month I'd be paying for rent (for a 500k house, give or take $100 a month).

Also would it be mistaken to assume that worst case, after three years I could list the house for (roughly) what I paid for it? Even with the broker fees/closing costs, wouldn't I still be ahead of the 120k (or more) I'd be wasting on rent? Or alternatively, if I were to move out of NYC, couldn't I just rent it and have the rent pay my mortgage?

IMO, the problem is liquidity. If you sink money into a home, you might be able to sell at an equal or better price, but you might not. If you don't need the money right away, you can rent it out (assuming you can find a renter. I think some co-ops have restrictions on this). But if you need the money to purchase your next home, you're at the mercy of the market. It's far easier to get out of a lease than to sell a home.

re: getting hosed, a fun anecdote. I have a friend in banking whose mortgage was guaranteed by his firm. Apparently the partner told him, "we're doing this because i know you'll be the best goddamn associate with a $X mortgage hanging over your head."

so, i'm thinking about this issue too---rental prices in CA are absolutely drowning me---and I have an affluent extended family member who would be willing to put up a downpayment for that percentage ownership of a condo, partially as an investment but more to help me out.

assuming the downpayment isn't an issue, i can get a great mortgage rate through my firm's partner bank, and i think the main downside is potential costs associated with repairs. california real estate in the area i'm looking at didn't get hurt too badly in the last crash, so i think i have a decent shot at reasonable appreciation. i don't think i'd want to be there longer than 5-6 years though, which i know is costly.

insurance, property taxes, and hoa fees look similar to what i'm paying in rent now, and the ny times calculator indicates it's a decent deal, but i don't want to deal with the hassle of all the paperwork and repair bills if i'm just going to break even. i'm hoping the mortgage tax deduction and the money i can recoup selling the place in a few years makes it worth the trouble---I'd appreciate thoughts on that from anyone who's made the jump from renting to buying.

accidental anon, that was me ^^^

I'm buying in NYC (just signed contract). We're buying a place that we could afford based on my 1st year big law salary (2nd year now) with the idea that I will save money the next couple years, and if I'm shown the door as a 4th-6th year I will have savings to rely on because my next job will likely be lower salary than big law first year. It's inherently a gamble to buy on a big law salary but because mortgage interest is tax deductible for us the cost of living will be the same as renting and if prices continue to go up we will profit. So fingers crossed that my work situation stays stable and the housing market doesn't tank.

Buying sounds good until you realize there's a lot of extra costs over and above the mortgage / taxes. My A/C went out last July. There goes $5500, including the emergency rush payment to get it done quick. I need some fence repairs done - that's $3500. The exterminator I have to pay? $100/ visit. HOA isn't much, about $750 a year, but still...

All of that stuff starts to add up and can skew the benefits of buying.

Previously mentioned, but what about the NYT's logic is faulty? I realize individual circumstance can change the calculus, but I think the NYT pretty much killed it in making this choice.

https://www.nytimes.com/interactive/201 ... lator.html

I’m glad I purchased. According to our HOA, home prices in our development have increased $20K during the past year (Zillow backs up their claim). Even if prices had remained flat I strongly believe buying was easily the better decision. Granted there is the lawn and the if-it-breaks-you-fix-it disadvantage but on all other levels buying wins out.

I'm also probably a bit bitter because I got homeowners insurance renewal notice (fuck you, Texas and your bending over for insurance companies) and I'll get my property tax notice soon.

So I had read that the tipping point (the point at which it makes more financial sense to buy than rent) in Manhattan was just over 7 years, but that seems to conflict with the NYT link you sent above (for OP's rental at $3,000), which seems to make a lot of sense to me.

SowhatsNU wrote:So I had read that the tipping point (the point at which it makes more financial sense to buy than rent) in Manhattan was just over 7 years, but that seems to conflict with the NYT link you sent above (for OP's rental at $3,000), which seems to make a lot of sense to me.

There is no apartment in NYC that rents for 3k and sells for 500k. More like a million. (that might be overstating it somewhat, but call it 7-800k. 500k is a pipe dream.)

The math for condos in DC is interesting. You can find condos for between 300-350 that would rent for 1700

dixiecupdrinking wrote:

SowhatsNU wrote:So I had read that the tipping point (the point at which it makes more financial sense to buy than rent) in Manhattan was just over 7 years, but that seems to conflict with the NYT link you sent above (for OP's rental at $3,000), which seems to make a lot of sense to me.

There is no apartment in NYC that rents for 3k and sells for 500k. More like a million. (that might be overstating it somewhat, but call it 7-800k. 500k is a pipe dream.)

Here are two I found just now- not saying they're super common, but they certainly seem to be available (850 sqft, in columbus circle/midtown area)

http://streeteasy.com/building/carnegie-house/21m

http://streeteasy.com/building/carnegie-house/10i

Boston is another interesting case. Cause the rent here is outrageous, but the market is so aggressive that high downpayment and foregoing things like inspections is becoming common. And then if you move out of the T to get a true house not a condo, the commute gets awful.

SowhatsNU wrote:

dixiecupdrinking wrote:

SowhatsNU wrote:So I had read that the tipping point (the point at which it makes more financial sense to buy than rent) in Manhattan was just over 7 years, but that seems to conflict with the NYT link you sent above (for OP's rental at $3,000), which seems to make a lot of sense to me.

There is no apartment in NYC that rents for 3k and sells for 500k. More like a million. (that might be overstating it somewhat, but call it 7-800k. 500k is a pipe dream.)

Here are two I found just now- not saying they're super common, but they certainly seem to be available (850 sqft, in columbus circle/midtown area)

http://streeteasy.com/building/carnegie-house/21m

http://streeteasy.com/building/carnegie-house/10i

this is a coop. maintenance on that is 1800/month. this has to go into the equation.

ruski wrote:

SowhatsNU wrote:

dixiecupdrinking wrote:

SowhatsNU wrote:So I had read that the tipping point (the point at which it makes more financial sense to buy than rent) in Manhattan was just over 7 years, but that seems to conflict with the NYT link you sent above (for OP's rental at $3,000), which seems to make a lot of sense to me.

There is no apartment in NYC that rents for 3k and sells for 500k. More like a million. (that might be overstating it somewhat, but call it 7-800k. 500k is a pipe dream.)

Here are two I found just now- not saying they're super common, but they certainly seem to be available (850 sqft, in columbus circle/midtown area)

http://streeteasy.com/building/carnegie-house/21m

http://streeteasy.com/building/carnegie-house/10i

this is a coop. maintenance on that is 1800/month. this has to go into the equation.

And a minimum of 30% down. Which will probably be a moot point when a 0.1%er comes in and buys this place for 100% cash for their kid who finished undergrad.