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Depends. How much do you earn, how much do you pay for rent, and how much would a comprable apartment cost for you. You can always save money by going in foreclosure sales though, but that means essentially means entering a bidding war.
I would also feel more comfortable buying a condo/co-op as a couple honestly, since in this climate I'd want the second income to keep some stability if one of use were to lose our job.
it all depends why you want to buy. financially buying may not be the best for accumulating the biggest pile of money at the end of the game . renting and investing elswhere typically will give you the biggest return for the buck money wise.
historically a diversified portfolio easily beat by 2 to 3x the rate of home appreciation . a portfolio can easily generate far more income than rent increases will go up.
my own home which i bought in 1987 in kew garden hills for 169 was worth 335k when i sold it in the early 2000's. that same amount of money in the fidelity funds i use would be worth 1.4 million. thats more than enough to subtract out decades of rent and have enough to buy 2 homes today.
but there are reasons for owning, pride of ownership,security and being your own boss.
just dont do it if you think financially its the only way to get ahead ,far from it.
now we rent in bayside and have a beautiful apartment right by bay terrace . we still own a 2nd home in the poconos which we thought we would retire to but the maintaince and expenses are just so high on a home in a harsh winter area that we put it up for sale 3 weeks ago.
i bought my first rental property in 1987. a co-op in kew gardens near the queens court house.being the great market timer that i am i closed 2 weeks before the biggest market crash both in stocks and real estate in nyc that we ever saw..
by the time the smoke cleared i lost 30% in value. i had a mortgage based on the value i bought it at and maintaince to pay but i couldnt get a penny more in rent than the markets went for.
it took us 10 years to finally get to a point where the rent was the same as my costs.
my tenants benefited big time. it cost me 1200 per month while they slowley worked their way up from 800 a month over the next decade.
of course today the rent is 1650 and the apartments are double but you know what?
if my tenant merely invested the 15k i put down , the closing costs and the difference between the rent and my costs for that decade in nothing special mutual funds , she could subtract out all the rent she paid me and had enough left to buy 2 apartments today.
Last edited by mathjak107; 07-04-2011 at 05:14 PM..
no one knows which way things are headed .but even if things drop a little more so what.if you will be living in the house for a while so what if things dip?
ask yourself this:
if you managed to catch the very bottom of the market and when you sold you missed the very top of the market are you any worse off than someone who missed the last 10% of the drop but sold at the peak? of course not.
its just as silly as folks who negotiate the best possible deal on a new car and then trade it back into the dealer on a wholesale level when they buy the next one.
as i said earlier a home is not an investment ,its an expense and as such you should be buying it not for financial reasons but for all the other reasons there are for owning your own home.
i dont want the headaches anymore that go with a home so after we sell ours i choose not to own anymore at this point but that doesnt mean its not right for the next person.
as i said earlier a home is not an investment ,its an expense and as such you should be buying it not for financial reasons but for all the other reasons there are for owning your own home.
So then add up all the monthly costs of buying and compare it to the monthly costs of renting a comparable place and voila,you have an answer. The hard part is dollar valuing the intangibles but it can be done with a little thought.
And get that time frame settled because you don't want to pay closing costs for a mortgage initiation, etc., and then high brokers costs on selling for short term ownership.
most folks sell and move in the first 7 years. they pay tons in interest and closing costs .
the problem is housing costs whether you buy or rent never stop.they just keep accumulating until we die .
they are expenses and in both renting and buying the costs exceed the residual value any house may have.
typically the way it works out is over long periods of time is the home owner has less housing costs than the renter . over time the renter who invested that difference in the early years or plunked down a lump sum will have higher housing expenses over a lifetime but much higher income from a pile of investments to pay those costs with. from a pure numbers standpoint because homes appreciate so little in comparison to other assets the renter can win with a much larger nest egg.
but and its a big but...most renters will not invest that money they are saving.they will get a nicer apartment,better car etc and so without discipline the renter can end up the big looser instead of the big winner. at least the homeowner has a consolation prize.
im both a renter, a homeowner until we sell our 2nd home , a rental property owner and an investor. i got a vested interest in them all.
think about this" here in bay terrace where we rent we can buy a similiar 2 bedroom apartment for 330k..... we pay 1700 a month rent but even nonstabilized is 2100.00 a month.
just the income we get on 330k pays the rent. if we bought instead of renting the maintaince fee is another 1k a month. thats 12,000 a year more to buy than rent. thats about the proverbial decade before rents equal buying.
as an investor i can grow alot of money over that time frame and all investments grow faster than the rent increases ever did..
Last edited by mathjak107; 07-05-2011 at 09:28 AM..
I agree with mathjak107. I myself have never been a homeowner and religiously placed my savings into no-load index mutual funds via bimonthly deductions. And I've done well enough since 1997 to semi-retire.
But, fundamentally, if one is a renter and does not wisely save the differential between a rent and mortgage costs, then you'd be worse off. I guess the nice thing about having a mortgage is that the discipline of making the monthly payments is helpful for people who otherwise lack the self-control.
The condo/coop fees will kill you in Manhattan. Alone it would make your rent feel like a bargain in comparison with the cost of ownership especially if you live in a place over 1000 sq. ft.
The homeowner fees = money thrown away pretty much, and it can easily be 2K a month for an average quality apartment. it is not always something you can control either.
Your mortgage alone will be higher than your rent most likely and most of it in first years will go towards interest = money thrown away, not to build equity. So, if you require mobility and will need to relocate, you won't be able to recoup your expenses with the sale unless you stay put for many years. If you want to rent out when you move, you won't be able to cover your expenses with the tenant's rent and will be negative.
I would not buy in the market where cost of ownership is significantly higher than cost of rent. But, if it's the opposite, it is a much better idea to own.
If you can buy a place that you can rent to cover your mortgage and then some, I would do it. But, you also have to remember that even if you stay put for 20 years to pay off your mortgage, if you only make min payments you have paid way more than your property was worth (interest/fees). You need to do the math and decide if you can afford to prepay and pay off earlier, it's the key. The chances are higher if you live below your means.
If you think that putting your potential downpayment plus the differential bet. rental and ownwership price into the market would give you automatically higher return think again. Not many people are disciplined enough to make such large returns as the PP indicated. Mutual funds can be losing you money too. Any investment is not risk free. And if you are also going to be tempted to trade with your money and to go for large quick returns, chances are you would be better off and safer putting that downpayment where it belongs and prepaying your mtg.
there is almost no place decent where right off the bat it will be cheaper or the same to buy as it is to rent unless you put alot down or something is wrong. typically 8 to 10 years are needed before for the total costs connected with owning equal the rent. you would need to find a totaly depressed area of foreclosures to have that happen from day 1.
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