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While I am starting this thread in NYC where I live, I believe this could apply to many other real estate markets in the country where prices are exorbitant. Given the absurd rent prices in the city, it has always been my goal to purchase a condo or God willing, a townhouse. However, despite my best efforts, the numbers just don't add up. I am thus perplexed as to how others can afford anything here.
Let's break it down. A person who makes $200,000 a year, for example, takes in after taxes, approximately $9,000/month. Taking out 20% for savings, s/he would have approximately $7,200 left. Even in an optimistic scenario where our prospective buyer were to save $0, living in Manhattan, s/he would spend each month approximately $500 on groceries, $50 on home insurance, utilities of approximately $100, entertainment/shopping/going out $700. That leaves our person approximately $7650/month to spend on mortgage + common charges + maintenance. Common charges and maintenance in Manhattan, based on the listings I've seen, would run you about $2,000/month, if not more, leaving us with $5,650.
How much can you afford with $5,650/month in mortgage, real estate taxes, and fees? That's approximately a home purchase price of $500,000. What can you buy in Manhattan for $500,000? NOTHING. Most 1bedroom co-ops would start around $800,000! That's not mentioning the fact that you are not saving anything and would also need at least $160,000 for down payment.
So how do they do it? Mind you, I used an annual salary of $200,000, which is in the top 5% salary in the country!
I understand that some people make much more, some are foreign investors, some people inherit money/property or have a huge windfall, but I can't imagine that all these saturate the market. There has to be some secret I don't know.
Many people can sell stock to afford it, from a stock bonus, a strong IPO, or just doing well on their own with a mutual fund or the right individual stocks, especially if they were in on the bull market early on. Others are successful owners of smaller private companies with access to enough money for a big down payments or an all cash purchase
i did it using the most powerful force on the planet , compounding small amounts over time.
i started very early on investing in mutual funds and the compounding through the years grew enough to let me branch out in to investments in real estate , most of which have been in manhattan.
but i will say this . investing in real estate is a profession like any other.
it isn't passive investing . it is all about the deal on the buy side and for that you need contacts and connections .
paying market price and hoping inflation or gentrification bails you out is what most folks do and in the long run they would have been better of in mutual funds over the long term .
While I am starting this thread in NYC where I live, I believe this could apply to many other real estate markets in the country where prices are exorbitant. Given the absurd rent prices in the city, it has always been my goal to purchase a condo or God willing, a townhouse. However, despite my best efforts, the numbers just don't add up. I am thus perplexed as to how others can afford anything here.
Let's break it down. A person who makes $200,000 a year, for example, takes in after taxes, approximately $9,000/month. Taking out 20% for savings, s/he would have approximately $7,200 left. Even in an optimistic scenario where our prospective buyer were to save $0, living in Manhattan, s/he would spend each month approximately $500 on groceries, $50 on home insurance, utilities of approximately $100, entertainment/shopping/going out $700. That leaves our person approximately $7650/month to spend on mortgage + common charges + maintenance. Common charges and maintenance in Manhattan, based on the listings I've seen, would run you about $2,000/month, if not more, leaving us with $5,650.
How much can you afford with $5,650/month in mortgage, real estate taxes, and fees? That's approximately a home purchase price of $500,000. What can you buy in Manhattan for $500,000? NOTHING. Most 1bedroom co-ops would start around $800,000! That's not mentioning the fact that you are not saving anything and would also need at least $160,000 for down payment.
So how do they do it? Mind you, I used an annual salary of $200,000, which is in the top 5% salary in the country!
I understand that some people make much more, some are foreign investors, some people inherit money/property or have a huge windfall, but I can't imagine that all these saturate the market. There has to be some secret I don't know.
So how is that relevant? Its NYC, its not "the country".
In any event, God is clearly not willing it for you so come up with plan B.
While I am starting this thread in NYC where I live, I believe this could apply to many other real estate markets in the country where prices are exorbitant. Given the absurd rent prices in the city, it has always been my goal to purchase a condo or God willing, a townhouse. However, despite my best efforts, the numbers just don't add up. I am thus perplexed as to how others can afford anything here.
Let's break it down. A person who makes $200,000 a year, for example, takes in after taxes, approximately $9,000/month. Taking out 20% for savings, s/he would have approximately $7,200 left. Even in an optimistic scenario where our prospective buyer were to save $0, living in Manhattan, s/he would spend each month approximately $500 on groceries, $50 on home insurance, utilities of approximately $100, entertainment/shopping/going out $700. That leaves our person approximately $7650/month to spend on mortgage + common charges + maintenance. Common charges and maintenance in Manhattan, based on the listings I've seen, would run you about $2,000/month, if not more, leaving us with $5,650.
How much can you afford with $5,650/month in mortgage, real estate taxes, and fees? That's approximately a home purchase price of $500,000. What can you buy in Manhattan for $500,000? NOTHING. Most 1bedroom co-ops would start around $800,000! That's not mentioning the fact that you are not saving anything and would also need at least $160,000 for down payment.
So how do they do it? Mind you, I used an annual salary of $200,000, which is in the top 5% salary in the country!
I understand that some people make much more, some are foreign investors, some people inherit money/property or have a huge windfall, but I can't imagine that all these saturate the market. There has to be some secret I don't know.
People that are good at saving money can do a lot better than those budget numbers that you gave. Also, it's likely they would have had their eyes on trying to buy a place years before the market started getting out of hand so they would have a head start on the downpayment. If they wanted to pull the trigger now, my guess is they've been saving for the past 5-10 years or like others have stated, they have access to reserve cash (stocks, family gifts, etc). Also, don't underestimate that people can live UNDER their means if they are trying to save money. Having roommates, not eating out often, bringing your lunch to work, cutting cable TV, cutting shopping (outside of nececessary items), etc goes a long way in saving cash.
How did you come up with that kind of monthly mortgage payment on a 500k mortgage?
Truth to the matter is that anyone who makes 200k/year and has owning an apartment in Manhattan as their highest priority could do it.
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