How can you afford the condos in Chicago (rental, attorneys)

[Jesse69]

Originally Posted by Lookout Kid

Sure, but another 40% drop in home values would be catastrophic. Nearly everyone would choose forclosure because nearly everyone would be upside down. And pretty much every bank holding mortgages would fail in a spectacular collapse of the global financial system. And then there's the vast amounts of personal wealth down the drain on top of it all...

Did this happen to Japan with their real estate crash?

Blame Bush for laxing up the mortgage system!

[coldwine]

Originally Posted by j33

Those of us in the 40k market (I'm one of those people) are much better off renting a cheaper apartment than paying 60-70% of our monthly income on a stupid condo we can't afford, that way we can actually save some money and not find ourselves on the brink of doom if we miss a few paychecks due to losing a job.

The obsession with owning property has cause much financial ruin with some of my lower income friends. I stayed away from the whole rush to buy a condo on my income even though I was encouraged to, because I knew I couldn't afford it. Since then, I've know more than a few people who have lost their condos, and a couple who had to refinance at a much higher rate, and are now stuck with a very expensive one-bedroom condo, and a child who sleeps in the front room.

I'm going to say something that will shock a lot of people, but here goes.

You can save money.

No, really. You can actually not spend it. You can just put it away. Often times, it even grows. Crazy, right? But true.

I made about $50k a year as an accountant, and I was able to actually save about $12,000 a year. Even more. After five years, that's a whopping $60,000. I put it all down (I had about $72,000 by that point) on a studio that was about $126,000 in the Gold Coast. I then saved up again, paid off the mortgage, rented out my parking space I never used and rented out the studio. I used that income to finance another mortgage for a one bedroom... and so on.

Financial planning is so much easier than what people believe. You just have to be willing to suffer.

[LakeShoreSoxGo]

Ugh but that involves being miserly now, with no gurantee of tommorrow. Tons of people saved earlier in the decade, to watch real estate continue to fly out of reach. It's so hard not to live for now.

[coldwine]

Originally Posted by LakeShoreSoxGo

Ugh but that involves being miserly now, with no gurantee of tommorrow. Tons of people saved earlier in the decade, to watch real estate continue to fly out of reach. It's so hard not to live for now.

The negative savings trend began in the early 1990's, and didn't turn around until last month.

[Lookout Kid]

It was a tricky decision to make in the "bubble period" of 2001-2006. You could sit on the wayside and watch prices get further out of reach while you saved a larger down payment, or you could put less than 10% down and be highly leveraged. It was hard because appreciation grew much faster than anyone's savings. People who put down small down payments from about 2001-2004 did quite well. People who put down small down payments in 2005-2006 are now probably upside down on their mortgages.

As an example, a friend of mine bought a loft in Roscoe Village in 2001, rehabbed it, and walked away a couple of years later with a nearly $200,000 profit. They did this with a small down payment. It was hard to watch stuff like this without saying "I want in!". To this day they are sitting on a huge equity cushion and own a detached house in Lake View.

[ajolotl]

I need to get you and my wife together. Maybe some of this thinking will magically rub off on her.

Originally Posted by coldwine

I'm going to say something that will shock a lot of people, but here goes.

You can save money.

No, really. You can actually not spend it. You can just put it away. Often times, it even grows. Crazy, right? But true.

I made about $50k a year as an accountant, and I was able to actually save about $12,000 a year. Even more. After five years, that's a whopping $60,000. I put it all down (I had about $72,000 by that point) on a studio that was about $126,000 in the Gold Coast. I then saved up again, paid off the mortgage, rented out my parking space I never used and rented out the studio. I used that income to finance another mortgage for a one bedroom... and so on.

Financial planning is so much easier than what people believe. You just have to be willing to suffer.

[JanuaryGirl]

Originally Posted by ajolotl

400K with 20% down and current interest rates is probably around $1700 a month (rough estimate excluding property taxes but also interest tax deduction). That is super cheap for almost any professional couple. There are endless couples in Chicago that make together several hundred K per year, not to mention the reams of people with serious money.

Hm... even calculating no property tax, and very low interest rates, that monthly payment seems pretty low. Add on a several hundred for property taxes, association fees, etc. and it seems more realistic.

There are a lot of people that make more than you would think... but I also know a LOT of 20-somethings that were given a LOT of money from their parents towards a condo, some where the parents even bought it outright. Especially when the markets were better, wealthy parents would buy the condo for their kid as an "investment."

[ajolotl]

Very true. I know a lot of people who get an incredible amount of help from their families starting out (including full downpayments). Unfortunately I wasn't one of them.

at 5% 320K loan (ie 400K with 20% down) is 1717.00 per month. Yes of course there are other costs, I was just giving the mortgage amount. at 6% is is 1918.00.

Originally Posted by DNaomi

Hm... even calculating no property tax, and very low interest rates, that monthly payment seems pretty low. Add on a several hundred for property taxes, association fees, etc. and it seems more realistic.

There are a lot of people that make more than you would think... but I also know a LOT of 20-somethings that were given a LOT of money from their parents towards a condo, some where the parents even bought it outright. Especially when the markets were better, wealthy parents would buy the condo for their kid as an "investment."

[oakparkdude]

Originally Posted by ajolotl

Very true. I know a lot of people who get an incredible amount of help from their families starting out (including full downpayments). Unfortunately I wasn't one of them.

at 5% 320K loan (ie 400K with 20% down) is 1717.00 per month. Yes of course there are other costs, I was just giving the mortgage amount. at 6% is is 1918.00.

Don't forget the interest and property tax deduction on your federal taxes.

[j33]

Originally Posted by coldwine

I'm going to say something that will shock a lot of people, but here goes.

You can save money.

No, really. You can actually not spend it. You can just put it away. Often times, it even grows. Crazy, right? But true.

I made about $50k a year as an accountant, and I was able to actually save about $12,000 a year. Even more. After five years, that's a whopping $60,000. I put it all down (I had about $72,000 by that point) on a studio that was about $126,000 in the Gold Coast. I then saved up again, paid off the mortgage, rented out my parking space I never used and rented out the studio. I used that income to finance another mortgage for a one bedroom... and so on.

Financial planning is so much easier than what people believe. You just have to be willing to suffer.

I realize that you've lived a charmed life, in which you went to the University of Chicago almost for free, travel the world, and make money hand-over-fist, are able to walk comfortably in the snow wearing stiletto heels, and have never suffered any unexpected financial setbacks, but that isn't quite how it works out for everyone ya know.