Will $500K be enough to buy? Or should I just rent instead of buying? (renters, co-op)

[Alkonost]

Originally Posted by bluedog2

You can also own a similar unit in other places for less than the mortgage and maintenance combined..... and then deduct most of it.

yup!

If you can afford to buy instead of rent, it usually pays off (provided you're going to live there for 5 years or more- it takes time for the apartment to appreciate in value)

Just don't buy an apartment in a poorly run condo or coop.

[mathjak107]

becareful how you look at those deductions you all like to talk about as a benefit . they can be very mis-leading.

in order to deduct anything it means you are spending 4 dollars over and above the price of the property just to get back 1 .

get rid of those deductions and your better off. that property has to escalate 3 to 4x in value just to break even from un-reimbursed mortgage interest and real estate taxes. we havent even touched the other costs that go with ownership.

the other point is its the renter that really has the better tax deal. a renter gets the same standard deduction as a home owner. a couple who rents may not use the entire 11,400.00 standard deduction up and whats left over is a bonus to them.

the homeowner actually loses the first 11,400 in mortgage interest and property taxes to the standard deduction while actually pulling that money out of the piggy bank and spending it.

on the other hand except for state and local taxes the renter may be adding money to that piggy bank with the rest of the standard deduction.

i tell folks never figure the deductions as a benefit. it all it means is you pulled additional money over and above the cost of the property out of your piggy bank and may see 1 of those extra dollaes come back.

you may not even get any deduction at all depending on whether you hit the amt tax or not and also your deduction for interest becomes less and less as time goes on until eventually out of your entire mortgage payment your writing off no interest to speak of.

consider one other thing too. here in ny the cost of buying can be about 30% more compared to renting for many many years until the lines cross and rents are higher than the cost of ownership.


our apartment in bayside which we rent would run about 300k. just the income we get on 300k pays our rent. if we bought it would run another 1k a month in maintence charges making buying 12k a year more and that assumes no maintaince increases.

at the typical rent increase we have about 7 to 10 years before buying is cheaper but then again we dont know what the maintaince will go up to over that time frame either.


bottom line is dont look at renting vs buying as if one is a better deal than the other. look at it for all the non financial reasons you may want to buy.

freedom from landlords, pride of ownership, security of owning your own place, freedom to make it the way you want it ,etc.

[Alkonost]

Originally Posted by mathjak107

becareful how you look at those deductions you all like to talk about as a benefit . they can be very mis-leading.

in order to deduct anything it meands you are spending 4 dollars over and above the price of the property just to get back 1 .

get rid of those deductions and your better off.

the other point is its the renter that really has the better tax deal. a renter gets the same standard deduction as a home owner. a couple who rents may not use the entire 11,400.00 standard deduction up and whats left over is a bonus to them.

the homeowner actually loses the first 11,400 in mortgage interest and property taxes to the standard deduction while actually pulling that money out of the piggy bank and spending it.

on the other hand except for state and local taxes the renter may be adding money to that piggy bank with the rest of the standard deduction

Mortgage interest and property tax is deductible, and if memory serves the interest portion of your building fees can be used as an income adjustment- but you have to itemize your taxes. However any assessments are not deductible. bummer.

[mathjak107]

your missing the point,while its deductable not only are you spending 4 dollars over and above the cost of the house or apartment to get back 1 dollar but the first 11,400 in mortgage interest and real estate taxes are lost to the standard deduction which you would have gotten as a renter anyway.


mortgage interest and taxes are an expense,they are no different than an electric bill a repair, a gardner etc. the fact you get a piece of that expense back if its mortgage interest or real estate taxes is nice but it isnt a good thing. you would be much better off if you didnt have the expense. paying mortgage interest isnt a good thing, more than likely you would be ahead with no mortgage and no deduction. if the bank gave you 1% financing wouldnt you be ahead even though you can deduct less? of course you would.



any calculations as to rent vs buy have to start after the first 11,400.00 if your a couple. your fooling yourself if you dont start your calculations after the standard deduction if your trying to compare true after tax costs of ownership vs renting.

[Alkonost]

Originally Posted by mathjak107

your missing the point,while its deductable not only are you spending 4 dollars over and above the cost of the house or apartment to get back 1 dollar but the first 11,400 in mortgage interest and real estate taxes are lost to the standard deduction which you would have gotten as a renter anyway.


mortgage interest and taxes are an expense,they are no different than an electric bill a repair, a gardner etc. the fact you get a piece of that expense back if its mortgage interest or real estate taxes isnt a good thing. you would be much better off if you didnt have the expense.

any calculations as to rent vs buy have to start after the first 11,400.00 if your a couple. your fooling yourself if you dont start your calculations after the standard deduction if your trying to compare true costs of ownership vs renting.

The only scenario where renting beats ownership is if it is cheaper to rent than to buy, or if you don't plan on staying put for more than 5 years. Right now the rental prices are so high that the opposite is true (even WITH taxes and fees), and in the end you have equity in a home that appreciates over time- with rent you get nothing and you may as well be burning your money.

[mathjak107]

very very wrong about renting.

let me ask you this:

suppose i rented a house to live in . lets suppose i bought a similiar house using my down payment money and bought a rental property and rented that one out to a tenant...

if i got more rent on my rental then im paying am i at a disadvantage because im renting? of course not.


lets suppose instead of buying a rental property i bought other assets instead that generated even more of a total return than the rental property. is renting a dis-advantage? of course not.

its not whether you buy or rent, its all about if you rent what did you do with the money you would have plunked down for a down payment ,closing costs and the difference in expenses each month as its rare the early years of buying are going to be the same or less than renting unless you plunk down a whopper of a down payment

the part your missing is in both cases either renting or buying both are purely expenses.they represent your housing costs. at the end of a lifetime both will leave you in the negative. the expenses of buying and maintaing a property for a lifetime will easily eclipse the residual value of any home.

even if you sell the clock keeps ticking and the expenses keep adding up on the next place.

the real issue is which one do you lose the least on, buying or renting as in either case you will spend lots of money for housing you and your family.
thats going to depend on what the renter did and what assets he bought if he didnt tie up the money in the house. renting can be a very powerful tool for someone with the discipline to invest the money he isnt tying up in the house .

the question is how many renters have that discipline? not many and thats the problem. most renters will just get a better apartment, better car etc and they wont have those other assets that shift the equation.

renting and investing elswhere is no better or worse than buying . in fact many times it works out by retirement the renter has higher housing costs from rent increases but a bigger nest egg to generate income with since almost all asset classes surpassed home appreciation by as much as 4x . the homeowner may have lower housing costs but a smaller nest egg. assuming they both are working with the same amount of money over their lifetime.

things can work out just as bad or just as well in either case.

[goodlife36]

Originally Posted by bluedog2

You can also own a similar unit in other places for less than the mortgage and maintenance combined..... and then deduct most of it.

Isn't amazing how few people know this?

[Alkonost]

Originally Posted by mathjak107

very very wrong about renting.

let me ask you this:

suppose i rented a house. lets suppose i bought a similiar house instead as a rental property and rented that one out to a tenant...

if i got more rent on my rental then im paying am i at a disadvantage because im renting? of course not.

First of all you're changing the subject with this imaginary scenario of acquiring an income property to offset one's financial losses from remaining in an inflated rental apartment.

That is not the case or subject here. We are talking about buying a primary residence in which to live in (which the OP is considering doing) to avoid paying inflated rent, not buying a separate income property to offset one's ongoing financial losses from inflated rent.

Originally Posted by mathjak107

lets suppose instead of buying a rental property i bought other assets instead that generated even more of a total return than the rental property. is renting a dis-advantage? of course not.

Like what? Stock? Commercial real estate? Investing in venture capital? You're going to have to be more specific then that for illustrating a magical return making soooo much money on a 150k investment (after taxes) that one can pay inflated rent and still be well into the green. And you're also going to have to stop assuming we're talking about buying a rental property for income, we're taking about a primary residence scenario.

Originally Posted by mathjak107

its not whether you buy or rent, its all about if you rent what did you do with the money you would have plunked down for a down payment ,closing costs and the difference in expenses each month as its rare the early years of buying are going to be the same or less than renting unless you plunk down a whopper of a down payment.

I'm going to remind you we are talking about the OP buying a primary residence with 30% down which he says he has. That qualifies as a whopper. No coop or condo worth their salt will let you buy in for less than 20%.

I'm also going to remind you, again, that it only makes sense to buy if you plan on staying put for 5 years or more.

For starters, you'd have equity in your apartment with a down payment (which you can sell to recoup) which builds even more as you pay your mortgage off.

With renting an apartment that is more than or equal to mortgage, you get NADA, zip, zilch. You get nothing back, no savings, no equity, nothing. You may as well burn your money.

Originally Posted by mathjak107

the part your missing is in both cases either renting or buying both are purely expenses.they represent your housing costs. at the end of a lifetime both will leave you in the negative. the expenses of buying and maintaing a property for a lifetime will easily eclipse the residual value of any home.

Incorrect. They're not purely expenses, you are getting real estate in exchange- which is an investment- instead of pissing your money away into a rental where you get nothing in exchange for your "housing expenses".

While stock investments will have a higher return in the very, verrrrry long run, you can't reside in a stock portfolio, but you can live in a real estate that you own. And even if the return isn't as high on it as stocks, you're better off owning it since it will appreciate over time and lock in your housing costs, as opposed to paying inflated market rate rents that are only going to go up.

Furthermore you're grossly out of touch with real estate appreciation, especially NYC real estate where the demand, short supply and high wages protect it from market fluctuations. IF you hold on to a property long enough for it to appreciate and ride out any cycles and bubbles (note that I REPEATEDLY said this only makes sense if you plan to stay for more than 5 years), it takes far less than a lifetime to make a profit (1980-2004 home prices went up 247%). That's much more of a return than pissing that away into rent and getting 0% back.

Originally Posted by mathjak107

even if you sell the clock keeps ticking and the expenses keep adding up on the next place.

You are erroneously assuming that rental prices do not go up- they DO, frightfully so compared to a stable mortgage. If you rent, you have no hope of controlling your housing costs. You are at the mercy of the market- something which bleeds countless NYC renters dry and keeps them in a financial downward spiral or stalemate where they cannot save any money to escape their situation or invest in other things. If you buy, you are locking in your housing costs, probably lowering them considering the inflated rent prices you'd otherwise pay, and getting property you can sell once it has had time to appreciate.

Originally Posted by mathjak107

the real issue is which one do you lose the least on, buying or renting.

The evidence is clearly in favor of buying.

Originally Posted by mathjak107

thats going to depend on what the renter did and what assets he bought if he didnt tie up the money in the house. renting can be a very powerful tool for someone with the discipline to invest the money he isnt tying up in the house .

This assumes a number of things which may not apply to the OP as he is looking for a place to live, and not buying a rental property to offset his inflated cost of living.

If the OP has 30% down on a 500k property that's 150k. That's not enough money, especially in the short term, to live off in in terms of interest or investment income. WE are also talking about NYC rents and real estate, where rents are so high it costs less to get a mortgage.

If you're talking about someone with more money than God who makes 800k+ a year or more on investments alone, then yes it probably wouldn't make a difference to that person whether he rents or buys.

But guess what, I don't think the OP is in that situation, do you?

[goodlife36]

Originally Posted by mathjak107

very very wrong about renting.

let me ask you this:

suppose i rented a house to live in . lets suppose i bought a similiar house using my down payment money and bought a rental property and rented that one out to a tenant...

if i got more rent on my rental then im paying am i at a disadvantage because im renting? of course not.


lets suppose instead of buying a rental property i bought other assets instead that generated even more of a total return than the rental property. is renting a dis-advantage? of course not.

its not whether you buy or rent, its all about if you rent what did you do with the money you would have plunked down for a down payment ,closing costs and the difference in expenses each month as its rare the early years of buying are going to be the same or less than renting unless you plunk down a whopper of a down payment

the part your missing is in both cases either renting or buying both are purely expenses.they represent your housing costs. at the end of a lifetime both will leave you in the negative. the expenses of buying and maintaing a property for a lifetime will easily eclipse the residual value of any home.

even if you sell the clock keeps ticking and the expenses keep adding up on the next place.

the real issue is which one do you lose the least on, buying or renting as in either case you will spend lots of money for housing you and your family.
thats going to depend on what the renter did and what assets he bought if he didnt tie up the money in the house. renting can be a very powerful tool for someone with the discipline to invest the money he isnt tying up in the house .

the question is how many renters have that discipline? not many and thats the problem. most renters will just get a better apartment, better car etc and they wont have those other assets that shift the equation.

renting and investing elswhere is no better or worse than buying . in fact many times it works out by retirement the renter has higher housing costs from rent increases but a bigger nest egg to generate income with since almost all asset classes surpassed home appreciation by as much as 4x . the homeowner may have lower housing costs but a smaller nest egg. assuming they both are working with the same amount of money over their lifetime.

things can work out just as bad or just as well in either case.

I am in the process of re-entering the rental market and the cost of rent today is ridiculous. I did not pay these prices ten years ago. I now understand why people are amazed how I am able to travel and purchase high ticket items.

What other investments allows you to live there and build equity overtime? It kills two birds with one stone. You do not have to sell the home to pull out money and it can be turned into a business to generate cash flow. It gives you autonomy and shields you from rental hikes. I 've read on this forum about all of the outrageous rental increases. My house payment actually went down $7.00.

[mathjak107]

A simple mix of 25% in gold,a total market index fund,cash and long term treasuries rebalanced once a year has returned over 9% cagr for almost 40 years now so as far as a simple investment anyone can make thats your example.

Your only talking about enough growth in investments to subsidize your rent payments as they rise.

My own example is my first investment property back in 1987 was a co-op. It cost me 1200 a month maintaince and mortgage with 20% down and closing costs.

It rented for 800.00 at the time.

If my tenant put that same 20k into that mix above and simply put the difference per month into that mix for all those years it took for the rent to surpass my costs she would have more today than the value of my apartment even counting pulling some out each year to cover the average 3-4% rent increases.
today the apartment rents for 1600 bucks and her portfolio would easily have covered the rent increases each year of 3-4% while gaining an average of 9%
.

even my home i owned was an interesting study. i sold our co-op and bought a house back in the 1980's. the house was 169k.. we sold the house in 2004 for 335k ... that sounds pretty good except for the fact if i threw the same money into the portfolio it would have been worth almost 1.9 million...

after even subtracting out all the rent i would have paid it left enough over to buy 2 homes today.

thats the logic of what im saying.

some people have the cash and have a choice about whether to plunk it down and buy a home or rent and invest. others may only have the down payment money to invest. in either case you can be succesful .

its all a question of what your options are, your wants and the deals you can get . there is no rule that says one way is better than the other