Delete

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Topic Author
Goldie50
Posts: 13
Joined: Sun May 12, 2024 11:23 pm

Delete

Post by Goldie50 »

Delete
Last edited by Goldie50 on Sun Jun 16, 2024 8:28 pm, edited 1 time in total.
BirdFood
Posts: 518
Joined: Sat Mar 23, 2024 12:15 pm

Re: Am I buying too much condo? NYC $2mm

Post by BirdFood »

You're committing to doubling your housing costs. That feels worrying.

A big part of your stated reason for going over budget is size, but your post doesn't offer any details about size. How big is this? How big is your current rental? What makes you feel that you need this size?
Phaedrus
Posts: 77
Joined: Sat Feb 27, 2010 6:31 pm

Re: Am I buying too much condo? NYC $2mm

Post by Phaedrus »

What is your motivation for buying?

Personally, given your age, uncertainty about job/kids, ratio of HHI to savings, etc., if I were you, I'd rent for longer. Save more money, get some clarity on if you will have a kid (in which case, things like school zones become important), etc., and re-visit buying in 5 years.
Cruise
Posts: 2846
Joined: Mon Nov 21, 2016 6:17 pm

Re: Am I buying too much condo? NYC $2mm

Post by Cruise »

Can you—yes. Should you?

My rule of thumb was buy a home that would be affordable if one spouse lost their job. How does that metric work for you?
nyclon
Posts: 722
Joined: Fri Oct 02, 2015 5:30 pm

Re: Am I buying too much condo? NYC $2mm

Post by nyclon »

Goldie50 wrote: Thu Jun 06, 2024 12:03 am Am I buying too much home? NYC, Married, both 30-32, at most one kid in the future, but potentially none.

This would be our first home purchase after renting all our lives. We do not have any large inheritances or anything like that in our future.

Potentially accepting offer for $2.01mm (after closing costs & concessions)/$1.98mm (before closing costs, after concessions). Condo was listed at $2.15mm (before closing costs). This is a new construction.

Mortgage: Planning to finance 80% at an ARM of about 6.5%, which implies total monthly housing expenses of ~$14k after principal, interest, and HOA/taxes

Currently renting at about $7.2k/month, excluding electricity, internet, etc type bills

Pre-tax HHI: ~$730k, ~$50k of which is in deferred equity. This could either go up 10-15% per year if staying in current role/field or decrease 20-30% if I switch out of client services to an industry role

Combined Net Assets: $320k in cash, $500k in brokerage, $400k in IRAs/401ks, $50k in HSA

Assuming we move forward with this purchase, and add in our other personal expenses and net pay after 401k/IRA/HSA contributions, we would be saving ~$35-$50k per year.

We are hesitating to pull the trigger here. This is a more expensive place than we initially sought out for (we were looking in the $1.5-1.7mm range initially) but have found that this is the size that we could grow into (vs feel is too small in 3-5 years) and also preserve optionality to have a kid or re-sell at better value. We have made offers and viewed many other units that are cheaper (in the $1.7mm range mostly) but we have question marks around whether they will appreciate/be hard to sell or whether rental cash flow will be material.

We have at times, dreamed of FIRE, but this purchase may eliminate that possibility altogether, make us house poor, and tie us to my stressful career.

Any advice would be much appreciated as we need to decide in the next couple days.
So the options are you can rent for $7k/mo or pay more for an upgrade. No commitments.

Or shell out $14k/mo plus this happens? “We have at times, dreamed of FIRE, but this purchase may eliminate that possibility altogether, make us house poor, and tie us to my stressful career.”

How is this even a question?
wunwun1
Posts: 81
Joined: Fri May 24, 2024 7:47 am

Re: Am I buying too much condo? NYC $2mm

Post by wunwun1 »

Op,

A few things that are not clear for me:

1/ How much is your current spending per year? Including and excluding rent?

2/ How much is your current saving per year?

3/ How much will you be spending per year after the purchase?

4/ How much will you be saving per year after the purchase?

5/ How many years have you been earning high income? (useful info to assess your net worth)

6/ What is your profession? (Useful info to assess job security)
Valuethinker
Posts: 49659
Joined: Fri May 11, 2007 11:07 am

Re: Am I buying too much condo? NYC $2mm

Post by Valuethinker »

Goldie50 wrote: Thu Jun 06, 2024 12:03 am

We have at times, dreamed of FIRE, but this purchase may eliminate that possibility altogether, make us house poor, and tie us to my stressful career.

Any advice would be much appreciated as we need to decide in the next couple days.
There are a lot of red flags in that sentence.

I would say that it's worth a "stretch" to get a dream property, forever home etc. If this is your ideal Inter-war Upper East Side home, or that Brooklyn Brownstone, well then, it's worth building a life there.

You only live once, and I am always telling people here that the right home can be part of that, the debt eventually gets repaid, life goes on.

But you are sacrificing optionality. A *lot* of optionality.

I would think again, on this one. If you subsequently have a child, you can buy a bigger place, you might well move out of town (school issues etc).
eric321
Posts: 228
Joined: Thu Jan 14, 2021 9:49 pm

Re: Am I buying too much condo? NYC $2mm

Post by eric321 »

The NYC mansion tax at $1mm+ makes trading up for a larger apartment more costly.

How long do you see yourself in this condo? 5+ years, the numbers should work out for you.

Your mortgage payment isn't all spend. There is a principal component where you are paying yourself back. This is lower at first and increases over time.

You can refi your mortgage if rates move lower. This is market dependent but you have that option.

Capital gains, the first $500k are excluded from gains. This is an IRS gift to homeowners.

As a real estate investor, I don't like NYC returns and cap rates (investor returns). If you work in NYC and love NYC, the decision process is different.

Ultimately is do you see any near term change in location or job. If you see steadyness, it can make sense.
muffins14
Posts: 6052
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Am I buying too much condo? NYC $2mm

Post by muffins14 »

I also bought a 2M a condo in Manhattan in 2023. My thoughts:

1) you should deduct the mortgage interest. Thus you save some money there and are not paying $14k. Maybe more like $12k?

2) you mention renting and appreciation. Don’t assume your condo will beat inflation. Be conservative. Why are you interested in renting it? Don’t assume you’d make money as a landlord.

2a) buy it because you want it as a primary residence, not as an investment or rental unit

3) consider buying an older place and renovating

4) consider a co-op not a condo

If you love NY and want to stay you can do it, but you need to build up your savings and will be tied to your industry for a while. Renting is pretty great too. Why not rent another year and see how you feel?
Crom laughs at your Four Winds
Topic Author
Goldie50
Posts: 13
Joined: Sun May 12, 2024 11:23 pm

Re: Am I buying too much condo? NYC $2mm

Post by Goldie50 »

BirdFood wrote: Thu Jun 06, 2024 12:23 am You're committing to doubling your housing costs. That feels worrying.

A big part of your stated reason for going over budget is size, but your post doesn't offer any details about size. How big is this? How big is your current rental? What makes you feel that you need this size?
Correct, it would be double at the current rates, until we refinance (ideally in the next few years). At a ~5% interest rate, the monthly housing expenses would be closer to 12.5k, assuming 2% annual increases in carrying costs.

This would be about 100 sq feet larger than my current rental. My current rental is in an older building that is less comfortable to live in. It’s less about the change in size and more about the change in neighborhood and quality of building.

Would your answer change if instead of this, it was an $11.8k/month housing expense unit, 200 sq feet smaller, same building for closer to $1.77mm after closing costs and $1.675mm before??
muffins14
Posts: 6052
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Am I buying too much condo? NYC $2mm

Post by muffins14 »

Goldie50 wrote: Thu Jun 06, 2024 7:53 am
BirdFood wrote: Thu Jun 06, 2024 12:23 am You're committing to doubling your housing costs. That feels worrying.

A big part of your stated reason for going over budget is size, but your post doesn't offer any details about size. How big is this? How big is your current rental? What makes you feel that you need this size?
Correct, it would be double at the current rates, until we refinance (ideally in the next few years). At a ~5% interest rate, the monthly housing expenses would be closer to 12.5k, assuming 2% annual increases in carrying costs.

This would be about 100 sq feet larger than my current rental. My current rental is in an older building that is less comfortable to live in. It’s less about the change in size and more about the change in neighborhood and quality of building.

Would your answer change if instead of this, it was an $11.8k/month housing expense unit, 200 sq feet smaller, same building for closer to $1.77mm after closing costs and $1.675mm before??
The 30k in additional cost is nothing in the long term if you truly prefer the $2.01M home to the $1.77M one. More important to make sure the overall budget fits and that you have a home you’d stay in for 10 years+
Crom laughs at your Four Winds
mikejuss
Posts: 3092
Joined: Tue Jun 23, 2020 1:36 pm

Re: Am I buying too much condo? NYC $2mm

Post by mikejuss »

If you're saving only $50,000 a year on $730,000 of household income, something's wrong, OP. You also seem shaky on whether you're going to have a kid. I'd hold off on this purchase for a few years, boost your savings rate, and see how your life evolves in the meantime.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
muffins14
Posts: 6052
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Am I buying too much condo? NYC $2mm

Post by muffins14 »

I don’t know if this is helpful, but for our condo, we spent $2M and have monthly costs of $11500 including HOA, special assessment through 2029, taxes, and a mortgage payment at 4.75%. It’s entirely deductible though so effectively we pay more like 2.6% and effectively the monthly payment is more like $11500-$3000= $8500 or so.

So $8500 monthly cost currently, and income around $1M combined now, around 880k when we bought. Current portfolio is about 1.5M

If that means anything, then perhaps my suggestion is that you’re doing OK, but will want to hope (pray) that you can refinance. Make sure you deduct mortgage interest, and try to get a new raise / promotion to set you up for more savings. If you’re having kids this is going to stretch your FIRE goal to a longer timeline now
Last edited by muffins14 on Thu Jun 06, 2024 8:22 am, edited 1 time in total.
Crom laughs at your Four Winds
muffins14
Posts: 6052
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Am I buying too much condo? NYC $2mm

Post by muffins14 »

mikejuss wrote: Thu Jun 06, 2024 8:13 am If you're saving only $50,000 a year on $730,000 of household income, something's wrong, OP. You also seem shaky on whether you're going to have a kid. I'd hold off on this purchase for a few years, boost your savings rate, and see how your life evolves in the meantime.
I think the meant 50k after all 401k/HSA savings. So maybe that’s like 140-150k between two mega-backdoor Roth and 50k on top of that? They can confirm. Even that seems a little light, and perhaps expenses are high for some reason
Last edited by muffins14 on Thu Jun 06, 2024 8:17 am, edited 1 time in total.
Crom laughs at your Four Winds
mikejuss
Posts: 3092
Joined: Tue Jun 23, 2020 1:36 pm

Re: Am I buying too much condo? NYC $2mm

Post by mikejuss »

muffins14 wrote: Thu Jun 06, 2024 8:16 am
mikejuss wrote: Thu Jun 06, 2024 8:13 am If you're saving only $50,000 a year on $730,000 of household income, something's wrong, OP. You also seem shaky on whether you're going to have a kid. I'd hold off on this purchase for a few years, boost your savings rate, and see how your life evolves in the meantime.
I think the meant 50k after all 401k/HSA savings. So maybe that’s like 140-150k between two mega-backdoor Roth and 50k on top of that? They can confirm.
Who said anything about a mega-backdoor Roth?

And even if the savings number is $150,000, that's only a 20% savings rate. That's O.K., but not great.
Last edited by mikejuss on Thu Jun 06, 2024 8:19 am, edited 1 time in total.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
muffins14
Posts: 6052
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Am I buying too much condo? NYC $2mm

Post by muffins14 »

mikejuss wrote: Thu Jun 06, 2024 8:17 am
muffins14 wrote: Thu Jun 06, 2024 8:16 am
mikejuss wrote: Thu Jun 06, 2024 8:13 am If you're saving only $50,000 a year on $730,000 of household income, something's wrong, OP. You also seem shaky on whether you're going to have a kid. I'd hold off on this purchase for a few years, boost your savings rate, and see how your life evolves in the meantime.
I think the meant 50k after all 401k/HSA savings. So maybe that’s like 140-150k between two mega-backdoor Roth and 50k on top of that? They can confirm.
Who said anything about a mega-backdoor Roth?

And even if the savings number is $150,000, that's only a 20% savings rate. That's O.K., but not great.
I made a hypothetical guess, based on them saying something about “net pay after 401k/IRA”. They can follow up and let us know the details. I agree the savings seems too small relative to income, at least for someone who hopes to FIRE
Crom laughs at your Four Winds
dknightd
Posts: 3885
Joined: Wed Mar 07, 2018 10:57 am

Re: Am I buying too much condo? NYC $2mm

Post by dknightd »

My quick read says. You are thinking about buying more than (or near the limit of) what you need or can afford.
That does not mean it is a bad decision. It may work out great, or not.

My brother did this. It has worked out great for him. He now owns a house he could likely not afford to buy today. I was more conservative. I bought a cheap house. I can comfortably afford where I live. But could never afford to buy my brothers house.

He lived with 20 years of uncertainty. I would not want to do that. Different strokes for different folks. He has had heart problems, I have not. That may or may not be due to stress. Don't know
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
wunwun1
Posts: 81
Joined: Fri May 24, 2024 7:47 am

Re: Am I buying too much condo? NYC $2mm

Post by wunwun1 »

mikejuss wrote: Thu Jun 06, 2024 8:17 am
muffins14 wrote: Thu Jun 06, 2024 8:16 am
mikejuss wrote: Thu Jun 06, 2024 8:13 am If you're saving only $50,000 a year on $730,000 of household income, something's wrong, OP. You also seem shaky on whether you're going to have a kid. I'd hold off on this purchase for a few years, boost your savings rate, and see how your life evolves in the meantime.
I think the meant 50k after all 401k/HSA savings. So maybe that’s like 140-150k between two mega-backdoor Roth and 50k on top of that? They can confirm.
Who said anything about a mega-backdoor Roth?

And even if the savings number is $150,000, that's only a 20% savings rate. That's O.K., but not great.
It seems op does not want to come forward with the numbers, although they are asking whether the numbers work.

I asked this above and OP has responded to other comments after my post, indicating that they saw it but opted not to disclose.
wunwun1 wrote: Thu Jun 06, 2024 2:33 am Op,

A few things that are not clear for me:

1/ How much is your current spending per year? Including and excluding rent?

2/ How much is your current saving per year?

3/ How much will you be spending per year after the purchase?

4/ How much will you be saving per year after the purchase?

5/ How many years have you been earning high income? (useful info to assess your net worth)

6/ What is your profession? (Useful info to assess job security)
User avatar
TomatoTomahto
Posts: 17579
Joined: Mon Apr 11, 2011 1:48 pm

Re: Am I buying too much condo? NYC $2mm

Post by TomatoTomahto »

mikejuss wrote: Thu Jun 06, 2024 8:13 am If you're saving only $50,000 a year on $730,000 of household income, something's wrong, OP. You also seem shaky on whether you're going to have a kid. I'd hold off on this purchase for a few years, boost your savings rate, and see how your life evolves in the meantime.
Whether it’s $50k or $150k, the point still stands. I understand that NYC is expensive, and there are many temptations, but I would continue renting until (if ever) you can afford something on the lower of one of your salaries.
I get the FI part but not the RE part of FIRE.
Tundrama
Posts: 283
Joined: Thu Mar 11, 2021 9:26 am

Re: Am I buying too much condo? NYC $2mm

Post by Tundrama »

Money stress is a relentless churning of molten crud in the pit of your gut.

Don’t do it. With your income, you can build up your net worth quickly if you sacrifice now and have a truly reasonable and well disciplined budget.

…your little voice is already speaking to you. Listen to it!
z3r0c00l
Posts: 3905
Joined: Fri Jul 06, 2012 11:43 am
Location: NYC

Re: Am I buying too much condo? NYC $2mm

Post by z3r0c00l »

Get a nice $1.2 million 2 BR 1 B in Park Slope instead, problem solved.
70% Global Stocks / 30% Bonds
finite_difference
Posts: 3684
Joined: Thu Jul 09, 2015 7:00 pm

Re: Am I buying too much condo? NYC $2mm

Post by finite_difference »

Did you try the NYT Rent vs Buy Calculator?
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
SubPar
Posts: 501
Joined: Mon Apr 27, 2020 11:48 am

Re: Am I buying too much condo? NYC $2mm

Post by SubPar »

Yeah, kind of agree with the general sentiment -- if it doesn't feel right, don't move forward.
London
Posts: 766
Joined: Sun Dec 11, 2016 10:50 am

Re: Am I buying too much condo? NYC $2mm

Post by London »

Like most decisions in life, it comes down to risk tolerance. OP has to decide for themself, what level of uncertainty they can handle without causing negative stress in their life.
FootballFan5548
Posts: 402
Joined: Mon May 01, 2017 2:20 pm

Re: Am I buying too much condo? NYC $2mm

Post by FootballFan5548 »

If you're incredibly stable in your jobs/careers with very little chance of layoff and expected raises/higher income in the future, I guess i'd consider it.

However, given where you are in your life, the current/future economic situation which feels unstable, and that monthly cost I personally would pass.

I have the same household income as you, and my monthly housing costs are $4,500. I couldn't dream of paying 3x that just for housing.

NYC is expensive as is, i'd spend less on housing and more on experiences like eating out, going to shows, travel, etc... just my thoughts.
Topic Author
Goldie50
Posts: 13
Joined: Sun May 12, 2024 11:23 pm

Re: Am I buying too much condo? NYC $2mm

Post by Goldie50 »

muffins14 wrote: Thu Jun 06, 2024 7:28 am I also bought a 2M a condo in Manhattan in 2023. My thoughts:

1) you should deduct the mortgage interest. Thus you save some money there and are not paying $14k. Maybe more like $12k?

2) you mention renting and appreciation. Don’t assume your condo will beat inflation. Be conservative. Why are you interested in renting it? Don’t assume you’d make money as a landlord.

2a) buy it because you want it as a primary residence, not as an investment or rental unit

3) consider buying an older place and renovating

4) consider a co-op not a condo

If you love NY and want to stay you can do it, but you need to build up your savings and will be tied to your industry for a while. Renting is pretty great too. Why not rent another year and see how you feel?
Very helpful. Were you in a similar financial position as me at the time? Do you think I’m jumping the gun here and should save/rent for another year? The other option is to buy a $300k cheaper place in the same building, with monthly housing expenses a $2k/month lower, not including refi.

We have looked at a couple older buildings and co-ops but have been turned off by the investment and effort required to renovate. We really like the feel of the newer building and not having the inconvenience of people doing construction for so long vs moving in and having it be more livable on day 1.

Have been renting for 10+ years, but this is by far the highest our rent has ever been. Paying $84k/month on rent just seems irresponsible vs building up some equity and having a more permanent home. We also wonder if there’s some value to having less optionality (counterintuitively). Putting down the investment would force us to kind of focus on making the grass greener where we water it vs. always longing for something else. We’ve moved cities 3 times in 10 years.
muffins14
Posts: 6052
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Am I buying too much condo? NYC $2mm

Post by muffins14 »

Goldie50 wrote: Thu Jun 06, 2024 9:29 am
muffins14 wrote: Thu Jun 06, 2024 7:28 am I also bought a 2M a condo in Manhattan in 2023. My thoughts:

1) you should deduct the mortgage interest. Thus you save some money there and are not paying $14k. Maybe more like $12k?

2) you mention renting and appreciation. Don’t assume your condo will beat inflation. Be conservative. Why are you interested in renting it? Don’t assume you’d make money as a landlord.

2a) buy it because you want it as a primary residence, not as an investment or rental unit

3) consider buying an older place and renovating

4) consider a co-op not a condo

If you love NY and want to stay you can do it, but you need to build up your savings and will be tied to your industry for a while. Renting is pretty great too. Why not rent another year and see how you feel?
Very helpful. Were you in a similar financial position as me at the time? Do you think I’m jumping the gun here and should save/rent for another year? The other option is to buy a $300k cheaper place in the same building, with monthly housing expenses a $2k/month lower, not including refi.

We have looked at a couple older buildings and co-ops but have been turned off by the investment and effort required to renovate. We really like the feel of the newer building and not having the inconvenience of people doing construction for so long vs moving in and having it be more livable on day 1.

Have been renting for 10+ years, but this is by far the highest our rent has ever been. Paying $84k/month on rent just seems irresponsible vs building up some equity and having a more permanent home. We also wonder if there’s some value to having less optionality (counterintuitively). Putting down the investment would force us to kind of focus on making the grass greener where we water it vs. always longing for something else. We’ve moved cities 3 times in 10 years.
When we bought we had perhaps 1.4M portfolio and then put 600k of that into the condo and closing costs. We then spent too much on a renovation, but whatever.

I think if you are not sure whether or not you want kids, I would consider renting or at least convincing yourself you are OK in the current location with kids. It's possible your priorities for space / neighborhood change with kids. Or not. Only you know that.

"Paying $84k/year on rent just seems irresponsible vs building up some equity" I would try to ignore this way of thinking. You are spending money to have a roof over your head, it's not throwing it away. Put differently, you say that $84k/year on rent feels irresponsible, but then you are going to be OK spending $103k/year on interest payments? You are paying 84k a year to have a) flexibility to walk away any time, b) move for work, c) avoid maintenance, d) keep your down payment invested in stocks instead of locked up in home equity, and e) avoid major financial issues like a huge assessment. Things happen to homes, and they can be expensive. If your rental literally blew up, you can get your possessions via renters insurance and never think about it again

When we bought, I figured that *maybe* it would be a financial net positive after 30 years, but who knows. It might not be. I wanted to protect against the downside risk of rental inflation being 6-7-8% per year, in which case having a locked-in payment felt better than the rental increases. I also just thought a condo was cool, and it's something like a luxury purchase. For example you can eat sandwiches all day, but Michelin-star dinners sure are really fun. The sandwich is obviously better financially but the fancy dinner gives you some sense of personal satisfaction that may go beyond the financial issues. We want to be in NYC long-term, and like our neighborhood and condo, so were willing to make this purchase and commit to it.

You seem a little on the fence. I would renew your lease, save another 200k, and see how you feel next year. This is a bit of a one-way street. If you buy now, you are going to pay a lot in taxes and commissions. If you regret it and want to sell, you again are going to pay a lot in taxes and commissions. like hundreds of thousands of dollars in total. If you have kids, they are going to be expensive. You are young, you have a good income, you have no kids, and you can move around the city to keep your rent low and really pile money into savings. It might be a really good time to focus on improving your job and your savings/budgeting for 1-2 years to get ahead of the game, and then revisit this.

Edit to add:
We have lived in NYC for 10 years, and had about 5 different rental apartments through those years. Nothing wrong with moving around to find a good deal.
Last edited by muffins14 on Thu Jun 06, 2024 9:49 am, edited 3 times in total.
Crom laughs at your Four Winds
User avatar
BrooklynInvest
Posts: 1266
Joined: Sun Jul 28, 2013 9:23 am

Re: Am I buying too much condo? NYC $2mm

Post by BrooklynInvest »

Been there. Couple of things OP -

1. You don't mention common charges, taxes, past/future assessments etc. Are those significant? They can be, especially with doormen buildings. All other things being equal I'd want the purchase price relatively high and the common charges relatively low because you benefit from gains in only one of those inputs.

2. Remember mortgage (and SALT) deductions are now capped so your tax situation doesn't improve markedly with an expensive mortgage as it once did. I'd operate on the assumption that that unpleasantness stays even though they'll hopefully expire soon.

3. If you're thinking of staying medium- to long-term (and that's criteria #2 in this decision, closely behind "Do I have the money?") school zones and such come into play. A large mortgage plus private school can be tough on some folks.

4. New construction to me was always risky. A lot of unknowns with the potential to add to my cost/hassle. It may well be that you're getting a good deal as a result of that but only you can tell.

Good luck OP. I bought a ramshackle brownstone 20 years ago with finances nowhere near as healthy as yours. A few frugal years got things trending on the right track but it was stressful at times.
Topic Author
Goldie50
Posts: 13
Joined: Sun May 12, 2024 11:23 pm

Re: Am I buying too much condo? NYC $2mm

Post by Goldie50 »

wunwun1 wrote: Thu Jun 06, 2024 8:32 am
mikejuss wrote: Thu Jun 06, 2024 8:17 am
muffins14 wrote: Thu Jun 06, 2024 8:16 am
mikejuss wrote: Thu Jun 06, 2024 8:13 am If you're saving only $50,000 a year on $730,000 of household income, something's wrong, OP. You also seem shaky on whether you're going to have a kid. I'd hold off on this purchase for a few years, boost your savings rate, and see how your life evolves in the meantime.
I think the meant 50k after all 401k/HSA savings. So maybe that’s like 140-150k between two mega-backdoor Roth and 50k on top of that? They can confirm.
Who said anything about a mega-backdoor Roth?

And even if the savings number is $150,000, that's only a 20% savings rate. That's O.K., but not great.
It seems op does not want to come forward with the numbers, although they are asking whether the numbers work.

I asked this above and OP has responded to other comments after my post, indicating that they saw it but opted not to disclose.
wunwun1 wrote: Thu Jun 06, 2024 2:33 am Op,

A few things that are not clear for me:

1/ How much is your current spending per year? Including and excluding rent? >> Average of $8-10k/month over a year, including vacations and excluding rent. I could bring this down to $5-6k/month including vacations as we would probably focus on saving more. Add in the current $6.7k/month rent currently (or $7.1k/month if I renew my lease).

2/ How much is your current saving per year? >> Currently saving around $150k/year after maxing out retirement and HSA type accounts

3/ How much will you be spending per year after the purchase? >> Hard to say, but estimate could be $122k/year this year + $167k/year of annual housing = ~$290k/year. Comp would increase 10-15% per year and lifestyle would presumably get better work-wise

4/ How much will you be saving per year after the purchase? >> Based on the above, ~$55k/year ish, after maxing out all accounts (Roth, etc)

5/ How many years have you been earning high income? (useful info to assess your net worth) >> past two years. Prior to that income was closing to the 250-400k range HH. Net worth based on total accounts is around $1.3mm right now but can increase rapidly if I stay in current role

>> Yes I can do a mega backdoor Roth.
6/ What is your profession? (Useful info to assess job security). I work in finance and wife works in data.
I was not intending to avoid any questions. I appreciate the input received so far. I wanted to be more thoughtful in updating the numbers for these questions.

I have responded to your questions in-line above in the quotation box.
Topic Author
Goldie50
Posts: 13
Joined: Sun May 12, 2024 11:23 pm

Re: Am I buying too much condo? NYC $2mm

Post by Goldie50 »

BrooklynInvest wrote: Thu Jun 06, 2024 9:42 am Been there. Couple of things OP -

1. You don't mention common charges, taxes, past/future assessments etc. Are those significant? They can be, especially with doormen buildings. All other things being equal I'd want the purchase price relatively high and the common charges relatively low because you benefit from gains in only one of those inputs.

2. Remember mortgage (and SALT) deductions are now capped so your tax situation doesn't improve markedly with an expensive mortgage as it once did. I'd operate on the assumption that that unpleasantness stays even though they'll hopefully expire soon.

3. If you're thinking of staying medium- to long-term (and that's criteria #2 in this decision, closely behind "Do I have the money?") school zones and such come into play. A large mortgage plus private school can be tough on some folks.

4. New construction to me was always risky. A lot of unknowns with the potential to add to my cost/hassle. It may well be that you're getting a good deal as a result of that but only you can tell.

Good luck OP. I bought a ramshackle brownstone 20 years ago with finances nowhere near as healthy as yours. A few frugal years got things trending on the right track but it was stressful at times.
1. For common charges + taxes, I referred to those as “carrying costs” which are $3.3k/month. I don’t have any info on assessments, I don’t think any are needed in the near future. My model assumes a 2% increase in both common charges and property taxes, for illustrative purposes.

2. Good point. I would probably hire an accountant to help with taxes if I purchased

3. I am personally leaning towards not having kids, I just added it to the top to acknowledge there is a non-zero chance that we have one. There are schools nearby this building. We recognize we would need to live in this building for at least 7+ years to make this worthwhile.
Valuethinker
Posts: 49659
Joined: Fri May 11, 2007 11:07 am

Re: Am I buying too much condo? NYC $2mm

Post by Valuethinker »

Goldie50 wrote: Thu Jun 06, 2024 9:45 am
wunwun1 wrote: Thu Jun 06, 2024 8:32 am
mikejuss wrote: Thu Jun 06, 2024 8:17 am
muffins14 wrote: Thu Jun 06, 2024 8:16 am
mikejuss wrote: Thu Jun 06, 2024 8:13 am If you're saving only $50,000 a year on $730,000 of household income, something's wrong, OP. You also seem shaky on whether you're going to have a kid. I'd hold off on this purchase for a few years, boost your savings rate, and see how your life evolves in the meantime.
I think the meant 50k after all 401k/HSA savings. So maybe that’s like 140-150k between two mega-backdoor Roth and 50k on top of that? They can confirm.
Who said anything about a mega-backdoor Roth?

And even if the savings number is $150,000, that's only a 20% savings rate. That's O.K., but not great.
It seems op does not want to come forward with the numbers, although they are asking whether the numbers work.

I asked this above and OP has responded to other comments after my post, indicating that they saw it but opted not to disclose.
wunwun1 wrote: Thu Jun 06, 2024 2:33 am Op,

A few things that are not clear for me:

1/ How much is your current spending per year? Including and excluding rent? >> Average of $8-10k/month over a year, including vacations and excluding rent. I could bring this down to $5-6k/month including vacations as we would probably focus on saving more. Add in the current $6.7k/month rent currently (or $7.1k/month if I renew my lease).

2/ How much is your current saving per year? >> Currently saving around $150k/year after maxing out retirement and HSA type accounts

3/ How much will you be spending per year after the purchase? >> Hard to say, but estimate could be $122k/year this year + $167k/year of annual housing = ~$290k/year. Comp would increase 10-15% per year and lifestyle would presumably get better work-wise

4/ How much will you be saving per year after the purchase? >> Based on the above, ~$55k/year ish, after maxing out all accounts (Roth, etc)

5/ How many years have you been earning high income? (useful info to assess your net worth) >> past two years. Prior to that income was closing to the 250-400k range HH. Net worth based on total accounts is around $1.3mm right now but can increase rapidly if I stay in current role

>> Yes I can do a mega backdoor Roth.
6/ What is your profession? (Useful info to assess job security). I work in finance and wife works in data.
I was not intending to avoid any questions. I appreciate the input received so far. I wanted to be more thoughtful in updating the numbers for these questions.

I have responded to your questions in-line above in the quotation box.
The condo will be a financial stretch. So you only want to do that if:

- you are dead certain about your job (and it is about you - which is harder to judge; for example in tech right now it seems to be a bit of a bloodbath)

- either you expect your income to rise, or conversely you can cram down your expenses. Either allowing you to move the mortgage down to a more comfortable level in 5-10 years

Neither of these things appears to be true. So my gut is you are going to have to pass on this "opportunity". You are not in a position where you can double your cost of living.

The danger is that as interest rates come down, the NYC housing market will shoot away, again. I keep thinking (I live in London, and know the Toronto/ Vancouver housing markets passably well) that prices will finally succumb to gravity. But it doesn't happen - partly due to the shortage of new construction (in condos in Toronto, that has not been the case, city is condo capital of North America).

Fear Of Missing Out. But this doesn't sound like the right move for you.
knowledge
Posts: 498
Joined: Wed Mar 02, 2011 4:44 pm

Re: Am I buying too much condo? NYC $2mm

Post by knowledge »

Based on your comments, I would wait. The open question about children is really the biggest uncertainty. You still have a decade of reasonable child rearing years ahead. But if you're confident you won't have kids, then sure, I think what you're proposing is fine, but as you said, you'll be stuck in a specific lifestyle to support the house you'll be buying.
Topic Author
Goldie50
Posts: 13
Joined: Sun May 12, 2024 11:23 pm

Re: Am I buying too much condo? NYC $2mm

Post by Goldie50 »

muffins14 wrote: Thu Jun 06, 2024 9:41 am
Goldie50 wrote: Thu Jun 06, 2024 9:29 am
muffins14 wrote: Thu Jun 06, 2024 7:28 am I also bought a 2M a condo in Manhattan in 2023. My thoughts:

1) you should deduct the mortgage interest. Thus you save some money there and are not paying $14k. Maybe more like $12k?

2) you mention renting and appreciation. Don’t assume your condo will beat inflation. Be conservative. Why are you interested in renting it? Don’t assume you’d make money as a landlord.

2a) buy it because you want it as a primary residence, not as an investment or rental unit

3) consider buying an older place and renovating

4) consider a co-op not a condo

If you love NY and want to stay you can do it, but you need to build up your savings and will be tied to your industry for a while. Renting is pretty great too. Why not rent another year and see how you feel?
Very helpful. Were you in a similar financial position as me at the time? Do you think I’m jumping the gun here and should save/rent for another year? The other option is to buy a $300k cheaper place in the same building, with monthly housing expenses a $2k/month lower, not including refi.

We have looked at a couple older buildings and co-ops but have been turned off by the investment and effort required to renovate. We really like the feel of the newer building and not having the inconvenience of people doing construction for so long vs moving in and having it be more livable on day 1.

Have been renting for 10+ years, but this is by far the highest our rent has ever been. Paying $84k/month on rent just seems irresponsible vs building up some equity and having a more permanent home. We also wonder if there’s some value to having less optionality (counterintuitively). Putting down the investment would force us to kind of focus on making the grass greener where we water it vs. always longing for something else. We’ve moved cities 3 times in 10 years.
When we bought we had perhaps 1.4M portfolio and then put 600k of that into the condo and closing costs. We then spent too much on a renovation, but whatever.

I think if you are not sure whether or not you want kids, I would consider renting or at least convincing yourself you are OK in the current location with kids. It's possible your priorities for space / neighborhood change with kids. Or not. Only you know that.

"Paying $84k/year on rent just seems irresponsible vs building up some equity" I would try to ignore this way of thinking. You are spending money to have a roof over your head, it's not throwing it away. Put differently, you say that $84k/year on rent feels irresponsible, but then you are going to be OK spending $103k/year on interest payments? You are paying 84k a year to have a) flexibility to walk away any time, b) move for work, c) avoid maintenance, d) keep your down payment invested in stocks instead of locked up in home equity, and e) avoid major financial issues like a huge assessment. Things happen to homes, and they can be expensive. If your rental literally blew up, you can get your possessions via renters insurance and never think about it again

When we bought, I figured that *maybe* it would be a financial net positive after 30 years, but who knows. It might not be. I wanted to protect against the downside risk of rental inflation being 6-7-8% per year, in which case having a locked-in payment felt better than the rental increases. I also just thought a condo was cool, and it's something like a luxury purchase. For example you can eat sandwiches all day, but Michelin-star dinners sure are really fun. The sandwich is obviously better financially but the fancy dinner gives you some sense of personal satisfaction that may go beyond the financial issues. We want to be in NYC long-term, and like our neighborhood and condo, so were willing to make this purchase and commit to it.

You seem a little on the fence. I would renew your lease, save another 200k, and see how you feel next year. This is a bit of a one-way street. If you buy now, you are going to pay a lot in taxes and commissions. If you regret it and want to sell, you again are going to pay a lot in taxes and commissions. like hundreds of thousands of dollars in total. If you have kids, they are going to be expensive. You are young, you have a good income, you have no kids, and you can move around the city to keep your rent low and really pile money into savings. It might be a really good time to focus on improving your job and your savings/budgeting for 1-2 years to get ahead of the game, and then revisit this.

Edit to add:
We have lived in NYC for 10 years, and had about 5 different rental apartments through those years. Nothing wrong with moving around to find a good deal.
This is great context. Would your response/recommendation change if it was a $1.7mm condo at closer to $10-11/k month in total housing expenses (mortgage principal + interest + HOA + taxes). I honestly really want to make a deal here given how much we’ve invested in the process (sunk cost fallacy, I know). But I think you are right that renting probably makes more sense, especially given job uncertainty (so much can change in my job in 6 months).

On my point about moving - i meant 4 cities in 10 years. 7 different apartments during that time. It would just be nice for us both to settle into one apartment and make it feel Iike home.
muffins14
Posts: 6052
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Am I buying too much condo? NYC $2mm

Post by muffins14 »

Goldie50 wrote: Thu Jun 06, 2024 9:45 am
1/ How much is your current spending per year? Including and excluding rent? >> Average of $8-10k/month over a year, including vacations and excluding rent. I could bring this down to $5-6k/month including vacations as we would probably focus on saving more. Add in the current $6.7k/month rent currently (or $7.1k/month if I renew my lease).

2/ How much is your current saving per year? >> Currently saving around $150k/year after maxing out retirement and HSA type accounts

3/ How much will you be spending per year after the purchase? >> Hard to say, but estimate could be $122k/year this year + $167k/year of annual housing = ~$290k/year. Comp would increase 10-15% per year and lifestyle would presumably get better work-wise

4/ How much will you be saving per year after the purchase? >> Based on the above, ~$55k/year ish, after maxing out all accounts (Roth, etc)

5/ How many years have you been earning high income? (useful info to assess your net worth) >> past two years. Prior to that income was closing to the 250-400k range HH. Net worth based on total accounts is around $1.3mm right now but can increase rapidly if I stay in current role

>> Yes I can do a mega backdoor Roth.
6/ What is your profession? (Useful info to assess job security). I work in finance and wife works in data.
OK tough love, given the new information:

How are you spending 8-10k per month excluding rent? My partner and I spend about $5k per month, maybe $6k-$6.5k max on average including vacations during the year. You're spending extra $4k PER MONTH - that's a lot of money. Why do you each need an additional $2k over my budget? (rhetorical, don't need to answer, but think about this)

Your 150k total annual savings is just too low. At your income you should be saving like 250k at least. You aren't going to reach your goals if you're saving 150k now and are going to reduce it by 90-100k to pay for the things this condo requires. You really need to examine this budget. $55k savings is not going to get the job done.

And then you want to have a kid with your $2M house and only saving $55k? Your kid will eat into that $55k and you will not be saving much.

My recommendations:
1) Figure out your budget into categories
2) Decide whether you want to spend 8-10k per month on those things, or if you want to invest in your portfolio or a home. You probably shouldn't buy the home if you maintain your current level of expenses.
3) If you decide you want to buy a condo, figure out how to cut expenses so you're still saving $150k annually after the purchase, rather than $55k
Crom laughs at your Four Winds
muffins14
Posts: 6052
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Am I buying too much condo? NYC $2mm

Post by muffins14 »

Goldie50 wrote: Thu Jun 06, 2024 9:56 am
This is great context. Would your response/recommendation change if it was a $1.7mm condo at closer to $10-11/k month in total housing expenses (mortgage principal + interest + HOA + taxes). I honestly really want to make a deal here given how much we’ve invested in the process (sunk cost fallacy, I know). But I think you are right that renting probably makes more sense, especially given job uncertainty (so much can change in my job in 6 months).
I honestly think the 1.7mm vs 2mm doesn't matter, and 11k vs 14k doesn't matter, since you will deduct some of that interest and it will be more like 9k vs 12k. The difference will be washed out by being happy in the new house and avoiding another transaction cost when unhappy. And you may be able to refinance anyway.

The much more important thing is your overall budget, and rent-vs-buy in the first place. If you can reduce from 8-10k spending to 5-6k spending, then the house would be easier for you. It's a lifestyle choice.

Avoid the sunken-cost fallacy, if you can. There will still be homes for sale in 2025, and your realtor will enjoy your money in 2025 just like they enjoy it in 2024
Crom laughs at your Four Winds
bombcar
Posts: 1793
Joined: Sun Aug 12, 2007 6:41 pm

Re: Am I buying too much condo? NYC $2mm

Post by bombcar »

You mentioned a neighborhood change as a prime driver.

What options for renting in that neighborhood/area exist? If you're in a rental inversion (and many places in the USA are now, I can rent a house here for $2100 a month that would cost $2600 in mortgage payments alone to buy 80/20) you may want to move to the good neighborhood and rent there.

From what I've read you'd be putting basically all your eggs in this condo basket, leaving you little room for maneuvering. This can lead to resentment over little things that really shouldn't matter, and make you unhappy.

Perhaps stay where you are, renting, and save the difference for a year, see how it works out or if it puts too much pressure on you.
FoolMeOnce
Posts: 1473
Joined: Mon Apr 24, 2017 11:16 am

Re: Am I buying too much condo? NYC $2mm

Post by FoolMeOnce »

muffins14 wrote: Thu Jun 06, 2024 9:41 am "Paying $84k/year on rent just seems irresponsible vs building up some equity" I would try to ignore this way of thinking. You are spending money to have a roof over your head, it's not throwing it away. Put differently, you say that $84k/year on rent feels irresponsible, but then you are going to be OK spending $103k/year on interest payments?
+1 If paying $84k/year on rent and saving/investing what is left seems irresponsible, why is paying even more on the non-equity portion of a mortgage (and thereby having less to save/invest) not even more irresponsible? On top of that, of the lesser amount you have to save/invest, a portion will be directed to the equity. Whether that is good or bad compared to other ways to invest is up to you.
User avatar
Que1999
Posts: 281
Joined: Mon May 30, 2016 10:27 am

Re: Am I buying too much condo? NYC $2mm

Post by Que1999 »

Goldie50 wrote: Thu Jun 06, 2024 12:03 am Am I buying too much home? NYC, Married, both 30-32, at most one kid in the future, but potentially none.

This would be our first home purchase after renting all our lives. We do not have any large inheritances or anything like that in our future.

Potentially accepting offer for $2.01mm (after closing costs & concessions)/$1.98mm (before closing costs, after concessions). Condo was listed at $2.15mm (before closing costs). This is a new construction.

Mortgage: Planning to finance 80% at an ARM of about 6.5%, which implies total monthly housing expenses of ~$14k after principal, interest, and HOA/taxes

Currently renting at about $7.2k/month, excluding electricity, internet, etc type bills

Pre-tax HHI: ~$730k, ~$50k of which is in deferred equity. This could either go up 10-15% per year if staying in current role/field or decrease 20-30% if I switch out of client services to an industry role

Combined Net Assets: $320k in cash, $500k in brokerage, $400k in IRAs/401ks, $50k in HSA

Assuming we move forward with this purchase, and add in our other personal expenses and net pay after 401k/IRA/HSA contributions, we would be saving ~$35-$50k per year.

We are hesitating to pull the trigger here. This is a more expensive place than we initially sought out for (we were looking in the $1.5-1.7mm range initially) but have found that this is the size that we could grow into (vs feel is too small in 3-5 years) and also preserve optionality to have a kid or re-sell at better value. We have made offers and viewed many other units that are cheaper (in the $1.7mm range mostly) but we have question marks around whether they will appreciate/be hard to sell or whether rental cash flow will be material.

We have at times, dreamed of FIRE, but this purchase may eliminate that possibility altogether, make us house poor, and tie us to my stressful career.

Any advice would be much appreciated as we need to decide in the next couple days.
It's a huge commitment, and something that is very difficult to quantify is having optionality in future career prospects as a renter, especially at your young ages. Find yourself an amortization calculator online and see just how much you'd be spending on interest vs equity buildup if after 5 or 10 years you decide this place isn't for you. My guess is the vast majority of dollars will be going to your lender and not your investment... Usually the later half of your mortgage is when equity buildup really starts to become meaningful.

Overnight you'd be securing yourselves a negative net worth to buy this place. It seems like a huge bet on NYC real estate, when many would say you're crazy to bet on NYC real estate these days... but of course that is speculation.
HereToLearn
Posts: 1590
Joined: Sat Mar 17, 2018 5:53 pm

Re: Am I buying too much condo? NYC $2mm

Post by HereToLearn »

muffins14 wrote: Thu Jun 06, 2024 10:03 am
Goldie50 wrote: Thu Jun 06, 2024 9:56 am
This is great context. Would your response/recommendation change if it was a $1.7mm condo at closer to $10-11/k month in total housing expenses (mortgage principal + interest + HOA + taxes). I honestly really want to make a deal here given how much we’ve invested in the process (sunk cost fallacy, I know). But I think you are right that renting probably makes more sense, especially given job uncertainty (so much can change in my job in 6 months).
I honestly think the 1.7mm vs 2mm doesn't matter, and 11k vs 14k doesn't matter, since you will deduct some of that interest and it will be more like 9k vs 12k. The difference will be washed out by being happy in the new house and avoiding another transaction cost when unhappy. And you may be able to refinance anyway.

The much more important thing is your overall budget, and rent-vs-buy in the first place. If you can reduce from 8-10k spending to 5-6k spending, then the house would be easier for you. It's a lifestyle choice.

Avoid the sunken-cost fallacy, if you can. There will still be homes for sale in 2025, and your realtor will enjoy your money in 2025 just like they enjoy it in 2024
I thought that interest was only deductible on the first $750K of a mortgage? I realize that Manhattan property taxes are quite low, so I doubt you run up against the $10K property tax cap that I do in the suburbs.

I agree with waiting another year or two to accumulate additional savings and analyze cash flow.
life_force_prana
Posts: 114
Joined: Wed Jan 31, 2024 2:44 pm

Re: Am I buying too much condo? NYC $2mm

Post by life_force_prana »

Goldie50 wrote: Thu Jun 06, 2024 12:03 am but we have question marks around whether they will appreciate/be hard to sell or whether rental cash flow will be material.

We have at times, dreamed of FIRE, but this purchase may eliminate that possibility altogether, make us house poor, and tie us to my stressful career.

Any advice would be much appreciated as we need to decide in the next couple days.
I have a rental condo in that market and can tell you from an experienced guess that it will not be cash flow positive if you ever rent out in future. Mine was a 2007 purchase so it does generate income but buying today's prices no way. My tenants are high income professional couples but even though they can easily afford rent, buying will certainly double their monthly payment making them pause or move out to far burbs to buy. Most class A properties in HCOL areas are an appreciation play over long term, not a cash flow play like you would in class B/C properties in M/LCOL cities.

So I would only buy if you plan to live there a long time and can be close to a forever-ish home. Buying-selling transaction costs at this price makes selling in short to medium term a financially bad proposition. Since you guys are double income, hopefully you do not need to distress sell in future.
muffins14
Posts: 6052
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Am I buying too much condo? NYC $2mm

Post by muffins14 »

HereToLearn wrote: Thu Jun 06, 2024 10:59 am
muffins14 wrote: Thu Jun 06, 2024 10:03 am
Goldie50 wrote: Thu Jun 06, 2024 9:56 am
This is great context. Would your response/recommendation change if it was a $1.7mm condo at closer to $10-11/k month in total housing expenses (mortgage principal + interest + HOA + taxes). I honestly really want to make a deal here given how much we’ve invested in the process (sunk cost fallacy, I know). But I think you are right that renting probably makes more sense, especially given job uncertainty (so much can change in my job in 6 months).
I honestly think the 1.7mm vs 2mm doesn't matter, and 11k vs 14k doesn't matter, since you will deduct some of that interest and it will be more like 9k vs 12k. The difference will be washed out by being happy in the new house and avoiding another transaction cost when unhappy. And you may be able to refinance anyway.

The much more important thing is your overall budget, and rent-vs-buy in the first place. If you can reduce from 8-10k spending to 5-6k spending, then the house would be easier for you. It's a lifestyle choice.

Avoid the sunken-cost fallacy, if you can. There will still be homes for sale in 2025, and your realtor will enjoy your money in 2025 just like they enjoy it in 2024
I thought that interest was only deductible on the first $750K of a mortgage? I realize that Manhattan property taxes are quite low, so I doubt you run up against the $10K property tax cap that I do in the suburbs.

I agree with waiting another year or two to accumulate additional savings and analyze cash flow.
They will probably have 10k property tax or more likely 15-18k

They also have state and local income tax that will be like 60-70k
Crom laughs at your Four Winds
the_wiki
Posts: 3323
Joined: Thu Jul 28, 2022 11:14 am

Re: Am I buying too much condo? NYC $2mm

Post by the_wiki »

Goldie50 wrote: Thu Jun 06, 2024 12:03 am

We have at times, dreamed of FIRE, but this purchase may eliminate that possibility altogether, make us house poor, and tie us to my stressful career.
Yes it would.

Owning is only a benefit if it helps you meet your goals and leads to lower housing costs overall. Will that ever happen on this deal?
LCX2000
Posts: 74
Joined: Sat Feb 15, 2020 5:54 am

Re: Am I buying too much condo? NYC $2mm

Post by LCX2000 »

You have a lot of great breakdown re: the finance aspect. We have bought and sold 3 times on the UWS. 1999, 2014, 2016. Coop, Condo, Coop. I would make sure you do your homework in terms of buying new construction. Where is it located? I know of two realtors who sold their Condos (UWS, UES) to buy new construction and both have lost their shirts on the deals. A non-realtor friend nearly bought in new construction with beautiful views, then backed out, losing her deposit after she learned it could be hard to get out. All three were farther west, south of midtown. I'd also make sure you know what sort of sound quality the building has between apartments and floors.
newparentNYC
Posts: 37
Joined: Sun Apr 04, 2021 1:52 pm

Re: Am I buying too much condo? NYC $2mm

Post by newparentNYC »

If I were you I’d look at renting a more expensive and nicer place rather than committing to a $2m apartment in the city. Once you decide whether to have kids or not then you can go ahead and buy an apartment if you so desire. If you have a kid then you need to evaluate the school situation - public vs private - and ultimately many end up leaving the city in this scenario. The question of whether to be able to rent out the apartment if you leave is fine and dandy but consider that most of your liquid net worth will be tied up as equity in the apartment and not available to purchase your next place if you ever decided to rent it out.

Regarding throwing money away on rent vs building equity you should compute your expected housing payment (inc tax and common charges) less principal payment to get a closer comparison to renting. Your principal payments will be likely in the 1-2k range per month at which point renting for 10k / month will work out pretty equivalently from a net worth perspective to paying 14k (less 2k principal less 2k value of the mortgage deduction lets say). You can get a nice 2 bed or ok 3 bed for 10k in solid neighborhoods in Manhattan.

The biggest question is on children and I concur I wouldn’t take the plunge without greater clarity on that question.
rule of law guy
Posts: 716
Joined: Mon Jun 07, 2021 9:35 pm

Re: Am I buying too much condo? NYC $2mm

Post by rule of law guy »

it worked for us. in 1986 we bought a 3 bedroom on CPW with DW pregnant with first. eventually had a second kid. we spent basically all of our money then on the down payment. still own apt, with appreciation about 500%. paid off mortgage and now pay maintenance that is roughly what a 1 bedroom rental goes for. this was our plan and guess what, it all turned out in accordance with the plan
Never wrong, unless my wife tells me that I am.
sailaway
Posts: 8636
Joined: Fri May 12, 2017 1:11 pm

Re: Am I buying too much condo? NYC $2mm

Post by sailaway »

People refer to renting as throwing it away, but have you run the numbers? When we last needed a rental, it would have taken four years to get to the point where HOA + taxes + interest were less than rent. Turned out, the HOA went up almost as soon as we moved in on a 2 year lease, to boot. We would have been "throwing away" more than rent in carrying costs. And that was comparing identical units. If you aren't thinking of it as a place to raise a child you may not even have, you will probably be willing to rent something smaller.

We might have made some money by buying, due to the leverage, but that stock market went up even more than the crazy coastal housing market while we were there, so no regrets.

Take some time to run your own buy vs rent with the unit you would actually buy with what you would be fine renting. Look at rental prices in the new neighborhood if that is more suited to your lifestyle.
BirdFood
Posts: 518
Joined: Sat Mar 23, 2024 12:15 pm

Re: Am I buying too much condo? NYC $2mm

Post by BirdFood »

Goldie50 wrote: Thu Jun 06, 2024 7:53 am
BirdFood wrote: Thu Jun 06, 2024 12:23 am You're committing to doubling your housing costs. That feels worrying.

A big part of your stated reason for going over budget is size, but your post doesn't offer any details about size. How big is this? How big is your current rental? What makes you feel that you need this size?
Correct, it would be double at the current rates, until we refinance (ideally in the next few years). At a ~5% interest rate, the monthly housing expenses would be closer to 12.5k, assuming 2% annual increases in carrying costs.

This would be about 100 sq feet larger than my current rental. My current rental is in an older building that is less comfortable to live in. It’s less about the change in size and more about the change in neighborhood and quality of building.

Would your answer change if instead of this, it was an $11.8k/month housing expense unit, 200 sq feet smaller, same building for closer to $1.77mm after closing costs and $1.675mm before??
I think there's a chance that this would work out without regret, but that is indeed where my thoughts are leaning--"a chance". It feels, to me, more likely than not, that there would be regret.

I'm asking about the size because I'm wondering if the other units are irredeemably tiny, or if it's more that you look around and say, "Erm...not a lot of storage..." or similar things. Because a fraction of the amount that you'd save by buying one of the smaller places would allow for a good chunk of remodeling, and remodeling can do a lot to make a small space work.
Valuethinker
Posts: 49659
Joined: Fri May 11, 2007 11:07 am

Re: Am I buying too much condo? NYC $2mm

Post by Valuethinker »

rule of law guy wrote: Thu Jun 06, 2024 11:29 am it worked for us. in 1986 we bought a 3 bedroom on CPW with DW pregnant with first. eventually had a second kid. we spent basically all of our money then on the down payment. still own apt, with appreciation about 500%. paid off mortgage and now pay maintenance that is roughly what a 1 bedroom rental goes for. this was our plan and guess what, it all turned out in accordance with the plan
1986. That says it all right there. An interesting blip around October 1987, but basically, a clear sailing.

Even 2008, interest rates went only south, and eventually the negative equity went away. As long as you kept your job, it worked out alright.

This is not 1986, and it's not 2008. It's a much harder call.
User avatar
Que1999
Posts: 281
Joined: Mon May 30, 2016 10:27 am

Re: Am I buying too much condo? NYC $2mm

Post by Que1999 »

Quick math at https://www.calculator.net/amortization ... #calresult indicates that a $1.6m mortgage in 10 years of living there total interest paid would be $969,989 vs principal payments of $243,583. Of course, not factoring in the maintenance/hoa/tax costs you will shell out while living there, and also not taking into account property appreciation (hopefully) and/or any tax credits or deductions you'd receive from holding the mortgage.

Unless you're both absolutely certain this is where you want to be for the long haul, I would pass on this one.
LeftCoast
Posts: 180
Joined: Mon Jan 01, 2018 11:19 am

Re: Am I buying too much condo? NYC $2mm

Post by LeftCoast »

I'm not in NYC, but I am in a very expensive part of So Cal. Some years ago we faced the same issue as you. I'm glad I didn't know about Bogleheads at the time, because in my opinion there is a strong bias against real estate ownership. A lot of the advice on Bogleheads is to always rent, never buy. There's a strong bias to put your money in equities and not in real property. I just have to say that buying our home really worked out for us. It provided security and stability, and a great home for our one kid. Our place is now paid off and worth 5X what we paid for it. Unless you think your incomes are about to go down, be an owner.
Post Reply