Manhattan real estate

[Ryno]

Given the numbers you quoted, renting is way >>> buying without considerable continued appreciation. The tax deduction on mortgages is only up to 1 buck and you haven't mentioned maintenance which is another 1500 or so per month given the $$ range you are looking at.

With kids, yeah, you want the security of determining where you live through ownership, but in terms of pure financials, renting looks better right now. Do a total cost to own analysis, that includes passing up 5% on TBills risk free for whatever you put down.

[mtgordon]

When I ran the numbers it was pretty close. Assuming 7.5% rate on the loan, 20% down, 1.8M place, 7k rent, 1.5k maint/month, 45% tax bracket (might be way too high but not sure), 5% earned from TBills, 2% yearly on taxes, etc.

[Ryno]

I guess a shortcut would be to say 84k per year rent divided by 1.8mil is a 4.67% carrying cost. After tax mortgage is about the same, but then you have taxes and maintenance.

[mtgordon]

I may be misunderstanding your post (I had to think about it for a while) but I think you're not factoring in that you have a 1.8M apartment as an asset at the end.

[DesertCat]

[ QUOTE ]
I guess a shortcut would be to say 84k per year rent divided by 1.8mil is a 4.67% carrying cost. After tax mortgage is about the same, but then you have taxes and maintenance.

[/ QUOTE ]

He's not going to get the full tax deductions, because of NY income taxes and his income level he's way into AMT. And have we calculated property taxes, which also help trigger AMT?

Edit: I'm estimating cost of renting at around $70k per year, $7k per month minus $18k per year in interest on your $350k downpayment. Owning costs are near $110k for mortgage interest, $18k for maintenance, so $138k without property taxes. Wouldn't property taxes be at least another $30k or more?

And from a couple days ago in the WSJ.

[ QUOTE ]

Mortgage Fears
Drive Up Rates
On Jumbo Loans
By JAMES R. HAGERTY
August 7, 2007; Page A1

Turmoil in the U.S. home-mortgage market is starting to pinch even buyers of high-end homes with good credit records, in the latest sign of rising anxiety among lenders and investors.

...

Lenders -- having already slashed lending to subprime borrowers, as those with weak credit records are known -- now are jacking up rates on jumbo mortgages for prime borrowers. These mortgages exceed the $417,000 limit for loans eligible for purchase and guarantee by Fannie and Freddie. They account for about 16% of the total mortgage market, according to Inside Mortgage Finance, a trade publication, and are especially prevalent in California, New Jersey, New York City, Washington, D.C., and other locales with high home costs.

Lenders were charging an average 7.34% for prime 30-year fixed-rate jumbo loans yesterday, according to a survey by financial publisher HSH Associates. That is up from an average of about 7.1% last week and 6.5% in mid-May.

The higher costs for such loans will put further downward pressure on home prices in areas where homes typically bought by middle-class people can easily cost $500,000 to $700,000.

[/ QUOTE ]

This may be temporary, but the interest cost for new buyer just increased over 10% in the last few months. If it stays high it's going to impact demand and prices. The value of real estate is inversely correlated with interest rates.

If I was OP, it looks like renting is much the better financial decision for this year. I'd keep my eyes open for bargains and maybe make some low ball offers if the market gets cold. But I'd only make an offer if the cost of owning was similar to the cost of renting.

[IronFly]

Tweety,

What do you do?

If I were you I'd also consider Brooklyn or NJ. Park Slope is jam-packed with your demographic.

Also, I'd try my best to stay out of a situation where you can get hurt (buying at your max). To me its worth it to wait another year or two for additional safety margin.

[Ryno]

I'm just saying that you have to carry a 1.8mil asset somehow, either by renting it, or by owning it and paying interest. You can ignore the "principal" payment in the mortgage - you are just paying yourself. So if you are going to evaluate on a total cost to own, you would do rent vs. interest-only mortgage - tax deduction + property taxes + maintenance. And I was saying that rent is about the same as the (IO mortgage - tax deduction) alone. The other variable is asset appreciation, which only the owner gets, but you need that to cover taxes + maintenance just to break even.

[XXXNoahXXX]

[ QUOTE ]
I just noticed that you have a child as well. So here's some more unsolicited advice: Get out of NYC before (s)he's in school. You'll have to pay the equivalent of college tuition for a good private school in NYC. I don't think Manhattan is a good place to raise children at all. Let your kids have the opportunity to ride their bikes around town and play pickup wiffleball games during the summer.

[/ QUOTE ]

yes. no matter what you do, city kids grow up too fast and really miss out. I have friends that grew up in the city and when they hear me talking about tree forts in the backyard and riding my bike around, etc. they always tell me how they feel they missed out.

[Ray Zee]

that s right listen to slickpoppa and noah here.

find a place close in, in jersey and commute.
your family will be better off and safer. then get a rental in the city and reserve a bedroom or space for yourself on those nights you must stay over. then its deductable and makes profits.

[scott1]

[ QUOTE ]
that s right listen to slickpoppa and noah here.

find a place close in, in jersey and commute.
your family will be better off and safer. then get a rental in the city and reserve a bedroom or space for yourself on those nights you must stay over. then its deductable and makes profits.

[/ QUOTE ]

How did this end up as a "how to raise your children" thread in BFI? The Upper East Side is as safe as anywhere in the country, but that's not what this thread is about.