Author Topic: Talk us into/out of buying in NYC?  (Read 1724 times)

Jorey

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Talk us into/out of buying in NYC?
« on: January 04, 2021, 02:39:16 PM »
Hey all,

First time caller long time listener.

DW and I recently noticed we have too much cash, and were recently gifted a windfall that pushed us to take a look at the RE market here in Brooklyn for the first time in a few years. To our surprise, we saw some stuff that seemed pretty affordable (for nyc)for us. Wanted to run the numbers past some well informed internet strangers friends and see if we're missing anything and get some advice.

We currently pay 2400/month to rent an ~1100 sq ft 3 Bedroom apartment that is rent-stabilized(rent increases no more than 2% per year typically). So, a lot of leverage for us in terms of walking away from anything that isn't perfect. We know we're not getting anything close to that if we buy something where we want to be, and we're comfortable with that.

As I read it, we can comfortably afford something in the 650k purchase price range. We'd look for a condo, 2BR. Won't even consider co-ops unless someone here can change my mind. It seems possible with where the market is now. We have the down payment. We want to be here for at least 5 years, probably more. We'd like to own a place, but it's not buried too deep in our psyche or insanely important to us the way it is to some. This is really about making a sound financial decision/investment and/or getting something we don't currently have(outdoor space common or otherwise, equity). We have no debt, we make between 130-150k a year depending on my job, which is variable. I am freelance and self-employed, so my contribution limits are high to an i401k, fwiw. This purchase would impact the amount we are able to contribute to retirement accounts in the very short term as we are fastidious about our e-fund due to the nature of my work.

NYT calculator says yes. Michael Bluejay calculator is more of a grey area depending on when we sell the purchase.

What are we missing? Should we kick the tires on this more seriously? Fools to even consider? Need more numbers?

I'll take my answer off the air and appreciate the help. Thanks.
« Last Edit: January 05, 2021, 02:36:49 PM by Jorey »

JLee

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Re: Talk us into/out of buying in NYC?
« Reply #1 on: January 04, 2021, 02:51:02 PM »
My initial reaction is to keep renting - that seems vastly less expensive than buying. What are property taxes on a $650k house?

lhamo

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Re: Talk us into/out of buying in NYC?
« Reply #2 on: January 04, 2021, 03:53:51 PM »
I would keep your rent stabilized deal and keep saving.   That is a great deal for housing in NYC and you can keep saving in other ways, too.   It will make it much easier to leave NY, if and when you decide to do so, without having to get rid of a property.

Jorey

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Re: Talk us into/out of buying in NYC?
« Reply #3 on: January 04, 2021, 04:59:16 PM »
My initial reaction is to keep renting - that seems vastly less expensive than buying. What are property taxes on a $650k house?
Condo. The answer is it depends. We have seen some stuff in that range that has tax abatements for 15-20 years. Some stuff thats in the 300/month range, some stuff thats in the 600/month range.

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mozar

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Re: Talk us into/out of buying in NYC?
« Reply #4 on: January 04, 2021, 05:37:54 PM »
I have a lot of family in nyc and they've told me that rent-stabilized housing is everything. My cousins wife was on a list to get into a rent stabilized apartment for 20 years and she finally got it.

tk2356

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Re: Talk us into/out of buying in NYC?
« Reply #5 on: January 04, 2021, 08:25:31 PM »
Hi Jorey,

DW and I went through the same thought process as you in 2018 when buying a 2br HDFC co-op in Brooklyn. I'll share my thoughts in case anything helps.

We viewed the purchase as a way to stay in the city with a kid. If we had a rent-stabilized 3br (in an area I assume you enjoy) for that price, it would've been a harder decision.

A big plus for us is now having more considerate neighbors than when we were renting. Most in our building have been here for 20+ years; they've struck a semi-harmonious balance of existence that you don't usually see among year-to-year renters. In pre-war buildings that generally have poor insulation, this is important. Even with a newer condo, though, I'd look hard into the soundproofing/neighbor situation (visit at different times/days). If you buy and discover your neighbor is a professional trombonist in training and there isn't adequate insulation... well, that would suck.

Post-COVID would also make me a little more hesitant to buy a Brooklyn condo. The city is in dire need of cash, and (my understanding) is that Brooklyn owners pay somewhat significantly less property taxes than much of the city in relation to their assessed value. There was discussion to overhaul the system last year, but I don't believe any major changes occurred. In 1-5 years, though, this might not be the case, which would negatively impact your resell value.

Added to that is the unknown that the Work From Home shift brings. Current prices seem to bank on a somewhat return to pre-pandemic normalcy in regards to the demand to pay premium to live in a small NYC flat. While I wouldn't bet against that, what if it doesn't? If the city isn't able to fill all that office space (or if they turn many into residential units) -- your resale value would probably take a hit.

All that being said... I'm still happy we did it, haha. I hope that helped a little -- good luck with the decision!
« Last Edit: January 04, 2021, 08:30:16 PM by tk2356 »

brooklynmoney

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Re: Talk us into/out of buying in NYC?
« Reply #6 on: January 04, 2021, 08:29:08 PM »
Rent stabilized 3 bed? Stay. You canít even imagine the closing costs. Unless you plan to own for decades why bother?

Jorey

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Re: Talk us into/out of buying in NYC?
« Reply #7 on: January 04, 2021, 08:31:28 PM »
Rent stabilized 3 bed? Stay. You canít even imagine the closing costs. Unless you plan to own for decades why bother?
Am I wrong thinking they'd be around 4%?

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brooklynmoney

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Re: Talk us into/out of buying in NYC?
« Reply #8 on: January 04, 2021, 08:38:45 PM »
It depends on the price and how much the developer pays. If you buy new the developer might pay some if your negotiate my friend just did that in Bed Stuy. If itís more than $1mm you pay the mansion tax. between the lawyer the transfer tax title etc I feel like I paid more than 20k and my purchase price was 450. If you are planning to stay somewhere 5 years I dont see how thatís worth it.

Jorey

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Re: Talk us into/out of buying in NYC?
« Reply #9 on: January 05, 2021, 03:06:45 AM »
It depends on the price and how much the developer pays. If you buy new the developer might pay some if your negotiate my friend just did that in Bed Stuy. If itís more than $1mm you pay the mansion tax. between the lawyer the transfer tax title etc I feel like I paid more than 20k and my purchase price was 450. If you are planning to stay somewhere 5 years I dont see how thatís worth it.
At least 5 years. In reality, closer to 15. At FI we do plan to leave NYC. We are not looking at spending more than 650, so no mansion tax issues.

A relevant item to the benefits of space I left out of above here is that we do not plan to have kids.

Bottom line is, is purchasing something a worthy risk that brings us closer to FI? Seems like a lot here think no. We're definitely very open to that reality, and perfectly comfortable socking the money away in retirement accounts instead, of which we have a lot of access to due to my self employment.

Do you regret buying?

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Jorey

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Re: Talk us into/out of buying in NYC?
« Reply #10 on: January 05, 2021, 04:04:43 AM »
Hi Jorey,

DW and I went through the same thought process as you in 2018 when buying a 2br HDFC co-op in Brooklyn. I'll share my thoughts in case anything helps.

We viewed the purchase as a way to stay in the city with a kid. If we had a rent-stabilized 3br (in an area I assume you enjoy) for that price, it would've been a harder decision.

A big plus for us is now having more considerate neighbors than when we were renting. Most in our building have been here for 20+ years; they've struck a semi-harmonious balance of existence that you don't usually see among year-to-year renters. In pre-war buildings that generally have poor insulation, this is important. Even with a newer condo, though, I'd look hard into the soundproofing/neighbor situation (visit at different times/days). If you buy and discover your neighbor is a professional trombonist in training and there isn't adequate insulation... well, that would suck.

This is so interesting. We live in a pre-war now and I find the sound insulation to be excellent for NYC. I expect newer buildings to be worse on this front tbh. Interesting point on the neighbors, though we don't experience a lot of year on year turnover due to stabilization, I know my neighbors by eye if not by name. The stabilization does impact the level of maintenance/effort the landlord is capable willing to put in. They do just enough to keep it habitable.


Post-COVID would also make me a little more hesitant to buy a Brooklyn condo. The city is in dire need of cash, and (my understanding) is that Brooklyn owners pay somewhat significantly less property taxes than much of the city in relation to their assessed value. There was discussion to overhaul the system last year, but I don't believe any major changes occurred. In 1-5 years, though, this might not be the case, which would negatively impact your resell value.

Added to that is the unknown that the Work From Home shift brings. Current prices seem to bank on a somewhat return to pre-pandemic normalcy in regards to the demand to pay premium to live in a small NYC flat. While I wouldn't bet against that, what if it doesn't? If the city isn't able to fill all that office space (or if they turn many into residential units) -- your resale value would probably take a hit.

All that being said... I'm still happy we did it, haha. I hope that helped a little -- good luck with the decision!

This is the perspective I came here for re: taxes and how Covid might impact things. I was shocked at how low BK taxes can be relative to value. If we do this, we'll approach it very slowly and wait to be blown away I think.  The stabilized apartment gives us a lot of walking away power. Thanks for taking the time to respond.

Mariposa

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Re: Talk us into/out of buying in NYC?
« Reply #11 on: January 05, 2021, 07:22:23 AM »
I'm a NYC co-op owner. If I had a rent-stabilized 3bd at that price in a neighborhood I wanted to live in, I would never have bought in this city. Also keep in mind that you have to pay 6% realtor fees plus lawyer fees when you sell. Some buildings also have flip fees when you sell; a friend of mine lives in a building that charges 10%(!). We bought ~5 years ago, and minus selling costs, the value of the property hasn't appreciated all that much.

That said, we don't regret buying because we did NOT have that rent-stabilized 3bd. We're planning to stay in NYC forever, and we have to live somewhere.

Jorey

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Re: Talk us into/out of buying in NYC?
« Reply #12 on: January 05, 2021, 07:30:07 AM »
I'm a NYC co-op owner. If I had a rent-stabilized 3bd at that price in a neighborhood I wanted to live in, I would never have bought in this city. Also keep in mind that you have to pay 6% realtor fees plus lawyer fees when you sell. Some buildings also have flip fees when you sell; a friend of mine lives in a building that charges 10%(!). We bought ~5 years ago, and minus selling costs, the value of the property hasn't appreciated all that much.

That said, we don't regret buying because we did NOT have that rent-stabilized 3bd. We're planning to stay in NYC forever, and we have to live somewhere.
Thanks. I'm grateful for all the perspectives here, especially from NYC residents.



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tk2356

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Re: Talk us into/out of buying in NYC?
« Reply #13 on: January 05, 2021, 08:09:44 AM »
My understanding is that a lot of pre-wars are great for noise but many (especially tenement style and brownstones) are infamous for the opposite. I guess it's always hit or miss!

You're in the enviable position of being able to dip your toes in the water without stress or urgency. If you don't find a great deal or something that you love... no sweat! A probable 10-15 year timeline while being able to avoid the sizable, good school zone price hike (*cough* Park Slope!), though... well I'm not surprised the NYT calculator says it's better to buy.

I'd still play out the worst case regarding taxes, though, to ensure that you'd be okay if there is a major hike down the road. According to SmartAsset, the average effective property tax rate for Brooklyn is .66%, with Queens/Manhattan/the Bronx all between .88% and .98%, so take that for what you will.

ChpBstrd

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Re: Talk us into/out of buying in NYC?
« Reply #14 on: January 05, 2021, 09:41:35 AM »
1) Whatever you do, don't buy a "bargain" in a land-lease building.

2) Are you sure you need to live in NYC? A lot of jobs formerly located in NYC are going remote, which will cause a reduction in demand and could cause lower prices in the future. If your job could ever be done remotely, or could be in some way untied from NYC in the next several years, then buying now could be a risky bet. I'm very bearish on urban property because of cloud technology, higher bandwidth, and falling social cohesion in the US.

lhamo

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Re: Talk us into/out of buying in NYC?
« Reply #15 on: January 05, 2021, 09:54:39 AM »
We personally were very lucky with NYC real estate -- bought a 2+ bedroom co-op in Jackson Heights in 2000 for 118k and sold for 280k in early 2003.  And the people who bought it from us sold a few years later for over 500k (they did renovate the kitchen).  But we were REALLY lucky in that we got in just as that boom in JH real estate prices was taking off.  We didn't even consider Brooklyn even though the commute would have been shorter (we worked in the W. Village) because we felt it was already overpriced.

affordablehousing

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Re: Talk us into/out of buying in NYC?
« Reply #16 on: January 05, 2021, 10:20:23 AM »
I would just buy a vacation house. I like you had the golden handcuffs for a long time of a cheap Brooklyn apartment. After 10 years I had to move, and thankfully the space was small enough that when I looked back it would have held me back in many respects from moving along in life. Double check that your space isn't convincing you not to have kids, or work harder, or do more. Sometimes, a bit of financial responsibility can make people rise to the occasion. Only you know how you react to things.

And yes, plaster walls are better for noise insulation than all the double walls and green goo the building technologists come up with. There's nothing better for noise than good old fashioned super heavy cement plaster.

Is a $650K condo in BK a bad idea? I too was assuming it's an HDFC. It's not a bad idea, but I think in general in NYC, you pay to play. So the people with money to buy a $1.5MM fixer in Bed-Stuy, and who fix it up, are always going to make a lot more money over the long run than those who babysit a condo for 20 years. I can't imagine it would lose a lot of value, that's a really low price point even in BK. People will always need homes like that.

Jorey

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Re: Talk us into/out of buying in NYC?
« Reply #17 on: January 05, 2021, 02:34:28 PM »
1) Whatever you do, don't buy a "bargain" in a land-lease building.

Not sure there are many of those in Brooklyn, and they'd be coop anyway.

2) Are you sure you need to live in NYC? A lot of jobs formerly located in NYC are going remote, which will cause a reduction in demand and could cause lower prices in the future. If your job could ever be done remotely, or could be in some way untied from NYC in the next several years, then buying now could be a risky bet. I'm very bearish on urban property because of cloud technology, higher bandwidth, and falling social cohesion in the US.

Not a chance. I work on set in the film industry. So it's here or LA, with an outside shot at NM if they prove to me they can hold down a portion of the industry for more than a year or two.  DW is a jeweler. No WFH for us.

brooklynmoney

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Re: Talk us into/out of buying in NYC?
« Reply #18 on: January 05, 2021, 08:35:35 PM »
You asked about regretting buying. I canít answer til I sell haha. I bought 9 years ago in Bk so it definitely seems like it was a good time. That said I bought it because I liked the apartment and my neighborhood. I had been renting for 15 years before that and it didnít bother me in the least. Iím renting again now while I have a tenant in my place.

Rdy2Fire

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Re: Talk us into/out of buying in NYC?
« Reply #19 on: January 06, 2021, 08:00:00 AM »
I lived in NYC and made the mistake of not buying many years ago when it was affordable. I still live in NY (not city) and my opinion is, unless you plan on staying in NY forever or at least a very long time, I'd keep the rent controlled apartment and either invest the $$ in the market or buy something where you eventually plan to go like FLA, Carolina's etc etc..

zygote

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Re: Talk us into/out of buying in NYC?
« Reply #20 on: January 06, 2021, 09:31:51 AM »
Sometimes I think about buying here, but it just doesn't add up compared to the rent stabilized apartment I currently live in. The taxes/fees alone would be more than half of my rent. Then I consider the mortgage payment/interest, transaction costs, repairs, the chance of assessments, etc. It would take decades to break even on a comparable apartment. Honestly, even if I didn't like my current apartment (which I do), I'd try to find another rent stabilized place before I'd buy.

That said, I am in Manhattan. Maybe the common charges really are that much lower than Brooklyn. (Are you sure they are? They taxes might be lower, but there's usually also condo/HOA fees that go towards building upkeep. If there aren't, you're probably in for assessments later on when the building needs a new roof, etc.) However, my rent is close to yours and so is the price range of the units I'd be looking to buy.

FINate

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Re: Talk us into/out of buying in NYC?
« Reply #21 on: January 06, 2021, 10:37:43 AM »
Your rent stabilized flat has many of the benefits of ownership w/o the risks. Sure, you may miss out on future appreciation (not a given), but you also don't own a depreciating asset which requires ongoing maintenance and insuring (the physical building). It heavily favors the tenant, which is bad for the overall rental market, but great for the small number of individuals that can get and keep a rent controlled unit. For these reasons I'm not a fan of rent control, yet you didn't create the laws and should do what makes sense in your situation.

IMO, you are better off keeping the rent controlled flat unless you plan on staying in NYC forever. At 2% YoY increase, which is less than long-term historical inflation, your rent will increase just 35% to $3230 over 15 years. And I think you would be hard-pressed to keep ownership cost increases under 2% YoY.
« Last Edit: January 06, 2021, 10:42:06 AM by FINate »

Chrissy

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Re: Talk us into/out of buying in NYC?
« Reply #22 on: January 08, 2021, 05:17:23 PM »
I am also in entertainment.  You have an amazing living situation, and should be VERY cautious giving it up.  The bank is going to give you the stink eye just for trying to get a loan when you're not W2.  All of my friends with condos have stressful stories about the boards, the rules, the maintenance, special assessments, etc.  Even if every issue ultimately goes your way, it has sucked up time and bandwidth you might not feel you can afford.

Purchasing a condo doesn't get you closer to FI.  In fact, because of closing costs, and your total monthly payment being higher than your rent--likely MUCH higher--it actually drags you farther away, in the short term.

Let's see your numbers.  How much are you thinking of putting down?  Are you familiar with the Investment Order?  How old are you, and how much do each of you have in retirement accounts?  If you're not topped up, hold off on purchasing real estate.

Jorey

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Re: Talk us into/out of buying in NYC?
« Reply #23 on: January 08, 2021, 06:05:12 PM »


Let's see your numbers.  How much are you thinking of putting down?  Are you familiar with the Investment Order?  How old are you, and how much do each of you have in retirement accounts?  If you're not topped up, hold off on purchasing real estate.

We would put down 20%. We have the cash for this outright on something around 650k without liquidating anything including closing costs.

Yes. Familiar with investment order. We approach a bit differently due to the high limits of my Solo 401k(55k). We have no debt. Both are 32.

Our numbers:

Tax Advantaged Accounts: 160k
Taxable: 50k

Yearly Contributions

Max Roth for Both (12k)
DW 401K: 10.5K(20% pretax) + 3% match + 3% profit share
Me 401k: 27k(25% pretax)


Some of that would take a hit to make the monthly payment work, but not much in normal years(this is not, obviously). We would be okay making payments and still doing an okay if not mustachian level retirement contributions if every year was as bad as 2020. Which I see as our worst case scenario outside of a work injury to me, for which we have a cash E fund of 6 months expenses.

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Chrissy

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Re: Talk us into/out of buying in NYC?
« Reply #24 on: January 08, 2021, 08:17:39 PM »
Your numbers look good.  Technically, you could buy a place... but I wouldn't.