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Calling NYC dwellers

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Harriet

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Our rental is turning condo, and we have an option to buy it. If any of you have been in a similar position, I''d appreciate your input.
 

dtnyc

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Harriet-
Haven''t been in the same position but I know there are 2 things to consider here:
1) the overall construction quality of the building- how old is the building you live in?
Sometimes rental properties are not built w/ the same quality and care as buildings that start out as co-ops or condos. Of course this depends on the age of the property and I think is much more of an issue w/ buildings that were built in 1970''s (energy crisis) through today. Like much of this equation- the fact that you are in Manhattan makes a tremendous difference w/ regards to the construction quality, age of the building etc.

2) cost-benefit- many times renters get "sponsored-units" where as a renter you get a great deal and get first crack at the building before it''s available to the public. I know that the last few years in NYC have been crazy and buildings were selling out before they were even built (before they were even holes in the ground) but I know for high level luxury buildings the frenzy has temporarily subsided. Have you looked at what condos that are comprarable to your rental are going for? Would you want to buy the unit you are living in now or would you want to move w/i the building to a larger or smaller unit?

Lots to think about here- but it could be a great opportunity for you!
 

Harriet

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Date: 4/14/2007 9:34:41 AM
Author: dtnyc
Harriet-
Haven''t been in the same position but I know there are 2 things to consider here:
1) the overall construction quality of the building- how old is the building you live in?
Sometimes rental properties are not built w/ the same quality and care as buildings that start out as co-ops or condos. Of course this depends on the age of the property and I think is much more of an issue w/ buildings that were built in 1970''s (energy crisis) through today. Like much of this equation- the fact that you are in Manhattan makes a tremendous difference w/ regards to the construction quality, age of the building etc.

2) cost-benefit- many times renters get ''sponsored-units'' where as a renter you get a great deal and get first crack at the building before it''s available to the public. I know that the last few years in NYC have been crazy and buildings were selling out before they were even built (before they were even holes in the ground) but I know for high level luxury buildings the frenzy has temporarily subsided. Have you looked at what condos that are comprarable to your rental are going for? Would you want to buy the unit you are living in now or would you want to move w/i the building to a larger or smaller unit?

Lots to think about here- but it could be a great opportunity for you!
Thanks for your thoughtful response!

1. Our building is slightly more than 10 years old. The construction is solid. E.g. you can''t hear the neighbours at all. It''s 300 East 64th. Do you know it?

2. We have been offered 10% of the market price as well as a 5% instead of a 10% downpayment. I most certainly want to buy our current unit -- it''s the perfect size and layout, has 3 exposures (including of the river), and is on the 27th floor. Also, there are only 3 units on our floor. In fact, we recently moved from another unit within the building.

The other half wants to hold out because he believes that we''ll be able to afford something fancier in a few years time. But, I''m thinking of the here and now.
 

diamondfan

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If you love it and are there and it suits you I would worry about a few years from now in a few years. You love it, and are settled, and who knows what three years or so will bring? You might have kids by then and your needs would be different, but if the unit, building and location are great it should sell easily when and if you are ready. Personally, I would rather buy, at a good deal, get the deduction, and worry about later later, rather than rent, worry about looking for a new place and moving, especially if I just moved within the building, I have been ill and I am planning a wedding.
 

Harriet

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Exactly.
Moreover, I think the apartment will hold its value, given the land scarcity in Manhattan.

P.S. You could tell that I love it!
 

diamondfan

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Problem solved then! You would be wasting money moving which is so pricey, and you would also be stressed trying to find something you like, and rent is not something you get back anything from!

(I am a bit biased though because I HATE moving and think it is a waste to rent when you can take a mortgage deduction instead)...
 

Harriet

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Stubborn young man involved ...

Buying would of course curtail my jewellery spending, but it's a worthwhile tradeoff.
 

diamondfan

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No man is that stubborn...not when you have be unwell and you are happy where you are. Plus he will likely SAVE in the meantime and maybe even make out well when you sell THIS one later on. He could say wait and then you cannot afford anything that appeals to you. Real Estate is hard to gauge that way. In three years you could be priced out of what you would want. A bird in the hand as they say...
 

dtnyc

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Date: 4/14/2007 10:55:01 AM
Author: Harriet
Date: 4/14/2007 9:34:41 AM

1. Our building is slightly more than 10 years old. The construction is solid. E.g. you can''t hear the neighbours at all. It''s 300 East 64th. Do you know it?


2. We have been offered 10% of the market price as well as a 5% instead of a 10% downpayment. I most certainly want to buy our current unit -- it''s the perfect size and layout, has 3 exposures (including of the river), and is on the 27th floor. Also, there are only 3 units on our floor. In fact, we recently moved from another unit within the building.


The other half wants to hold out because he believes that we''ll be able to afford something fancier in a few years time. But, I''m thinking of the here and now.
I don''t know your building off hand- is there any retail/office space on the first floor?
Having retail on the street level can be great- it can really help offset the mtc. costs of a building.

That is great that you are happy w/ the construction, your unit, you would get a good deal, etc. It sounds like a no brainer.
Even though the market isn''t as nuts as it was 2 years ago, you can''t go wrong buying in Manhattan- especially that location! In a few years that unit will w/ almost absolutely certainly go up in value and then you will have equity to buy an even nicer place, etc. It would be a great investment that you could live in, and you would avoid moving.

I have a friend who bought a studio on the UES (just above 86th St) in ''99 for under 100K just after we graduated from college- her place has tripled in value since she bought it. She was able to refinance her mortgage from a 30 to a 15 yr, borrow against the equity to take 18 months and get a masters in Paris, etc. It was a phenomenal move on her part and I kick myself for not buying a place between 99 and 2001 (in NYC or otherwise.)

Also unless you are very, very diligent I think it''s hard to save up in NYC over a long period of time, there is so much temptation! With the overall discount on your unit as well as the downpayment deal the barriers for home ownership are probably as low as they will ever be for that location.

good luck!
 

Harriet

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Date: 4/14/2007 11:54:20 AM
Author: diamondfan
No man is that stubborn...not when you have be unwell and you are happy where you are. Plus he will likely SAVE in the meantime and maybe even make out well when you sell THIS one later on. He could say wait and then you cannot afford anything that appeals to you. Real Estate is hard to gauge that way. In three years you could be priced out of what you would want. A bird in the hand as they say...
Exactly again. Unfortunately, he has an irrational fear of defaulting on the mortgage -- he's in the invetment business and they are short on a number of mortgage companies. Luckily, my salary alone can cover the payments and my job is stable. Oh, and I'm a stubborn one too!
 

Harriet

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dtnyc,
It''s on 64th and 2nd, above the UA cinema. Ring any bells? There''s also more retail space (there used to be a Chase branch beneath us).
 

starryeyed

Ideal_Rock
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Hi Harriet. I have little more to add, other than to reinforce what dtnyc and DF have already said. They''ve given you great advice!

I''m guessing the most important thing about this is determining "market value". 10% off market price is great, as long as the "market value" is fair and accurate.

I can understand your DF''s fear of going into debt - it''s scary for sure. I think the government recommends that your housing costs not exceed 1/3 of your income. This is a useful rule-of-thumb, although I could see the number being a little higher in NYC. If you see yourself staying in NYC for the next 3-5 years, buying something and getting the mortgage deduction makes a lot of sense.

I can understand an investment company being short on the weaker/less diversified mortgage companies, but this is hardly a reflection of the entire industry or whether or not you should buy a condo. I don''t think you can lose in NYC.

The most important thing here is, can you stand the impact of a 5% down payment on your jewelry acquisitions and travel plans??
You''ve already said that you have a nest egg, so I''m guessing the impact will be minimal.
 

Harriet

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Date: 4/14/2007 12:20:33 PM
Author: starryeyed
Hi Harriet. I have little more to add, other than to reinforce what dtnyc and DF have already said. They''ve given you great advice!

I''m guessing the most important thing about this is determining ''market value''. 10% off market price is great, as long as the ''market value'' is fair and accurate.

I can understand your DF''s fear of going into debt - it''s scary for sure. I think the government recommends that your housing costs not exceed 1/3 of your income. This is a useful rule-of-thumb, although I could see the number being a little higher in NYC. If you see yourself staying in NYC for the next 3-5 years, buying something and getting the mortgage deduction makes a lot of sense.

I can understand an investment company being short on the weaker/less diversified mortgage companies, but this is hardly a reflection of the entire industry or whether or not you should buy a condo. I don''t think you can lose in NYC.

The most important thing here is, can you stand the impact of a 5% down payment on your jewelry acquisitions and travel plans??
You''ve already said that you have a nest egg, so I''m guessing the impact will be minimal.
Hi! Thanks for chiming in.

How would you go about determining market value? I''ve searched and there are no comparable apartments for that price.

My other half makes at least double what I do. So, the housing costs will not exceed 1/3 of our combined incomes. Also, we''ll be in NYC for the foreseeable future.

His company is short on subprime lenders. Fortunately, I don''t think we count. He is also worried about the proliferation of luxury condos in Manhattan, as dtnyc pointed out. What do you think?

We would have to put down more than 5% to get the full benefit of the interest deduction. Out nest egg isn''t huge, but the down payment shouldn''t be a problem. I''m perfectly willing to curtail my spending to do this, especially since most of my wishlist is for the medium- to long-term anyway.
 

dtnyc

Brilliant_Rock
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Date: 4/14/2007 11:54:20 AM
Author: diamondfan He could say wait and then you cannot afford anything that appeals to you. Real Estate is hard to gauge that way. In three years you could be priced out of what you would want. A bird in the hand as they say...
I couldn''t agree more- especially in NYC, especially 3-5 year range.
 

Harriet

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The stubborn young man has his eye on Park or 5th in the 3-5 year period.
 

Beacon

Ideal_Rock
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Date: 4/14/2007 12:01:34 PM
Author: Harriet

Date: 4/14/2007 11:54:20 AM
Author: diamondfan
No man is that stubborn...not when you have be unwell and you are happy where you are. Plus he will likely SAVE in the meantime and maybe even make out well when you sell THIS one later on. He could say wait and then you cannot afford anything that appeals to you. Real Estate is hard to gauge that way. In three years you could be priced out of what you would want. A bird in the hand as they say...
Exactly again. Unfortunately, he has an irrational fear of defaulting on the mortgage -- he''s in the invetment business and they are short on a number of mortgage companies. Luckily, my salary alone can cover the payments and my job is stable. Oh, and I''m a stubborn one too!
Heh, heh, that makes no sense. Maybe some other fear is in his mind. Being short a subprime lender does not have the least to do with your situation. Kind of like being short a food company and deciding you will no longer eat.

But he may be concerned about some glut of defaulted properties hitting the market, which could be a semi realistic fear. However, that location is a good one, my old neighborhood, (I was at York Ave and 63rd St). If you have a few years to wait out any supply issues, you should be ok.

I would inquire what the projected maintenance/HOA will be. And count on it rising substantially. Sounds like your income is fine for servicing the debt.
 

Skippy123

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Date: 4/14/2007 11:31:59 AM
Author: diamondfan
If you love it and are there and it suits you I would worry about a few years from now in a few years. You love it, and are settled, and who knows what three years or so will bring? You might have kids by then and your needs would be different, but if the unit, building and location are great it should sell easily when and if you are ready. Personally, I would rather buy, at a good deal, get the deduction, and worry about later later, rather than rent, worry about looking for a new place and moving, especially if I just moved within the building, I have been ill and I am planning a wedding.
I agreement here
 

starryeyed

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Hi Harriet. It may be worth asking the condo developer how he/she determined the market value. I wonder if the "market value" is more like a MSPR or a list price. This can exceed "market", particularly if the market isn''t hot. Have you checked out Zillow.com?

Long/short positions on subprime mortgage companies, etc. aren''t the kinds of factors that should be primary in your decision. Here''s how I would think about it:

1. First and foremost, given where you are in life, does it make sense to buy? Do you want to stay in NYC? If so do you like the location? Is it a convenient time to buy? (I''m hearing a loud "YES" on these points.)

2. For your time horizon, what do you foresee happening to the market? In other words, if you plan to stay in the condo 3-5 years, will prices go up, down or stay the same? For the period in question, what will be more costly - a mortgage payment or rent? If the mortgage is more, can you make the money back through the tax savings and appreciation?

3. What do yo think interest rates will do? If you think they will go down significantly over the next year, you may want to wait. If you think they are stable, or will go up, now is a good time to get a mortgage. (Personally I think interest rates are relatively stable.) Earlier in the year, there was talk that the Fed would probably lower rates in June or so, but minutes of the last meeting indicated that inflation is still a concern.

This purchase decision is for personal residential use. You are not deciding about buying investment property - like a second home or speculative property - so I think your decision factors are a little different. You need to have a HOME to call your own that you are happy in.
 

Harriet

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Date: 4/14/2007 12:55:07 PM
Author: Beacon
Heh, heh, that makes no sense. Maybe some other fear is in his mind. Being short a subprime lender does not have the least to do with your situation. Kind of like being short a food company and deciding you will no longer eat.

But he may be concerned about some glut of defaulted properties hitting the market, which could be a semi realistic fear. However, that location is a good one, my old neighborhood, (I was at York Ave and 63rd St). If you have a few years to wait out any supply issues, you should be ok.

I would inquire what the projected maintenance/HOA will be. And count on it rising substantially. Sounds like your income is fine for servicing the debt.
Good one, Beacon. Hehe.

He is concerned about the supply issues. What would you deem to be "a few years?"

What''s "HOA"? The projected maintenance is $1,420/month, which seems a bit high.
 

starryeyed

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In my area, the segment of the market most affected by defaults and subprime mortgages, is the low end - uneducated, first-time homebuyers victimized by predatory lending. Do you realistically foresee the market you are looking at to be flooded by defaults? I wouldn''t think so.

Beacon brings up an excellent point about the monthly maintenance fee. This needs to be included your 1/3 of income housing expenditure formula. You may also want to ask about any possible short- and mid-term assessments.
 

Beacon

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In my area, northern CA, we are seeing plenty of defaults in the 500-800K group, but those are mostly in the Sacramento area. They are very nice homes, not bad places. Just people got stuck on the market bubble and took mortgages that were more than they could handle, not anticipating that they would have any trouble selling if they needed to.

That part of NYC, is very nice and there will always be demand there. However, supply issues have happened in NYC before. Way back, after 1987 stock market crash, NY was a bad, bad real estate market. Worst hit were studio and small one bedroom apartments. Time healed it all, of course.

Harriet, HOA is 'home owners association'. In NY the term 'maintenance' is used, but I think it is just the same thing. I think of 'maintenance' as more for coops, but they are basically interchangeable terms. Coops include property tax in maintenance, condos usually do not. So, check how much the property tax plus maintenance, plus mortgage will be monthly so you have your comfort level.
 

curlygirl

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We just went through this exact same thing. We did it and consider it money well spent. NYC is not like the rest of the country where the real estate bubble is bursting. There will always be demand in NY in my opinion. We went to a bunch of open houses in our neighborhood to determine what people were asking for their spaces and realized that we were getting an incredible deal on our place as insiders. It really became a no-brainer for us, even though since our family is growing we probably won''t stay in this place more than 2 years unless we can buy the apartment next door and expand. We know we''ll still make money. You live in a great spot, you love your place, it''s an awesome investment and you can afford to do it. I say go for it!
 

zoebartlett

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Hi Harriet,

I think that if you love where you are and are willing to stay there for a few years, why not buy your place now? Obviously, this is if finances allow...

On a random note, I have always lived in small town America. I am somewhat fascinated by how people live in big cities like New York. I mean, where do you go for groceries, etc.? I know that sounds silly. Also, not having a car would be something to get used to, I''m assuming. I think it''s such a wonderful thing to do if you''re so inclined. My boyfriend would love to live in a big city someday, but I''d need some prodding.


Zoe
 

Harriet

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Beacon, Starryeyed,

Our combined net income exceeds 1/3 of mortgage+maintenance+tax. I just made the mistake of showing the other half a rental with absolutely stunning views (1 East River Place aka 72nd between York and the FDR)! Men.
 

Harriet

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Curlygirl,
Thanks for your encouragement. Btw, how much were your closing costs (as a percentage of the purchase price)?
 

Harriet

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Date: 4/14/2007 4:29:42 PM
Author: zoebartlett
Hi Harriet,

I think that if you love where you are and are willing to stay there for a few years, why not buy your place now? Obviously, this is if finances allow...

On a random note, I have always lived in small town America. I am somewhat fascinated by how people live in big cities like New York. I mean, where do you go for groceries, etc.? I know that sounds silly. Also, not having a car would be something to get used to, I''m assuming. I think it''s such a wonderful thing to do if you''re so inclined. My boyfriend would love to live in a big city someday, but I''d need some prodding.


Zoe
Hi Zoe,
We do have grocery stores, albeit on a smaller scale. In fact, there''s a great one just across the street! I can''t drive and NY is perfect for people like myself -- it''s extremely walkable and there''s lots of public transport. Give it a try!
 

Skippy123

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Harriet I put pics for you in the "No HW Earrings for the Time Being," so Missy you get go look, please.
LOL!
 

Skippy123

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Date: 4/14/2007 5:55:30 PM
Author: Harriet
Obediently going...
You are too cute! LOL!
 
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