Your price range to buy will give you very limited options if you want to be in Manhattan.. Renting will give you more options as far as location and proximity to your school.
You don't know where you will wind up after graduate school - so you might be facing a move at that time. I personally don't think a short term investment in real estate is a safe move right now.
If you were my son, I'd tell you to rent for now.............get a feel for the city.......... and buy when you land that big job after graduate school!!
Prudential NJ Properties
I lived in New York for thirty years, and there is no substitute for being close to campus. None whatsoever.
If your only costs were your mortgage, $1000/mo, five years, 5.5%, you'd pay off about $13,000 of the principal. The local experts here can advise you on what your co-op and / or condo charges are.
I don't often try to talk people down, but you have got to come inside - your model doesn't promise to work very well.
Now, in other locations, you can make this work better, because Maimon could buy a house and rent rooms out for income. But, other locations ain't Manhattan, are they?!
You may be able to purchase an apartment for the higher end of your budget, it just depends where you would like to live. Around Columbia, you may be able to find a studio or small 1BR for $275K, but would be even less likely to find anything in the immediate proximity of NYU. Which school are you attending? There are some great deals in Brooklyn and Queens right now and both are very quick commutes to either school, NYU of course is much closer than Columbia. Also, has anyone mentioned the difference between a Condo and a Coop? 75% of all of the buidlings that are residential in Manhattan are Coops which are much more financially restrictive to purchase in. Understanding this difference is one of many things that you should know when tackling the purchase of an apartment in NYC. I have been an agent in Manhattan for quite a few years, please call me if you wish to discuss further. I would gladly be of assistance.
Shaun T. Anders
Prudential Douglas Elliman
575 Madison, 5th Fl
New York, NY 10022
You might even what to consider buying a condo or co-op in southern Westchester County. Westchester County is just north of NYC and it is very convenient to travel to the city by train. There are many co-ops and condos that are within your price range. You might even want to consider the towns on Yonkers, New Rochelle, Mt. Vernon, Bronxville and Pelham because of their proximity to the Metro North train stations.
Here is the link to the MTA website and if you click on the stations you can figure out the commute time.
The green line represents the Hudson line, the blue line represents the Harlem line and the red line represents the New Haven line. The trains on these line travel to Grand Central Station in Manhattan.
Keller Williams Realty Group
Lets say you can buy something for $150k. You would have lost $60k in rent so if it can be sold for $90k in your pocket you would be even. At a $150k selling price you would expect to incur $9k in re commissions.
You will have lost say 2% x 5 years. Maybe $15k (or so) in compounded interest. If you could resell for a $50k total loss you would be ahead financially. I understand your situation now.
If you do not lose more than 20% you would be $$$ ahead of renting.
I hope you will have actual work on campus. You are going to need to have some income coming in. Not including food and maybe having a bit of a life you will have expensive taxes, insurance, and more than likely healthy HOA fees in a condo.
Have the city people (realtors) explain to you how much those can cost. I only know they hurt. Once person said I believe $750 a month for HOA fees at one complex.
Does it include heat, hot water, trash removal, insurance, and taxes? Maybe, I have no idea. I am just a country boy who would never consider city living or a hoa.
Buying could actually work for you in your situation IF you can handle buying, paying all the (condo) expenses, and living expenses (including school) without going into debt (for the condo).
I would not want to see you go more than $300 a month for more condo than you could buy cash. And only then if you had a job you knew would cover that expense.
The problem with funds in hand is they can unexpectedly run out if they are not replenished. That is why I would want to see you with a job of some kind. If you made $500 a month I would be happy with that. If you could make $1,000 or more a month it would be great.
1. speak to a financial planner, as no one here knows what "funds" you have available, or how you will be paying either rent or towards a mortgage.....come up with a budget
2. speak to a mortgage rep, asap, to see if you would qualify for any amount of a mortgage, especially considering you have no active income (based on what you said)........this is key!
3. speak to an agent just to get an idea (check Craig's list, too) of what you can buy with a price range of 150-275,000 (or whatever the number is after speaking to a mortgage rep)...........in Manhattan, it will buy you very little - and you may not like the choice of areas open to you.........if you need to look in the other boroughs, for affordability, then you need to factor in the expense of commuting, as well as the time involved.
4. decide, if you don't buy now, where you could safely invest that 150,000 you currently have, and how it might grow in the next 4-6 years..........if invested in buying an apt, there is still the chance you will lose some of it if there is depreciation in the next few years - it may still go down further , before coming back up
5. keep in mind that the $60,000 you might spend towards the mortgage & monthly fees (instead of rent) will be (this is approximate) 80% INTEREST payments, and very little towards the principal in the first few years, so you will not be paying down that loan as much as you might think.
Also, keep in mind if you own, you have no super to call when something breaks - you'll need to budget for that, too. I will also assume that in your price range you may very well have to do some updating in whatever it is you buy, so that's another cost to factor in.
Since you stated you are not familiar with Manhattan, you certainly do need a realtor to at least help you sort it all out. It may be very sobering when you see what your price range will buy there....
Do your due dilligence, and then make your decision. You sound like a bright, sharp young man....once you have all the facts......you'll know what's right for you.
Best of luck................and lots of success in graduate school!
1. I am ready to put 100-150K directly into a purchase, so the mortgage, if there would be one, would not be for much. Though as a grad student I won't have a source of income in terms of work, I do have funds.
2. I would rather pay money for something that I will own rather than just paying rent without getting any reciprocal equity.
3. I am fairly confident that the real estate market won't fall more that 10-15 percent if it does fall at all, and predict that it will most likely stay where it is, if not heat up, in the coming years, so I am not scared to lose more than what I would have lost in paying rents.
4. I am not committed to using a real estate agent.
5. Although it is possible that I may move in 4-6 years, I still see owning a place which I can later sell (and perhaps even turn a profit or at least get my principle investment back) as a better option then paying rent for all this time.
Suppose I live in NYC for 5 years, and later decide to move:
That is 60 Months.
60 x $1000/month rent = $60,000
Meanwhile, with $60,000 I could have owned 20% of a $300,000 property!
Can someone explain the financial BENEFITS to renting over buying? I simply don't understand what they would be given my situation...
I understand the temptation to buy, but having grown up in the city, let me tell you that being an hour away is a great incentive to miss an otherwise worthwhile lecture or class.
Since your education is the priority, don't make real estate investment a hobby. Try to live within a short walk of campus. It will pay off better than your real estate investment would have.
Just in case something happens and you have to; or decide to stay in new york get a fixed rate mortgage. It would be a real shame if you got an adjustable rate one and ruined your fico score before you really got started in your new career. A fico score might even affect your ability to get a job. Do not forget to include insurance, HOA fees, property tax, water, sewer, and any other costs like electricity when you do your financial calculations.
Have you considered when you move away the realtors commissions? The time required to sell? The possibility of prices dropping?
Here is how a mortgage works. You take out a 30 years 5% fixed rate mortgage. Every month you make your payments figuring you are building up a lot of equity. Lets run some numbers. Double check with a lender.
$100k 30 year 5% mortgage. After 7 years you will have paid off $12k of what was owed. you would still owe $88k on the mortgage. If you use a realtor to sell you will lose about 6% or $6k. Add that amount to what you still owe on the mortgage. $88k + $6K = $94k. You would have $6k in equity after 7 years of paying for your mortgage.
You will not be there for 7 years. Lets see what happens with a 5 year mortgage. We have the same $100k 30 year 5% mortgage as before. But now because it is less time you have only paid off about $8,340.
Subtract the same 6% realtor fees as before. You now have $2,340 in equity. But here is the kicker. You paid closing costs when you bought and got the loan. I am sure the closing costs would just about eat up everything you have built up in equity.
In even less time like 2 years, you will almost certainly lose money buying. You could be stuck paying for an apartment you do not want. Yes, it is possible that you could have some home appreciation, but the more likely result would be the foreclosures coming, the massive unemployment, the problems of the economy and tight lending standards making prices go lower.
A real estate housing forecast site for the whole nation. (keep in mind forecasts are not always accurate) http://www.housingpredictor.com/better.html
That site expects 10-17% decline in 2010. that means you would lose far to much money.
Resets Projected to Cause Mortgage Crisis in 2010
That last site has a lot of foreclosure information on it. Study and be informed about the area you would buy in. Understand how financing works and how you really are just paying interest for a long time.
Buy or rent, you have to make the choice. I would consider living in a cramped apartment with many other students to save money. I would consider on campus housing (if available). I would consider buying. Once you look at the true costs involved (including being able to move away easily) make the right decision for you.
Maybe you could live some distance away, take a train, bus, or whatever kind of public transportation they have there and save a lot by spending time getting to school each day.
I do not know the area to tell you where. All I could do was to give you ideas to consider. If you are getting into graduate school I am sure you are smart enough to dig and find out a lot more information yourself. Always keep an eye open and be skeptical of what anyone (myself included) tells you. More so if they could be profiting from giving the advice.