I've been thinking about this recently. My annual income is a little over $100,000 and I live in NYC. I have some student loans, with $30,000 (base) all in gold at the moment -- 60k total in gold on margin, bought at well beneath the current market price. I was thinking about buying a low end 1 bed/1bath condo or co-op out of range of the city with a longer rail commute for around $85,000. I figure I could pay a place like this off very quickly. Now, everyone is avoiding real estate; however, if I aggressively pay off a 30 year fixed loan on a place within 3-5 years. My thinking is: An $85k loss is no big deal in the long run of my life, and the rents in the market (far out from NYC) seem like they'd be fairly close to covering the actual mortgage. So unless there was a huge population shift, the value of the property wouldn't fall too much beneath rent at this end of the market. I'm paying around $1500/month in rent and my building is crap, has rats, roaches, bad internet connection and this is still a "good deal" by NYC standards. I've about had it with NYC landlords. They're all crooks. Thoughts? Has anyone else looked at the very low end of the market? One more note: I had a $400,000 condo in LA that I sold a few years back. I basically lived there rent free, so this is not my first home. That unit that I sold dropped a full $50,000 on the open market after I sold it. I am worried about buying again, but I feel as if risk in the sub $150,000 market isn't all that much -- especially if I have intentions of living in the area for quite some time.
$30,000 isn't "all this cash". What world do you live in? It's the bare essentials needed to survive a job loss, getting fired, or a health care cost shock. Have you been to NYC? A non rat-trap costs $2000/month minimum. People will criticize me, but $100,000/yr is poverty level in NYC.
if you can hold on where you are, more deals are coming this is just the tip of the iceberg. wall street bonus season should be bad and that will bring out more deals. in 90/91 people were just walking away from stuff in new york. prices came down hard. i feel for you prices just are out of hand in new york . good luck
brilliant comment...you idiot.. OP, Real Estate is a long term investment, there is always a risk you will lose some but not all your investment. Generally people who lose money in real estate are investor/speculator types. They also make big money when its good. IF... you can find a reasonably priced condo...look at foreclosures/bank owned etc and stay there 3-5 years you'll do just fine. GL edit...given your age (assume young) I also wouldn't be in a big hurry to pay it off...20% down and a mortgage is a good leverage tool. You can always rent it out at a later date if you make more money and want to move. It then becomes an investment property with certain tax advantages.
buying cheap is very logical EXCEPT, you should not be buying a condo in nassau or something of that nature 1.5 hour LIRR Transporations are NOT fun find something closer to the city, and nothing would be $90,000 though... You don't want to lose 2-3 hours of your life everyday.... , what you should do is before buying something out there rent a cheap motel and transport yourself to work for 3 days, see how you like riding the subway or railroad for 1-2 hours each day before buying so far out in the boonies and regretting your liability
Staten Island, near the ferry is good. It goes into the financial district, and SI has better parking and more green than the other boroughs. YOu can also likely find a few good deals. And the ferry is free.
Imo, a cheap home is not going to have much equity appreciation, in exchange for zip equity returns, a cheap home offers immediate cash flow. You're trading off the cheaper living expense and transferring the savings to the value of your commute time. What is your free time worth? Suppose you could have the benefits of both, equity appreciation and cash flow. You might look for a cheap home in an expensive neighborhood, or in the path of a future highway or project, a home zoned for commercial. Personally I view the rent vs own argument, narrows down to the dividends. The dividends being the improvment or enhancement of lifestyle that can't be quantified with dollars and cents.
Regarding value of free-time -- my rationale is that my time is actually usable on above-ground trains with the advent of broadband cellular. If I carry a lightweight laptop, I can work on the train on projects and homework without much difficulty. If I were home, I'd be doing the same things anyway. Primary motivation: I want to retire early from the work force, and therefore want to minimize the overall portion of my income that rent is. I have had a traditionally high level of job instability, but have never had a problem making at least $1000/month after taxes, independently or working for others. I want to shield myself from out-of-lease price shocks in non rent-controlled apartments. I feel as if now might be a good time, especially if more people are leaving home ownership to rent because of foreclosure issues. So let's say I pay off $60,000. If I have any job instability, the monthly HOA fees or common charges would be easy to pay off, even with a job at McDonalds. That is my primary motivation. It's a "hedge" (in the loosest sense of the word) against homelessness and unemployment. Secondary motivation: once I outright own the condo or co-op, this will give me more freedom to experiment with starting businesses. The lower the payment I have, the more cash-flow I have to divert to business operations. My reasoning is that a 20k hit in value makes little difference to me, if I intend to live in the place for more than 10-20 years. FYI, I'm not looking at condos in Nassau. I was looking more at co-ops along the Metro-North line in Westchester, or maybe something even more upstate.
How far out of range of the city are we talking? And in which direction? $85k seems awfully low for anything in Long Island, so I presume you're talking about PA or NJ. I would try to keep the commute capped at 1 hour (if possible). Anything beyond that and it really begins to weigh down the cost/benefit of the lifestyle. I presume you're working close to a 10-hour day, so if you tack on a 2-3 hour r/t commute, you don't have much free time on the weekdays anymore. edit- Sorry, missed your last reply. Westchester isn't bad time-wise, I'm surprised prices start at $85k there. A cellular modem/laptop is a great idea, if you think you have any chance of nabbing a seat on a rush-hour MetroN train.. Otherwise it's a long stand.. On the inbound morning line, you've got plenty of stops behind you, so your chances aren't the best.