long term housing..rent or buy

[justin]

Originally Posted by Patrick

And what crystal ball did you use to focus in on MSFT before the fact? Who's going to loan you money at 20:1 (at an interest rate comparable to that for real estate) to invest in stocks?

I was responding to Honobob's post. What crystal ball would you have used in 1986 to determine that real estate will increase in value 600% in the next 20 years? If you found my post ridiculous, that was my intent. Sarcasm. Notice the roll-eyes smiley.

[Celany]

Originally Posted by cho oyu

Out of curiousity, what are common charges?

in nyc apartment buildings (both co-op & condo), the common charges are supposed to cover a number of things, which vary, depending on the rules of that particular building. for instance, a certain amount of $ every month should go towards long-term things, like fixing the roof, or any other building repairs. common charges would also cover the cleaning company that keeps the common areas/hallways clean, a super and/or doorman(men), elevator repair, groundswork, garbage disposal. I'm not sure if common charges cover water in nyc. In my apartment that I rent, I pay the gas/electric, but water is covered in my rent.

The cheapest common charges I've seen around between $200-300/mo. The highest are in the thousands.

In a more middle-class residental area, like washington heights, hudson heights, inwood (the areas in manhatten that I looked into) charges seem to generally be between $350-800/mo. If I were to buy, I wouldn't want to pay more than $600/mo.

[Nords]

Originally Posted by honobob

Ha, A good comparison of similar properties is the Gross Rent Multiplier(GRM) Market value divided by annual rent.
My Vegas and two Diamond Head properties have a GRM of 22, 23 & 24 with Vegas being the middle one. The GRM on the WA property you mentioned would be 23. Here in SF I've seen GRM's over 30!

A high GRM would imply that just about any CD would be more profitable... but I guess that the numerator of the GRM doesn't account for profits after sales costs & taxes.

[Patrick]

Originally Posted by justin

I was responding to Honobob's post. What crystal ball would you have used in 1986 to determine that real estate will increase in value 600% in the next 20 years? If you found my post ridiculous, that was my intent. Sarcasm. Notice the roll-eyes smiley.

I wouldn't have used a crystal ball. I don't have a dog in this fight, but your argument was ridiculous. Sorry, somehow I missed the sarcasm.

[mathjak107]

when you buy a co-op there are 2 mortgages involved. your personal one for the equity in your apartment that you bought and the building mortgage where the bank holds the equity that you didnt pay for yet.

your maintance fee pays this part of the mortgage, the buildings taxes and all the expenses of the building.
co-ops are much cheaper than equivalent condos as far as your personal mortgage but you pay higher fees to pay the buildings share of the mortgage

[honobob]

Originally Posted by Brat

I nominate Portland for at least runner-up.

If my memory serves me right I think the hands down GRM winner is Vancouver. Kcowan is renting a $2,000,000 penthouse for $35,000 for the winning GRM of 57

If I could rent a place worth 57 times the rent I'd be very pro renting! (I'd still have real estate investments on the side.)

[cho oyu]

Originally Posted by mathjak107

when you buy a co-op there are 2 mortgages involved. your personal one for the equity in your apartment that you bought and the building mortgage where the bank holds the equity that you didnt pay for yet.

your maintance fee pays this part of the mortgage, the buildings taxes and all the expenses of the building.
co-ops are much cheaper than equivalent condos as far as your personal mortgage but you pay higher fees to pay the buildings share of the mortgage

Thanks - I was curious why the numbers were so much higher than the HOA or condo-owner's association fees that I have seen. The additional costs of building mortgage, taxes, etc. make sense.

[mathjak107]

lets take 2 identical buildings one is co-op ,one is condo. when you ask how much the condo is they say its 300,000 and 175.00 a month common charges which cover the pool , the club house, etc.

when you ask how much the co-op is they go its 150,000 and the maintaince charges are 1,000 a month because the banks holding 150,000 in mortages on the building still .

it works out to the same but heres the difference.

in nyc where real estate was high in the 80's it was easier to qualify for a 150,000 mortage than a 300,000 one.

another difference is you actually own your apartment in a condo. in a co-op you are buying shares in the overall building. your given a proprietary lease to live there as a benefit. thats why if the building defaults you can loose your home even though you are paying your personal mortgage

[dylar]

On San Francisco GRM nuttiness...

My parents moved into the flat where they still live, the the place I grew up, the year before I was born (1975). Rent control has limited the increases to some fraction of CPI for 30 years. They currently pay ~$600 for a 1bd 1ba flat with garage in Russian Hill, probably one of the 2 or 3 more expensive neighborhoods in SF. Market rent is probably 4x that much. A similar flat would be $700K minimum. That's a GRM of 97 for those of you scoring at home. Needless to say, my parents never bought real estate in San Francisco.

[kcowan]

Originally Posted by honobob

If my memory serves me right I think the hands down GRM winner is Vancouver. Kcowan is renting a $2,000,000 penthouse for $35,000 for the winning GRM of 57

If I could rent a place worth 57 times the rent I'd be very pro renting! (I'd still have real estate investments on the side.)

Yes the new construction is now selling for $1000/sqft and our total footprint is 3300 with 2000 of that indoors. Now our place is older but was completely refurbished in Dec 2005. Even discounting for the older construction, the 1300sqft patio with southwest ocean view unobstructed is also worth something too.

I agree that RE exposure is an important asset class to hold and we do. Although nothing near $2 million. That is the dilemma with ownership, the asset allocation grows and you really have no control over it. When the market gets super-heated to average GRMs of 23, any action to readjust is highly disruptive personally.

(One reason that the GRM is 57 is that the land we are on is owned by natives under a 99-year lease. So that part of the RE inflation is mitigated by the land lease. I would be very nervous to be renting here in year 99. But I think we are pretty safe!)

[haha]

Originally Posted by kcowan

(One reason that the GRM is 57 is that the land we are on is owned by natives under a 99-year lease. So that part of the RE inflation is mitigated by the land lease. I would be very nervous to be renting here in year 99. But I think we are pretty safe!)

I don't understand why the financing of the place should affect rents. It should affect return to ownership, but what a renter wants is space and amenities, and as you say, as long you don't plan to be there beyond the lease, why would it matter? In any case, residential leases are relatively short term, so your occupancy is subject to periodic renegotiation.

Some years ago I bought waterfront land with fee title. However, it was on the res and thus subject to tribal law and administration. I bought it cheap, and got out of it within a few years as the market developed. I felt that this uncertainty was best not dealt with once the property had attained value close to levels outside of an Indian Nation.

Hot markets make for undemanding buyers, but later on everyone gets smart again.

Ha

[honobob]

http://tinyurl.com/2tpgvl

So rough figures with the reported 6.6% increase in median home prices here in the Bay Area means if you sold last april to rent you would be out of pocket about $85,000 in appreciation and selling commission. AND if you wanted to buy your house back it would cost you $26,000 more per YEAR in higher (1%) mortgage rates and loss of your old property tax base.

That's why you need to think twice, maybe more before you sell in the Bay Area. Then there's your $24,000 rent GONE to rent a studio. Of course that would be offset by the bazillions you made on your $80,000 down payment and the $100,000 you appreciated before you sold. What would you need...100% return? YMMV

Wait till the summer market heats up!!!

[cho oyu]

Originally Posted by honobob

http://tinyurl.com/2tpgvl

So rough figures with the reported 6.6% increase in median home prices here in the Bay Area means if you sold last april to rent you would be out of pocket about $85,000 in appreciation and selling commission. AND if you wanted to buy your house back it would cost you $26,000 more per YEAR in higher (1%) mortgage rates and loss of your old property tax base.

That's why you need to think twice, maybe more before you sell in the Bay Area. Then there's your $24,000 rent GONE to rent a studio. Of course that would be offset by the bazillions you made on your $80,000 down payment and the $100,000 you appreciated before you sold. What would you need...100% return? YMMV

Wait till the summer market heats up!!!

An increase in median home prices does not mean that an individual house has appreciated. The article even mentions this. From everything I have seen, prices have decreased. However, the fewer houses that are selling are higher end and more expensive.

If someone just purchased property, it most likely wouldn't make sense to immediately sell; realtor costs, loan origination costs, etc. from purchasing would likely not be covered by appreciation.

However, if one had seen significant appreciation and was able to take a large amount of equity out of the property by selling, it could very well make sense to rent.

Another aspect to consider is if one were to be moving in 3 to 4 years; I expect that real prices will fall drastically based on house payment:income ratios. If you were forced to sell in a down market, you might have to pay a significant amount of money to sell your home.

All I'm trying to say here is that there isn't a one-size-fits-all solution. One would obviously have to run the numbers to decide which was a better economic and lifestyle decision.

[kcowan]

Originally Posted by cho oyu

...All I'm trying to say here is that there isn't a one-size-fits-all solution. One would obviously have to run the numbers to decide which was a better economic and lifestyle decision.

Exactly.

Just like there is not a lot of comfort jumping into a super-heated stock market with PEs north of 25, any market where new employees cannot afford to buy is going to eventually become strangled of new blood fuelling the move up chain (unless rich people are moving into the area).

Immigration from the far east certainly helped the Pacific Coastal areas during the last 15 years. Will it continue? We have also seen rich Persians taking over from the Orientals in the last five years. As long as the inflow of money continues, the balloon can stay aloft.