Getting Started: How Much Cash Do I Need To Buy in New York City?

Piggy Bank

Oh no. There it is again. Your landlord is raising your rent to some ungodly number just so you can have the privilege of living in a top floor walk up in a building where the amenities consist of a door. Is it time to buy?

It certainly is! Of course I always think it’s time to buy, mostly because a) New York real estate is always a good investment and b) it sucks being a tenant. So the real question now is CAN you buy? How much money do you exactly need?

Let’s imagine that you found a $500,000 apartment with $1,000 a month maintenance charges (numbers chosen for easy math, like the kind I can do without a calculator). You know you’ve got the paycheck to cover your monthly mortgage payments and maintenance charges, but that’s all in the future. How much cash do you need to have on hand now just to get approved by a co-op board and close on your $500K apartment?

Down Payment Most co-op and condo buildings in New York City require a down payment of 20% of the purchase price. There are some that require more, like 25% or even 35% (these buildings tend to be found on the Upper East Side). Occasionally you may find a condo that only requires 10% down or even an FHA approved building that only calls for 6%, but I wouldn’t plan my sales search with those numbers in mind.Let’s go with the 20%:

20% of $500,000 = $100,000

Closing Costs A lot of things are covered in the big category called closing costs: attorney fees, title fees, court recording fees, any move in fees the building may require, etc. The amounts for each of these things can vary widely, so it’s pretty much impossible to give anyone a definitive number before the closing; as you get closer to the date your attorney may be able to give you a clearer estimate, but I would feel safe if I set aside $10,000 to cover everything. That may be way too much–it could be as little as $5,000–but I’d rather overestimate than underestimate. And if you end up with extras, you can go buy some candy (or a drink, because nothing says, “I need a drink” like a few hours of handing over large checks to attorneys).  So let’s say you need another $10,000

$100,000+$10,000

Savings to Impress the Co-op Board You’ve probably heard stories about co-op boards analyzing your reference letters for signs of character flaws, or asking difficult personal questions at interviews to find out if you will be the right kind of neighbor, but you know what they’re really interested in? How much money you have. You could have the best personality in the world and the heart of a saint, but if they don’t see that you a serious amount of liquid assets, that won’t matter one bit. Co-op boards want to be sure that if you lose your job, you’ll be able to cover your monthly maintenance fees for a year or two; The amount of years will vary from building to building. The seller’s broker should be able to give you some idea of how much the board would like to see. If it looks like you don’t have enough, someone will let you know; no one wants a buyer to go through the process of filling out a board package and waiting weeks for word on that if there’s little chance the buyer will pass financially. That would be a waste of time for both the buyer and seller. Let’s go with the two year number for our sample case:

$100,000+$10,000+$24,000

…and Something Extra The co-op board won’t be that impressed if you only have $24,000 saved because they won’t believe that you may not do something like, oh, I don’t know, buy some furniture for that new apartment. Let’s throw in another $10,000 (and that’s probably skimping on things) just to show that you’re not going be pushed down to nothing if you have to tap into those savings.

$100,000+$10,000+$24,000+$10,000

Okay! Time to add it up:

$100,000 + $10,000 + $24,000 + $10,000 = $144,000

So yeah, to buy that $500,000 apartment, you probably should have about $144,000 easily accessible to you. Does that sound doable? Of course it does (provided you don’t work in the arts–but you knew that already). Now get ready to say goodbye to your landlord!

Stacks of Cash

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Open Houses: What to Do, What to See, What to Ask

Look, old time New Yorkers waiting to go to an open house at a brownstone...Oh, they're waiting for word about the Titanic. Never mind.

Look, old time New Yorkers waiting to go to an open house at a lovely brownstone…Oh, they’re waiting for word about the Titanic. Never mind that.

The weekend is here! I bet you’re planning on spending part of yours indulging in New York’s second favorite Sunday activity: going to open houses. (Brunch is the first favorite Sunday activity. I know I didn’t even need to tell you that.) If you are, here are some tips for getting the most out of your tours of apartments.

Take your own photos Sure, the broker is going to give you a lovely show sheet with professional photos showing the apartment at its best. Take your own photos to show what it looks like today. You may also want to take pictures of things that the broker didn’t think were important…or didn’t want to show.

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Deal or No Deal? Making a Good Condo Investment in New York

Let's talk filthy lucre.

Let’s talk filthy lucre.

(I really hate the title of this post. It’s clunky and lacks wit, but I guess it gets the job done. Anyway, sorry about that.  And overall, this is going to be low on entertainment value…but sky high in information! So keep reading. I’ll try to make this as painless as possible.)

When my grandfather died, he left my dad some money. My parents used some of it to pay off their mortgage, then used the rest to buy a house at the New Jersey shore (or “down the shore,” as we like to say). He said buying shore property was a good investment, because they can’t build more shore.

The same can be said of New York City–they can’t really build more of it. Sure, they can continue to build up and try to find other ways to squeeze tiny residences onto our little island, but it’s a good bet that there will always be more people trying to live here than decent homes available (and if there is a time when people don’t want to live in New York, well, that probably means something really bad has happened and we may all have bigger problems than our rent). That means that New York real estate can also be a good investment. But when you’re shopping for a possible investment property, how do you know if you’re getting a good deal? Let’s think through this.

Bad news! Remember that old lady you used to cat sit for years ago when you first moved to New York? I’m sorry to tell you that she has shaken loose from this mortal coil. Good news! You’re her sole heir and it turns out that she had several million tucked away under her mattress.

Being kind to Princess Pretty Paws has paid off handsomely.

Being kind to Princess Pretty Paws has paid off handsomely.

Okay, you’ve used some of it to buy your own dream apartment, but now you have some leftover and you’d like to do more with it than have it just sit and rot in your savings account. You decide to buy a condo so you can earn some income from renting it out.

Here’s a good looking deal. It’s a one bedroom in a prime West Village location for $900,000 with monthly charges of just $900 (note: this is based on a real listing but numbers have been rounded for easy math purposes). Is it a good investment.

Aww, the West Village is so pretty...

Aww, the West Village is so pretty…

Step 1: How much do you think you can charge for rent? A quick look at rental listings in the same area show that you should be able to get at least $3,000 a month in rent. You may be able to get more–after all, the West Village is a super popular location–but let’s go with the low end of things.

Yearly income from rental: 3,000 x 12 = $36,000

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Q&A: What’s a Co-op? What’s a Condo?

nyc view from empire state bldgSome of these buildings are co-ops. Some are condos? What’s the diff?

Hello everyone! It’s great to see you here. And now, how about some questions from our audience. Anyone? Anyone? No? Okay, that’s understandable. You did just get here after all. So let me start?

Q: I want to buy an apartment in New York City, but I keep seeing things listed as co-ops. What’s a co-op? How is it different than a condo?

This is easily one of the most common questions that come up when people first begin their New York apartment search. So let’s get to it.

Co-ops: Co-op is short for co-operative, which, in most parts of the country, is a word you’re more likely to see on a kindergarten report card than in the real estate listings. However, in New York City it refers to a co-operative building, or a building that is owned by all the residents (see? people cooperating. It all makes sense now). When you buy a co-op apartment, you do not get a title to real property, as you would if you buy a house or a condo; instead, you buy shares in the corporation that owns the building. As a shareholder, you pay a monthly maintenance fee which contributes towards paying off the building’s mortgage, (if it still has one), the real estate taxes, and the upkeep of the building.

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