Is it me or.... (rental vs price)

11 Replies

Take Ozone Park for example. I saw a house last week for 630k 2bd over 1bd. Running some basic numbers.... (not conservative).

Upfront

5% down + 20k closing = 51.5k out of pocket

Monthly (best case scenario)

- 2944 Equity + Interest (4.25% rate)

- 425 property tax

- 150 insurance

- 250 utilities

- 0 maintenance

Net Total Expense

- 3769

Scenario 1, 2bd rented out, 1bd I live in

Rental Inc (Zillow est.) 

- 2150 *0.67 (income tax) = 1440 assuming 100% occupancy

My portion = 3769 -1440 = 2329 for 1bd.

Scenario 2, 1bd rented out, 2bd I live in

Rental Inc (Zillow est.) 

- 1700 *0.67 (income tax) = 1139 assuming 100% occupancy

My portion = 3769 -1139 = 2630 for 2bd.

Both 2329 and 2630 seem like ridiculous numbers to me. Everywhere else in NYC that is under 600k, is hood, and everywhere under 500k is Brownsville like hood. 

Are these numbers the new norm or are my calc's missing something important, like depreciation tax, per say?


NYC is expensive to make $

travel to the outskirts...... 

Thats what I thought too, except all of the outskirts other than JC And Newark tax on property, not on income.

2 family outskirts nyc:

-360k asking price w/12k taxes. 2bd over 2bd. 30k cash upfront. 

-1682 mortg

-1000 property tax

-100 insurance

-250 utilities

-100 for car gas.

- 0 maintenance and reno.

total monthly expense

-3133/mo

income

- 2000 rental inc. * .7 ( no city tax) = 1400 net inc.

net payment 

=3133-1400=1733/mo

Monthly payment is a lot better, but the snake is right behind the apple here.

example outside nyc: 

630/2630 = 0.239 (queens)

360/1731= 0.208 (any county outside city).

while monthly payment is lower their, most of the MYcmonthly mortgage payment goes to taxes, not to equity or interest.

this is the problem in ny. you have a Hawaii like tax haven inside and right outside you have direct opposite. its almost like they want you to leave...

Updated 2 months ago

Thats what I thought too, except all of the outskirts other than JC And Newark tax on property, not on income. 2 family outskirts nyc: -360k asking price w/12k taxes. 2bd over 2bd. 30k cash upfront. -1682 mortg -1000 property tax -100 insurance -250 utilities -100 for car gas. - 0 maintenance and reno. total monthly expense -3133/mo income - 2000 rental inc. * .7 ( no city tax) = 1400 net inc. net payment =3133-1400=1733/mo Monthly payment is a lot better, but the snake is right behind the apple here. example outside nyc: 630/2630 = 0.239 (queens) 360/1731= 0.208 (any county outside city). while monthly payment is lower there, most of the monthly mortgage payment goes to taxes, not to equity or interest. this is the problem in ny. you have a Hawaii like tax haven inside and right outside you have direct opposite. its almost like they want you to leave...

With interest, expenses, depreciation, ect you won't likely pay any taxes. I actually just filed my taxes it came out as a loss which I can right off against my regular w2 income.  

If you are trying to get something with 5% down in NYC you will most likely need to look for off market deals or in the "hood". Anything in the more competitive areas get taken so fast its even hard to get something with 20-30% down. You also didn't take into account mortgage insurance. You need to pay that if you're paying less than 20% down.

Assuming you still try to make it work you can do this,

rent 1 br out 1700 live in 2 br but get a roommate and rent out the other room for 1000. You still end up paying 1k out of pocket. 

Dear god your market is expensive. Two months at that projected rent nearly equals my total out-of-pocket cost to purchase SFR house. What kind of income requirements do you look for in NYC, 3x rent, etc?

Your market is best suited to speculators not income investors. If you do not have deep pockets it is not a investors market.

@Jaron Walling The standard for rentals in new york city is monthly rent*40 as income so you need an income of 80k to qualify for a 2k apartment. The projected rents and price the op posted is actually considered cheap. 

The NYC market is pretty different. People always say its for spectators and too over priced but houses always fly off the shelves. Personally I think it is stable you might not get 10-15% income to cost but places don't crash 50% either. There is still a lot of demand but its just hard for someone to start in. 

@Bin Chen has a point, long term growth continues because of the city busting out of its jeans.  Like 6 pounds of potatoes in a 5-pound bag.  The play in NYC is appreciation.  

Check out my blog post on Scranton PA. We are 2 hrs drive from GWB and the play here is cash flow, with some appreciation over time.

After over 30 yrs in the NYC residential market, from my personal experience, you've got to have deeeep pockets to last through a long term buy/hold game there.

Originally posted by @Bin Chen :

With interest, expenses, depreciation, ect you won't likely pay any taxes. I actually just filed my taxes it came out as a loss which I can right off against my regular w2 income.  

If you are trying to get something with 5% down in NYC you will most likely need to look for off market deals or in the "hood". Anything in the more competitive areas get taken so fast its even hard to get something with 20-30% down. You also didn't take into account mortgage insurance. You need to pay that if you're paying less than 20% down.

Assuming you still try to make it work you can do this,

rent 1 br out 1700 live in 2 br but get a roommate and rent out the other room for 1000. You still end up paying 1k out of pocket. 

 What is wrong with low down payment? Is it risk of non closing due to buyer backout or appraisal issues? I imagine that either way, the seller will get all of the money after fees.

@Daniel Maciag

Yeah its about the risk of not being able to close. The seller can be put on contract for a month or two and just completely waste their time and legal fees. 

It really depends on the seller because their goal is to find the best price with the ability to close. If someone comes with 50% down payment but has a 550 credit score and no recorded income while someone else comes with 20% 100k incomes and 750 credit score it would be better to go with the 20% since they have a much higher chance of closing the deal. Something like FHA is harder to get accepted because most of the houses I've tried to buy have had multiple offers, a lot of the time higher than listing price so the seller has so many options the 5% down is likely not the most appealing offer. I don't have much experience in Ozone Park specifically but I have experience in Flushing queens and Bronx, people throw around all cash offers. If someone like that can provide proof of funds and are willing to pay the asking price, its likely no one else has a chance. At the end of the day it all comes down to what options the seller has.

If you can somehow get the seller to agree to sell to you before it hits the market or you have some sort of previous relationship with the seller then maybe you have a chance with 5% down. 

Unless you find a smoking deal where you can add a ton of value. I wouldn't even consider buying in NYC given the low rent to value, high taxes, and tenant friendly laws. If you really want to househack, look on long island or jersey. Even if the property taxes are a bit more, consider your overall ROI.

If it was me personally, I would just look to rent an affordable apartment in NYC, save money and invest where it makes sense from a cash flow perspective.

Not everywhere in NYC is the hood under 600k. There are properties i know of that may meet what you are looking for, lets connect. 

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