A: Keep monthlys low and then focus on Location, Raw Space, Light/View. You'll do fine!
HEY, DID YOU CATCH THAT ARTICLE IN THE NY TIMES TODAY ABOUT THE HOUSING BUBBLE THAT'S GOING TO POP?
Is anybody else tired of this conversation?
I will NEVER argue that Housing/Real Estate = A Type of Market, and that as a market it is affected by basic fundamentals as well as outside influences. I will also NEVER argue that since housing/real estate is a market, that it could not go down in value. However, history has proven time and time again, that real estate is a very safe and wise investment for the main reason of tax benefits offered by the federal government & the ability to live in your investment.
No other investment can offer you the combination of these two principals.
To find GOOD VALUE in this city, you need to focus on the following notions first:
1. How Long Will You Live In Your New Home
2. Keeping maintenance Costs Low. See "Maintenece Charges: The Hidden Devil"
3. Knowing What Luxuries To Pay For
HOW LONG WILL YOU LIVE IN YOUR HOME
Ask yourself, WHY are you buying this apartment? Did you just land a new job and you are tired of renting? Are you expecting a child and you need to get a larger place? Do you plan on renting out the property for investment? Or, are you downsizing so that you can free up some money for your lifestyle?
There are so many different answers to this question, but the answer should always be enough information to answer this next question. How long do you intend to live at this property?
The answer to this question will allow us to determine which mortgage product best suits your needs. Its sad to me that so many people out there don't put enough time and energy into investigating what type of mortgage you will end up taking. This could be the most important financial decision you will have to make, AFTER deciding how much you can afford to spend on your new apartment.
For sake of ease, I created a visual chart for you to use as a starting point when talking to your mortgage broker.
*With The Interest-Only Options, Please Be Sure That You Are NOT Buying A Property You Cannot Afford & Then Using An Interest Only Payment To Rationalize The Purchase. You Should Keep Your TOTAL Housing Costs Per Month Under 1/3 of Your Total Income.
KEEPING maintenance COSTS LOW
One thing you must keep in mind when you are out there searching for your new home, is that eventually, you will resell this property to someone else for a nice tax-free profit!
Therefore, if you are going to resell, you should buy something now that would put you in a great position to get the highest asking price down the road. One of the biggest factors that affect buyers is the TOTAL maintenance CHARGES that they will have to pay every month.
THE LOWER THE maintenance CHARGES --> THE HIGHER PURCHASE PRICE THEY CAN AFFORD
So, try to stick to keeping your maintenance charges UNDER $1.25 a square foot. If your apartment is 800 sq. ft., make sure the maintenance charges are under $1,000/Month (800 x 1.25)!
KNOW WHAT LUXURIES TO PAY FOR
Knowing what features of an apartment to pay for is vital to making a smart and profitable investment. The 5 MOST IMPORTANT features that you should be paying for in your new home are:
1. LOCATION - Stay Near Mass Transit, Parks, Restaurants & Shops
2. VIEW/SUNLIGHT - Hopefully This Will NOT Change While You Own Your Apartment
3. RAW SPACE - Look For The Most Raw Space As You Can Afford Even If It Needs Work
4. DOORMNAN/CONCIERGE - Security Gives You Peace of Mind; Convienence
5. OUTDOOR SPACE - Increases Quality of NYC Lifestyle; Sets Your Apartment Apart From The Rest!
If you can find a place that satisfies these 5 criteria, then you are off to a GREAT START!
Now, there are also features that you should be wary of paying extra dollars for, as you are most likely paying a premium over what the features actually costed the original owner. These include:
1. KITCHENS/BATHS/FLOORS - You'll Pay 2 Times What The Owner Paid; Is It What You Would Want?
2. ROOFDECKS/GYMS - You Will NOT Use These Amenities As Much As You Think
3. PAINT JOBS - Chances Are You Will Re-Paint When You Move In
4. FURNISHED CLOSETS - Are They How You Would Do It?
You get the picture!
Follow these 3 GUIDELINES and you should be just fine with your next purchase, even if there is a downturn in the housing market!
One of the reasons I love real estate, is that besides the basic fundamentals that are powering this housing boom, there are always variables that come into play that can never be anticipated. Hurricane Katrina is a great example of one of these variables.
The basic fundamentals that have been causing home prices to surge continue to be: Low Inventory, High Demand, Weak Dollar (brings in outside investment, particularly from Europe), Tax Benefits of Owning, Continued Weak Confidence in Stock Market, & Historically Low Interest Rate Environment.
Now that Hurricane Katrina has devasted much of the Gulf Coast region surrounding the city of New Orleans, Im hearing estimates upward of 200,000 families that have lost their homes and are now displaced. This is a staggering figure, which will result in Hurricane Katrina being one of the most costliest natural disasters to hit the USA in the past century. While the army corps of engineers works around the clock to rid the area of bacteria infested flood waters, which is no easy task by the way, the cities affected are beginning to realize the complete devastation that has occurred. I ask you:
Where are these 200,000+ people going to live now?
Well, being a holder of NYC real estate myself, and having experienced an absolute wonderful run over the past 4 years, I think we will see some SPILL OVER should the California market correct as I think it will.
A recent article on CNN Money brings up a few very valid points. For one, they estimate that the market value of some houses may now be up to 45% OVER-VALUED. WOW, that is crazy!
The article then goes on to mention that a 'soft-landing' is expected, in what most experts agree will be a cooling of the housing market in California. This is where I get a bit worried.
I have been saying on this website, through my post Interest Only Loans: Are they For Me?, back in August, that I think this nation has pockets of problems. There are some neighborhoods in California, Florida, & Nevada that have housing prices gains off the charts. This CAN NOT and IS NOT sustainable. So, it will be these markets that get hurt first, and probably the hardest.
Any downturn in the Riskiest 3 Markets (California/Florida/Nevada) housing markets will have a psychological effect on buyers in NYC. My prediction:
A SMALL BUT SHARP & TEMPORARY DROP IN HOUSING PRICES
Some financially weak homeowners will be selling out of necessity, while others will weather the storm just fine. If the market lulls for a period of 10 months and drops 10% from where we are right now, the wisest investors will be buying after the drop by recognizing the percentage change in value. New York City just has that incredible knack for recovery, and I think many people are out there waiting for prices to drop to get what will be a great value for down the road!
If Alan Greenspan & Co. keep interest rates low, and I think they will now that Katrina & Rita stopped by, there might be a great buying opporunity setting up if you are diligent and ready! Keep your eyes out, and watch those other housing markets first to see effect will really happen to ours!