New York City Real Estate | NYC, NYNew York City Real Estate | NYC, NYNew York City Real Estate | NYC, NYNew York City Real Estate | NYC, NY
  • ABOUT
    • ABOUT SCOTT
    • ABOUT THE TEAM
    • PRESS
  • BUYERS
  • SELLERS
  • VIDEOS
  • LISTINGS
  • JOIN OUR TEAM
  • BLOG
  • CONTACT
  • CALL SCOTT NOW

Mortgage Rates vs Rentals

    Home Newsletter Mortgage Rates vs Rentals
    NextPrevious

    Mortgage Rates vs Rentals

    By admin | Newsletter, Uncategorized | Comments are Closed | April 15, 2012 | 0

    Whether I’m speaking to a $3mm buyer, or a $500k buyer, some of the conversation is the same- mortgage rates are simply too low to pass up.

    Even someone who can afford to pay cash is taking advantage of rates.

    At a 40-50% effective tax bracket, along with the tax deduction of mortgage interest, turns 4% money into 2-2.5% money.

    How do you say no to that?

    When the tax deductibility of a rental is zero, the option of purchasing an equivalent property becomes more and more interesting?

    The stock market has outpaced the sales market since 2009.

    With the market touching 13000 recently, and certain investments showing time to hit the exits, making a purchase using cash or money that’s been in the market seems like a logical choice.

    Time to deploy cash in an apartment?

     
     
     
    Interest rates are fairly stable across loan amounts.

    I’ve written about this many times, but I will share a couple of funny stories from the last few weeks about how challenging lenders are being:

    1) A buyer who was going to combine

    her current apartment the the purchase of her neighbor’s apartment had no mortgage on her apartment- but wanted to take a modest (under $417,000) mortgage on

    the neighbor’s unit- the day before the closing, the

    lender asked for a letter from her coop board approving the combination before she closed.
    If this sentence makes no sense, I’ll explain.
    The order usually is: Sign a contract, get a loan, get board approval, close on the purchase, apply for whatever work you want to do with the coop board, get approved, do the work, end scene.

    The lender eventually understood how out of order their expectations were, but not without some genuine legal threats.
    2) Appraisals are taking 2-3 weeks to schedule once a contract is signed.

    This delays is incredibly frustrating for buyers and sellers- since rate locks are only 60-90 days, and as we approach the time of year when boards do not meet, every buyer is trying to get his/her board package in before June/July.
    3) A happy ending:

    Recently we had a listing we took over from another firm, when a deal in contract fell apartment- due to the lender.

    However, we discovered that the buyer could not get financing due to income, and nothing else.

    When we brought a qualified buyer to contract with the seller, she was able to get a loan within 3 weeks.

    So, money is available.

    Go and get it!
    The question is really one of getting the best rate in this environment.

    If rates are hovering around 4% for fixed loans, and interest-only products are around 2.5-3%, what do you do?

    Certainly, just use common sense- if you’re planning to stay for 5 years or less, be very sure of that, and take the rate with the lowest product you can find.

    If you’re not sure, get a fixed product.

    There are some cooperative boards who don’t allow buyers to take interest-only loans- and certainly as rates rise, it will be the rare owner who regrets having a fixed loan at these rates.
    But I almost forgot to write about the cost of rentals.

    Using 1-bedroom rentals in doorman buildings- if the cost of a rental is $3500 on average, and the cost of a purchase is approximately $600,000 with an $1100 maintenance- the cost of the

    monthly carry

    with an interest-only product (assuming a 5-year move) is $2700 right now, with 20% downpayment, or $3325/month in a fixed product- and this is before any tax deductions!

    This will drive many, many sales over the next quarter or two, or three.

    There’s too much 1-bedroom inventory still lingering, and not enough rental property, by a LONG shot.
    The same argument works for bigger apartments, when rates are

    this low.

    The three-bedroom unit which is asking $8000-10000 rent in a prime location may cost about $10,000 per month- assuming a $2mm purchase price, with 20% down, and $2500 per month in maintenance.

    This again is before any tax deductions.

    The moving pieces become location, how much renovation a property needs, and the monthly maintenance.
    This seems like a fairly obvious comparison to make right now- I’m happy to discuss it further with anyone out there!

    brown harris stevens, buy vs rent, condominiums, harris residential team, mortgage rate, NYC Real Estate, upper west side

    NextPrevious

    Recent Blog Posts

    • VIDEO: No Supply Problems, No Demand Problems. It’s Only About Pricing. January 1, 2021
    • The Myth of the Desperate Seller – And Other Real Estate Fallacies December 25, 2020
    • Bottom of the Market, Part II – New York is Coming Back, Baby! December 25, 2020
    • Year Over Year: The Real Estate Recovery is WELL On Its Way December 9, 2020
    • VIDEO- Am I Really Calling the Bottom of the RE Market? Yes, I Am. November 30, 2020
    • All Signs Point To A Bottom- And Don’t Just Take My Word For It November 27, 2020
    • Virtual Real Estate vs Brick and Mortar Real Estate Investment- “Unlimited Upside”? November 27, 2020
    • An Inclusive New York City Real Estate Market- A Dream Home For Everyone November 27, 2020
    • Should I Stay or Should I Go? (A NYC Real Estate Market Conversation) November 27, 2020
    • Our Inventory Report: Actual Inventory Levels vs Sales Pace October 29, 2020

    Archives

    Call us: (646) 400-0769
    Email us: sharris@bhsusa.com
    Visit us: Brown Harris Stevens
    1926 Broadway
    New York NY 10023

    © 2021 The Harris Residential Team. All rights reserved.
    • About Scott Harris
    • About the Team
    • Press
    • Buyers
    • Sellers
    • Videos
    • Listings
    • Blog
    • Contact
    • Call Scott Now
    • Brown Harris Stevens Fair Housing Policy
    • ABOUT
      • ABOUT SCOTT
      • ABOUT THE TEAM
      • PRESS
    • BUYERS
    • SELLERS
    • VIDEOS
    • LISTINGS
    • JOIN OUR TEAM
    • BLOG
    • CONTACT
    • CALL SCOTT NOW
    New York City Real Estate | NYC, NY