Pinching Pennies To Save Up for a Down Payment
This week’s cover story in the New York Times real estate section is about people who’ve scrimped and sacrificed— sometimes for years— to save up enough money for the down payment on their first home. One guy survived for an entire year on a daily diet of a $2.95 chicken special and a 99-cent coke;…
This week’s cover story in the New York Times real estate section is about people who’ve scrimped and sacrificed— sometimes for years— to save up enough money for the down payment on their first home. One guy survived for an entire year on a daily diet of a $2.95 chicken special and a 99-cent coke; another woman started drinking only at happy hours. It’s notoriously hard to save from paycheck to paycheck in New York City; we were lucky that a real estate deal we worked on back in 1999 paid off well enough a few years later to enable us to come up with the downpayment on our house. (That, and we had the good fortune to flip a couple of one-bedrooms in Manhattan between 1997 and 2000, when we cashed out thinking the market had peaked! Got that one wrong, huh?) There must be lots of tales of self-deprivation in the name of nest-egg building. Anyone care to share?
Every Penny Counts [NY Times]
nobody said anything about hating anyone whose parent’s help them out – you’re the one who used the word ‘hate’, which causes me to wonder what you really think. i don’t hate brownstoner cause his parents feed him cash left and right, i just have the kind of snarling envy that makes me want to paint every other brownstone in clinton hill white, that’s all.
yeah, i have to repeat the so what, anon 11:05. particularly for a single person, it can be near impossible to save the kind of money needed for a down payment, yet buying real estate young can really set the stage for financial security throughout life. if a parent can help, why wouldn’t they?
i bought a place four years ago with help from my mom (a small loan that was repaid with a healthier amount of interest than she would have made in a mutual fund)–at just over $100k for a studio in boerum hill, it was manageable. but in today’s inflated market i would need double or triple that amount to get started. there’s no way that at the under $50k salary i was pulling in at the time i could have done it, despite having managed to save about $10k in two years by squirreling away my tax return and having a small portion of my paycheck directly diverted to my savings account (you just learn to live on less when you don’t realize it was there in the first place).
I lived in a dumpy 300 sq ft rent-stabilized studio in Chinatown for all of my young carefree single days. After my husband and I got married, we moved into my place instead of his place (which was much bigger and nicer, but much, much more expensive). Clawing each others’ eyeballs out in RS squalor allowed us to save almost $2000 a month for two+ years. That got us to about half the money we needed. It still took a buyout from the landlord, a well-timed business commission, loans off 401k plans, and very generous help from both sets of parents to get into our modestly-priced dreamhouse in the G-slope. The Times article left me feeling like some critical piece of each story was still missing. We made all those sacrifices too — cut down on meals/drinks out, took PBJs to work for lunch, both spouses still have to ‘turn their key’ for purchases over $100 — and we still couldn’t have possibly bought real estate in Brooklyn without A LOT of help and luck.
And so what, anon 11:05?
If I was in a position to help my children make a real estate purchase I certainly would! Although the fact that I can’t doesn’t make me hate people who can.
We did something really risky back in ’90. We were in our 20’s, just married, and had really small art job incomes. We went for a “no money down” deal from a developer who held the note for the down payment separately. Apartment was a 5th floor walk-up on a sketchy, not-so-pretty block in Boreum Hill. Barely had enough to cover monthly expenses to begin with and promptly got laid off 3 months after closing on the place. Then watched the apartment market completely tank, esp. in Brooklyn. Yes, folks, the market can go down. So we didn’t scrimp to get the down payment but spent the next bunch of years living that way to make it work. No vacations and really controlled spending for what seemed an eternity.
We were literally stuck there- our apartment was in a building with less than 50% owners and for years we couldn’t even refinance since lenders got really particular about lending in buildings like ours when the market tanked. But we hung in there (15 years!) and sold in Dec ’02 for 3x what we bought the place for. So did all the folks who bought in the neighborhood five years before we sold but we were building some equity the whole time and enjoyed living there. We watched the area become the place where we loved to live.
We used the money from that for a house in Kensington. Yes, we could’ve made more on the apt by waiting longer but back in ’03 Kensington was barely on anyones radar and we got the whole house with backyard for what a 2bed/bath apartment was going for in Boreum Hill. We couldn’t have afforded the house here if we had waited much longer to look here. We made out OK and we are really happy here but there were 7-10 solid years of financial hardship carrying that apartment and note. I guess you have to decide when you want to scrimp or just be smarter than us and buy what you can afford when you can afford it.
I wish I was like those people who could scrimp and save by eating one chicken meal a day. I admire their discipline. I am becoming much more frugal now owning a brownstone, which has turned out to be a pretty expensive proposition. I bought my first coop in 1984. If I wasn’t burglarized several times on the upper upper east side (at that time, lower east Harlem), I might have lived forever in my cheap railroad apartment. It was very cheap and I had a decent job so I could put aside money without too much deprivation, though I didn’t grow up with money so I wasn’t in the habit of spending much. When Lincoln Savings Bank (yeah, them) lent me 100,000 for my first mortgage I couldn’t believe their recklessness. (Turns out it was one of several reckless acts since they were key players in the Savings and Loan crisis.) Once you get one property, you are on the train so to speak and it becomes easier to trade up as the place appreciates and/or you make more money. Anyway, I appreciate what one poster wrote about spending too much money on housing rather than saving for retirement. That is real and something I am struggling with now. Sometimes I wonder about dropping that 1,000 dollars for some work or other when it could be 10 shares of Exxon which will probably do me much more good when I retire.
20 bucks says Brownstoner got money from his or his wife’s parents to help him out with that “real estate deal” that got him going way back when.
I was so happy to read this article. Finally, accolades for the unsung minority who sacrificed and bought a property without help from mommy and daddy. My wife and I, both employees of non-profits, saved for four years. We don’t own a car and gave up vacations, eating out, movies, and paid cultural performances. We checked out DVDs from the library, took our lunch every day, redeemed cans and bottles, and rolled loose coins. It was hard work but well worth it. We now own in PH and love watching our apartment and neighborhood appreciate. The generous tax returns from the mortgage interest have enabled us to sock away at healthy nest egg, too.
Anon 9:37, probably the same amount of people that don’t spend what they should invest for retirement on housing.