House of the Day: 145 Bergen Street

4:12 makes this look much more attractive than it is.

For an investor: 4:12 assumed 6.5% jumbo loan — which is probably too low — but let’s use that number. 400k is tied up here, not making money in some other investment. If you’d make 6.5% after taxes elsewhere, that’s another 2166/mo you’ve lost — an opportunity cost, but a cost of owning here nonetheless. So your costs are over 12k/month. To break even you need to rent your unrenovated floor through apts for 3k each. To make money, you need to get more than that, which isn’t happening in the near future. As an investment it’s a loser.

If you want to live in one apartment, and you enjoy being a landlord, so you don’t need to charge for your time as a real estate manager, then it looks a bit better, because you get the full benefit of the tax subsidy. You have 12k/month expenses, less about 6k/month rental income at a more realistic 2k/mo/floor. So you are paying 6k/mo for your unrenovated floor through. The government will cover about 2k of that through the mortgage deduction. So in the end, you are paying about 4k/mo — only double what your tenants pay. Ah, the glories of homeownership!

If you plan to live in the whole thing, you need to add renovation costs. If you can renovate for 500k, the place will cost you 15k/mo or 180k/year, using the calculations above (and assuming you can find a super-jumbo loan at 6.5%, or if you use your own money that you don’t have any better investment paying more than that). If you want a 1m reno, it’s 18k/mo or 220k/yr. The tax subsidy for owner occupants will give you back about 25k of that (less if you are high income). So you are paying the equivalent of renting at 13 – 16k/mo.

If you were completely in love with this neighborhood, you could manage that (barely) on an income of somewhat over $500,000, if you don’t have kids in private school and you are willing to live (otherwise) as if you were making $100k. Or it’s doable if you’ve made a killing in Manhattan or inherited a chunk of money from someone who did. But does it make sense? Seems to me that it to buy this purely to live in it, you should have an income closer to $1m than $500k. And at that income I have to wonder whether you want to live in Boerum Hill anyway.

If you are paying all cash, it doesn’t cost much in monthly cash outlay — just taxes, renovation, headache, and heat. But what opportunity costs! $2.5m invested should give you at least 125k effortless income per year. Isn’t there something better to do with 125k/year than spend it on this house?

And if you are planning to sell it, you need to consider how fast the income distribution drops off: will there be enough people making $2m/yr and looking for houses in Boerum Hill to sell the place in 5 years?

“Wesly Snipes school of income tax payment” yes please try comedy because that bullshit your slinging here and in real life aint cutting it. You suck real hard at business.

renting is for suckers.

can’t afford a brownstone, but a studio or a 1 bedroom and work your way up.

you don’t start out with a million dollar pad you whiny losers.

3:44 — if you are boasting about your good fortune, congratulations.

If you are claiming that buying in Hell’s Kitchen for 175k in 1997 is comparable to buying in Boerum Hill for $2m + renovation costs in 2007 — that’s just silly. If it escalated in the next ten years the way your apartment did in the last ten, it’d be selling for $30 million. Even in NYC there aren’t many people who can pay that much and have a desperate need to live in Boerum Hill.