Lawyerly Lairs: Young Legal Eagles Feather Their Nest
(Or: At least some Americans still live within their means.)
Remember Kathleen DeLaney and Courtney Thomas? Almost a year ago, this comely couple was named an ATL couple of the week. In the words of Laurie Lin, “Team DeLaney-Thomas, you’ve shaken LEWW out of our winter doldrums with your sterling credentials and sizzling good looks. Congratulations!”
Now ATL would like to congratulate the DeLaney-Thomases on something else: a fabulous new home. Once again, they make their appearance in the New York Times:
For three years, Kathleen DeLaney Thomas and her husband, Courtney Thomas, lived in a Chelsea rental of 900 square feet. “That apartment felt big when we moved in and small when we moved out,” Mrs. Thomas said….The place had scarce closet space and an unnecessarily large second bedroom, carved from the living room, that made for a claustrophobic feel. Wedding gifts were stacked in the hall or stored at Mr. Thomas’s mother’s house in New Jersey.
ATL readers from Texas, this is your cue: “In Texas, you could live in a 5,000 square foot mansion for the same amount!”
The sluggish elevator drove the couple mad. If they were paying so much in rent — around $3,300 a month — they would rather get a return on their outlay. Once they saved enough for a down payment on a condominium, Mrs. Thomas said, “we were totally ready to go.”
And go they did — to Brooklyn, where all the cool kids live nowadays.
Read more about their fabulous new pad, after the jump.
Kathleen and Courtney’s search for a new home is chronicled in loving detail in The Hunt column, by Joyce Cohen — one of the Sunday Times’s great guilty pleasures, right up there with the wedding announcements.
Initially K. and C. tried to stay in the neighborhood:
The two, now working as lawyers, were glad to remain in Chelsea until they saw the small sizes of condos in their price range, up to $1.2 million. “We thought, ‘This is crazy,’ ” Mr. Thomas said. “If we are going to spend seven figures on an apartment, it has got to be a really nice apartment.”
Come now, Courtney — you can swing it! You’re a sixth-year associate at the well-regarded firm of Richards Kibbe & Orbe (which, while smaller than the Skaddens and Simpsons of the world, takes in many of their refugees). Meanwhile, your wife is a fourth-year associate at Cooley Godward. Between the two of you, you’re easily earning over $400,000 a year.
But maybe a free-spending mentality is what caused our nation to tumble into near (or future) depression. The DeLaney-Thomases opted for fiscal conservatism. They looked to the more economical option of Brooklyn:
An ad for the 27-story BellTel lofts, the 1930 Art Deco building once housing the New York Telephone Company, seemed “like just another listing” amid the condominiums in downtown Brooklyn, Mrs. Thomas said. The agent showed them some model apartments and “kept asking us what we thought,” she added. “I was like a broken record at this point — ‘It’s O.K. but not big enough; it seems expensive.’”
Kathleen, you’re not the only one who has issues with the BellTel building. It was originally picked to host the Real World: Brooklyn, but the deal later fell through.
Ah, but wait. Our story has a twist:
So the agent showed them to a unit on the second floor. Her keys didn’t work, so she summoned the super to drill open the lock. “She is asking us not to leave, and we are looking at our watches,” Mrs. Thomas said. After such an ordeal, “I would feel really bad if we hated this apartment.”Once inside, they were awestruck. It was by far the biggest place they had seen — more than 1,700 square feet. The price, they were told, had just dropped to $799,000 from $899,000. Monthly common charges were in the mid-$400s.
That works out to about $470 a square foot, a bargain here in NYC (even if Charlotte tipsters will cry “rip off”). In Manhattan, it’s not uncommon for condos to sell for over $1,000 a square foot.
As for financing, it’s not mentioned in the Times article, but city property records show that the DeLaney-Thomases took out a mortgage for $719,100 (90 percent of the purchase price). Putting down 20 percent might have been safer. But if you have the dizzyingly high credit score required for 90 percent financing in this ridiculously tight credit market — the mortgage was executed on October 16, 2008, after the fall of Lehman — then you might as well take advantage of historically low interest rates. Borrow as much as you can, baby.
It looks like the DeLaney-Thomases are sitting pretty. We’re guessing they’ve paid off any law school loans from their NYU days (assuming they had any student debt — not everyone does), thanks to their years of working at Simpson Thacher and then their current firms. Servicing a $720K mortgage on over $400K of gross income is not difficult, especially given how low interest rates are.
So congratulations once again to Kathleen and Courtney. When the Great Recession makes us all homeless, we’re moving in with you!
Finding Value, Despite a Droopy Market [New York Times]
Earlier: Legal Eagle Wedding Watch 2.24 and 3.2: Cancún Honeymoon
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Comments
no...in Texas it would only have been 4000 square feet while still having a bar, home theater room, and a game room. Let's not exaggerate.
Nice pic. Which one's Kathleen and which one's Courtney?
Nah, but seriously, this dude really looks like Samwell. What what...in the butt!
http://www.youtube.com/watch?v=fbGkxcY7YFU
It looks like a great building:
http://www.belltellofts.com/
Also in Texas or Charlotte the husband who looks like that would be a gay in a sham marriage.
In Houston, you could live in a 5,000 square foot mansion for the same amount!
1. Love the bangs!
2. [Straight] men, please, please, please, always layer a t-shirt under v-neck sweaters. Please.
So in the meantime WTF happened to her hair?
other than she's hot, who cares?
These two are both incredibly sexy lawyers. Just like me.
Is he wearing the same shirt in both the wedding announcement and the real estate article? Lame.
Ladies,
Honest question here. Do you find this guy attractive?
I echo 7 & 8: WTF Who Cares?
I'm glad they bought within their means.
My guess is that Courtney at least must feel some anxiety about the immediate future given his practice (direct lending transactions; syndicated loan facilities). Kathleen is in tax, which is probably safer. She certainly is pretty.
In any event, the Belltel is kind of in an awkward place; squeezed up next to the dreary Metrotech office park and w/o any real grocery facilities nearby (lots of sneaker/gold/cell phone shops though). They went for the biggest space possible, and took a very low floor to get it. My sense is that this was probably a pretty good choice. They are probably in a negative equity position right now, but not by much, and the downside was probably less in this apartment than in smaller -- but more expensive -- apartments further up in the buidling. Even with one income (or one law firm income and one other income), they should be able to pay their mortgage and weather the storms w/o much trouble.
honeymoon in cancun? stay classy!
"Servicing a $720K mortgage on over $400K of gross income is not difficult, especially given how low interest rates are."
. . . . If you have no kids and no education debt. Otherwise, $400k of mortgage is more like it on $400k gross income (soon to fall when they're passed over for partner and booted in 2 and 4 years, respectively).
People who move from Manhattan to Brooklyn should do a little research first. They did not move into a particularly nice part of Brooklyn and $799K is not a bargain for that neighborhood.
I enjoy stuff like this. ATL is great for real estate / socioeconomic voyeurism.
OMG, you can have like a 5,000 square foot mansion in Texas for that!
15: And when they have children and realize there is no way they are willing to send them to the public schools near that building.
They probably don't have kids - they just got married a year ago - and probably won't for a while. She's only 30 or so; she can wait.
You could carry a $700,000 mortgage on just one of their incomes.
"You could carry a $700,000 mortgage on just one of their incomes"
You people are seriously deluded.
What is the formula for mortgage vs. income?
Not only can you afford much more space in Texas, since you've paid off your mortgage, you don't give a crap if you're laid off from the biglaw job.
No way this guy is straight.
15 is right on the nose.
People are always surprised when I tell them I cannot afford pricey homes. Then they are surprised when I explain my associate position lasts on average 3-6 years and the next job will pay less.
I guess I should not be too surprised they are surprised. Most occupations involve low starting salary and continued pay increases your working life.
a $700,000, 30 year mortgage would cost around $4700-$5000 with taxes and everything. a couple making $400k a year would bring home close to $20,000 a month - over $30,000 gross.
how is that not affordable?
A mortgage like this should translate into $4K-$5K a month in payments.
That seems doable on $400K+ in gross income (or $33K a month).
honeymoon in cancun? stay classy!
must be a slow news day
28 here. Sorry, I didn't see 27 before I posted. But obviously I agree.
That's what I love about New Yorkers -- they don't blink at spending $3,300 per month (for 3 years) to live in a 900 sq. ft. apartment! While 1,700 sq. ft. is a huge improvement, they're in Brooklyn now and paying way too much to live there.
Brooklyn is overrated - especially now that the recession is here. Outer boroughs get hit the hardest in down times.
She's only 30, she is running out of time....
wow, this story is totally retarded, and yet I clicked it and read it. Shows how much I don't want to be working on this paper.
I hate the kiss-assy tone of this article. Fuck 'em and their nice apartment in Brooklyn.
Don't spend more than 25-30 percent of your gross income on housing.
Under this rule, they are very safe. With gross income of $33K a month, they could spend up to $8,000 a month on housing. They will fall below that (even counting taxes, insurance, etc.).
But 21 is definitely wrong. One income would not do it.
Mall hipsters.
27: I'd argue that's not affordable on just one salary, which is what somebody above argued. As another poster pointed out, your salary generally only goes down after BIGLAW unless you make partner.
resale is going to be the problem for them.
figure they can live in the building for 5-8 years; once they have school age kids, they'll either need to move or send them to private school. (building is zoned for ps 287, but they won't be sending their kids there.) if they can afford private school, they'll probably want to move anyway, as metrotech isn't really a great place to raise kids.
I don't get his hair -- does he shave the front or have a receding hair-line?
This post should be titled, "Two Lawyers Buy A House," and should be MANDATORY reading.
I should have married another lawyer.
"Sizzling good looks"? Lat, I think you've lowered the bar.
"Lawyerly Lairs" is a longtime ATL feature (although usually the profiles homes are more lavish):
http://abovethelaw.com/lawyerly_lairs/
40, since PS 287 is 80% black their children will fit right in.
how the fuck is this news?
Fail ATL. Who gives a crap?
47 - Ask the New York Times. It appeared there first.
43 - Or an investment banker.
Oh wait....
I will never understand why someone would want this kind of information posted in the times. I mean how self absorbed can you possibly be.
27/28, that's fine, if -- as I said -- they have no kids (and don't plan on having any soon) and no student loans. If you add those costs, $ 5000/month in total payments (probably more, actually -- they've got $400 in HOA fees too) is not affordable at all:
Monthly income (after taxes): $20,000
- Student loan payments ($1500/each): $3,000
- Nanny (for 60 hours/wk): $3,300
- Food (for family of 3, no eating out except lunch): $3,000
- 401(k) (both): $2,000
- various bills (electricity/cable/etc.): $450
______________________________________
remainder: $8700
So yeah, if you live extremely frugally and don't go on more than one vacation a year, you could do this (and save maybe $5k/year). But you'd default on your mortgage (or school loans) as soon as one of you is asked to leave the firm because you're not being made partner.
Plus, you'd be a complete idiot to buy in this still rapidly-falling market -- which hasn't even hit NYC yet.
making over 400,000 but only owns one shirt...lame
Second-year Associate in Texas here. I just refinanced my 3,000 sq ft five-bedroom home for $264,000 plus closing costs. My monthly payment will be about $1,400 per month.
Stay classy, NYC. I love the Big Apple, but living in Texas is great.
50 - I married a musician! Even worse!
Have fun watching your ginormous-screen TV, 54, since there's absolutely nothing else to do in Texas.
52: Agreed. I just can't imagine committing to that kind of a mortgage on a (frankly) risking piece of real estate during a time when associates are getting laid-off left and right.
I agree with 52, NYC is headed for a fall so buying right now in that particular market is "crazy." Marginal neighborhoods in Brooklyn will likely be hit harder than Manhattan as well.
58 : Yes. It would be one thing if they bought it on some huge discount and rode this out, but at nearly $800K that's clearly not the case.
52 - Who says they have student loans?
My parents paid for my entire education (college + law school). Thanks, Mom and Dad!
WHO FUCKING CARES?
59 - Isn't a $100,000 discount on a $900,000 place a big discount already?
62: Not if it's ridiculously overpriced to begin with.
60: Yes, I suppose some of us are infantilized through our twenties. Always something to consider.
Dayum! That chick is frickin hot!
64, that's a form of infantilization that I would happily accept.
I would also like a trust fund please.
52 - beyond the fact that you must eat like a HORSE to think two people and a baby would spend $3000 per month on food without eating out, if you think having approximately $4000 per month extra after paying all your bills is not much, I'd be interested to know what your extracurriculars are.
adding in the fact that these guys almost certainly have paid off their student loans, they will likely have more like $7000 a month in cash flow.
if worse comes to worst, they can still sell and have equity unless they move very, very soon. better than spending $30,000 per year in rent!
64, anybody who says that is a moron and a liar. Some people like to claim the moral high road by paying for their education themselves, but nobody rejects their parents' offer to pay if the parents can easily afford it. Simply put, your post reeks of jealousy.
67- why would anyone paying 2.5% for student loan interest pay them off early? I agree with the rest of your points, though. I'm pretty sure that no family of 3 spends $100 a day on food.
UMMM WHO CARES hes an ugo that definitely married 'up' and she prolly just married him to piss her parents off.
the most obvious question has yet to be posed, although I'm not going to do it
69 - in that case, they either took 30 vacations per year and spent boatloads of money, or they built up a large savings instead of paying loans.
anyway, not to beat the dead horse . I'm just shocked to hear people think this is crazy. I imagine most live in areas where the real estate is not so high - if you live in an expensive area, this is really the reality unless you plan to rent until you are 45 years old (and thus waste a million bucks in rent). They were more than responsible in spending what they did here.
I use to work with Courtney, I'm pretty sure they have a 3rd roommate because he's sooo not straight. She clearly a cover up.
I'm pretty sure they have a 3rd roommate because he's sooo not straight. She clearly a cover up.
I'm pretty sure they have a 3rd roommate because he's sooo not straight. She is clearly a cover up.
I'm pretty sure they have a 3rd roommate because he's not straight. She is clearly a cover up.
I'm pretty sure they have a 3rd roommate because he's not straight. She is clearly a cover up.
Does anyone know him and whether or not he is straight?
@71 - Oh, it's twue! It's twue!
I know Courtney. He's straight, but a complete a-hole. His wife is very nice, but not nearly as attractive as her picture (you'll note the consistent hair swoop in her pictures to cover up her five-head).
this girl must really like being a beard to make such a huge real estate commitment
52--Where can I get a 60-hour a week nanny for less than $40k a year? Does that include the coyote's fees?
After reading 46, I laughed until the end of the comments. I guess no one else got the joke.
Here you go 71.
http://www.moviewavs.com/php/sounds/?id=bst&media=WAVS&type=Movies&movie=Blazing_Saddles"e=whitewmn.txt&file=whitewmn.wav
21 is correct ("You could carry a $700,000 mortgage on just one of their incomes.") Including property taxes but taking into account the tax savings, the mortgage the payment (not including HOA fees) is about $4000 on a 30-year fixed loan at current rates. That ain't bad, if you don't spend money like a middle class striver.
67/72, stop repeating the whole "renting is throwing money away" canard. That's exactly the bs pedaled by real estate agents that has led to a bunch of bus drivers "buying" houses (really, buying mortgages). Renting isn't "throwing away money" any more than taking a mortgage is. You're just renting a house instead of renting money to pay for a house. With monthly buying payments to rental payments for comparable properties being at as high a ratio as they are, you have to be betting on pretty significant sales price increases for buying to make any sense (meaning it doesn't make any sense today). A piece of property is also a lot tougher and more expensive to unload (for instance when you don't make partner and have to get a lower paying job) than a lease. Seems like a no-brainer not to buy in this economy.
Here: http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html
If you think that a couple making $400k a year can't afford a $700k mortgage, you are living way beyond your means.
FIRST to say Brooklyn sucks
87, if you think they can reasonably expect to continue making $400k a year for more than 2 more years even in a good economy, you clearly don't understand how law firms work (hint: "up or out").
85, good luck throwing $4400/month at housing payments on one lawyer's salary. I hope you like a straightjacket.
"That ain't bad, if you don't spend money like a middle class striver."
"If you think that a couple making $400k a year can't afford a $700k mortgage, you are living way beyond your means.
I don't see how buying way too much house for your income isn't being a "middle class striver" and how spending nearly double your salary on real estate with very little down in the worst market in recent history isn't living way beyond your means. Real estate IS NOT always a good investment. Haven't the last six months shown everybody that?
86: Incredibly, nobody will listen to you when it comes to NYC, regardless of n'hood. I agree with you 100%.
90,
You argue: "I don't see how buying way too much house for your income isn't being a "middle class striver" and how spending nearly double your salary on real estate with very little down in the worst market in recent history isn't living way beyond your means."
Your response begs the question. Affording a $700k mortgage on $400k a year is easy. If you think it isn't, you spend too much money elsewhere. Many people in NYC pay $4k a month on rent. Why not spend it on a mortgage?
"Real estate IS NOT always a good investment." Thank you Captain Obvious.
89,
Up or out doesn't mean your income goes below $100k. Small firms pay senior associates with good credentials quite well.
86: Amen. They also get the added benefit of paying an assessment on 1700 sqft in a very old building.
Living higher up is not just about light and a view. I sure hope they like dogs barking and sirens. If their heating is not included in their condo fees they are even more screwed.
86/89/whoever else -
No one is saying everyone on the planet should buy instead of rent. But if you think these two, highly credentialed and successful attorneys with a loan ratio of less than 15% of their gross salaries per month made a mistake here you are nuts. Based on the recommended loan ratio, they could afford this on half of their salaries.
How they choose to live otherwise is THEIR CHOICE; maybe they forego going out drinking or having a nanny (*gasp* - perhaps a nanny share or day care combined with baby sitters, etc.). This goes for everyone, so get over it. You don't need to be able to put 50% down to have made a good real estate purchase.
91 asks: "Many people in NYC pay $4k a month on rent. Why not spend it on a mortgage?"
Answer: "Because you will get a larger place AND accumulate more equity/wealth by spending it on rent." This was not true during the bubble's rise, but it is now. A place you'd pay $4k/month in rent would cost you $10k or $12k/month in purchase payments (mortgage, HOA, property taxes, etc.). You'd be much better off spending the $4k and throwing the difference in a CD or other low-risk investment vehicle.
92: obviously, they don't need to drop below $100k/each before this becomes unaffordable. Not to mention, even small firms do not want 8th year associates with no business in this economy.
86 - your little page compares COMPARABLE homes. they switched from $3000 for a 900 sq ft place to around $4500 for a 1700 sq ft place. If you compared the rent they would likely pay for something COMPARABLE, I'd bet buying would be better so long as they remain there 5-10 years.
94, purchasing any asset in a falling market is a bad decision. How much money you make has absolutely nothing to do with it.
-86
94, I (and I belive others) are more critical of the timing and location of the purchase. If they both plan on working full-time they are certainly "living within their means" by making this purchase, but that does not mean it's smart to buy in a questionable neighborhood in Brooklyn at what is likely very near the peak of the market in NYC.
96, they also moved to a far cheaper and shittier neighborhood, and into a 2nd floor apartment surrounding by tall buildings. You could rent that place for way less than $3000/month. (Though even at $3000/month, it would still make more sense to rent.)
Why did that hot women marry an ugly silverback gorilla? What a waste of good looks!
What's with Courtney's tight baby t-shirts? Are they sharing a wardrobe now that they have a mortgage to pay?
98 - that's a totally different argument; almost every negative Nancy on this page, however, has cited the couple's ability to afford the mortgage, not the prudence of their time of purchase (with the exception of I think 86).
96, it is always cheaper (in total costs) to rent than to buy a comparable house. Otherwise, everyone would use the free arbitrage:
1. buy a house for X dollars/month total cost
2. rent out the house for the higher amount of X+ dollars/month total cost
3. profit!
Shh, 103, don't tell the others -- I need to keep my 100 homes rented out.
104, Charlie Rangel is that you?
Don't forget to report the rental income on your taxes this year.
94: Your logic works if they can re-sell the apartment not at a loss (or if they live in it for many, many years - also a possibility). For those of us who know that neighborhood, we know that where they live is not that desirable. Maybe it will be in ten years, who knows? It's not Brooklyn Heights, though, and it's not even Park Slope. I don't think they've necessarily
made a dire mistake, but to sell it as "living within their means" and as some huge bargain is preposterous.
As for combining daycare and BIGLAW, best of luck.
$799k for 1700 sqft is cheap by Palo Alto standard. For those of us in California, is that part of Brooklyn like East Palo Alto?
$700,000 mortgage with $400,000 income? EASY!
Anyone who thinks this is crazy must live in Texas. In high COV locations (NY and Cal) a 3:1 ratio (mortgage:gross annual salary) applies (that's why they were expecting to spend up to $1.2 Mill). In Texas you can get away with 2:1, but you have to live in Texas.
108, STFU. Anyone taking out a $1.2M super-jumbo mortgage on $400k/year is beyond idiotic. Also, please see 86, 97, 98, 99, etc.
Maybe the issue here is really how long you plan to stay in your home. If you stay for the 30 years or even the rest of your life, I'd like to see the argument that renting is cheaper.
Also rent goes up. Mortgage stays the same. I'll anecdotal-y cite my parents' mortgage, which was $200 per month in 2000 for a three bedroom home (bought in 1980), with rent, which was twice that for a one bedroom apartment.
108: Possible, not easy. One thing goes wrong - a sick child or parent, a lost job, a catastrophic accident - and you are in deep shit. I, for one, wouldn't want the pressure of never being able to take a paycut to meet my mortgage payments.
109 - (I assume you are 86) I am not referring to the location/timing of purchase, like 86 et al. Did you get confused by my 3 sentence comment?
I don't know the location at all. It could be a terrible investment. However, my simple point was that getting by each month is rather easy with a $400,000 income. You must live in middle america. A 3:1 ratio is pretty standard in desirable locations.
108
112: The thought of spending $750K on a house, three times my/my husband's income, is laughable. I believe that "standard" is what got this country into so much trouble.
112, I live in San Francisco actually. I don't care where you live: you are a complete moron if you take out a $1.2M mortgage on a $400k salary. See, e.g., 111. My references to the other comments were for the point that purchasing anywhere right now (unless it's a sweetheart deal from a family member) is a terrible investment.
110: the argument is that you can get better appreciation on your money by investing it in something other than real estate. Also, most major cities have rent control. My rent has not gone up a dollar in 5 years (despite the housing bubble). But just run the numbers yourself on the link 86 posted.
-109 (not 86)
111 - absolutely. Shit happens...
With real estate, however, you have to plan for success. In some locations (like NYC) you simply can't buy a home much cheaper than this. So, you have to take somewhat of a risk and hope that it will pay off over time. You don't want to be that 45 yr old who is buying his first house. With a little luck, and wise money-management, they should be great.
-108
113 - I don't think you understand how the system works. How much do you think homes cost in NYC? A family making $400,000 can easily afford $700k. The math has been done throughout this message board, so I won't go through it. I do understand that the price/sq. ft. is shocking if you're not from NYC.
114 - You either live in a complete hole, or in your mother's basement. Are you still a student? You can start living better when you get a job. Unfortunately, that's not going to happen any time soon.
15 says: "You don't want to be that 45 yr old who is buying his first house."
What a stupid thing to say. You may, in fact, want to be that "45 yr old" who is buying his first house. It depends entirely on market conditions. I'm 30 now. It may very well be that I maximize my wealth by not purchasing a home until I'm 45 (and putting that million dollars' worth of payments elsewhere until then). In any case, buying right now is *certainly* not the wealth-maximizing move.
This just about sums it up...
http://www.homes.com/Content/ListingDetail.cfm?City=FRISCO&State=TX&Radius=0&FirstRec=37&OrderBy=price%3AD&Bedrooms=&FullBaths=&MinPrice=&MaxPrice=&PriceRange=&AmenitiesList=&PropType=%20&TotalRecs=446&MinSqFt=&MaxSqFt=&LotSize=&MinYear=&MaxYear=&PropIdList=3_81784599,3_81771713,3_82247352,3_82247357,3_82247353,3_82317411,3_81753825,3_82247374,3_81472821&PropId=82317411&NHC=1&searchorig=main
116, I don't know what part of my post you're responding to (since your comment nominally addressed to me is completely non-responsive). My wife and I are also both BIGLAW associates, and we also have approximately $400k/year in current income. We live just fine. We would live much more poorly, however, if we took out a fucking $1.2M mortgage. What could be more obvious? I could rent that place for a tiny fraction of the monthly payment and put the huge amount of extra money elsewhere rather than in a totally shriveling asset. I can't believe rubes like you actually fall for the whole "why would you rent when you could by" line. Congrats, you are a tool of the uneducated real estate broker class.
116, I don't know what part of my post you're responding to (since your comment nominally addressed to me is completely non-responsive). My wife and I are also both BIGLAW associates, and we also have approximately $400k/year in current income. We live just fine. We would live much more poorly, however, if we took out a fucking $1.2M mortgage. What could be more obvious? I could rent that place for a tiny fraction of the monthly payment and put the huge amount of extra money elsewhere rather than in a totally shriveling asset. I can't believe rubes like you actually fall for the whole "why would you rent when you could by" line. Congrats, you are a tool of the uneducated real estate broker class.
-114
117 - Ok, wait until you're 45. By then, I'll have rolled over three houses into a beach house in malibu. I'm only 29 and own my first house. Just did my taxes and will be returned $20k because of mortgage interest. Where is this extra million dollars of yours coming from? You still pay rent, right? You could pay a little more for a mortgage, and write off the interest. I probably pay more per month than you, but I feel confident that I will come out ahead.
You think the housing market will continue to go down for 15 years? Lawyers are pussies.
-115
In SF or NYC, "a little more" = 3x more. It makes sense only if you think home prices are going to increase an average of 5% a year -- they don't have to "go down for 15 years" for it to be a retarded investment. Much better to take the 2/3 cash you're saving to rent the exact same place and make some money with it. I can get a long-term bond that will still pay me 12%.
But have fun with your "flipping" and "rolling" houses. Party like it's 2007.
"113 - I don't think you understand how the system works. How much do you think homes cost in NYC? "
I live in NYC and have for fifteen years - I'm not from the midwest. I am well aware of how the system works and am well aware that naive people get duped into spending way too much money on NYC real estate because it's NYC real estate and people believe you can never take a bath on it. You know, like people spending over a million dollars to live in fucking Sunset Park or $800K to live in one of the most depressing, desolate parts of Brooklyn.
119, 120: you have to do what is comfortable for you and your family. The point is, making the payments is possible. It may not leave much for extras and vacations, but it's possible. $1.2 M may not be the best investment (and I never said it was), but it's possible. I do not have a $1.2 M mortgage, but I'm not going to judge someone who does. Maybe in 5 years, that person will turn it over for $1.5M... Wil you have saved $300,000 from your rent payments in 5 years?
I have a feeling you are just scared, and are lashing out at those who can take risks. Of course, this is probably why you went to law school to begin with.
122 - 3x more? How much do you pay in rent in NYC or SF? Is $3000 a reasonable guess? Are you thinking that I pay $900,000 a month for my mortgage? Your numbers are not close.
Wow. I can't believe people are advocating taking a risk with real estate after the subprime crisis. Keep fiddling while Rome burns, people. 120: You're absolutely right. I can't believe it's even debatable. Is it a bad investment only if blue-collar people overshoot their ability to make payments?
sorry, I meant $9000/month.
-125.
They are living within their means. An easy rule-of-thumb is a house purchase should be 3x your annual gross income (assuming you have a 20% down payment). So they could afford 1.2 million. However, the real problem is they just bought a depreciating asset that will be worth $500,000 in 2 years. So they just threw away their down payment.
124, that person will have also spent $150k on closing costs. And I will actually save more than $300k by renting instead of buying ($3k versus $9k for a comparable mortgage = $6k x 60 months = $360k -- even if you just put that in a savings account, you're up to $375 or so). I'd also not like to be in a position where I or my wife absolutely have to make partner in order to avoid selling.
Can someone please get Courtney a bra? Those things are gross.
125/127, if you're not paying $9k, you're not living in a comparable space. What's your point?
"I'd also not like to be in a position where I or my wife absolutely have to make partner in order to avoid selling."
Bingo. I see my high income as an anomaly - I'm probably not going to make partner and I'm probably going to take a pretty significant paycut. People are so incredibly optimistic. Aren't you watching what's going on in this very field?
129 - where does the $9k come from? We have to consider equivalent homes. Can you rent a $1.2M place for $3000/mo? I think that might be pretty rare. $150k on closing costs isn't right either.
Agree with 125. My mortgage payment in DC suburbia is maybe $700-1000 more than it would be to rent something that isn't close to as great (currently have a brand new 5 bedroom house with a big fenced in yard, for about $1000 more per month than renting a three bedroom apartment).
So whatever. You guys with your rent controlled two bedroom apartments are going to be in for a surprise when you suddenly have to upgrade to something bigger after having two kids in a few years.
It's like people on this board have talked themselves out of buying by making up inflated numbers. Most of you have it wrong. The difference in mortgage payments and rent isn't that much with these interest rates. If you can afford it, do some research and see for yourselves. Perhaps not $1.2 million, but still something nice.
@86
Technically, the borrower doesn't "take" a mortgage. The lender gives the borrower funds to purchase the property, and the borrower gives the lender a mortgage on the property as a security interest for the loan.
133, that's fine. We'll do it with totally realistic numbers. My current place ($2800/month) would list for about $900,000, maybe $1M. Running the numbers through the handy widget 86 linked to shows that, assuming a 10% down payment on a $900k home, you spend over $220k more in the first 5 years (and that's assuming a 1% annual increase in both rent and sales price -- neither of which is accurate; more like -5% and 0%). After 30 years, with the mortgage paid off, you've spent an additional $1.6M. Sure, you own the home then, but I have $1.6M that I've invested in stable instruments. I could buy your home from you for cash and put an addition on it.
-129
129 - you forgot to subtract your rent payments over those years.... M
129 - you forgot to subtract your rent payments over those years....
The key to the math on rent/buy is the tax deduction. With $400k in income, they are in a high tax bracket, so the deduction of mortage + real estate taxes is what makes the whole equation work. Meanwhile, when you eventually sell, you will also have paid down some of your mortgage, so particularly if you hold for more than 2-3 years, you are making more than you think.
138/139, $9k - $3k (i.e., rent payments) is where the $6k came from. 133's point is taken that $9k/$3k is aggressive though. $9k/4k is very realistic though, and still gives you $300k in savings (though you'd have to reduce that somewhat for the tax deduction -- though only for the first $1M of house).
-129
141 - for the first several years, there is a huge tax deduction (nearly all of the payments). Being able to deduct $90k is not "somewhat" of a tax deduction.
142, you're still much better off renting in that scenario (by about $270k over 5 years -- that includes the tax deduction).
So crass. Who talks about how much money they spend?
So crass. Who talks about how much money they spend?
143, are you referring to the "1% annual increase in both rent and sales price -- neither of which is accurate; more like -5% and 0%" scenario from 137? If so, then you are better off renting.
However, I doubt rent will go down 5% annually and sale prices will never go up again. This is silly. Call me optimistic!
143 - only a $30K difference ($300K savings to $270K)? With those deductions? How?
146, other way around, champ. Totally plausible that sales prices go down 5% annually in the near future (though I think the experts predict it bottoms out in 2010) and rent does not go up (mine doesn't).
Who said anyone needs a $1.2 million mortgage? Staw man anyone?
The question is whether someone should have a $700k mortgage with $400 of income. The "X" factor is how much this couple has in savings, which we don't know.
148 - not what the 137 scenario says. Reading comprehension problems, or do you need to revise the scenario?
Obviously it's plausible that sale prices do down - they are now in most places. We are talking long-term investments, past 2010. Don't be too shortsighted. Prices will bottom out eventually.
Nice rack.
I have a $600k mortgage. My property tax payment is covered by the tax break I receive for the interest on my mortgage. My total monthly payment after the tax break comes out to $3500. This is easy to do on the salary of a big firm lawyer, even a first year. You add a second lawyer income, and it gets even easier. I am fiscally responsible enough to have at least 6 months in savings, no car payment, almost no law school debt, no other debt. I live in a big city (NY, LA, SF). Whoever says that this is impossible is simply wrong. Yes, if we lose the double income, things get a bit tight. Like someone else said, lawyers are pussies. You take a risk and see what happens.
152, you could rent that place for $1700/month. You shouldn't buy something just because you can afford to do so. And it's not really a "risk"; in the near term it's a near certainty that the value of the home falls. It might be worth buying in a couple years; not now.
153,
Actually, the house down the street rents for $3500. Great school district.
The one bedroom we were renting, which is subject to rent control, was more than $2200.
152 - Agreed. I have a $600K mortgage as a 5th year associate (So. Cal). My wife is a teacher and makes a modest salary, but we bank all of it as savings, even after my 401k contributions. The tax deduction is sweet. Things are relatively easy. We drive nice cars and go to nice restaurants. We even take a couple vacations a year.
Granted, I only pay about $200/month for student loans and if my wife wasn't working, things would certainly be tighter, but not unreasonable. If I lose my job, however, the house will have to go. As an IP attorney, I feel somewhat safe since I continue to be busy when not posting on ATL. I hope it all works out, but I wouldn't be able to live with myself if I were sitting on the sidelines renting an apartment.
Fair enough, 154. That is a total anomaly, so more power to you. Congrats on getting an obscenely good deal. Or maybe the renter down the street is just getting raped. Either way.
-153
@ 152: "I live in a big city (NY, LA, SF).
152 @ 154: "Great school district."
Ok, stop flaming. I call BS on everything you've said.
153 - My neighborhood has maintained $/sq. ft. It probably has not increased in the past year, but there hasn't been a loss. It is an upscale neighborhood in a great school district. Smart investments are necessary, but it is possible to come out ahead.
I think the "risk" is that you are buying while the price is depressed with the hope that you can sell it high. I think it makes less sense to buy a house when the market is on the rise.
154, that makes no sense, even aside from what 157 pointed out. Unless you bought 5 years ago or put $300k down, there's no way someone's renting out a place for $3500 that would require only a $600k mortgage. Total BS. There are tons of million dollar homes renting at that price point in SF, NYC and LA.
159,
It was a good sized down payment and a great deal.
http://www.realestatejournal.com/buysell/tactics/20071011-hodges.html
157,
Not flaming. I don't actually live in the "city of LA, SF, or NY." They don't have good school districts. Slightly outside in the burbs, obviously.
154/159, then that's not an adequate comparison. Your homeownership cost also includes the foregone rate of return that you can make on the $300k of equity or so that is in your house earning nothing.
Imagine if I said I paid $500k for a house in cash, so that means my ownership cost is $0 compared to the $2000 for renting. Obviously that is a ridiculous assertion.
Renting will always be cheaper than buying, because otherwise you can just buy a house, rent it out to cover your cash flow, and get free money.
163,
Foregone rate of return? Ok. CD's are getting 1.5%. Oh yeah. Some people get "pleasure" from a nice house. How do you factor that in?
163,
The original question is should two attorneys making $400k a year have a $700k mortgage. Most people (i.e. pussy lawyers) say no. A few say yes. Perhaps a consideration should be "I have enough money for a big down, so it makes sense." You can try to put this into a vacuum to make your point, but the question should be based upon realities in the marketplace. You can't keep every factor constant. There is no one right answer for everyone.
That girl is HOT!
163: "Renting will always be cheaper than buying, because otherwise you can just buy a house, rent it out to cover your cash flow, and get free money. "
Renting will always require less cash each month than buying, but that does not mean it is cheaper. From a cash flow perspective, renting is a better position. That doesn't mean it's "cheaper."
The real question is whether (the intangible benefits of home ownership (e.g. freedom to paint the walls) + appreciation + mortgage reduction + tax savings - additional maintenance expenses - risk premium) is greater than the opportunity cost of the difference between rent and mortgage payments invested over the relevant period. A rough rule of thumb is that the market historically stabilizes at a breakeven point where the deciding factor to tilt the equation is whether the appreciation of the house outweighs the maintenance expenses.
Over the past decade, the artificial run up in housing prices has made buying a better deal until recently, when they crashed. While this means that people who bought a year or two ago made a bad decision, it doesn't necessarily follow that buying now is a bad decision. On the contrary, collapsing prices now signal that buying might be an even better investment over the long run than it was, say, two years ago. It obviously depends on the market and the individual circumstances.
I would say that handling a $700k mortgage on $400k income should be cake, regardless of whether they have student loans. With $400k as married NYC residents in 2008, they'd bring home ~$17.5k/mo after maxing their 401k. Let's assume that mortgage is @ 6%, putting PITI close to $5,500/mo. Using reasonable numbers for expenses (food at $3k? are you kidding me?), they should have no problem paying for this.
The catch is that, as others have pointed out, it's up-or-out, and the long-term salary is likely to be lower than $400k. They should make sure to plan their 30-year mortgage based on their expected lifetime salary, not what it is right now.
167,
Good analysis.
Last time I saw a mouth like that it had a hook in it.
167, a narrow question: do you really think $3k/mo for food is ridiculous in NYC? It's only $100/day. $15/ea for lunch, $7/ea breakfast, $27/ea dinner. On average. Meaning typically less but sometimes you go out to a nice dinner. It's not like it's a totally implausible number. Besides, the $3k number came from someone positing a couple with 2 kids or something. At that point, $3k/month is low, if anything.
170,
Breakfast, buy cereal. Lunch, buy a sandwich. Dinner, order Chinese.
170, 167 here. If two people eat out every single meal, then $3k is in the ballpark. I'm not in NYC, so maybe that's just a cultural difference. Here (Chicago), I eat cereal for breakfast, sandwich for lunch, and cook dinner 3-4 nights a week. My wife and I spend about $600-750/mo. on food, mostly depending on how often we go out.
172, Chicago explains it. When I graduated law school, the career services people's line was that Chicago was approximately 1/3 the COL of NYC. $3k is not at all absurd for NYC. And if they're both working in BigLaw, they don't have time to cook dinner 3-4 times a week.
I work in big law and I cook 3-4 times a week... and eat breakfast at home everyday. $1000 for a couple in NYC is more than reasonable. Anyone who can't do this is missing a basic life skill.
164 - pleasure is only worth 1.4%, so the 1.5% CD is still better.
165: Most people say no? I'm a pussy lawyer, and I still think it would be pretty easy. Maybe a lot of vocal people on this comment board say no, but they are probably very young or not familiar with the NYC housing market. I agree with you, however, that there is no vacuum answer.
Come on renters, ask yourself: do you know any wealthy people that rent apartments and aren't home owners? If you say yes, then you are lying or you know some miserable rich people.
THIS JUST IN - MARRIED COUPLE BUYS CONDO!!
Is this news?
I'm sure Kathleen and Courtney must be thankful for all the free financial planning and advice.
8: the NYT cares... but not only because she is pretty. the NYT cares because she is pretty, accomplished, and -- the kicker -- she married an accomplished black guy. they are the ultimate PC power couple.
They are taking a huge risk. That place will be worth $400,000 in a year. NYC real estate has a long way to fall (most are predicting 30-50% - "marginal" areas of Brooklyn will be hit the hardest). If you plan to sell within 5 years (minimum), you are crazy to buy in NYC right now, unless you are ultra rich and don't care.
What happens when, in two years, these two decide to have kids and need a bigger place? They will be underwater on their mortgage and will completely stuck for the foreseeable future. Have they not been paying attention?:
http://static.10gen.com/businessinsider/~~/f?id=49a02ccc796c7afa009b4708&maxX=620&maxY=474
Courtney, you are one motorboatin' SOB. God bless ya, my ugly friend. Ya did good.
@2 : Sooooo true...LOL
"Come on renters, ask yourself: do you know any wealthy people that rent apartments and aren't home owners? "
In this economy, quite a few. I know people who smelled this crash a mile away, sold their apartments/houses, and are sitting things out until they have more of a guaranteed return on their investment. They are not laboring under some preposterous, self-imposed shame of not having homeowner status.
I went to law school with Courtney. 80's right - he's an asshole
I am not in the high income bracket that many of you apparently are, but buying is much better than renting, a giant tax deduction and the ability to take equity out of the house for other expenses. It makes a lot of sense. This is assuming you can afford your mortgage and do not overpay for your house, two big assumptions.
I call bs on 183. You know people that sold there house and rented? Hopefully they did not put their profit into the stock market because now they have no real estate and no profit.
sold their house, not there house obviously.
183 - I hope you feel self-imposed shame for LYING!
Hello bitches,
most of you are going to lose your jobs to relatives from the slum dog from Mumbai.
http://endofesq.com/
189 got rejected from his safety school.
Anyone who thinks it's affordable to buy a house that costs 3x their combined annual salary is in for some a rude awakening down the road. Wait till you have to send your kids to private school AND still pay a nanny plus mortgage and maintenance fees.
The safe thing to do is to buy a place that costs no more than 2x your combined annual income (before taxes).
Real estate in NYC is still significantly overpriced:
www.urbandigs.com
191 - just buy in a neighborhood with good public schools. They exist in the burbs. And, be a good parent and take care of your kids yourself. done and done.
191,
Under your theory, someone making $100k in LA. NYC, or SF should only get a place with a $200k mortgage. Assume 20% down, and we are taking a place costing $240,000. Do you really think that is what people do? Everyone in a big city would rent funtil they near retirement under your plan.
Five head aside, does the girl have a slammin' body? It seems so from that one picture.
192: "just buy in a neighborhood with good public schools."
Basic misunderstanding of economics. Buy in a neighborhood with shit public schools. They have nowhere to go but up, carrying real estate prices with them.
192, basic misunderstanding of economics. Buy in a shit school district. It has nowhere to go but up, carrying real estate prices with it.
195-96,
You have a basic misunderstanding of how real estate prices actually operate.
195-196 = Renter 4 Life.
Your comment sounds stupid no matter how you change the wording.
How is this a story? (other than the fact that the guy looks like a total wierdo and somehow got a hot girl)?