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Should I buy an NYC co-op from a stressed seller?
A thought exercise I gave to a mid-20s software engineer
1. Is your spending aligned with your values
2. It's hard to find a dream home AND great investment
3. Can you manage your liquidity
4. Don't feel like you need to jump in
A thought exercise I gave to a mid-20s software engineer
1. Is your spending aligned with your values
2. It's hard to find a dream home AND great investment
3. Can you manage your liquidity
4. Don't feel like you need to jump in
1. Your money values
Do you know what they are? This big purchase could (temporarily) close some doors like:
- Adventure
- Entrepreneurship
- Service-minded work
- College savings for future kids
- Other luxuries
While providing:
- Financial security
- Nesting
- Stability
Do you know what they are? This big purchase could (temporarily) close some doors like:
- Adventure
- Entrepreneurship
- Service-minded work
- College savings for future kids
- Other luxuries
While providing:
- Financial security
- Nesting
- Stability
2. Investment or dream home?
When you introduce a constraint, you limit your options. The BUY constraint means that you have less options for your perfect dream home.
PLUS, markets are (semi) efficient. A home that checks many great boxes, may not be the best VALUE.
When you introduce a constraint, you limit your options. The BUY constraint means that you have less options for your perfect dream home.
PLUS, markets are (semi) efficient. A home that checks many great boxes, may not be the best VALUE.
3. Can you manage your liquidity?
Every year you add to your purchase horizon, de-risks your exit (as you have more time to recover).
He's got a good job, but also gut-check if you think it's pandemic-proof.
What's a good horizon? 5-7 years
Every year you add to your purchase horizon, de-risks your exit (as you have more time to recover).
He's got a good job, but also gut-check if you think it's pandemic-proof.
What's a good horizon? 5-7 years
(A side note on commissions)
Remember that the 6% commission hits your entire investment amount (i.e. reverse leverage).
Say you buy $500k with 20% down ($100k) and sell the next day ($30k commission).
You lose 30k/100k of your investment or 1/3 of your money
Remember that the 6% commission hits your entire investment amount (i.e. reverse leverage).
Say you buy $500k with 20% down ($100k) and sell the next day ($30k commission).
You lose 30k/100k of your investment or 1/3 of your money
4. Manage your FOMO.
I have no view on RE prices, but this is a big purchase. Don't feel like you need to rush. Like any good investment, you'll have another bite at the apple.
The cost of being wrong can be punitive to your quality of life here.
/FIN
I have no view on RE prices, but this is a big purchase. Don't feel like you need to rush. Like any good investment, you'll have another bite at the apple.
The cost of being wrong can be punitive to your quality of life here.
/FIN
