Buying real estate in Brooklyn

[Luca Truffle]

I'm a first time buyer and am going through a stage of extreme indecisiveness now. I made an offer on a 3 bedroom in Brooklyn, and it was subsequently accepted - the offer was about 10% below an already lowered asking price. I'm now getting cold feet because of the massive monthly outflow I would need ($8k would cover mortgage, taxes and common charges). I make $500k a year in base and bonus, and I will likely not save anything other than my bonus at year-end if I do this. My other option is to rent a three bedroom in new york - and rentals for3 beds in new york should be around $6k. I was wondering if I'm over-extending myself here because it can cause mental stress even if I could afford it.  I don't pass certain rules - like buying for less than 3x annual income - and I'm just wondering if I'm better off renting. My financial model bakes in a 2% yearly appreciation - at this rate buying vs renting is about break-even, renting is less stress, but buying gives my family a sense of home.

What are everyone's thoughts on buying real estate in Brooklyn? Is 2% appreciation too conservative - it's generally been around 3%. And how do you deal with the mental stress of making significant monthly payments.

[Eric Hajdu]

@Luca Truffle

I’m in a pretty similar scenario to the one you mentioned above, and at times I regret it, but for the most part love where I live and know there will be significant capital appreciation. We bought our 3bd in bk about 3 years ago for about the same price as a multi family townhouse in the area. I often think maybe it would have been better to house hack a 2 or 3 family to have some income coming in, but it ends up being a very different lifestyle.

I don’t believe age old formulas regarding salary to cost of living really apply to NYC. When you live here, it doesn’t matter if your making 50k or several million a year, a larger portion of your salary is going towards cost of living compared to most parts of the country.

If you love the apartment and believe in the area, I think you should go for it, and with your salary, lock in a great interest rate plus possibly heloc to buy a secondary investment property. Best of luck, I know these larger numbers are scary, but if you can make it work, it’s a real accomplishment.