All Forum Posts by: Viraj M

Hi Jon, thanks for the reply. You're technically right - the interest on a loan, less the tax break, is still a sunk cost. However, in the buy scenario, you have equity upside. Since I've got to live somewhere, regardless, I'd rather have some potential to make a profit then not.

Given 10% round trip costs, what I was looking for in a response is a creative way to build these costs into the loan. Then, you could make the numbers work with a slight drop in purchase price - buy something where monthly loan payments < (opp. cost of rent + tax savings). The difference is the monthly "savings" effectively (if in fact, I am living in something of similar quality to something I would have rented). If the monthly "savings" can offset some (or all) of the seller's costs upon exit, I stand to break even without property price appreciation under the assumption I can sell for exactly what I bought - a fairly conservative, base case. Any property price appreciation is icing on the cake.

I realize there are some assumptions in here. Looking for other creative ways to leverage what I have (credit, steady cash flow to get a loan, high tax rate) against what I don't (a lot of up front capital).

Before you speak condescendingly, please think about when you first started out in this line of work. Thanks.

Hi Guys,

Stumbled on this forum via google and have spent a few days on it - seems like there are some really interesting posts here and lots of info to sift through. Wanted to run a potential scenario by you all and get some advice:

Situation:
I'm relatively young, work in finance / have a relatively high income (>$250k / year), solid credit score, and about $10k to risk. I pay extremely high taxes and started looking into buying instead of renting, as there are significant tax savings. It would make sense to buy with a mortgage payment = (rent + tax savings), as rent now is a sunk cost; at least in the buy scenario, I would have some equity upside.

Dillema:
I live in a high fee (closing cost, seller fees) area - think NYC / SF. I also only plan to live in this city for the next 2 more years and will likely goto graduate school after. This puts a problem, as when I run the numbers, the fees alone either outweigh or match potential property price appreciation over 2 years (meaning, my 2 year timeframe is too low). I could buy something in my home town where prices are much cheaper, but then I can't get 95% financing, as it isn't my primary home, and the mortgage isn't taking the place of the sunk rent cost.

So, I'm basically asking how to strike a deal via leveraging of my high income, good credit score, high effective tax rate, but current low access to capital (I put most of my liquidity into my fund, which on a risk adjusted basis has higher returns than real estate, but is tied up for 5-7 years)

I've run numbers such as financing the down payment via credit card offers I get - downside here is that the cost of capital isn't deductible and ups the monthly rental; it's also limited to ~30k. Again, could possibly make the numbers work if I felt there was upside on the property price appreciation - but I run into the 2 year timeframe as just too much risk - am I really going to get >5% IRR on a property over the next 2 years?

Looking forward to ideas. As background to potential responses, I understand general real estate financing. Thanks!