Midlife Beginnings

It’s been six months since I last wrote a post on this blog. How time flies…..

A lot has happened since then. The main thing is, I have bought a condominium! I’m a bit nervous about the housing market, but I found the perfect condo and decided to buy. It’s a two-bedroom / two-bath, brand new construction, huge windows, on the fifth floor.

After living in a 120-year-old brownstone for 23 years, I can’t get over how much I appreciate some of the smaller luxuries of a new building — a washer/dryer, a garbage chute by the elevator, a parking space for my Vespa, and a dishwasher….where else but in New York City does anyone consider a dishwasher or a parking space to be an unusual luxury?

And best of all, I have a decent view. Instead of living in an old brownstone, I look out over brownstones — hundreds of them!

I’m now living in Bedford Stuyvesant, just over the border from Clinton Hill. It’s a big change from my old neighborhood, Carroll Gardens, which went from being mostly Italian American twenty years ago to being pretty much exclusively ultra-rich in the genre of Greenwich, CT or the Hamptons out on Long Island. For those who don’t know Brooklyn, Bedford Stuyvesant is predominantly African American and, though absolutely beautiful with its Victorian brownstones, has a reputation for being a bit rough. But after a couple months of living here, I have found it to be perfectly safe — haven’t had any issues whatsoever. I’m enjoying the West African and Jamaican restaurants around here, as well as the vibe on the street, which is so different from my old neighborhood.

The process of moving has been difficult though. After 23 years of living in one place, I had accumulated a LOT of stuff, and have spent pretty much the past 4 months getting rid of stuff. moving stuff, and rearranging stuff. This weekend I have finally finished. The new apartment feels like home.

I tend to get into financial details in this blog, and will probably go into detail about my condo transaction in a later post. For now though, I’ll say that what convinced me that buying was the right decision was this: My landlord wanted to raise my rent to $2,300, which is more than I wanted to pay. I could find no comparable two-bedrooms in my old neighborhood (or just about anywhere in Brooklyn or Manhattan, for that matter) for under $2,500.

My monthly payment now is $2,800 (this includes mortgage, maintenance, taxes and insurance), but after tax deductions my monthly payment comes out to just over $2,200, which is cheaper than what it would have cost to rent. I took out a 30-year fixed mortgage — none of that interest only or adjustable rate business — so I know that I won’t be paying more in the future. The next several years may be rough for the economy, but eventually better times will come and housing prices will rise. When that happens, my monthly mortgage payment will still be $2,800.

Now that my move is complete, I plan to start blogging more. Writing is a way that I use to work through my thoughts, and I’ve missed it, as well as the feedback that I received here.

I am taking a four-day weekend off from work, and swore that I wouldn’t touch a computer for the entire time. I managed to hold out for three days, but today couldn’t resist catching up on my favorite blogs, on the news and on the financial markets. It’s been pouring outside all morning, I’m drinking a pot of tea, my cat is curled up on the desk beside me, and I’m not about to leave the apartment. In fact, this is a perfect time to do some writing.

It’s been a while since I’ve posted. A lot has been going on. I wrote a few weeks ago that I will need to move before the end of March (lease is ending). I’ve been out looking at apartments and have been amazed at how much cheaper they are than they were a year or two ago. An article in the NY Times this morning states that NY rents are 25% off of their 2006 peak, and have fallen back to where they were in 2000. It’s a good time to be looking for a rental!

But instead, I’m on the verge of buying an apartment. I’ve paid off my debt, and feel secure in my job for the next year or so. I also have been doing well with my side business. While I have loved living in my rental apartment with a big garden for these past 23 years, I am acutely aware that I could have paid down the majority of a 30-year mortgage in this time. Also, I am not getting any younger, and don’t want to be renting when I’m 60.

The place I am looking at is a two-bedroom condo in a brand new building with floor to ceiling windows, and a balcony. I’ve made an offer on it and am working out a few kinks in the contract with my attorney before signing.

There are drawbacks to buying though, and I am nervous. First, I will have to take most of the down payment out of my 401k. I understand how the stock market works, and am pretty good at moving in and out at opportune times. I sold in early 2008, and was in a cash equivalent account for most of that awful period when so many retirement accounts were getting decimated. (if only there were an inverse (short) fund offered in my 401k program.) I moved my 401k funds back into small caps and emerging markets funds a few days after the low in March 2009, and have done very well over the past year. By tying $40,000 up in a down payment, I won’t be able to work that money in the markets anymore. Not to mention the fact that I will have to pay taxes plus a 10% penalty on it.

Then there is the problem of a falling real estate market. NY condo prices have come down a good 25% in the past couple years, but with the government about to end its support of the mortgage markets, and with all those Alt-A and Option Arm resets about to hit who is to say that prices won’t come down another 25%? If that happens I’ll be under water on my mortgage by about $100k. On the other hand, I have never seen so much angst in New York City in my life. Angst about real estate prices, about the job market, about the financial industry; people are nervous. If there is one thing I’ve learned, it’s that one should buy when everyone else is afraid to (and sell when everyone else thinks you’re a fool not to buy).

Lastly, I see myself staying in the city for at least another five years. And when I leave, I would most likely want to rent out my condo, keeping a foothold in Brooklyn regardless of where I end up. Of course, with those plummeting rents, I don’t think I’d even be able to cover 3/4 of my monthly mortgage and maintenance…..

So, in another day or two, the contract will be ready to sign. What do I do — take a big risk, bite the bullet, buy a new condominium and become a middle-aged home-owner worried about my housing equity? Or do I put off my decision, sign another 2-year rental lease, and buy once the mortgage reset mess is behind us in 2012?

It finally happened.  I live in a three-unit brownstone, one apartment on each floor.  I have the main floor,  the basement and the back yard, and pay an absurdly cheap rent.  Now, after 20 years, my landlord has decided that she needs more permanency in her life (she is single and lives in a Manhattan rental), and that she wants to live in her own building, which she received in a divorce several years ago.  Of course she wants my garden apartment, so when my lease is up in February I will have to move.

I wasn’t too happy with this news, but the truth is, while living in a 19th century brownstone has its charms, I really wouldn’t mind having a dishwasher, a garbage disposal, a washing machine, and maybe even a doorman.  I also wouldn’t mind having a view.  I always thought these things were out of my reach, but after looking around at apartments today, I was really surprised — astonished, really, by how many nice apartments are on the market in New York, and how much prices have come down in the last year or two. I saw some two-bedroom apartments in luxury buildings that I could actually afford!

In New York, landlords generally expect a prospective tenant to have a yearly income of 40x the monthly rent for an apartment.  For example, if an apartment is $2000 per month, then a tenant would be expected to earn $80,000 per year, or 40x the monthly rent. Between M. and I, we earn about $125,000 per year, so can afford about $3,100 per month.  3 years ago, this wouldn’t have even gotten us into a studio apartment in a luxury building, but we saw two bedrooms today for $3,300.

I also found that some landlords are bending the usual 40x rule to be 35x or even 30x.  And the landlord of one luxury building we visited doesn’t even check income — if you have a credit score of above 750, you can take any apartment you want.  This is good for me because I have business income outside of my salary, which most landlords wouldn’t include in their 40x equation.

So all in all, this is a very good time to get an apartment in New York City, at least if you have good credit.  There is a ton of stuff out there, and prices are cheaper than they’ve been in years.