What’s a liquid asset requirement?
“This should consist of at least two years of housing costs after closing on the property,” says King-Brown. “The building wants to make sure that the buyer has the financial health in order to maintain maintenance fees [for co-ops] or common charges and taxes [for condos] once they own.”
This means that anyone looking to buy an apartment in the $500,000-$1,000,000 range (which is on the LOW END in NYC. Like seriously, good luck finding less than that), should have a couple hundred thousand dollars left over in their bank account after the purchase.
Considering you sit in a cubicle and subsist on happy hours that tout half-priced appetizers, this should be no problem for you.
So... when is the right time to buy?
The honest answer for most New Yorkers is never. There’s a reason why this city is a renters market. But hypothetically, if you have been in New York for 10 years, are in your early- to mid-30s, and are looking to spend $3,000-$5,000 in rent per month, then it WOULD make sense to buy. And you would be looking at a half-million dollar apartment, which would be a big one-bedroom in Manhattan (or an even bigger one-bedroom in Brooklyn). You would put 20-30% percent down and still have more than $200,000 left over after the closing. If this is you, congratulations. And also, drinks are on you.
Another example: let’s say you are looking at a $1.5 million apartment. Your mortgage would be $1.2 million if you put 20% down. If interest is 3.6% over a 30-year fix, you're looking at mortgage payments of $5,500. Common charges on something that size would be just over $2,000... and then there’s insurance and electricity. This puts you roughly at $8,000/month, paid out of pocket for a small two-bedroom, whereas paying $8,000 a month in rent would get you... sizably more. But, here’s the snag: 50-60% of that mortgage payment is going toward the principal, so you would be building equity. Out of pocket that ends up being $4,600 as the cost of owning in New York. If you take that over the year, the average appreciation of the property exceeds the cost.
This scenario makes perfect sense for someone who is going to be living in this apartment for five years minimum. “The cost of getting in and out of property in NYC, such as the transaction costs, mansion tax, mortgage recording tax, property transfer tax, and then, of course, the broker fees, is totally worth it if you’re going to be here for a long time. In this market it takes two to three years to break even, all things considered.” MANSION tax?! The mathematical nightmare that is purchasing real estate is probably enough to keep you happily renting until the end of your days. First and last month’s rent plus security doesn’t seem so absurd now, does it? Oh a 15% broker’s fee? I ACTUALLY KNOW WHAT THAT MEANS!