Income requirements are often 3-4x the actual rent, so if someone has a good financial grip (no debt, no car) as many in NYC do, they may be able to afford it but not technically qualify. This is a sure fire way to become house poor but if you’re smart about it you can make it happen
The issue is you aren’t even “house poor” in that case since it is rent. “house poor” at least has a way out if you don’t fully go bankrupt and can sell the house at some point. This cash just goes in the bin.
That said: If it is your only option to live in NYC and you need to…
Remember that renting can be financially better, depending on circumstances.
Purchasing also throws some money away, interest, insurance, maintenance (which is more than people think), and actual purchase and sale fees to banks and realtors.
Often the recommendation is to only buy if you really think you’ll be in that house for at least 10 years, can put 20% down… and some other things I can’t recall of the top of my head.
If your mortgage+insurance costs are comparable to your rent, it is pretty much always better to “own” if you are planning to stay there for at least one or two years. Mostly because, with housing trends, you are making significant percentages of that back (if not a profit) when you leave. Albeit, that is a lot harder with the insane interest rates right now but… rent is also getting insane.
Because yes, your rent per month might come out a bit lower and you (probably) don’t have to worry about repairs. But all of that is just going down the drain.
That said, with the modern housing market: it is less that renting is “better” and more that you are fucked either way. But you can at least afford rent… to the degree that it will prevent you from ever building up enough cash for a decent down payment (20% would be nice to avoid PMI but it is far from necessary… depending on interest rates).
Everyone has to do their own math (if they even have an option, which they likely don’t). But the “ten years” advice has been wrong for years. And a lot of the people who jumped the gun and bought a house a few years back… have REALLY REALLY good interest rates and potentially a solid retirement asset (plus a home). And they either rent it out when they move or sell it for a significantly higher price.
But also: none of that really matters here. Putting the majority of your income into a mortgage is bad, but potentially has payoffs… sometimes. That is being “house poor”. Putting the majority of your income into rent has no payoffs and is mostly just a way to get trapped because you have no way to save up to change anything. And are pretty much screwed the moment you are unemployed/underemployed.
Perhaps you’ve never rented before. Affording and “not qualifying” are very different things. Sometimes you make far more than enough money to rent but maybe you work in the wrong industry.
I spent at least 16 years renting and rented at least 10 different apartments.
I’ve never run into anything that crazy. There was one place I tried to rent, but it was designated for low income. When they told me the income limit and I knew the rent, it didn’t seem to add up. There was no way I would have paid the rent they were asking for making even the high end of the income limit that was set.
They ask for the stupidest things. They want 3x rent up front for first, last, security. They want you to have a full year of rent in your savings. Until laws were passed, a person in my town would have to drop $9000 on DAY 1 to rent a 2bd, 2bathroom.
It’s been 2-3 years since I rented. I signed my last lease right before the pandemic started, but rented a lot before that… too much.
I haven’t run into anything that crazy. One place told me I had to pay for a year of parking up front instead of monthly, but that wasn’t required to rent there, only if I wanted to keep a car in nearby structure.
Once when I was signing a lease the other person at the leasing office was told to pay 2-3x rent for a security deposit, while they only asked me for $200. I don’t know what was behind that, but I’m going to assume it was credit score or something. Asking for first and last months rent up front seemed pretty standard.
Most of the things you mention are about having a lot of cash on hand, and less about how much money is coming in each month to pay rent, which I thought was what the girl was faking, which would make her rent-poor, spending 70% of her paycheck on rent or something.
If she can’t afford the rent, photoshop isn’t going to help on the first of every month when rent is due.
Income requirements are often 3-4x the actual rent, so if someone has a good financial grip (no debt, no car) as many in NYC do, they may be able to afford it but not technically qualify. This is a sure fire way to become house poor but if you’re smart about it you can make it happen
The issue is you aren’t even “house poor” in that case since it is rent. “house poor” at least has a way out if you don’t fully go bankrupt and can sell the house at some point. This cash just goes in the bin.
That said: If it is your only option to live in NYC and you need to…
Remember that renting can be financially better, depending on circumstances.
Purchasing also throws some money away, interest, insurance, maintenance (which is more than people think), and actual purchase and sale fees to banks and realtors.
Often the recommendation is to only buy if you really think you’ll be in that house for at least 10 years, can put 20% down… and some other things I can’t recall of the top of my head.
If your mortgage+insurance costs are comparable to your rent, it is pretty much always better to “own” if you are planning to stay there for at least one or two years. Mostly because, with housing trends, you are making significant percentages of that back (if not a profit) when you leave. Albeit, that is a lot harder with the insane interest rates right now but… rent is also getting insane.
Because yes, your rent per month might come out a bit lower and you (probably) don’t have to worry about repairs. But all of that is just going down the drain.
That said, with the modern housing market: it is less that renting is “better” and more that you are fucked either way. But you can at least afford rent… to the degree that it will prevent you from ever building up enough cash for a decent down payment (20% would be nice to avoid PMI but it is far from necessary… depending on interest rates).
Everyone has to do their own math (if they even have an option, which they likely don’t). But the “ten years” advice has been wrong for years. And a lot of the people who jumped the gun and bought a house a few years back… have REALLY REALLY good interest rates and potentially a solid retirement asset (plus a home). And they either rent it out when they move or sell it for a significantly higher price.
But also: none of that really matters here. Putting the majority of your income into a mortgage is bad, but potentially has payoffs… sometimes. That is being “house poor”. Putting the majority of your income into rent has no payoffs and is mostly just a way to get trapped because you have no way to save up to change anything. And are pretty much screwed the moment you are unemployed/underemployed.
They’re 40x the monthly rent.
If you want to rent a $2,500 apartment, you need $100k in income (gross, not net).
Yes, if you can skimp elsewhere, you can make it work with a smaller ratio. But it isn’t an insane rule of thumb for what you can afford.
They’re saying 3-4x on a monthly basis.
I’m just saying what it is, in NYC it’s 40x the monthly rent for annual gross income, 80x for guarantors.
3.3x the monthly rent. This is true pretty much everywhere in NYC.
It’s in their range but more precise, and they will care about annual income. They’ll ask to see tax returns often.
Perhaps you’ve never rented before. Affording and “not qualifying” are very different things. Sometimes you make far more than enough money to rent but maybe you work in the wrong industry.
I spent at least 16 years renting and rented at least 10 different apartments.
I’ve never run into anything that crazy. There was one place I tried to rent, but it was designated for low income. When they told me the income limit and I knew the rent, it didn’t seem to add up. There was no way I would have paid the rent they were asking for making even the high end of the income limit that was set.
The stupid policies will come to your town and then you’ll understand.
Have you rented recently?
They ask for the stupidest things. They want 3x rent up front for first, last, security. They want you to have a full year of rent in your savings. Until laws were passed, a person in my town would have to drop $9000 on DAY 1 to rent a 2bd, 2bathroom.
“rental down payments can’t hurt you, they aren’t real”
It’s been 2-3 years since I rented. I signed my last lease right before the pandemic started, but rented a lot before that… too much.
I haven’t run into anything that crazy. One place told me I had to pay for a year of parking up front instead of monthly, but that wasn’t required to rent there, only if I wanted to keep a car in nearby structure.
Once when I was signing a lease the other person at the leasing office was told to pay 2-3x rent for a security deposit, while they only asked me for $200. I don’t know what was behind that, but I’m going to assume it was credit score or something. Asking for first and last months rent up front seemed pretty standard.
Most of the things you mention are about having a lot of cash on hand, and less about how much money is coming in each month to pay rent, which I thought was what the girl was faking, which would make her rent-poor, spending 70% of her paycheck on rent or something.