Yeah, you’ve got the general idea. The prevailing wisdom is that rent always goes up, and a mortgage caps how much you could pay (aside from taxes).
Sounds fantastic! You certainly won’t regret those savings even if you choose not to buy.
Up to you and how much you want a house. The way you write, it sounds like you feel obligated to buy and you’re not passionate about it, so I recommend continuing your aggressive strategy and consider dumping the down-payment money into a brokerage account.
I have never been to NYC, so I have no insight here.
One thing you should consider is total value of investing vs buying a property. Stocks should return something like 7% after inflation, so you’d need to estimate:
how much rent will increase - can look at past data to get a feel for averages
how much the property would appreciate - NYC is weird here
how much you’d “waste” in interest, taxes, etc vs how much goes to principal; compare vs the amount you’d save w/ rent
It could very well turn out that renting is the better financial decision, and that dumping money into stocks can help fight the increase in rent prices. I know NYC real estate is messed up, and that includes both buying and renting properties. So while you’re saving up the down payment, I recommend running numbers to compare buying vs not buying and continuing to save. Basically, estimate your net worth after 30 years or whatever if you buy a house vs invest. Then decide what lifestyle you’d like, and how that fits with the numbers.
In my case, we wanted a house and we found a good deal, so buying made a ton of sense. Then again, I live in the suburbs in a semi-rural area that’s growing quickly, which is a very different situation vs NYC. If I were to move to NYC, I’d run those numbers before assuming buying is going to be the better choice long term.
That’s the thing, our rent stabilized place is has location and size, but the amenities and maintenance of the building are lacking. We have actually been curious about doing some renovation ourselves because it’d be cheaper to spend 10 to 20k on renovation and keep the rent stabilized rates than get a similar apartment at market value and pay that rate for 2 years. So that is why we kind of look at the saving strategy as a test of lifestyle. The thing about the market though is all conventional wisdom says don’t put that down payment in the market if you want to buy in the next 5 years.
Well, to me it doesn’t sound like you’re sold on buying in 5 years. If you’re definitely going to buy in 5 years, then be a bit more conservative with it. But perhaps you can work something out with the landlord to maybe split the cost of a renovation if that’s what you’d prefer.
On the one hand, 10 or $20k is certainly a non-trivial sum.
On the other hand, there are probably several much cheaper things you could do to make your apartment much more livable/acceptable for you, nevermind the possibility of executing the renovations incrimentally. Then, if a better opportunity arrises, no sunk-cost fallacy to hold you back.
I will say, I hope you are saving for retirement, as well as saving for a down-payment!
Totally am. Not maxing out my 401k, but employer does 100 match of 6 percent which gets me close to the same sum compared to folks that max out with less generous matching. I am also doing the planning on how to back door roth ira next year and just converted my old tIRAs.