Photo by echiner1.
Whether you’re a “transplant” or a native, the thought of living in New York City without paying rent may seem like such an impossibility it could only be the result of incredible fortune or the misfortune of general homelessness. In the past 10-plus years the city has endured widespread gentrification, making the ability to live life outside of the monthly tug-of-war with one’s bank account difficult to imagine for younger, more marginalized home buyers.
Though for your average twentysomethings in the Big Apple, the answer to coming up with enough money to buy a home isn’t always as lofty as hoping to win some figurative lottery or finding a long lost wealthy relative to be your patron. The most ambitious of financial advisors argue that it is indeed possible to take substantive steps toward home ownership while living paycheck-to-paycheck.
On face value, considering this option makes as much as sense as listening to an obvious Pyramid scheme over lunch with an old college friend. With an already recovering economy holding its breath every few months as Washington decides whether or not the nation will continue to function normally, how could the current housing climate sound even remotely palatable for prospective home ownership?
Regardless of whether the argument makes you decide to jump into real estate, the math makes sense. Since the economy is still bouncing back from a housing bubble, prices are as well to compensate from a massive decrease in homeownership since the dawn of the crash.
Another fortunate side effect of the economic recovery is that the cost of borrowing money has actually gone down. According to real estate agent Roberto Gonzalez of the “Live Rent-Free in NYC” workshops, if you’re crazy enough to take out a $100,000 loan from a bank at a rate in the ballpark of four percent, that would mean paying only roughly $400 a month to have enough capital for a purchase into one of the toughest real estate markets on the planet.
The rest of Gonzalez’s plan includes subletting and/or renting that space above that price and pocketing the profit, but as critics have pointed out, doing so comes with a lot of uncertainty. Also, is is not terribly likely that a trustworthy bank would give out a loan of that magnitude to a young professional with only a nice smile and arguably average credit.
However, in support of Gonzalez and others who encourage the young to hop into the housing market, there are success stories to go around. Take for instance Polly Mosendz, a 22-year-old who is not “an Ecclestone sister, fertilizer heiress, or start up sell out,” who managed to land her own apartment in Greenwich Village.
As she testifies in an op-ed for The New York Observer, Mosendz was paying two grand a month for a “glorified attic” on the fourth floor of an Alphabet City complex before becoming a happy apartment owner. Her neighbors comprised of other twentysomethings who resigned themselves to believing that such a cost of living was simply their lot in life.
If there’s any catch to her story, it’s that Mosendz did have a little help in terms of capital. With some life savings set aside combined with a nest egg from her family, $50,000 helped her land a “shockingly small” mortgage (by Manhattan standards) of $150,000.
Which isn’t to say that Mosendz’s ride through the real estate world was a cakewalk. The recent college grad was consistently given long-eyed stares by real estate and loan agents because her age (though not always). The process of obtaining a loan was not without obstacles either. While helpful gurus like Gonzalez claim that the rates for borrowing are currently at historic lows (and they are), Mosendz ended up taking a personal loan with high interest, citing the fact that doing so can be helpful to young buyers with limited credit history.
While getting a personal loan with a higher rate can be safer for some buyers, it also comes with significant risks that many recent college grads finding their way in the real world may not be fully equipped to handle just yet.
Perhaps that’s the best takeaway that a young person can glean from these numerous stories of financial advisors, burgeoning twentysomething purchasers, and home ownership workshops: that while possible, it is a long road to living without paying rent. Even in her new found castle, Mosendz contends that there still are some painful expenses (read: maintenance fee checks).
Though you sitting at home may not have a $50,000 nest egg to start with, there are still many ways you can start taking pragmatic steps to living without rent. To begin, check out more on Gonzalez’s acclaimed workshop (and its critics), available through Skillshare. Here’s to hoping there’s not another housing bubble about to burst on the horizon.