Since your resolve has brought you here and convinced you to stay, as one of the almost 9 million people living in New York City: should you rent or buy your home? Many people will laugh and this question. Buying in NYC, are you serious?
Even though NYC has a reputation as a renter’s market for a reason, is there any benefit to buying a place?
The ubiquitous and contentious issue of rent vs buy comes to New York in this blog and I am prepared to help you regional folks in your quest for answers.
It’s A Landlord’s World…
And renters are just living in it!
The average rent for a one bedroom apartment in NYC rests at about $2,500, which comes out to $30,000 per year. Yes, that is why everyone has at least 3 roommates and pizza is our favorite food (Joe’s pizza for life.)
When talking about real estate in general, many people say that renting is simply throwing money away. This theory says that in buying, you give yourself the opportunity to build equity and invest in your property, not your landlord’s cable bill.
But the situation is much more complicated than that.
The housing market is fickle, to say the least, and varies dramatically based on the location you are in. NYC, for example, has many home-buying caveats and not the least among them is the average pricing for buying.
On the lower end, condos and co-ops can be on the market for $500,000 to $1,000,000. After factoring in that 20% down payment, taxes, insurance, maintenance, and fees most people are looking at a monthly price of $5,000 to $8,000 per month. This does not make sense for many NYC residents.
Renting can offer many benefits for New Yorkers:
Better pricing options.
Rent prices do fluctuate, but there are many places to rent and many pricing options available
Flexibility to move.
If you are going to stay in a
Less responsibility for building and apartment maintenance.
Broken appliances, electrical issues, pest control, and many other utility-related problems do not fall on your plate.
Lower insurance costs.
Renters insurance as opposed to homeowners insurance
Better tax rate.
State and Local Taxes (SALT) are quite high and not fully deductible anymore, so not having that financial responsibility really helps.
Can the grass be greener?
The jungle of the renter’s market can get really cut-throat, leaving buyers begging for another alternative. There is an opportunity to buy in New York City, but there are many factors to consider.
You’ll need money and a lot of it.
According to the New York Times and a study was done by the Corcoran Group, a brokerage firm, the average price of all apartments in Manhattan is $916,000.
Remember you will likely need 20% to 40% of that as a downpayment.
You’ll have to look at the different options you have as a buyer, such as buying a condo, single-family home, or co-op.
You have an opportunity to build equity.
If you weigh your options and decide that buying is right for you, you have the opportunity to build equity in one of the most aggressive real estate markets in the country.
Keep the long-haul in mind.
If you are tied to a particular location and plan to be there at least 5-7 years, buying could be a great idea for you. This time frame allows you to build equity and potentially sell the place for a profit when you do move.
Your payments will be steady.
Unless you have a rent-controlled apartment, rent prices can fluctuate year to year. But with a mortgage, you will have set payments which can help you plan out your finances.
So now that you have the facts, what will you decide? For most people, renting will be the way to go. But if it is your goal to buy in NYC, securing your finances and planning for that investment are two crucial first steps.
It really comes down to your values and priorities. Working with an advisor who understands NYC housing can help you to create a strategy that incorporates either renting or owning your living space. Want to know more? Contact me today!