Deciding whether to buy or rent an apartment in New York City is not a decision that should be made lightly but should rather receive a great deal of consideration. You should weigh all the pros and cons, and closely examine your finances, your lifestyle, and what particular features you might possibly desire to have in your home. The following is meant to help guide you in your decision-making process by introducing you to options, advantages, and considerations for the New York City homeowner.
Personalizing Your New Home
Since a long-term financial commitment is required in order to purchase a New York home, you must take great care in making your decision. There are many reasons one may choose to move to New York City—new employment, proximity to family, a fondness for the area—but one must understand that buying property is much more stressful and time-consuming than renting. One cannot simply choose a home and move into it immediately. One has to deal with brokers, possibly co-op or condo boards, closings, etc etc, and one will also most likely not want to move into the new home as is. One will want to personalize it, through decoration or modifications/renovations, some of the most popular being remodeling the bathroom and upgrading the kitchen appliances.
Owning a New York City apartment provides a number of tax benefits, which arise from the ability one has to deduct property taxes and mortage interest from their income statements—benefits that are not afforded to renters in New York City. Due to these benefits, people can additionally save a great deal of money, which they can then reinvest, leading to far less monthly expenses being incurred. In other words, if one has enough money to buy, one can find oneself saving a great deal of money in the long-term.
With that said, a potential downside is the fact that renters also aren’t tying their capital down, as people who buy property that doesn’t earn income. But one can potentially later receive a large capital gain if he resells the property. Ask an accountant for further information.
Being the owner of an apartment in New York City doesn’t only bring with it the benefit of having an abode that is actually yours but also some important financial advantages, as well. The first and most simple is that no money is being wasted on rent. Instead, most money spent is going towards the long-term goal of owning the property, if a mortgage is required. At least, however, one is contributing towards something he or she will one day own, rather than rent, which one can pay for years and years and still have no more claim to the place than the day he or she moved in. Even if one later decides to move, he can rent the place out himself and earn some nice income that way. Also, when the real estate market is doing one, one can find oneself finally selling their property for significantly more money than they originally purchased it for. This option, of course, isn’t a guarantee but is certainly a nice incentive.
One of the top advantages to buying a co-op or condo unit is that these buildings generally have higher standards, such as better finishes, appliances, and amenities, as well as larger living spaces. Co-ops and condos are maintained with much greater care and pride than the general New York City rental building. Additionally, a condo or co-op homeowner can be actively involved in making the decisions that manage the building, if he or she so desires.
Co-op Associations and Condo Boards
Before one can purchase a unit in a co-op or condo, one must first be approved by the management, which tend to be associations or boards made up of the building’s residents. Condo rules tend to be less strict than co-ops and don’t tend to give people much difficult. Co-op boards, on the other hand, can have very unyielding requirements and also be run by people who are far more picky about who they allow into their community.
Downsides to Buying
Probably the most significant downside to buying a home in New York City is the costly sum that is required in order to make a down payment. In New York City, the average one-bedroom apartment costs $7000. At least 20% of this total is required upfront, and this does not even take into consideration the significant closing costs, attorneys’ fees, insurance costs, commissions, and more. In order to buy an apartment in New York City, one must have at least $100,000 to his or her name, if not more, along with at least six months of mortgage payments and other expenses saved up. One also must undergo a credit check, provide rental and owner history, and receive approval by the co-op board or condo association (as previously mentioned). In short, it is neither an easy process nor a swift one.
The aforementioned long-term commitment can also be a strike against apartment ownership for some people. The purchasing of real estate requires a potentially enormous financial obligation that will have an impact on the buyer’s life, particularly when a mortgage has to be paid each month for a long period of time, not to mention the fact that the owner then becomes fully responsible, legally speaking, for all aspects of home ownership.
Advantages to Renting
If you don’t have enough money to buy a home, or don’t want to deal with the time or stress of the process, renting is cheaper and more relaxing. The financial and legal commitments are simpler, and the process is swifter. For newcomers to the city, renting also offers one the opportunity to acclimate to the environment and decide if it is indeed somewhere where they would like to own a home. Further, they can become better acquainted to neighborhoods this way and learn where would be the best place for them to set up a more permanent home base in the future, if desired.
Additionally, renting is much cheaper, what with no down payments, attorneys, mortages, closing costs, and insurance, to worry about. Condos and co-ops also require monthly repair and maintenance fees, as well as property-related taxes, all of which can add up to just as much, if not more, money a month than some rental buildings require of their tenants. Renters only need to worry about utilities and a potential brokerage fee.
Down Sides to Renting
Renting builds no equity, so no matter how long you live in the apartment—6 months or 25 years—you will receive none if/when you move. The rent money also isn’t tax deductible, both of which are fairly significant downsides. The buildings are also usually maintained and built with far lower quality than co-ops or condos.
In addition to this, renters have no control over many factors regarding their living conditions. If an apartment’s stairs are bad or doesn’t have an elevator or has a broken one, or has flawed bathrooms and kitchens, there is little a renter can do. Sometimes, a landlord will allow a renter to make customizations to the apartment but often the costs are so prohibitively expensive, a renter will decide not to spend that much on something they don’t own. Things can be very unpleasant if one has an unpleasant landlord. When one enters into a rental arrangement it is, therefore, always good advice for someone to consider a landlord carefully and have a meeting with him or her, to get a sense of how helpful or not he might be.
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