The rate of home ownership in New York City is declining. With more than 65% of New Yorkers paying rent each month, the American dream seems dead in the Big Apple.
Yet New York City offers more homeownership opportunities than any other hotspot in the United States. Condominiums, co-ops, apartment buildings, single-family homes – New York has something for every homebuyer.
Should you purchase or rent property in New York City? Ask yourself the following five questions to help you make the best decision for yourself.
Five questions to help you decide whether to rent or buy in New York City.
1. Do you know all the hidden costs of owning a home?
As a landlord, you probably know that you are responsible for mortgage payments, HOA fees, taxes, and insurance premiums. However, there are often hidden costs that not everyone takes into account when budgeting. Unexpected costs can include
- Broken equipment.
- Exterior home repairs (roof, deck, driveway).
- Building maintenance and upgrades (windows, doors, siding).
- Cosmetic projects
- Emergencies (broken pipes, electrical repairs).
Even if the household budget is tight, unexpected repairs can make a single-family home seem like an endless waste of money.
Maintenance, upgrades, and emergencies are less of a concern in New York rental housing. In New York, landlords are required to make repairs that affect the health, safety, and expectations of their tenants.
There may be additional costs associated with renting an apartment, such as tenant insurance. However, unexpected expenses are usually minimal compared to owning a home.
2. How long will you stay?
It is impossible to know the future. However, if you know how long you plan to stay in New York, you can decide whether it makes more sense to rent or buy.
For example, let’s say you want to stay in New York for a few years before moving elsewhere. The average rent for an apartment in New York City is $3,477, or $83,448 over 24 months. Considering that the average home in New York City costs more than $670,000, this amount seems reasonable.
Of course, a purchase is an investment, and when you rent, you often end up empty-handed. Despite the surprising number of economic variables to consider, the longer you plan to live in New York, the smarter the purchase (by the way, the average New York homeowner has lived in an apartment for 18 years).
However, if you’re tired of only thinking about closing a deal as a buyer and coming back a few years later as a seller, renting may be the best option for you.
3. What is your budget?
This is probably the most important question when deciding whether to buy or rent in New York. Ultimately, it all depends on what you can afford.
How do you calculate that magic number? It doesn’t help that prices in New York are 22% higher than the national average.
When you buy a home, you need to set aside enough money for a down payment, acquisition costs, insurance premiums, and other small expenses that can quickly add up. You also need an emergency fund before you move in. In an emergency, it doesn’t take long to be financially prepared.
For example, let’s say you want to buy a $400,000 home. You need.
- A 20% down payment of $80,000 (unless you qualify for an FHA loan).
- Be prepared to make monthly mortgage payments of about $1,500, depending on the interest rate and term of the loan.
- Set aside funds for acquisition costs (typically about $5,000 in New York).
- Build an emergency fund that will cover living expenses for at least three months (preferably six months or more).
To buy a house in New York, you will probably have to save at least $100,000.
If you don’t have a lot of money in your bank account, you can avoid these high upfront costs by renting. You will need to budget for an application fee, security deposit, pet deposit, moving expenses, and renters insurance, all of which are less than the cost of an apartment in New York.
4. What are my goals?
Is homeownership your goal? Be honest with yourself. It’s not for everyone, and rushing into it because you think you need to make a major purchase is not responsible. However, being responsible means taking control of your money and achieving your financial goals, whatever they may be.
Want to pay off student debt or credit cards? Focus on that first. Want to travel? Spend the money on plane tickets. Want to start saving? Owning your own home isn’t the only way to prepare for retirement.
But if you want to put down roots and have a place to call your own, home ownership may be the way to do it.
5. How will my decision impact my lifestyle?
Do I want more freedom or more stability? Do I want to change the wallpaper whenever I want or can I adapt my eccentric style with less financial risk?
Owning a home offers freedom of choice, pride of ownership, and financial benefits. Renting offers convenience, flexibility, short-term commitments, and overall less stress.
We hope these five questions will help you evaluate your options and get you closer to a final decision. After all, the decision is both financial and personal. Your heart (and your bank account) will tell you what’s right for you.
Lily Poole is a Property and Home Insurance officer by profession. She is pretty well experienced in the tenant insurance nyc and accounting field and has an impressive profile in the training and development industry.