What Does it Take to Buy Real Estate in NYC?

Considering buying real estate in NYC?

Looking at New York homes is a big step for a local and an even greater accomplishment. You may have already started browsing properties on Zillow and StreetEasy, or asking your friends and family for advice. As a professional real estate agent and fellow New York City homeowner, I hope to shed some light on exactly what it takes to achieve for first New York home purchase.

And it may not be as challenging as you expect. Many people believe that they can’t afford a home, that they need to wait for a special moment to enter the market, or that they’ll save money by renting. But when I do strategy sessions with my client’s, they’re often surprised to discover that this often is not the case. 

If you're struggling to decide whether or not now is the right time for you to purchase your next apartment, this article is for you. 

Real Estate in NYC Can Feel Complicated and Overwhelming.

Don’t Forget There Are No-Obligation Resources You Can Take Advantage of for Insight and Support

If you've been finding yourself in internet rabbit-holes stuck between whether to purchase a home or spend another year renting, don’t let your lack of insider knowledge push you into decision paralysis. While it can emotionally feel like a huge step, many people don’t know that you can consult with real estate agents and mortgage lenders without any obligation to move forward in the home buying process.

And talking to a professional real estate agent can give you a much greater understanding of the home buying process, and whether or not another rental or a property purchase is your next best choice. Ask yourself what your fears and concerns are with home ownership, make a consultation with an agent, and see if they have any insights that can help you prepare for this next stage of your life. 

Tip: I have another post on how to find a buyer’s agent you’ll rave about over here. 

What You’ll Need to Prepare Before Buying Real Estate in NYC

I am proud to say that I too am a home-owner. So I intimately understand the journey you’re about to go on in a way that many other real estate agents in the city won’t. Buying my first home in Greenwich Village was a huge accomplishment for me, but there were many baby steps I was able to take to build up to this purchase.

Here’s how I advise my clients to prepare for their home purchase: 

• Assess Your Finances:

  Start by evaluating your current financial situation. Calculating your debt to income ratio will allow you to more accurately assess your buying power. Here’s how you do it: 

1. Find your gross income. this is the amount of cash you take in between your salary, dividends , bonuses, and any other income you might have. Write down the amount of money you have in each category, and add it all up.

2. Next calculate your outgoing debt payments. Debts, or liabilities, are the money that you owe, or are borrowing. This might include car loans, mortgages, outstanding credit card debt, or unpaid taxes. You’ll likely be paying money each month toward those debts. Add up those payments (not the total debt).

3. Find Your Debt to Income Ratio. Take your total debt payments and divide it by your total gross income. Multiply that number by 100 to find your debt to income ratio. (DEBT/INCOME) x 100 = your debt to income ratio.

This might sound daunting, but when I work with client’s I simplify everything by having them fill out what’s called a REBNY Form (see below).
Banks like to see that you have a debt to income ratio of 43% or less, and many cooperatives may have more demanding requirements.

You can get the REBNY form to use yourself here. >>>

• Save for a Down Payment:

  NYC properties typically require a substantial down payment that, depending on the type of property you choose to buy, can be anywhere from 10-100% of your total purchase price. The more you save up for your down payment the more you’ll be able to afford – not to mention you’ll have more options to choose from.

  This is the biggest hurdle most people face when purchasing a home. Some people might choose to talk to family members who may be willing to help cover their down payment.

  I recommend consulting with a financial advisor, your CPA, or a tax attorney. They’ll be able to help you create a detailed plan for saving, investing, and budgeting for home ownership. They can also provide advice on tax benefits and other financial considerations.

• Review and Optimize Your Credit Score:

Aim for a credit score of 780 or higher for the best mortgage rates. If your credit score needs improvement, take steps to boost it. Pay bills on time, reduce credit card balances, make sure your credit card spending is low in relation to your card’s limits, and avoid opening new credit accounts in the months leading up to your purchase.

• Get Pre-Approved for a Mortgage:

Even if you don’t feel fully financially ready yet, get pre-approved for a mortgage. This will give you a clear idea of how much you can borrow and what your monthly payments might look like. You can get a pre-approval letter without a hard credit pull, so there’s no down side to pursuing this. And once you have your pre-approval, you’ll know exactly what you can afford and which properties you should browse. It’s a prerequisite to submitting an offer, so it shows sellers that you are a serious buyer.

90% of Millionaires Accredit Real Estate to Their Financial Success. 

Ben Lovro wrote a fantastic article on how real estate is a long-proven asset for generating wealth. He writes: 

“Real estate investment has long been a cornerstone of financial success, with approximately 90% of millionaires attributing their wealth in part to real estate holdings.”

Don’t Try to Time the New York Real Estate Market

Your uncle from back home means well when he says you should wait for the housing market to go down before making your next home purchase. This is often advice that will disadvantage you in the long run.

The NYC real estate scene is unique and complex. Advice that might be applicable in your home town will not be applicable in New York. So instead of listening to your family members, who can’t predict the future, let’s talk about the history of New York’s housing prices.

The New York housing market is particularly resistant to downturns, so waiting for a dip in the market is often unrealistic. The fact is that over the past 10 years New York City condos have appreciated by 35%. Some may argue that it’s better to invest in the market. However, this critique fails to take into account two factors. Firstly, we’re talking about purchasing a primary residence, which means that you need to consider that this is money you would have been throwing away in rent payments — not money you would have been able to invest elsewhere. Secondly, you wont get the same the tax advantages from investing in the market that you will get from investing in your home.

No one can predict what the market will look like at any specific time, property in NYC appreciates. Which is why we say: “It’s not about timing the market. It’s about time in the market.”

Hire a real estate agent who can help you build the following team

Now, just because you currently have every bit of real estate knowledge someone might need, doesn't mean you can't buy a home in New York City.

This does mean you’ll want to work with professionals who will protect you from being screwed over by a poor purchasing decision. You can always choose to go about your home buying journey on your own – and certainly if you put in the years you could teach yourself how to become a real estate expert - but you have other obligations, and having a team of professionals who deal with the real estate market every day is going to help your purchase a home with confidence that you’re not spending too much, buying a terrible property, or making a terrible mistake because of an issue you wouldn’t have even considered looking for. 

First you need to hire a…

• Real Estate Agent: This person helps you find properties that meet your criteria, negotiates offers for you, and guides you through the buying process. This person minimizes your risk as you buy a home, which means that you want to hire an experienced, organized realtor with knowledge of the local market, a strong network, and even stronger mathematical skills. A good real estate agent can also help you land off-market deals, which further optimizes your buying advantage by reducing competition.

This is the only important professional you will need to hire on your own. A good real estate agent will be well connected, and have a plethora of contacts to connect you with so that you are well equipped for the entire process. Here are the types of professionals your realtor will introduce you to:

• Mortgage Broker or Lender: This person will assist you in finding and securing the best mortgage rates and terms based on your financial situation. Look for competitive rates, a transparent fee structure, and strong customer service.

• Real Estate Attorney: Your real estate attorney will handle all legal aspects of your purchase, including reviewing contracts, conducting title searches, and overseeing the closing process. You’ll need someone who specializes in real estate law, and has familiarity with NYC’s local regulations.

• Insurance Agent: This person will helps you obtain homeowner’s insurance, which is typically required by lenders. Look for comprehensive coverage options, competitive rates, and a strong customer service track record.

• Financial Advisor: As you prepare for home buying, you’ll need someone who can provide advice on the financial implications of buying a home, such as how it fits into your overall financial plan and tax strategies. You may be able to use your CPA, or whomever you currently work with to complete your taxes. 

• Renovation Contractor: Depending on the property, you may need someone to handle any remodeling or repair work needed before or after you move in. Be sure to hire a licensed professional who has positive references and experience with similar projects.

If you’re feeling overwhelmed, take a step back and seek out support. As a NYC home owner myself, I know how daunting home buying can be. So I put together this free guide for you. Use it to better understand the entire home buying journey, educate yourself on the ins and outs of the real estate in NYC, and learn how to avoid making common mistakes. 

Click here to download My Ultimate Guide to Your NYC Home Buying Experience.

Do you have what it takes to buy real estate in NYC?

Are you already more prepared than you originally realized based on what you now know about assessing your finances and knowing how to find a support team?

You are well on your way to buying the home of your dreams in the city that never sleeps. 

Remember, you can download my Ultimate Guide to Your NYC Home Buying Experience to help you navigate the complex New York real estate market with ease.

Click here to download my Ultimate Guide to Your NYC Home Buying Experience  >> 

I hope this post has been helpful!

Any questions? Shoot me a message on my contact page.  And check out my blog for more information on how to become an expert home buyer.