What is Your Best Option? Compare Buying vs. Renting NYC
I see a lot of clients contemplating the advantages of buying vs. renting NYC apartments as they plan their upcoming moves. It’s a complex and personal decision to navigate, and this article will help you by outlining the various factors you should consider, including:
Financial Considerations
Lifestyle Variables
Buying Vs Renting Advice for Common Scenarios
Each of these factors essentially breaks down to this: buying gives you ownership and control while renting gives you flexibility.
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Understanding Your Financial Situation
When thinking about buying vs. renting NYC property, understanding your financial situation is a key first step in making an educated decision. It’s not just about how much money you have saved or how much you earn. You also need to think about if you’re ready to make a down payment, your overall financial stability, the long-term benefits of owning a home, and the costs of other necessary expenses. By looking at these factors, you can decide if it’s better to invest in a property and build equity, or to rent and keep more flexibility. Let's explore the important financial aspects you need to consider.
Assessing Your Down Payment Readiness
If you’re going to buy a home, you will need to have some money saved for a down payment. Most homes in NYC require 10 - 20% down. That being said, don’t assume you can’t afford a down payment. There are many ways to acquire a home without putting a full 20% down.
If you explore your options and find you truly can’t afford a down payment right now, buying may be out of reach. In which case renting a place in the city may be your best way to explore and experience all the amazing things New York has to offer.
Analyzing Long-Term Financial Benefits
Buying a Home Builds Equity
Buying your Manhattan apartment turns what would have been your monthly rent into an investment. Instead of tossing your hard-earned cash into the rent black hole, you can build equity in a property that gains value. New York properties tend to appreciate. In fact, homes in some areas of New York City doubled in value over a 5 - 10 year period.
Home Buying Tax Incentives
The United States government really wants you - especially if you’re a first time home buyer - to buy vs rent. There are a litany of financial incentives that the government provides home owners. The capital gains exemption and the mortgage interest tax deduction can save homeowners thousands of dollars in taxes.
Evaluate Your Monthly Expenses
Rent vs. Mortgage Payments
Rent payments are variable and subject to market forces. Mortgage payments, on the other hand, are predictable - your payment stays the same year to year, even as rent prices rise. Mortgage payments are made to your bank, and a percentage of that payment goes toward building equity in your property. It can be helpful to think of this part of the payment like a deposit you make in the stock market or another type of investment - that money is still yours - it’s just been transferred from your checking account to an asset.
Renting leaves you vulnerable to market hikes
If you’re a renter, you’ll be vulnerable to rent hikes. Right now supply-and-demand dance is tipping heavily in favor of landlords, which means fewer rental listings and rising asking prices. And this is somewhat standard for our times: between 2014 and 2024, rents in Manhattan rose by 40%, and in just the last year, Brooklyn rents rose by over 9%.
Additional Home costs
When you own a home, you’ll pay monthly fees for your real estate taxes and for the building’s maintenance and long term financial health. In coo-ops, these real estate taxes and HOAs are combined into one monthly cost - the “maintenance fee”. These costs tend to keep pace with inflation.
PRO TIP: You may have been spooked by steep maintenance fees while looking at co-op listings on Street Easy or Zillow. These maintenance fees, however, actually cover your property taxes as well. So don’t be terrified if you see a surprising price tag — you won’t be paying property taxes on top of it.
Navigating Broker's Fees
Rentals often come with a steep broker’s fee. I’ve seen realtors in the city charge anywhere from 15%-30% of your first years rent. And you can expect to pay 15% of the first year's rent, regardless of whether or not you secure representation. If you’re looking at no-fee apartments, you’ll typically pay higher rents and potentially get into a bidding war, as there is higher competition for such listings.
If you’re buying your home, your agent’s services are usually 100% free for you; traditionally the seller pays for both agents involved in the transaction.
Evaluating Lifestyle Considerations
Buying comes with Freedom
Owning your place in NYC means you're the boss. Want to paint your walls neon green? Go for it. Dreaming of a gourmet kitchen? Make it a reality. When it comes to pets, parties, and renovations – you call the shots. No more dealing with flooring you hate or avoiding hanging a picture because your apartment is “just a rental” - you’ll enjoy the pure, unadulterated freedom to make your space truly yours.
The Pride & Stability of Home Ownership
Owning a home feels good. Coming home every day knowing a space is yours provides a level of comfort and permanency that renting doesn’t.
Rent If you need Flexibility
The benefits of home ownership are more prevalent for long-term living plans. Renting on the other hand, provides you with more flexibility:
No Long Term Commitments: If you’re only going to be in NYC for a few years, it makes sense to rent an apartment instead of buying one. When you sell an apartment, you incur some closing costs, so to make money, you’ll need to let your asset appreciate for more than a year or two.
See If You Like Living in New York: If you’re trying out the city for the very first time, it makes a lot of sense to rent before you purchase. Even if you know you’ll be in the city for the long haul, it’s nice to take a year to really understand the ins and outs of the various NYC neighborhoods.
Advice for Common Scenarios
Living in nyc for just A Few Years
If you know for certain you’ll only be in NYC for a few years, rent instead of buying. There are costs associated with buying, and if you don’t let your property appreciate enough to cover those costs, you’ll end up losing money.
PRO TIP: A lot of people underestimate how long they’ll be living in the city. If you don’t have a set end date or existing relocation strategy, it’s likely you’ll be in the city longer than you think.
New new-yorkers
Think you want to live in the city for the long haul but still want to try it out? Renting is a great option for people who brand new to New York. Renting for a year will give you the time you need to find the neighborhoods that you like and assess the viability of a long term stay.
Long-Term New Yorkers
Buying is your best option if you’re staying in the city long term.
Common questions about buying vs. renting NYC
Is it better to rent or buy in NYC now?
It depends on what your long term plans are. If you’re planning on being in NYC long term, buying is a good move. If you’re looking to try out the city or know you’ll need to move in a few years, renting is the better option for you.
Is buying a studio in NYC worth it?
Yes, as long as you are planning on holding on to that property for the medium term. While studios appreciate less than one bedrooms or two bedrooms, they still appreciate. However, maybe think twice about buying a studio today if you’re certain you’ll need a one bedroom a year from now.
Does it make sense to buy a condo in Manhattan?
Buying a condo in manhattan is a great option if you’re looking to build wealth or make a space truly yours. Real estate in Manhattan appreciates well.
Is NYC real estate a good investment?
Yes buying in NYC is a good investment. The NYC market is known for its appreciation and resiliency.
IS IT WORTH BUYING OR RENTING IN NYC?
It depends on your personal situation. If you’re going to be in the city for the long term and can hold on to your property, it absolutely makes sense to buy instead of rent. If you’re going to be here fore a year or two, opt for a rental.
WILL RENTS EVER GO DOWN IN NYC?
Highly highly unlikely (basically no). Rents in New York consistently rise and they are currently at an all time high.
WILL PRICES EVER GO DOWN IN NYC?
Also unlikely. Prices in NYC tend to remain steady or go up. Rent if it makes sense for you, but don’t put off buying hoping for a prices to drop in the future. NYC property prices are incredibly resilient.
ARE APARTMENTS IN NYC A GOOD INVESTMENT?
NYC apartments tend to appreciate in value and owning a primary residence also confers tons of tax benefits that renters loose out on. Therefore, owning an apartment in NYC.
Making the right decision for yourself
The best decision for buying vs. renting NYC property is fundamentally a personal one that is based on your particular circumstances. If you’re planning on being in the city long term, buying is a great option and a wonderful tool to generate wealth. For those who are here for a short stint, rentals are a great way to explore all that NYC has to offer.
If you find home buying to be an overwhelming task, check out my free Home Buyer’s Guide. It will walk you through all the steps to making your dream home a reality, and teach you how to become an informed buyer and avoid potential pitfalls.
You can also reach out to me for a free consultation and personalized advice. I’m want to help you find the home of your dreams!
