4 Financial Reasons to Invest in Realty in New York City

Thinking about investing in realty in New York City? A New York City condo, co-op, or townhouse can be more than just a place to call home; it can be a tool for generating wealth. This article covers four important financial incentives - many of which are exclusive to property investments - that all potential - and current - home owners should know about.

1. Your NYC home gains value over time

NYC is well known for property appreciation. According to a StreetEasy study, in certain areas of New York City property values doubled in the decade between 2009 and 2019. Investments that lasted fewer than 5 years proved lucrative as well, with sellers in downtown NYC enjoying an 18% return.

From January 2010 to March 2024, the median sales price of a home in New York City rose by 84%. In the same time period, the median sales price of homes in Manhattan itself rose 60%.

While the stock market has done well in the last decade, investments in real estate are generally considered safer than investments in the stock market. From 1999 to 2009, the stock market returned -1% on investments. This period is known in the finance world as “the lost decade” of the stock market. According to the St Louis Fed, in the same time period, the average price of real estate in New York City rose by 96%. A well balanced portfolio should be diversified, and by investing in real estate, you can hedge against losses in other asset classes like equities.

2. Realty in New York City Qualifies for Capital Gains Exemption

You can profit from the eventual sale of your home without being taxed. Single homeowners can profit up to $250,000 from the sale of their property without having to pay a single penny in taxes. For married couples this exemption doubles to $500,000. The home needs to be owned for at least two years and used as a primary residence to qualify for this exemption.

While this direct capital gains exemption only applies to primary residences, owners of investment properties can minimize their tax burden by leveraging a 1031 exchange.

3. Your Mortgage Interest Is tax DEDUCTIBLE

You can deduct the interest paid on your mortgage to reduce what you owe on taxes. Unlike with a lot of other investments, where you can deduct expenses toward that investment against income generated from that investment, you can deduct the mortgage interest on your primary residence directly against your W-2 income.

In heavily taxed areas like New York City, marginal tax rates can easily get above 50%, so high earners find the mortgage interest tax deduction to be a particularly appealing benefit of home ownership.

As of 2017 when it was lowered from a threshold of $1,000,000, the mortgage interest tax deduction applies to the first $750,000 of your loan principle. Mortgage interest is front loaded, so in the beginning, a large part of your monthly payment will be deductible.

4. OWNING PROtects You from rental hikes

Rent prices in New York are notorious for being high. They are also notorious for always going up. Between 2014 and 2024, rent in Manhattan rose by 40%. When you own your home, you no longer dread that annual renewal letter - often informing you of a substantial rent increase - from a landlord. Instead, home owners enjoy the consistency of a mortgage payment, which, depending on the type of loan, can stay the same the entire time they own the property.

Note that while your mortgage payment will stay consistent, it is customary for your building maintenance fees and real estate taxes to keep pace with inflation.

FAQ

Is real estate a good investment in NYC?

Yes, homes in NYC tend to appreciate. If you’re already planning on living in New York, owning your primary residence is a financially responsible way to diversify your investment portfolio, save money on rental expenses, and enjoy tax benefits exclusively offered to home owners.

Who should not invest in real estate?

If you’re absolutely certain you’re going to need to sell your property within the next two years, purchasing realty in New York City is not a good option for you. Your property won’t have the proper amount of time to appreciate and you likely will be net negative when you take into account the closing costs associated with selling the property.

Is now a bad time to invest in real estate?

While the price of property fluctuates day to day and year to year, over time, New York real estate has appreciated significantly. A general rule of thumb, both with the stock market and in the real estate market, is that “time in the market is better than timing the market.” Most financial advisors will advise you to enter the market as soon as possible, as the more time you hold an asset, the better it tends to perform.

Is it ever too late to invest in real estate?

No. Housing prices across the country are on the rise. There is a limited amount of space in New York City and we are in the midst of a housing shortage crisis (both in NYC and in the US in general). There is no evidence that housing prices will go down in the foreseeable future and a lot of evidence suggesting that NYC housing will continue to appreciate.

Gain expert Insights on buying Realty in New York City

For many, owning real estate is a fundamental part of wealth generation. If you decide that it should be a part of your wealth building strategy, you’re next step is to arm yourself with knowledge to navigate the market successfully. My comprehensive buyer's guide is designed to teach you how to steer you clear of common pitfalls while maximizing your investment, and it’s free to download. You can also contact me to book a free real estate consultation, where I can answer any specific questions you may as we talk about whether or not home ownership is the right choice for you.