Buying vs. Renting – 13 Reasons on Whether You Should in NYC
Buying and renting offer the same pros and cons in New York City as in the rest of the country. There are a few different variables involved with good ol’ NYC – and we will get into them a little bit later – but the most important is to understand the costs and benefits of each housing strategy in a clear, easily categorizable way. That way, the right decision becomes a straightforward matter of weighing two sets of several different factors against each other, and then ask yourself which approach is best for you.
Let’s first divide the pros and cons into two main categories: Financial considerations and lifestyle concerns.
Talking strictly about finances first, if you can afford it, buying is almost always the better long-term investment. Barring obscene interest rates, much of your monthly mortgage payment will come back to you in the form of the value of the home when you eventually sell it. Rent payments, as most of us get to feel deep down in the gut once a month, are just throwing money out the window.
Furthermore, the federal tax structure favors homeownership – social security, and that part of the tax code are the only two last vestiges of a civilized country’s social policies that we have left in the U.S… The federal government subsidizes a considerable part of home ownership by making most mortgage payments tax deductible.
There are two financial downsides to home ownership. First, if there is any real chance of you defaulting on your debt, then you should keep in mind that doing so can ruin you financially for a good chunk of your life. Don’t get cocky when considering the likelihood of this possibility, Mr. Financial Superman; unforeseen events can put you in extreme financial jeopardy.
Relatedly, don’t get sucked into a high-interest loan. Owning a home is a lot of work, and if you’re paying almost as much in interest as you would have been in rent, then it’s just not worth it.
Now, let’s talk lifestyle concerns.
Take it from someone who has both studied a whole lot of economics and has been worked into the ground as a teenager by two parents who owned a home that required a lot of fixing up: The real main drawbacks to home ownership aren’t financial, they are practical. While you might gain a lot financially, you lose a lot regarding mobility. Owning a home is a lot of work, and you can’t just rent the place and go gallivanting off around the world.
In New York City, two main things make owning a home more desirable than elsewhere: First of all, everything involving housing in the city is costly. That means that the financial benefits of homeownership are proportionally more important. Secondly, demand for New York City real estate is expected to continue to rise for years to come, through corrections and all. The limited size of the city in comparison to the growing population means that property values are likely to increase, making home ownership in the city a safer than usual investment.
If you can afford it, and you know you are going to be in the city for a while, home ownership is probably the way to go. But the best colloquialism to apply to home ownership everywhere should be stressed in New York City even more strongly: Never, ever, bite off more than you can chew.
13 Reasons on Whether You Should Buy vs. Rent
Buying or Renting your New York City apartment should be dependent on some factors. Consider your particular lifestyle, your finances and any other additional features you might want in your home.
1. Enjoying privacy and comfort in your home
The decision to purchase New York City real estate requires a long-term financial commitment, so it is essential that it thought of while considering numerous things. Some choose to move to New York for reasons related to their employment, others because of family and there are many other reasons for moving which may require a change in lifestyle. Purchasing property is more time-consuming affair than the practice of renting.
Someone who has purchased their home will usually be eager to settle down in their new abode. The primary concern for the homeowner has to deal with their privacy and comfort. The new owner will also want to think of ways that they can personalize their new home, and this might mean some renovation or modifications to the existing floor plan. However, most people usually stick with upgrading kitchen appliances and bathroom remodeling.
2. Equity Creation
Owning a New York City apartment isn’t merely about having a place to call home; it also comes with some significant financial advantages. Buying property means that the property owner isn’t wasting money on rent and even if they do decide to move homes, the property can always be rented and become a source of income. The many benefits of property ownership are why it is an important option. People who bought five figure homes in the 70’s were delighted to sell the same houses for seven figures and more in the later part of the 90’s. This tremendous growth isn’t always guaranteed, but it does not make owning New York City real estate any less rewarding.
3. Tax Benefits
Tax benefits regarding owning an NYC apartment, come from the ability to deduct mortgage interest and property taxes from your income statements. People who choose to rent do not have such benefits. A substantial amount of money can be saved and reinvested from such gains and can also lead to a sizeable reduction regarding expenses incurred monthly.
Despite all this, it is essential to note that those who choose to rent are not tying down their capital like those who purchase property that earns them no income. The fact that it is possible to yield a substantial Capital Gain from the resale of a property decides to buy a smart one.
If you require additional information about tax benefits that accrue from purchasing property, contact an accountant or another relevant professional.
4. Well Equipped and Maintained property
People who demand a higher living standard should note that condominiums and co-operative buildings tend to come built with higher standards compared to rental buildings. They typically feature larger living spaces, better finishes, high-end appliances and more great overall amenities. Also, those that own a condominium or co-operative can choose to be actively involved in the management of the building.
5. Substantial Capital Commitment
The main reason people decide not to buy is a significant amount of money required for the down payment. A one bedroom apartment costs $700,000 on average in New York City, and at least 20% is expected as a down payment to buy it.
Expensive closing costs are an additional expense as well as insurance costs and attorney’s fees. Find further explanation in our Buyer’s Guide. Anyone who wants to purchase a New York City apartment should have no less than $100,000 in their bank accounts as well as a cash reserve of up to six months for mortgage payments and common charges.
There will also be requirements you need to fulfill the purchase, such as a credit check, rental and owner history, and approval by a condominium association or a cooperative board.
6. Long-Term Involvement
Another reason while people may not be so eager to purchase a New York City apartment is the long-term commitment required. Buying real estate is a tremendous financial obligation that can impact on a buyer’s lifestyle with the loan financed the needs be paid off over an extended period. Buyers’ will be legally responsible for every aspect that comes with home ownership.
7. Dealing with Condominium Associations and Cooperative boards
People who wish to move into a condo or a co-op apartment will first require approval from the management overseeing the building. In the case of condo boards, the rules are not as strict as co-ops, and most people don’t experience too many difficulties. People applying for co-ops may find that things tend to get more complicated. When it comes to approval requirements for co-operative buildings, New York City co-ops have the most stringent requirements.
8. Stress-Free Process
If you have neither the money nor time to buy a home, renting one can be a quicker and cheaper way of living in New York City. The legal and financial commitments are less complicated than buying a property, and a quicker process. Many people who come to New York City choose to rent whether they come to work, to search for work or just to experience residing in the Big Apple.
Renting offers the opportunity to live in the city, understand it better and prepare thoroughly to make the right decision when purchasing a home.
9. No Long-Term Commitment
Renting an apartment is the least expensive option for short-term purposes, with no substantial down payments, mortgage, attorneys, insurance or closing costs. There is also no monthly charges, repair fees or property taxes when renting. The only commitment is utilities, and in some instances, a brokerage fee equals up to 15% of the annual rent.
10. Renting does not build Equity
The primary disadvantage when renting is that regardless of how long you have lived in an apartment, you do not own property or equity when you move out and the money spent on rent is also not tax deductible. All these are substantial benefits you would enjoy when owning your apartment. Building equity
11. Buildings and Apartments not as well equipped and maintained as condos and co-ops
Rental buildings are rarely the same quality as coops or condos. There are a few exceptions. However, most co-ops and condos constructed to higher quality standards.
12. Lack of Control over Living Conditions
Renters must accept different living conditions when it comes to various buildings. Some significant problems may include the lack of an elevator, old staircases, leaking roofs, issues with kitchens and bathrooms, electrical faults, etc. Landlords might allow renters to customize their apartments but sometimes the costs are so prohibitive that tenants stick with whatever is available.
13. Landlords
The most critical aspect of any tenants’ position. A great owner can make your stay an enjoyable one, and a terrible landlord can make you regret ever signing the lease. The best thing to do is have a meeting with the owner first and assess the person’s demeanor and understand what they desire from their tenants and what they can provide in return.
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