Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
Rent or buy in NYC? This is a tough question and there are experts that will be able to strongly argue and advocate for both sides of the equation. A simple way to look at this is, it depends.
In most cities in the U.S. buying will most likely always make more sense than renting. In a market with low mortgage rates the argument for buying is even stronger. The annual rent of a 2-bedroom apartment in NYC (approx. $40,000) is the down payment of a house almost anywhere outside NY (and California!)
A very important concept when discussing buying vs. renting is the tipping point. The tipping point is the amount of time you need to stay in an apartment for it to be economically worthwhile. In other words: if you’re going to buy, how long should you stay in that apartment for it to make more sense than to rent it?
There are several tools online that help you calculate: Streeteasy offers a very user-friendly formula to guide you depending on neighborhood preference and apartment size. Smart asset takes into account your income, marital status and current rent to give you an accurate response.
If you’re planning to stay in the city a short term; the flexibility of renting is hard to beat. Even people who could afford to buy sometimes prefer to rent. The rental market in NY is huge and offers so many options that you will always be able to find something you like. Renting also gives you the freedom to forget about maintenance costs, real estate taxes and in most cases your rent will most likely be lower than your mortgage payment.
Having said that; buying a home allows you to borrow. This means you are acquiring an asset with someone else’s money. Assuming you are able to secure a good mortgage rate you will also be able to take advantage of tax benefits. In a market as liquid as New York and with a stable appreciation rate, your property will be most likely be worth more when you’re ready to sell that when you purchased.
The biggest difficulty with buying is coming up with the cash required for the down payment + closing costs. This is no small ordeal and is the biggest limitation for potential buyers. When you have reached that point, any additional cash will be welcomed and the cash rebate offered from NestApple will definitely help.