Those planning to relocate to New York City need to consider several factors before deciding if renting or buying is right for them.
If you’re relocating to the Manhattan area, one of the first priorities on your list is finding affordable housing. Considering that Manhattan is second only to the San Francisco area when it comes to the high price of renting or buying property, this can be a tall order. In other areas of the United States, whether to buy or rent is often a simple decision that depends on your budget and whether you plan to stay in the home for at least five years. In Manhattan, though, the decision gets a bit more complicated.
If you’re wondering how you’ll afford to live in Manhattan and whether buying or renting is better for your financial security, keep reading.
Living in the City vs. Outer Boroughs
Many of those who work in the city choose to live in one of the outer boroughs and commute rather than pay the steep rental prices in Manhattan or shell out millions of dollars for an apartment. While median sale prices in Manhattan, Brooklyn, and western Queens hover around the $1 million mark, you can still get affordable housing in the Bronx’s Parkchester (median cost of $180,000), Rockaway Beach (median sale price of $275,000), and Staten Island’s Port Ivory (median sale price of $363,228). Not only are these areas less expensive to buy in, but they’re also easier to navigate, less crowded, and generally have superior public school systems.
Living in the outer boroughs involves sacrifice, of course. Though public transportation is widely available throughout the boroughs, you could still experience a commute time of up to an hour if you work in the city. You also won’t be within an easy walk or cab ride to world-class restaurants like Atomix, Aquavit, or the Michelin three-star rated Per Se, icons such as the Guggenheim or the 9/11 Memorial Site, or shopping on Madison Avenue.
Renting in Manhattan
Buying is a smart investment and, with historically low mortgage rates, is usually less expensive than renting. However, it also involves extra costs. If you want to buy in Manhattan, you’ll have to come up with a 20% down payment or pay extra each month for mortgage insurance. That means if you’re looking at Manhattan real estate that sells for the median price of $760,000, you’ll need to bring over $150,000 to the closing. That doesn’t include the added closing costs, upfront insurance payments, and other fees that could run another $3,000-$10,000. Manhattan also has the sixth-highest rate of property taxes in the U.S., something that will add to your monthly mortgage payment (but not to your monthly rent).
Even if you can afford to buy a home in Manhattan, you may have difficulty finding one that suits your needs. The market is tight all around the nation, but New York has one of the tightest markets in the United States. Property is being snapped up at a record pace, and offers are often made and accepted mere days after a home is listed. This also drives the cost up since sellers know they don’t have to compromise to get their home sold.
Flexibility is one of the biggest perks of renting in Manhattan. When you lease, you will likely only sign a year-long contract. That means you can move to a different building, area, or even an entirely different part of the country after a year if your life changes. When you buy, you don’t really start recouping your money until you’ve owned the home for five years. You’ll also have to deal with the hassle of selling if you want to move, a process that can take months. If your life hasn’t settled to the point where you’re ready to put down roots, you’ll almost always be better off renting than buying Manhattan real estate.
Buying in Manhattan
There are plenty of reasons to buy instead of rent, even in expensive markets like Manhattan. First, being a homeowner equals getting a tax break. You can deduct your property taxes and your mortgage interest on your taxes, which can add up to big savings. When you buy, you’re also making an investment you can draw on later. After you’ve started to build equity in your home, you can take out home equity loans, lines of credit, or a second mortgage to fund projects or ventures. If you stay in your home long enough, you can also sell it for a profit and use the money to invest in a larger home.
Though you have more flexibility to move when you rent, you have far less flexibility when it comes to your home. When you buy, you can make improvements and engage in home remodeling projects that increase your enjoyment and the resale value of your home.
Which is Right for You?
The low interest rates make now a perfect time to buy one of the homes for sale in Manhattan — if you meet certain criteria. The first, of course, is your financial situation. The best deals in Manhattan now are in new development in prime areas and larger apartments where sponsors will sometimes offer to pay transfer taxes or even some of the closing costs. However, these homes fall into the $5 to $6 million price range. If you don’t have $1 million to put down at closing, these deals won’t work with your budget.
If you can afford a hefty down payment, have good enough credit to secure a mortgage, and find a home you love, the next question to ask yourself is about your future. Do you plan to stay in the home for at least five years? If the answer is yes, buying Manhattan real estate is likely the better option. If not, it’s better to rent while you explore your options and decide where you want to reside long-term.
Manhattan is an exciting place to live with opportunities around every corner. If you plan to relocate to the Big Apple, consider your finances and future plans before deciding whether to rent or buy.
