Welcome to the First Time Home Buyer Series where we help newbie NYC home buyers navigate through the most thrilling (and sometimes most headache-ridden) process out there.
Homeownership is a defining part of the American dream, but for many who live in NYC, this can seem like a pipe dream only attainable by the super-rich. However, with a little research and digging, you can find gems available for sale where your monthly costs would be equal to (or sometimes less than) what you would pay in rent.
A great example is my sales exclusive on the Upper East Side at 162 East 91st Street. Listed at just $439,000, this extra large one-bedroom located 5 minutes from the 4, 5, 6 subway would only cost, on average, $2,650 per month to own (mortgage + maintenance).
To rent something similar would easily be $2,800 per month.
But what about having enough money for a downpayment and closing costs? Ideally when you consider buying, you have saved up enough for a 20% downpayment, which is the minimum required by most coops. Many times parents and relatives are willing to help out if they understand the benefits of the investment. You can also use retirement account assets (IRA, 401k) without penalty to help with a downpayment. And if you have a coop like 162 East 91st Street that is flexible about allowing co-purchasers, it makes finding the down payment source that much easier.
So why buy and go through the hassle when it’s relatively easy to rent? Here are the top 3 reasons many people overlook when making this decision:
1. It’s a huge tax shelter
Homeownership is one of the best tax shelters for us average joes. You’ll be able to write off any interest expense from a mortgage, money spent on improvements on the home, and (if a coop), part of the monthly maintenance expenses. That can add up to a nice chunk of change saved every year. Of course, consult your tax accountant for details on the exact savings amounts before you buy.
2. Make money for yourself, not your landlord
The most common argument made for home ownership. When you rent, you are basically putting money into your landlord’s pocket every month, and losing out on potentially gaining for yourself.
By owning your own place, not only do you put that monthly payment towards building equity in your home, but you also make money on the price appreciation of your home. On average, home prices in NYC have risen 4.1% year over year in the last 10 years.* Better than a savings account, and much better than just throwing it at your landlord.
*”Manhattan Real Estate Ten-Year Review: Neighborhoods Where Prices Have Gone Up The Most”, Forbes.com
3. Your home is yours and no one else’s
When you own your own place, you know that everything you put into it, from decorations to home improvements, will ultimately benefit you and no one else. You also don’t need to worry about being evicted or having monthly costs increase uncontrollably. And if you find yourself having to leave NYC for whatever reason, you can rent out your home and have someone else pay for your investment, or sell.
So if you are considering purchasing a home, take the leap! And stop making your landlord richer. It’s definitely worth it in the long run.