This question has stumped New Yorkers for years. Truthfully, deciding whether to buy or rent in New York City might be more difficult than passing the New York bar. Picking a neighborhood, deciding your budget, and understanding the pros and cons of each type of apartment is essential.

But buying and renting in New York is different than in any other city because co-ops and condos create one more layer of complication. With so many questions in your head – and maybe some you didn’t even know you needed to ask – we’d like to clear things up. This guide aims to walk you through the important factors to consider when choosing between renting and buying.


All About the Money

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Whether it’s your first time living in New York or you’re an old pro, renting and buying each have their own unique financial benefits. Of course, the cost of buying a home is a scarier number than your monthly rent. On the other hand, many long-time renters don’t realize that buying a home is often much more worth it.

The first question you should ask yourself is, “What is my budget?”

We all know that buying a home is a big decision. Take a closer look at your budget. Be sure to consider your bank statements and spending habits honestly to determine what and where you’re spending. You may find that buying a home is unrealistic, or you need more time to save money before you make the switch to buying.


Debt Versus Income

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The Federal Housing Administration formula advises spending a maximum of 31 percent of your monthly income on housing. The rule of thumb for renters: You typically need to prove that you make 40 times the monthly rent in a year.

If you’re looking to move from renting to buying, we recommend taking a hard look at your debt-to-income ratio (DTI). “Your debt-to-income ratio is a very important number to calculate to prove to the seller that you’re a qualified buyer”, says Lucas Callejas, expert agent at Triplemint. Here is what it entails: “Simply put, it’s your monthly salary versus your monthly expenses”, according to Lucas. The lower your DTI, the more attractive you’re going to look as a buyer.

A low DTI means a high income compared to low monthly payments, and vice versa. This, in turn, means that your DTI is not only affected by your salary, but also by your dream apartment’s maintenance fees, your mortgage payments, student loans, and child support, for example. However, it excludes your personal expenses like going to restaurants or shopping. These won’t be factored into your DTI.

“Conservative co-op boards look for an income ratio below 25 percent, in general, it should be below 30 percent”, advises the expert. Lucas and his business partner Jim Moorehead are happy to sit down with their buyers and calculate their DTI before submitting their application to the seller.


Student Loans

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What if your DTI is negatively affected by your student loan debts? Lucas Callejas gives the green light: “Firstly, your credit score should still be good if you’re regularly paying off those debts.” Debt is not a problem – you just need to prove that you’re in control of it.

“Secondly,”, he continues, “you might be able to have your parents help you with the down-payment. The more money you can put down on your new home, the lower your monthly mortgage payments will be, giving your DTI a positive boost.” And here’s his third tip: “Consider looking for an apartment with less amenities. If you can live without a doorman or a gym in your building, your maintenance fees will be lower as well.” Thanks, Lucas, that makes us feel better!


The Right Time to Buy

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Timing is also very important here. Ask yourself where you will be in one year, 5 years, or 10 years. New York City’s tipping point, or the point in time in which the financial advantage of buying a home exceeds that of renting it, is approximately 5.6 years.

Compared to the rest of the country, which had a median 2.5-year tipping point in 2017, New York City is expensive. While as a whole New Yorkers need to wait it out almost 6 years before buying is financially advantageous, this number varies in certain neighborhoods. For example, certain parts of East Brooklyn boast a tipping point under 3 years, while Soho, Nolita, and Tribeca may take up to 30 years to provide financial benefit.

Ask yourself; will you be in New York City for more than 5 years? Are you looking to settle down in a neighborhood and raise your family, or are you single and looking to bounce around Manhattan for a few years?

In addition, make sure your career and lifestyle match. If you’re outgrowing your current job and want to make a change, it may be wise to stick with renting for now in case the job search takes you to a new city.


Where Your Investment Can Take You

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Many people refer to buying in New York City as an investment. In reality, the choice to buy or rent is the difference between investing in an appreciating asset or investing money in other areas.

If you decide to buy, your home is likely to be worth more in the future than it is the day you buy it. According to Bloomberg, for the quarter that ended March 31, 2018, the price change for resale homes in the Lower East Side increased by 24.3% since last year. A high appreciation like that makes your new home a great investment property.

On the other hand, renting allows you to invest your savings in other ways. Buying a property consumes a lot of money (down payment, mortgage, maintenance fees etc.) that could be invested in the stock market or put into a retirement fund. Carefully consider which areas you’d like to invest in. Returns from these investments may outweigh the real estate prices in the city.


A Lifestyle Choice

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Recently, many New Yorkers have made the conscious choice to continue renting instead of buying.

According to the New York Times, Manhattan residents favor trying out a new neighborhood and changing things up. Regardless of whether you hope to rent or buy, New York will always welcome renters with open arms. In other parts of the country, a common part of “adulthood” involves buying your own home. For many New York City residents, having the budget to buy a home in New York City does not lead to doing so. Again, this has to do with how long you’re planning on staying in the city and if you’d like to try out a few different neighborhoods.

And if you think buying in New York City is the only constant, consider the wise words of Carrie Bradshaw, “a rent-controlled apartment overlooking the park is forever.”