Buy or rent a condo in NYC? It’s hard for many people to understand why that’s even a choice. The dream of home ownership is woven into the fabric of American culture. It’s the number one source of wealth for most Americans, If you can afford to buy, why on earth would you want to rent?
New York City, as we know, is full of renters. Even when house prices and interest rates are both down, some people prefer to pay extortionate numbers for rent. That’s because the Big Apple has many issues at play when it comes choosing to rent over buying. The most obvious is flexibility. It makes no sense to be saddled with a long term mortgage if you plan to move soon. Many NYC residents don’t intend to call the city home indefinitely. When you factor in closing costs, repairs, maintenance and insurance, being able to leave at short notice is a logical choice.
Why spend $20,000 a month on rent
Many buildings such as The Northmore in Tribeca have units available for rent at $20,000 a month. Why, you may ask would anyone pay that much? Let’s do the numbers. A $20,000/month apartment amounts to $240,000 a year in rent. If you were to buy a similar condo and paid $20,000 a month in a mortgage, you’d be talking about a property that could cost $4-5 million with a 20% down payment. The majority of your mortgage payment for the first half of your loan will go on interest payments. That doesn’t factor in insurance, maintenance, and taxes. So, if you plan to move before long, why part with a million dollars as a down payment and then have the hassle of selling, paying broker’s fees, etc.? You might wind up losing money.
Invest your money
Many people choose to rent rather than buy because they would rather invest their on an asset which will bring them higher return than a property in which they live. A real estate investment is also depreciable, meaning tax breaks apply. That’s the first rule of investing — spend your money on something that will make you money. Of course, you don’t have to live in shoebox. A $20,000 rental is luxury defined but instead of spending a million dollars on a downpayment, you could leverage it into a $5 million investment which will ensure you get paid.
A market in flux
New Yorkers have particular reason to think long and hard about buying a condo in the current volatile market. With a deluge of new properties up for sale in the next few years, many agents are predicting that we have a long way to go until we reach the bottom. Rental properties replete with luxurious amenities are abundant including private dining rooms, game rooms, lounges, libraries and terraces. Some new developments such The Orion at Hudson Yards, Manhattan offer residents a pool, fitness center, roof deck, spa, and of course access to Hudson Yards. There’s a lot to be said for stepping out of your apartment, without a concern for the weather, transportation or parking.
So until you can be sure where you want to live and what the condo market is going to do, a luxury apartment might just have your name written on it.