Buying a starter home in NYC typically means purchasing a smaller condo or co-op apartment
with up to one bedroom.
What Is a Starter Apartment?
A starter apartment is typically a studio, 1 bedroom or junior 4 condo or co-op apartment
in a multi-unit building in NYC.
Due to high housing prices in the NYC real estate market, it’s typically impossible
for the average first time home buyer to be able to afford anything larger, like a two
or three bedroom apartment.
For those on a budget, buying a starter home typically involves purchasing a small studio
in a co-op building in a cheap part of town.
For example, many parts of the Upper East Side have co-op buildings full of cheap studio
apartments that make for great starter apartments.
What Is the Best Type of Starter Home?
The best starter home is one that is flexible and adaptable to your changing lifestyle needs.
Ideally, it’ll have enough room for a baby crib if you have an unplanned pregnancy.
And if you have an unplanned infant, your apartment better have a washer and dryer installed.
Just imagine having to haul dirty diapers to the laundromat down the street instead!
If we had to choose, the perfect starter home would be a junior 4 apartment with a usable
2nd bedroom, even though it won’t be big enough to be considered a legal bedroom.
Remember that junior 4 apartments are by default cheaper than true two bedroom apartments because
the 2nd bedroom doesn’t meet the requirements for being a legal bedroom in NYC.
Should I Buy a Starter Home vs Renting?
Generally speaking yes; however, you should do a careful analysis of how long you plan
on staying in the city and when you’ll need more space because of life changes.
Furthermore, your analysis should consider your future earnings potential and whether
you’ll need to sell your apartment in order to buy a new, larger one.
The primary concern in all of this are closing costs in NYC which can eat up substantial
amounts of your home equity.
Common Starter Home Buying Mistakes
Not having representation – Having a buyer’s agent is free and there’s never any sort
of exclusivity.
Sellers typically pay a fixed commission regardless of whether it’s split between a buyer’s
agent and the seller’s agent.
Not getting a buyer closing credit – not only are the services of a buyer’s agent
free, but you can also get part of the buyer agent commission for yourself through a completely
legal and tax free buyer closing credit.
Not verifying the square footage – Square footages are often inflated by listing agents,
sometimes by 20% or more and especially for co-op apartments where square footages are
often just estimates.
Not participating in due diligence – Since you will ultimately be writing the check,
you should personally also review the building’s documents.
Not negotiating closing costs – In new development purchases, sponsors typically expect you to
pay their NYC and NYS transfer taxes and attorney’s fees; however, just know that this and much
more is negotiable!
Believing accepted offers are final – In NY, accepted offers are rather meaningless
and neither party is bound until a purchase contract is fully executed.
Not submitting multiple offers – It’s important to have option value and not get
your heart set on any single property.
Submit multiple offers and even negotiate contracts on multiple accepted offers!
Not doing a home inspection – A home inspection could make sense for special situations such
as condominium conversions, small self-managed buildings and top or ground floor apartments.