Will you regret buying an apartment in New York City?
This is something not a lot of people think about but we have a lot of thoughts on this
topic.
My name is Nick, I am with Hauseit.
We are the largest reduced commission platform for buyers and sellers here in New York City,
established in 2014.
So, let's get started.
So, will you regret buying an apartment in New York City?
There are a lot of ways to approach this question.
I think on a personal level the most important thing to think about when you're buying is
where you're going to be in two- or three-years’ time.
Buying and selling an apartment in New York City using traditional brokers is very expensive.
Buyer closing cost for a condo can be 4% or more, for new construction they can be 6%
and seller closing cost can exceed 10% if you're paying a 6% broker fee.
So, will you regret buying an apartment?
Yes, if you have to sell it after only a year or two.
Unless you're in the strongest of markets, your appreciation will not be able to keep
pace with the actual cost of buying and selling.
So, as a general tip try to make sure you're staying at your apartment for at least 3 to
5 years.
Another regret buyers may face when buying an apartment is just having to deal with all
of the headache of having neighbors particularly in small buildings.
In a small building whether it’s a condo or a co-op, you are bound to become intimately
familiar with your neighbors and in particular when it comes to running the building, making
decisions, board meetings, controversies, everything can get quite personal very quickly
and very intimate.
So, you'll want to make sure that you understand this and the fact that rental building is
very different from being in a building where the people you are living around might be
there for ten years or more and they're really not going anywhere in good times and bad.
Buying into a large building on the other hand, can feel a bit more like living in a
rental building.
So, you’ll have a very large management company and you’ll have so many people who
live in the building that you can feel somewhat anonymous.
So, to the extent that’s something you’re looking for, buying into mid or large size
building is great but if you are looking for a community and that's part of your objective
as a buyer you might have some degree of regret if you move in to a really big building.
One other regret, possible regret of buying an apartment in the city is if you don’t
necessarily know where your job will take you geographically.
As I’m sure you’re aware most co-op building in New York City have some number of restrictions
on subletting and in some cases a building might only allow subletting for a few years
in a lifetime of the ownership.
Now this is less common in Manhattan but is certainly as prevalent in Brooklyn and in
Queens.
So if you have the kind of job that you might get reassigned to London for an indefinite
period of time you might not necessarily want to just buy a co-op in particular because
if you end up staying in London, say for more than two or three years, the co-op might actually
force you to keep the apartment empty without a tenant which would cost you a lot of money
or of course you'd have to sell the apartment.
And that could certainly induce a feeling of regret to some degree.
Another possible regret of buying an apartment is the reality that it simply costs a lot
of money to keep things well maintained.
If you lived in a rental building in New York City since you moved here or for a number
of years, you'll know that as a renter you basically don’t have to ever open your checkbook
and pay for anything.
So, as renter yes might've paid for a lightbulb, you might have gone to home depot had a bit
of fun, bought a can of paint and out of fun just painted your living room but when something
serious need to be replaced and you’re an owner it can cost big money.
For example, if you have a bathroom and one of your tiles is cracked, well the cost of
removing a tile, removing all of the thin set below it, chiseling it out, buying all
the supplies, finding the same tile, installing it without cracking any of the other tiles
around it.
Well you’re looking at a thousand dollars over the course of a few days.
So, if you have a couple of things that go wrong over the course of a year, owning a
property can cost you thousands of dollars of upkeep.
Now the silver lining in New York City is that a) It's one of the best cities in the
world, it will always be relevant from a cultural and economic standpoint and pretty much everybody
in the world would love to be in New York City and spend some time here.
So, you own an asset that will invariably appreciate at a healthy rate over time.
The other possible regret or buyer's remorse of buying a property in New York City is simply
the time and mental energy you may have to dedicate to your home.
Particularly if you've bought a fixer-upper or if you're in a building that really needs
a lot of work or its self-managed or if it’s just a small building where the owner's need
to really get involved.
Going back to our previous example, even if you just need a tile replaced to your apartment,
sure money is one thing, a thousand dollars, drop in the bucket if you live here and have
a good job.
However, the real issue there is managing that project and dealing with construction
in your own apartment.
Having contractors come in and out particularly if you're at your office and not being able
to supervise them creates a lot of mental aggro and headache which can really distract
from your career.
If you are quite sensitive to distractions in your home it really can antagonize you
mentally.
But at the end of the day if you do plan on living in New York City for five or more years
and you're tired of renting, buying could be a great way to build equity over time.
New York City real estate has historically appreciated at a very healthy rate on an annualized
basis.
But more so than that buying a property is one of the only ways that you as an individual
can take out considerable leverage in the form of very inexpensive money to lever up
your investment.
So, if you are buying a 1-million-dollar apartment in the City taking out a loan of $800k 30-year
fixed rate mortgage with zero margin call-risk or any other conditions associated with that
money is extremely rare.
You cannot get anywhere near the same type of terms to lever up your investments say
in the stock market.
It’s a unique opportunity really to increase your leverage and really benefit from appreciation
over time.
Another way to think about real estate is over the course of 30-year whole period.
If you buy a property today and you make the payments for 30 years, in 30 years you will
own a fully equitized asset that will generate cash flow, it will not have a loan balance.
So, if you do this and you buy 2, 3, 4 ,5 properties even if you rent 4 of them out
and even if the rent may not cover all of your carrying costs, think about it as you
basically just paying a few hundred dollars every month and then in 30 years owning millions
of dollars of real estate which can generate a very healthy cash flow stream and help contribute
to your retirement income.
So, we hope you found this video helpful.
There are a number of ways you can feel buyer's remorse as a buyer here in the city but if
you make the right decision, you buy the property for the right price, in the right area, in
the right time, it can certainly be an amazing opportunity and it can also make you feel
like you've accomplished a bit more in life than simply going to work every day and spewing
out and giving away a large portion of your income every month for something that you
don't build any home equity from.
I'm Nick at Hauseit.
Visit our website https://www.hauseit.com if you're looking to buy or sell, we have
ways to help you and save money on your closing costs.
So, check us out and if you like the video please do subscribe and like.
Leave us a comment as well if you have questions.
Thank you so much!