Downsides to Buying
Probably the most significant downside to buying a home in New York City is the costly sum that is required in order to make a down payment. In New York City, the average one-bedroom apartment costs $7000. At least 20% of this total is required upfront, and this does not even take into consideration the significant closing costs, attorneys’ fees, insurance costs, commissions, and more. In order to buy an apartment in New York City, one must have at least $100,000 to his or her name, if not more, along with at least six months of mortgage payments and other expenses saved up. One also must undergo a credit check, provide rental and owner history, and receive approval by the co-op board or condo association (as previously mentioned). In short, it is neither an easy process nor a swift one.
The aforementioned long-term commitment can also be a strike against apartment ownership for some people. The purchasing of real estate requires a potentially enormous financial obligation that will have an impact on the buyer’s life, particularly when a mortgage has to be paid each month for a long period of time, not to mention the fact that the owner then becomes fully responsible, legally speaking, for all aspects of home ownership.
Advantages to Renting
If you don’t have enough money to buy a home, or don’t want to deal with the time or stress of the process, renting is cheaper and more relaxing. The financial and legal commitments are simpler, and the process is swifter. For newcomers to the city, renting also offers one the opportunity to acclimate to the environment and decide if it is indeed somewhere where they would like to own a home. Further, they can become better acquainted to neighborhoods this way and learn where would be the best place for them to set up a more permanent home base in the future, if desired.
Additionally, renting is much cheaper, what with no down payments, attorneys, mortages, closing costs, and insurance, to worry about. Condos and co-ops also require monthly repair and maintenance fees, as well as property-related taxes, all of which can add up to just as much, if not more, money a month than some rental buildings require of their tenants. Renters only need to worry about utilities and a potential brokerage fee.
Down Sides to Renting
Renting builds no equity, so no matter how long you live in the apartment—6 months or 25 years—you will receive none if/when you move. The rent money also isn’t tax deductible, both of which are fairly significant downsides. The buildings are also usually maintained and built with far lower quality than co-ops or condos.
In addition to this, renters have no control over many factors regarding their living conditions. If an apartment’s stairs are bad or doesn’t have an elevator or has a broken one, or has flawed bathrooms and kitchens, there is little a renter can do. Sometimes, a landlord will allow a renter to make customizations to the apartment but often the costs are so prohibitively expensive, a renter will decide not to spend that much on something they don’t own. Things can be very unpleasant if one has an unpleasant landlord. When one enters into a rental arrangement it is, therefore, always good advice for someone to consider a landlord carefully and have a meeting with him or her, to get a sense of how helpful or not he might be.