A Closer Look at Buying vs. Renting in NYC

A couple of months ago, I wrote about buying vs. renting an apartment in NYC and how I favored renting based on my rough calculations. Recently, I started thinking about the economics again, so I had my data geeks crunch some more numbers for me…seriously I did.

Ok, fine, I’m kidding – I have no data geeks unfortunately. This is how it really went down – I happened to be bored one weekend, so I decided to have myself crunch more real estate numbers.

The short of it is, after looking at the numbers again, one thing led to another and Jenn and I started looking at apartment listings and going to open houses for “fun.” Less than a month after starting our “for fun” search, we were in contract and on our way to becoming homeowners in Manhattan!

What Changed?
Co-ops vs. Condos: In my original analysis, I assumed if we bought a place, it would be a condo. However, upon further review and coming to the realization that nearly 80% of the available housing supply in NYC is co-op, we opened up our search to co-ops. In addition to their abundance, there are other advantages (and some disadvantages) to owning a co-op, which I will cover in a future article.

Unorthodox Calculations: In my previous spreadsheet, I was making some unorthodox calculations such as amortizing closing costs, not inflating maintenance/common charges and taxes, not factoring in homeowners insurance, and not taking into account the value of equity and how that affects your ultimate return.

Now that I’ve actually been through the apartment buying process, I know to generally inflate maintenance/common charges and taxes at a similar rate as annual rent increases, NOT to amortize closing costs, and to account for homeowners insurance, which is more expensive than renters insurance. In addition, closing costs for co-ops are generally lower than condos.

I’ve since updated my trusty spreadsheet for a NYC co-op specifically. As always, anything in blue is a number you should feel free to change. All non-blue numbers are formulas that you should NOT change. I’ve also added in some links to helpful articles for explanations on some of the line items.

Buy vs. Rent for NYC Coop

Loan Type: I had always made the assumption that if we bought, we would get a 30 year fixed rate loan since that’s what you hear everyone talk about. But the truth is, if our expected time horizon in this apartment is about 5-7 years, why would we lock in an interest rate for 30 years, which is more expensive. Locking in an interest rate for our expected time horizon of 7 years allows us to save a material amount on a monthly basis and makes the economics look more attractive. The risk of us staying longer than 7 years is mitigated by certain interest rate caps on the loan, whereby the interest rate cannot increase by more than 2% a year over the initial rate in year 8 and 9 and not more than 5% lifetime. For example, if you locked in a rate of 2% for the first 7 years, the rate in year 8 could only increase to 4% at most. Assuming you paid a rate of 4% in year 8, it could only increase to 6% in year 9 and no more than 7% for the life of the loan.

Breakeven Point: In my prior analysis, I estimated that buyer and seller closing costs on a $1 million apartment would be ~$100,000. I assumed you would need to have your place appreciate by this amount just to break even. However, I was not taking into account the value of building equity each month – the fact that the longer you stay in your apartment, the more you pay down on your loan. As a result, when it’s time to sell at some point in the future (5+ years), you could potentially sell your apartment for the same price as you bought it and still break even. This assumes, on a monthly basis, that your tax-adjusted monthly payment is generally around the same level as your current rent.

Image courtesy of Troy Faulder / FreeDigitalPhotos.net

Image courtesy of Troy Faulder / FreeDigitalPhotos.net

What Didn’t Change
Location: As I clearly stated previously, Jenn and I have no interest in living outside of Manhattan right now and if buying an apartment meant moving off the island, then we wanted nothing to do with it.

Amenities: While we are giving up having a gym in the building in our new apartment, we’ll still have an elevator, doorman, and be super close to the subway. These are all amenities that we’ve gotten used to over the last 8 years – and that would be shocking to take away one or all at the same time. With no gym, the worst thing I’ll need to do is rejoin Equinox for the 4th time. (Update: I managed to avoid joining Equinox and am now saving $100 a month by being with 24 Hour Fitness).

So there you have it folks. I’ve done a complete 180 in the past couple of months on the buy vs. rent in NYC question. I’m anticipating writing a lot more about NYC real estate and the process I went through over the next several months, so stay tuned! In the meantime, go wild on the revised spreadsheet, specifically for NYC co-ops!


As a licensed real estate agent in New York, I can help you with your real estate needs. Reach out to me at roger@lifelaidout.com to discuss how we can get you the best value from the process.  

Roger Ma

Other Resources
Buy vs. Rent in NYC
Finding an Apartment in NYC: Resources
How Much Will You Tip Your Doorman?
10 Questions to Ask Before Renting a NYC Apartment
Apartment Search Template

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I am a CERTIFIED FINANCIAL PLANNER™, founder of financial planning firm lifelaidout, and a NYC-based licensed real estate agent. I write extensively about personal finance and real estate on lifelaidout, Forbes, and TheStreet.

20 Responses to “A Closer Look at Buying vs. Renting in NYC”

  • kansas says:

    I have nevered rented or owne in nyc but those numbers suck, man…I feel for ya.

    I find it amazing that homeowners is only 75 a month on a 750k place…but I guess its kinda like renters in that if your shit burns up or whatever, the ins doesn’t have to pay for the structure, just your possessions? Those maintenance fees suck too, btw. I bet that part of that goes to the building ins fee?

    I guess I am just spoiled out here in the heartland….

    • Roger says:

      Yeah, those numbers in the spreadsheet are just rough estimates, and not my actual numbers. For the homeowners insurance, I think it really breaks down to building property, personal property, and personal liability. The building property is the biggest expense for homeowners insurance in NYC. And your coverage is typically around what you or your insurance company thinks it would take to replace your apartment if something really bad happened (around $250-300 per sq. foot is what people suggest you estimate as building coverage). Replace as in put down new floors, cabinets, appliances, bathroom stuff, etc. – basically anything beyond the bare bones of the unit (walls, pipes).

      The maintenance covers property taxes on the building, costs to maintain the building, the underlying mortgage of the building, utilities for the common areas of the building, and insurance, among other things.

      It sounds like you are spoiled in the heartland – lots of space, guns, and cows!

  • Al says:

    Great spreadsheet Roger! I’m going to start playing with it as I start searching for a place of my own to buy. In your future article about condos vs. co-ops, it will be interesting to see how the spreadsheet changes and the associated economics of owning a condo.

    • Roger says:

      Thanks Big Al! In the interim, to change the spreadsheet from a co-op to a condo, the main difference is really the closing costs in the “Return” section. Take a look at this page and you can revise the sheet accordingly: http://www.elliman.com/reports-and-guides/guides/new-york-city/closing-costs.

      I think the big difference in the two is in condos the buyer has to pay the NYC mortgage tax and in co-ops you don’t. For the $750k example I used in the spreadsheet, that would be an increase of $14k+ in closing costs if the apartment was a condo (because of the NYC mortgage tax).

  • On every NYC listing I see, the monthly maintenance fees are more than my rent, it just doesn’t seem to make sense.

    • Roger says:

      Yeah, it really comes down to making sure the economics work. We were luckily able to find a place that kept our tax-adjusted monthly payment about equal to our current monthly rent, while allowing us to get a bigger place with nicer finishes and appliances. We definitely made some sacrifices in the process, but nothing too major.

  • Marvin says:

    Hats off to you, I could never live in NYC. I thought home prices and rents were bad where I live. But as always different strokes for different folks.

    • Roger says:

      Yeah, the housing prices are definitely high in Manhattan, but rents seem to continue to soar as well. I’ve loved my time in NYC over the past 8 years and I honestly can’t picture myself living anywhere else right now.

  • Jeannie says:

    Hi Roger!!! It’s your old college friend Jeannie :) I really enjoy your website, by the way. My husband and I are buying in Brooklyn and I was wondering if you signed a contract with a Buyer’s broker? A broker that we are talking to presented us with a contracts (not unusual), but in the contract she negotiated in a buyer’s broker fee, which we thought was a little unusual. Know anything about this? Did you and your wife deal with this at all? Just curious — in any case, we should get together sometime!!!

    • Roger says:

      Hi Jeannie, great to hear from you and congrats on your purchase – that’s awesome! We should definitely get together once we are all settled in our new homes:).

      As for your question, the only thing our broker had us sign was a NYS Disclosure Form for Buyer and Seller. It basically just stated that he was acting as a buyer’s agent in the transaction.

      In terms of the buyer’s broker fee, is that in addition to the fee he is getting from the seller? Typically, the seller pays a broker fee of 6%, which is split between the seller’s broker and the buyer’s broker – so both would get 3%. There shouldn’t be a fee above and beyond that to my understanding.

      • Jeannie says:

        No, this would be a fee ON TOP of the split from the seller, typically at about an additional 1 or 2 percent of the final price. Doesn’t it sound strange to you? But essentially the Buyer’s Broker argued that this is essentially a way for her to represent your best interest in the negotiations, rather than the seller’s interests.

        No need for you to weigh in on this, I was just curious if you had heard of it and had any opinion. My cheap-asian self is feeling really uncertain about it, like, why should we pay for something that we could get from someone else for free? But apparently this is a way for buyer’s to get a competitive edge in a seller’s market. Here are some relevant links:




        In any case, just wanted to see if you knew anything about it. Best of luck to you and your wife in your new place! I’ll keep you posted on us :)

        • Roger says:

          That seems weird. Have you guys found a place yet and are in contract or are you in the looking phase? If you’re in the looking phase and this is the initial conversation with the broker, I would question working with him. Just my two cents as I don’t think you are required to sign anything when you start working with a broker. Plus the broker is already getting 3% pending a successful close.

          • Jeannie says:

            We are in the very beginning stages of looking. Sigh — yeah not sure what to do, but thanks for your thoughts. It’s really a jungle out there and I feel uneasy about this added fee. I’m going to keep doing research though, while keeping an open mind.

            Thanks again, Roger!

          • Roger says:

            If you are in the beginning stages, I would NOT sign that contract. Definitely keep looking around and let me know if you need recs. for a broker, bank, and insurance agent. I can send you the people I used, which I thought were very good and feel free to reach out if you have any questions about the process.

            I’ll be coming out with a post today that goes more in-depth on how to use the spreadsheet I posted, so stay tuned!

          • Jeannie says:

            Yes, any recommendations would be appreciated! And yay for spreadsheets!

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