Rent vs. Buy in New York: Answer This Before You Run the Numbers
This one has come up more than once lately, from people in very different situations who all arrived at the same place. Different neighborhoods, different budgets, different reasons. Same question. Should we keep renting, or is it time to buy?
If you are asking it, you have probably already done the quick version. Asking price, twenty percent down, whatever the mortgage app said. It came out close enough to your rent that buying started to feel like the obvious move. And then it kept you up anyway.
The reason for that could be that the math is missing things, and we will get to what it misses, but the math is rarely what settles this. Something else is doing the deciding, and it is worth getting a look at it first.
The week you have not lived yet
If you are seriously considering a place, sit down, with your partner if you have one, and walk through a full week in that home in as much detail as you can imagine.
Monday morning: what does the commute look like from this neighborhood, and what does it do to the rest of your day? Tuesday evening after a long day at work: how do you feel when you walk through the door, and does that space give you what you need? Wednesday night: are you cooking in a kitchen that works for how you actually eat, or ordering takeout because it does not? Saturday morning: are you at a nearby coffee shop, or waiting on a contractor who said he would be there at nine? Sunday afternoon: does the place feel like yours, or does it feel like a project that never quite ends?
Most people have imagined the closing. Very few have imagined the Wednesday.
That week tells you whether the life works. It is worth more than any calculator, and it costs you twenty minutes.
Wanting a place and being ready for one are different questions
Plenty of people who should own are not in a position to buy this year, and that is almost never about how careful or capable they are. It usually comes down to how much cash is left the day after closing, how firm the next three years look, or where the down payment is coming from. Every one of those changes with time.
Six questions below. No score at the end, no email required. It tells you which pieces are already solid and which one is standing in your way.
Common assumptions worth examining
Renting is throwing money away. Owning builds wealth. Every New Yorker has heard both sentences, usually from a relative who bought in 1994.
Property values here have gone up over long stretches, and long-term owners often do come out ahead. But the return looks different once you count everything paid along the way. Property taxes every year. Maintenance you cannot skip. Renovations that run long and cost more than the estimate. Those expenses compound right alongside the appreciation, and they quietly erase a large share of what looks like a gain on paper.
That is when the case for renting and putting the difference into a diversified portfolio instead becomes real. Yes, the market has its own volatility but it also does not call you on a Saturday morning because the boiler failed.
There is a second assumption worth pulling apart, and it usually arrives as a question: should I buy now, or wait for prices to drop? Trying to time a home purchase works about as well as trying to time the stock market. It delays a decision that should turn on something else entirely, which is whether you are financially and mentally ready to make the change, not where the market happens to be this spring.
Neither path is obviously right. The point is to run both.
Two things almost every calculator skips
The first is what it costs to sell property in New York. Between the broker commission, the city and state transfer taxes, and a flip tax if you are in a co-op, selling here commonly runs close to 10% of the sale price. Appreciation has to clear that hurdle before you have made a single dollar, and it has to clear whatever you paid during the closing when you were buying the property.
The second is that your down payment should already have a job. Invested, growing, doing something. Put $200,000 into an apartment and that money stops doing that. It is not wasted, but it is no longer invested. A renter who keeps that money in a portfolio starts every comparison with a head start, and the head start compounds. The comparison that matters is not buying versus renting. It is buying versus renting and investing the difference.
Both of those may tip the scales toward renting. But one large argument tilts them the other way, which is that a mortgage payment mostly stays the same while rent does not. Over fifteen or twenty years, rent growth in New York does real damage to a budget. The owner's advantage arrives late, and it depends heavily on staying long enough to collect it.
One last thing worth knowing, because it surprises almost everyone. The mortgage interest and property tax deduction that people count on is frequently worth nothing in New York, because state and city income taxes already fill the SALT cap before property tax gets anywhere near it. If your household income is high, that write-off may not exist for you at all.
Run your own numbers
The calculator below is built for New York specifically. It knows the difference between a co-op, a condo and a house, it charges you honestly for selling, and it compares buying against renting and investing the difference rather than against renting and spending it.
Two things to look at when you use it, and only two.
The first is the number of years, not the dollar figure. A result like "buying wins by $34,000" rests on four things none of us know: what the market returns, what your apartment appreciates, what rent does, and how long you stay. Change any one of them and the answer can flip. The year that buying moves ahead barely moves, and it happens to be the one piece of this you actually decide.
The second is the grid under the chart. It runs the same question across nine different combinations of appreciation and investment return. On a typical Brooklyn co-op, those nine answers range from year four to never. That range is the real answer, and it is why how long you stay matters more than what you pay.
Use it before you fall in love with a listing.
FAR Financial
Rent vs. buy in New York City
Most rent-vs-buy calculators quietly ignore the two things that decide the answer here: what New York charges you to sell, and what your down payment would have earned if you had invested it instead. This one counts both. Enter what you would actually pay, and see which path leaves you with more money.
$170,000
30-year fixed
The apartment you would actually rent instead, not a cheaper one.
Co-op maintenance already includes the building's property tax.
Included in maintenance for co-ops.
What the money would earn if it stayed invested in a diversified portfolio instead of going into a home.
Growth rates
Cost of owning
Repairs are a percent of the home's value each year. A house needs roughly 1%. A co-op or condo needs less because the building handles the roof and boiler.
Your taxes
Federal plus New York State plus New York City, combined.
This shares the SALT cap with your property tax, which is why the property tax deduction is often worth nothing in New York.
Charitable gifts and anything else on Schedule A.
Your co-op sends a letter each year with this number. It covers the building's property tax and underlying mortgage interest.
Buying and selling costs
Mansion tax, transfer taxes, mortgage recording tax and title insurance are calculated from the price and property type. See the breakdown below the chart.
What this comes down to
What you are worth, year by year
How much does that year depend on guesses?
Each cell is the year buying moves ahead, under a different pair of assumptions. Your own is outlined.
Investment return
Money you never get back, year one
The same math for renting
The full picture
| Buy | Rent |
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A few questions that come up
How long do I need to own before buying makes sense in New York?
Longer than five years for most people. The costs of buying and then selling here are steep enough that appreciation needs real time to cover them. Seven to twelve years is a more realistic range, and the calculator will give you a number for your own situation.
Is renting really throwing money away?
No. Rent buys you a year of housing. So do mortgage interest, property taxes, common charges, insurance and repairs. None of that money comes back for either person. The only part of an owner's payment that comes back is principal, and in the early years that is a small slice. Compare the money neither person gets back and the gap is usually much narrower than it looks.
Does it matter whether I buy a co-op, a condo or a house?
It does, and more than most people expect. They cost different amounts to buy, different amounts to sell, and carry their property taxes in different places. A co-op skips the mortgage recording tax entirely, which on a typical loan is worth more than ten thousand dollars, and then charges you a flip tax on the way out. Switch between them in the calculator and you will see the answer move.
The calculator says renting wins. Should I not buy?
Not necessarily. It answers one question, which is where you end up with more money. It cannot price the school district, the stability, or what it is worth to stop asking a landlord for permission to paint a wall. Plenty of people buy for those reasons knowing the money says otherwise, and they are not making a mistake. What the calculator gives you is the price of that choice, so you make it on purpose instead of by accident.
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Igor Aronov, the publisher of this content, is a registered investment adviser representative and owner of FAR Financial Inc.