- Posted July 10, 2014 by
New York City, New York
How To Decide If It's Better To Buy Or Rent An Apartment
The rent vs. buy question has been one of the most important questions asked by people trying to decide which option would be the best for them and their family. Of course, the answer to this question depends on which geographical housing market they're considering living in and many other factors.
They really need to run the numbers or have a realtor do this for them to determine the least expensive option for them. It all depends on comparing the exact current purchase price with the exact current rental price in the same area. Guessing or estimating these numbers is not a smart thing to do. Comparing property in different cities is not a good idea either. You wouldn't want to compare apartments in New York City with apartments in Manhattan, for example.
Also critical for getting an accurate answer to the rent vs. buy question is to compare properties that are as similar as possible. For example, one should compare luxury apartments for rent with luxury apartments for sale and a condo for rent with a condo for sale. Also, the neighborhoods should be very close together. Other important considerations are: the square footage, the age of the property, your credit score, how long you're planning on living there, what the current mortgage rate is and how much credit you have qualified for.
Buyers must also factor in additional costs when considering buying an apartment. Apartment renters won't have these expenses. For example, buyers will have a down payment, property taxes, maintenance costs and if it is a fixer-upper, there will be a lot of extra costs.
Knowing what their credit score is and what exactly is on their credit report is critical because mortgage companies will check this and most landlords or property managers will too. Potential buyers should get a copy of their credit report before applying for a mortgage. The best place to get a free copy of one's credit report is AnnualCreditReport.com, the only official site explicitly directed by Federal law to provide them.
For those people who are trying to decide between either buying or renting an apartment in Manhattan, some reports show that it's cheaper to rent an apartment than to buy one right now.
That's mainly because prices of apartments for sale are going up, mortgage interest rates are rising, qualifying for a mortgage loan is getting harder and available inventory is falling. All these factors are creating the “Perfect Storm” causing the rising prices of apartments for sale in Manhattan.
Thankfully, for those who want to rent an apartment, there is some good news. Rental prices are down and in May, 5.7% of landlords offered concessions such as covering broker fees or offering tenants a rent-free month.
The buy vs. rent pendulum has swung way over to the rent side as the “Perfect Storm” of rising apartment purchase prices has hit Manhattan. A report at Trulia.com stated that the best time to buy an apartment was about a year ago when it was 6% cheaper than it is now. The Trulia report also said that it's 17% less expensive to rent an apartment in Manhattan than it is to purchase one.
For those people looking to buy an apartment, it looks like they missed the bottom of the price market. But if they're still looking anyway, they had better get moving, and fast! We have probably hit the bottom in terms of mortgage interest rates which means they will only be going up from here.
The historically low mortgage interest rates of a year ago weakened the rental market as many renters opted to buy. Rentals became more abundant and less expensive because of the hot sales market. But don't expect that to last forever. With mortgage loans being tougher to get, many of those who didn't or couldn't buy an apartment are re-entering the market as renters.
That could mean an increase in Manhattan rental prices is on the way. If so, this means that those who are looking to rent an apartment had better do so as soon as possible. It's would be much better to sign a lease now as opposed to waiting and facing a likely higher-priced lease.
There is a lot to learn, take into consideration and think about when it comes to the decision of whether to buy or rent an apartment in Manhattan. A good place to start is at this Government website, MyCreditUnion.gov. There is a nice analysis of the differences between buying vs. renting along with a chart that shows a cost comparison for a renter and a homeowner over a seven year period. Do your homework and don't go into this lightly or uninformed. An informed consumer is a wise consumer.