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Financial Planning for Renting and Buying in NYC

Moving to a new city is tough, especially if it’s an expensive city like the Big Apple. There are so many things to figure out – the biggest one being where you’ll live. 

Then there’s that big decision: should you rent or buy in NYC? The answer to this depends on many things. How long will you be here in the city? Will your living situation change in the next few years? Do you see yourself in that neighborhood for a while? And most importantly, how much are you willing to spend?

There is no right or wrong answer. However, there are some factors to consider to ensure you make the best possible decision for YOU, and it all starts with a solid financial plan.

So, pull out your calculator, and let’s crunch some numbers. Here are some financial planning tips to rent and buy in NYC.

Financial planning for renting in NYC

Knowing how much you need to save before making the shift is crucial. In all honesty, it’s what separates those who transition smoothly from those who find themselves burdened by extra costs. We’re all about smart financial decisions – so let’s build a plan for you.

1. Set a budget 

The first important question is: How much do you want to spend? The answer to this depends on your monthly income and where you want to live. 

Besides your salary, your income also includes bonuses and additional streams of income. This combined should help you set a monthly cap. Once you have this figure in mind, you can proceed to the next step. 

2. Research neighborhoods  

The next question is: Where do you see yourself living? Are you more of a quiet suburban person? Or do you prefer the hustle and bustle of NYC avenues? 

Here’s the average rent for different neighborhoods:

Neighborhood Average rentAverage sq. ft.
Harlem $3,072/month690
East Village $4,653/month600
Lower East Side$4,824/month568
Upper East Side$4,939/month722
Midtown East$5,318/month739

Source: Apartments.com

Depending on the area you like, research the standard rental prices so you have a fair idea of what it will cost you. Be sure to factor in some wiggle room in the actual price to accommodate for minor hikes.

3. Factor in additional costs

Your rent is only one of the big expenses. You’ll have to factor in other expenses like broker fees (if you decide to go with one), renters insurance, hiring professional movers, and of course, the security deposit. 

Yes, It’s a lot.

Let’s look at some ballpark figures to give you an idea:

  • Broker fees: This usually costs about 15% of your annual rent or roughly 2 months of your rental fees 
  • Renters insurance: The average cost is about $170 a year or $14 a month 
  • Professional movers: This figure is subjective to where you’re moving from. You can use an online estimate calculator to get a rough idea
  • Security deposit: This deposit for rent-regulated apartments should be no more than one month’s rent 

P.S. Adding to the long list of bills, don’t forget to estimate your grocery bills, transportation fees, electricity charges, internet bills, furniture, and the laundromat (if your building doesn’t have its own laundry facility).

4. Create a savings plan

The next step towards renting your dream home in NYC is creating a savings plan. Your target should be to afford the upfront costs like the security deposit, first month’s rent, and broker fees. 

For this, you’ll need to stash away at least three months of your monthly rent. This can be anywhere between $6,000 and $12,000 approximately, depending on the neighborhood, apartment size, and so on.

Here are a few actionable tips to get you started:

  • Allocate monthly savings: First things first, analyze your monthly spending patterns. Then, evaluate areas that you can cut back – like unnecessary subscriptions or takeout bills — and redirect this money towards your moving savings. 
  • Use financial planning tools: If tracking your spending manually gets overwhelming, use tools to help ease the process. Some people prefer the traditional Excel sheet while others opt for budgeting tools.
  • Invest in renter’s insurance: For the price of a few lattes per month, this fee can protect your belongings against theft, fires, and other emergencies.

Reminder: Keep in mind the additional costs we discussed earlier in your savings plan. These can easily creep up and blow your budget out the window if not accounted for early on. Once these details are sorted, you’ll be ready to rent your dream place in NYC!

Now, let’s move on to the financial strategy you’ll need to buy in NYC. 

Financial planning for buying in NYC

Buying a home in the Big Apple can be quite a roller coaster. For most, it’s one of the most serious financial investments one can make. So, we’re here with some tips to help you navigate the concrete jungle and make the home-buying experience a little less stressful. 

1. Be prepared with answers 

If you’re taking the leap into owning your own home in NYC, you’ll have to answer a few critical questions about what you can afford, where you want to buy, or whether a condo or a co-op arrangement is better for you.  

Depending on the answers to these questions, you can proceed to look for locations and building types that best suit your needs.

2. Research neighborhoods (again) 

This rule is common whether you’re renting or buying. You want to do your due diligence before buying a place (it is a big investment, after all). Beyond the ambience, look into the neighborhood’s historical pricing trends, zoning laws, and future development plans to make the right choice.  

3. All about a mortgage 

We won’t sugarcoat this — securing a mortgage in the NYC market can be daunting. But we’ve broken down the steps to make the chase less of a hassle for you.

  • Check your credit score: Generally, a good credit score is the most sure-shot way of securing the best mortgage. The market is competitive, and buyers with a credit score of 740 or more, are usually the most successful. However, there are good options for buyers with scores lower than this and banks with no minimum credit score.    
  • Be prepared with the right documents: We’re talking about bank statements, tax returns, investment accounts, and W-2 forms. If you’re a self-employed buyer, banks ask for year-to-date profits and losses of your business, along with bank statements to support your claims. 
  • Determine your budget: A budget isn’t just about how much you can borrow, but how much you should. This depends on your lifestyle, financial goals, and future plans that you might want to invest in. If you’re looking for a figure, the typical debt to income (DTI) ratio for co-ops in NYC is between 25-30%
  • Get pre-approved: This step vets you as a serious buyer. It involves your lender verifying your financial documents, with a letter stating their interest in lending to you.
  • Analyze the mortgage types: Honestly, there are just as many options here as flavors in an ice cream shop. There’s fixed-rate, adjustable-rate, interest-only, jumbo… the list goes on. Find out which one suits you and your risk tolerance best before making a decision.

4. Save for the down payment 

In the Big Apple, the typical down payment that the buyer has to come up with is 20%. This ensures you’re less of a financial risk to lenders and makes qualifying for loans easier. Even if the home you’re considering doesn’t require a 20% down payment, it’s a good idea to go with this amount to increase your likelihood of getting a mortgage. 

5. Budget beyond your purchase price

Closing costs can include a range of fees — and these are especially high in NYC. These could be:

  • Attorney fees to handle your paperwork and legal challenges
  • Mortgage recording taxes (usually 1.8% of loans or more)
  • Co-op or condo application fees
  • Maintenance costs and common charges — these are especially steep in buildings with more amenities

6. Build an emergency fund

Finally, it’s worth mentioning that having a ready-to-go emergency fund is a good idea if you’re a homeowner in NYC. 

You’ll have pesky little bills for last-minute repairs, appliance replacements, insurance deductibles, and property tax hikes that come up now and then. Having an emergency fund ensures you don’t chip away your savings to cover these bills. 

Now, it’s your show.

With that, we come to the end of our financial tips for renting and buying in NYC. We know the process can be overwhelming, but we’re sure you’ll ace it. With the right strategy, tons of research, and a dash of luck, your next home is right around the corner. All the best – NYC awaits you!

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