Buy vs. Rent | NYC Apartments | Manhattan
Bad news for buyers…
If you bought a Manhattan apartment in 2008, indicators show it may have been a poor investment.
Multiple data outlets show the median price of a Manhattan apartment is up approximately 20% from 2008. However, Crain’s reported, that investment had an annualized return of 1.8 percent (excluding closing costs, taxes, maintenance and mortgage interest). When factoring in those costs, the investment is actually a loss.
Statistically, a majority buyers finance their purchases. “It is the leverage that allows you to make so much more on your money,” said Jonathan Miller of appraisal firm Miller Samuel. However, leveraging a property is only more profitable than all-cash purchases if home values outperform the mortgage interest rate.
Condominium and co-op owners likely paid approximately $55,000 in property taxes between 2008 and 2017, based on the $6,206-per-year bill in 2008 for co-op owners.
Closing costs — which can be 5 percent on the buy side and 8 percent on the sell side — adds up to roughly $139,000 for homes bought in 2008 and sold in 2017.
By calculating the average purchase price and down payment from 2008-2017, using net-present value, buyer’s in 2008 would actually be in the red.
If that buyer had rented instead, he or she would have broken even. [Crain’s] — E.B. Solomont
Source: The Real Deal