Fix Your Housing Costs
In the past year, rents increased in New York City anywhere from 15% to 53% depending on the neighborhood. While these crazy increases probably will not be repeated next year, the cost of renting is high and inflation just hit 9.1%. Your landlord will pass on the increased costs of utilities, so fix your housing costs now. Additionally, more people are returning to the office after a few years of working remotely. The continued return will keep rental demand high next year as well.
Why you should buy now
Yes, you should buy now. Prices in New York City were higher by 5% back in 2017 so you are not purchasing at the high. Demand started to shift in the second quarter to a more normal pace and now buyers are pausing because of rising mortgage rates and recession fears. The softened demand gives you an advantage as a buyer. As long as you are realistic about the price you will pay, you will get a good deal. Real estate is intended to be a five to seven year hold. If you want to know more about the ten-year appreciation in various neighborhoods, Harlem or otherwise, ask me.
Mortgage rate solutions
The recent increase in mortgage rates have caused many buyers to pause. A 5% interest rate is not historically high. In the future, if mortgage rates go up, you look like a genius and if they go down, you can refinance. Now if 5% still seems like more than you can bear, consider an Adjustable Rate Mortgage. You can lock in your rate for five, seven, or ten years. You may be able to get a rate a full percentage lower than the 30-year fixed. Another option if you are buying in certain Northern Manhattan neighborhoods is a special program by a very reputable bank offering close to 2% off the prevailing rate. Ask me for an introduction.
More on how to get a high mortgage rate?
How to save on taxes
Here is a smart tip for getting a good deal on real estate. More goes into your success equation than the purchase price and mortgage rate. You will also have common charges and real estate taxes to pay on a monthly basis. You can substantially reduce your tax bill by purchasing in a building with a tax abatement. For example, there is one block in Manhattan where there are four condominium buildings. Three have tax abatements and one doesn’t. In one building a 2 bedroom, 2 bathroom has a monthly tax bill of $76 a month. That tax break runs for another seventeen years. A similarly constructed building on the same block offers a 2 bedroom, 2 bathroom which is larger by 141 square feet but the monthly tax bill is $1,485/month. You will be paying $18,600 more per year to live in that building. If you want to be smart about your next purchase and reduce your tax bill, reach out to me today for a list of buildings with tax abatements.
What to do if you don’t have enough down payment money
Buying real estate is a classic hedge against inflation yet the amount of cash you need to buy can be daunting. Even if you saved a considerable amount during the pandemic, you might be finding it tough to come up with a 20% down payment, so we have a suggestion: try purchasing with a friend. If you find a great place to buy together you will be building equity and not throwing money away on rent. My one word of caution is to carefully craft your exit strategy in advance to avoid disagreements in the future. Curious to know how it works? Ask me!