The New York City real estate market is overwhelming for buyers at best. With a median sales price of $1,335,000, affordable housing isn’t easy to find. Maybe that’s why only 31 percent of NYC households own their homes.
With numbers like that, you might think you need to rent until you die if you live in New York. That isn’t actually true, though. Some places are better for buyers, so don’t give up hope on finding the perfect home to buy. If you have some cash to spend, you might be able to own a home in NYC after all.
Let’s look at the best places to buy in NYC, and then go over some options for renters.
Best Places to Buy in NYC
You can buy a home anywhere in NYC, but some places stand out as the best spots to buy. These places have some things in common.
First, the best places to buy have a median sales price that is below the city’s average. This is important, since most New Yorkers don’t have the means to plop down more than $1 million on a new home, no matter how nice it is. That isn’t to say that these places are cheap, because they aren’t. Living in New York is expensive, regardless of if you own or rent the place. However, these spots are significantly lower than the city’s average.
The increase in demand is also important. As any other commodity on the market, demand shows an interest in the area. To put it simply, areas that have a high demand growth are hot right now. Of course, this can be a double-edged sword. Eventually, the market will correct itself and the prices will go up. Right now, though, the demand has yet to bring the prices up to the city’s average, so you can get into a hot neighborhood without paying a premium as of right now.
Finally, there is the return on investment. Regardless of how long you stay in a home, it’s really an investment. You build equity in the home that you can pull out, and you can also sell the home to make a lump sum of money. You want to make a profit when selling the home, which is why ROI is so important. The higher the ROI, the more money you will make if you sell the home.
Let’s look at the five top places to buy in NYC.
Richmond Hill, Queens
If you’re looking for a home to buy, you can’t beat Richmond Hills. This Queens neighborhood borders on Kew Gardens, so it’s far removed from the action, which might be a drawback for people who like to hit up Broadway and other NYC attractions. It makes up for its location with a return on investment of 12 percent. That’s the highest in NYC, so you know you’re getting a good deal when you buy here.
On top of that, the median sales price is $542,500, which is well below the average for the city. Just make sure you get out there and start shopping quickly. The demand has increased by 200 percent in the last year. That means lots of real estate hungry buyers are out there in droves, trying to snatch up all of the property.
In fact, the demand comes at a price. Supply cannot keep up. “For Sale” signs are few and far between in this neighborhood. At a 9 percent turnover rate, you need to keep your eyes peeled for homes going up for sale before they’re snatched up. The real estate market is so hot here that you can’t expect the homes to stay up for long. Don’t wait for the deal to come to you. Go out and get it before it’s too late.
People haven’t always flocked to Bed-Stuy, but that’s quickly changing, thanks to the real estate. The return on investment is at a healthy 11 percent, and the demand has increased by 75 percent over the last year. The median sales price is $745,000, though, so you will need deep pockets to live here. Not quite as deep as you would need in many of the other places in NYC, though. When you compare it to the median price for the entire city, it’s practically budget real estate.
Ocean Hill, Brooklyn
Ocean Hill is similar to Bed-Stuy. The median home prices are around the same for both Brooklyn neighborhoods, with Ocean Hill sitting at $746,000. The demand for Ocean Hill has increased by 100 percent in the last year and the return on investment sits at 10 percent. With numbers like that, it’s a great place to invest.
People aren’t the only ones banking on Ocean Hill. Businesses have also taken notice. For instance, the C-Town supermarket just moved to the working class neighborhood. Expect other business to follow suit as Ocean Hill continues to become more popular.
If you’re more of a Bronx person, Longwood must be calling your name. If it isn’t, you’re practically alone. The demand has increased by a whopping 300 percent in the last year, thanks to the 10 percent return on investment and reasonably priced real estate. The median home price is a little cheaper than what you’ll find in Ocean Hill and Bed-Stuy. It sits at $727,500, so you don’t have to be a millionaire to live here. You do need to have good credit and deep pockets, though.
Flatbush is one of the most exciting places to buy in New York. It has an ROI of 10 percent, and the median sales price is just $520,000. It’s hard to find real estate that’s more affordable in the city, so jump on it if you can. Where else can you find a nice home for around half of the city’s median price?
Of course, people are excited about the neighborhood, which is why demand has gone up 400 percent. Act quickly if you want to take advantage of these deals.
Developers have taken notice of Flatbush’s popularity, and buildings are going up in the area left and right. In fact, Alloy Development has plans to redevelop an entire city block on Flatbush Avenue. The development company wants to create a 38-story building with office, retail, and residential spaces. One can only imagine what will happen to real estate prices if the development takes off, so buy quickly or you might be left out in the cold.
Prefer to Rent in NYC?
If you aren’t ready to take the plunge and buy a place in the city, you can still rent. It’s best to avoid renting in any of the five previously mentioned locations, as those spots are better suited for buyers. If you rent in one of those locations, you will basically throw your money away, and you don’t want to do that.
Where should you rent, then? It all comes down the real estate tipping point. Also referred to as the breakeven point, the tipping point is the amount of time it takes to recoup your investment when you purchase a home. If the tipping point is decades into the future, you might want to stick with a rental.
Let’s go over some examples so you’ll have a better idea of some good rental markets.
Harlem is an up-and-coming neighborhood, and the prices are soaring because of it. The townhouse prices have gone up 171 percent since 2009, and there’s no reason to think they’ll go down anytime soon.
The median sales price is $887,500, while the median rent price is $2,500 a month. The tipping point would happen after 355 months, or almost 30 years. If you intend to take out and keep a 30-year mortgage, you might benefit from buying, but most people do better renting in Harlem. That way, they don’t feel as if they have to stick in the same place for 30 years to recoup their investment. They have much more freedom when they rent in Harlem.
Washington Heights, Manhattan
There might be a trend here. This is another Manhattan neighborhood where it makes more sense to rent instead of buy. The median sales price for homes is $701,500 and the median rent per month is $2,100. That puts the tipping point around 30 years. You will have to pay your mortgage right up to the tipping point.
Dyker Heights, Brooklyn
With a median sales price of $880,000 and a median rent of $800 per month, renting might be your best option in Dyker Heights. This is another neighborhood where it will take you around 30 years to hit the tipping point.
Dyker Heights might not be on your radar, but this is a neat community. The community is known for its block parties that are complete with barbecues and three-legged races. There is also a lot of pride in this mainly Italian-American community. People take care of their yards and homes, and they are friendly to one another. On top of that, it is a quiet place to live, so you can sit back and relax while paying minimal rent. That’s not a bad way to spend your time or your money.
Upper East Side, Manhattan
The Upper East Side tends to attract people with deep pockets. If you’re one of those people, you might not mind spending $1,340,000 on a new home, but not everyone can. Of course, rent is also high here. The median rent per month is $3,500, so people who are living paycheck to paycheck need not apply. However, if you want to live the high-rolling lifestyle for a bit but don’t want to buy any property quite yet, you’ll be happy to know that it will take you around 30 years to reach the tipping point. By then, you might move on to Greenwich Village or one of the other neighborhoods in NYC.
If you’re trying to decide if you should rent or buy, you should consider some additional tips, as well. These tips will help you reach your own tipping point when making your decision.
Consider Your Long-Term Goals
If you want to stay in the same place for the rest of your life, buying might be the right choice. However, if your next place is just going to be temporary, there is nothing wrong with renting. Then, when a year or two passes, you can get on to the next place without having to worry about putting it up for sale.
Check Your Credit
You need to have good credit to buy. If you still need to work on your credit, rent for a bit while you get your credit in order. Then, you will be more likely to be approved for a home loan. On top of that, your interest rates will be much better than they would have been when your credit was still shaky.
Analyze Your Finances
Buying takes some money. If you don’t have the cash for a down payment quite yet, it is a good idea to rent and save. Then, when you get some down payment money in the bank, you can shop around for the perfect home to buy. You will be in a much better position when you put a huge chunk of money down on your new property.
Do Your Homework
When deciding if you should rent or buy in New York, it is important to do your homework. The right amount of research will help you determine if the breakeven point, return on investment, and demand warrant making a purchase or renting the property. It will also help you decide if you are ready to buy or not.
Already Own Property?
If you already own property, you can also take advantage of the booming market. Rent to a tenant and make a nice nest egg for yourself. Just don’t try to do it on your own. Let VerticalRent help. With free rental applications, vacancy advertising, background checks, and more, renting is a cinch with VerticalRent.