Buying New York Real Estate – Guide and How-To

If you want to buy real estate in New York, you’ll have to get informed. There’s many details and intricacies to be aware of and things to pay attention to. We will answer all your questions: What is the property tax like? Is New York property tax higher than elsewhere? Which New York neighborhoods are best? When should I invest in New York real estate? We answer all questions in this guide for buying real estate. Before we go on about the city though, let us take you through an important question. Which type of real estate do you want to buy?

If you already know in more detail what you’re looking for, go ahead and skip to one of the main articles! (opens in a new tab)

• Buy Apartment – New York
• Buy House – New York

Buying a House – Full Explanation, Guide

If you want to buy a house, our article on the topic is where to look. Our full guide takes you through all steps of the process from beginning to end, starting even before you decide to buy a house, and finishing after you close the deal. If you want to invest in a owning a home, this guide on buying a house is everything you need:

Buying a House

Buying an Apartment – Full Explanation, Guide

If you’d rather buy an apartment, we have you covered. Buying an apartment can be a long and arduous process, especially in a mega-metropolis like New York City. Many people neglect even the thought that apartments can be bought as opposed to rented. This article should convince you otherwise. There is sufficient reason to believe that a significant proportion of people who are currently renting their apartment, could easily buy that same property. Our guide, taking you from A to Z, will no doubt teach everything you need from this top guide. If you are even thinking about buying an apartment, this guide will bring you a step closer to your dream. This is your one stop for everything you need to know:

Buying an Apartment

Buying Real Estate in New York – Unique Costs

To buy real estate in New York is of course different than elsewhere. Let us explain the details which New York real estate carries with it, and what makes it different from other cities’ real estate markets. New York is a thriving metropolis of millions of people and a GDP larger than that of most countries. The real estate market, like most other markets in the city is booming, and there’s good reason to invest now. The only other market that would be similarly difficult is if you want to buy real estate in L.A., but honestly, there’s enough celebrities in the Big Apple.

• GDP: $1,57 trillion
• Pop.: 8,4 mil.

Taxes – Property Taxes, Real Estate Taxes + More

New York property taxes are very different than the general US property tax system. The state of New York changes the tax rates from year to year, depending on the needs of the state. Additionally, it is also complicated by the fact that tax rates are constructed in millage rates as opposed to tax rates. Property tax calculation is therefore more complicated than you’d like, but let us try to explain.

What are Millage Rates? New York Property Taxes Explanation

Mill Rates are Tax Rates. Quite similar to conventional property tax rates, Millage rates serve the same purpose and work quite similarly to the normal percentage of property value calculation. A millage rate, is first and foremost a number, as opposed to a percentage. This number indicates the amount of property tax a property owner is required to pay for their property. A mill rate of 1 indicates 1$ of tax for $1.000 worth of property, a mill rate of 24 indicates $24 of tax per $1.000 worth of property.

• Mill Rate of indicates amount of dollars of tax per thousands of dollars worth of property

New York Property Tax Rates – Most Expensive?

It is often said that New York has incredibly high property tax rates. This is true to a certain degree, New York state, and especially the counties surrounding the city of New York have relatively high property tax rates. NY has an average property tax rate of 0.86%, and this is higher than e.g. California (0.77%). Still Florida, the other major real estate state, has a significantly higher average property tax rate of 0,94%.

• New York Property Tax: 0,86%
• California Property Tax: 0,77%
• Florida Property Tax: 0,94%

Property Tax in New York Boroughs – Manhattan, Brooklyn, Queens, etc.

New York city is the real estate hotspot par excellence. Still its property tax rates are quite low compared to others in the area. New York city is made up of 5 counties (the same make up the 5 boroughs of New York), and they each have property tax rates lower than the national average.

• County of New York (Manhattan) – 0.65%
• Queens – 0.87%
• Kings County (Brooklyn) – 0.90%
• Richmond (Staten Island) – 0.91%
• Bronx – 0.97%

Want to learn more about New York Property Taxes? Reducing your property taxes? Everything you need to know in our guide on

• New York Property Taxes

Buying Real Estate Taxes – Transfer Tax, Mortgage Tax, More

You are required to pay 3 taxes when buying real estate. In New York, it is actually four. there is the real estate transfer tax, which in New York at the moment is a rate of $2 per $500 of property, amounting to 0,45% of the purchase price of a home. Additionally, you will pay the mortgage tax, called the mortgage recording tax in New York, which has a rate of 1,80% when your mortgage is worth less than $500.000 and when the mortgage is worth more than this, the rate is 1,93%. Then there is also the mansion tax, an additional 1% when the property is worth more than $1 mil. Lastly, you are typically required to pay property tax pro-rata when buying real estate.

• Transfer Tax: 0,45%
• Mortgage Recording tax: 1,80%-1,93%
• Mansion Tax: 1%
• Pro-Rata Property Tax: 0.65%-0.97%

Additional Costs – Real Estate Over-Budget

When hearing about the price of your new home, whether an apartment, condo, townhouse, or villa, you never think about all the possible additional costs in real estate. While some call these closing costs, this is not strictly true since, in addition to closing costs like real estate transfer taxes, title-search fees, escrow fees, realtor fees, etc., there are additional costs like mving and furnishing or renovation. L.A.’s closing costs are a little over 2% of the mortgage. I.e. of the mortgage principal (the money loaned to you) you can expect to pay an extra 2% to cover closing costs.

• Additional 2% of mortgage

For more information on additional costs that you can expect when buying a home:

• Buying Real Estate – Additional Costs

New York Real Estate Market Outlook

It’s almost a cliche that New York real estate is impossible to find, and that housing is a commodity for the few and rich. This is true to some degree, the real estate market in New York is intense to say the least. Yet there is enough reason to be optimistic that one can find a property, and once that is done, all evidence seems to indicate that this property will only gain in value over time.

Are Real Estate Prices Going down in NYC? – Housing Market Trends

No. The housing prices are increasing steadily, as indicated by the Case-Shiller Index. To accurately guage the development of real estate prices, the Case-Shiller statistic published by Standard & Poor’s indicates how prices are changing. To be exact, it is a residential real estate market value trend. This index allows one to view the development of housing prices in the city. In New York, one can easily see that housing prices are increasing steadily for the past 9 years.

• Housing Prices increasing steadily for past 9 years
• Case-Shiller Index NY shows development of housing prices

How much it Costs to Buy Real Estate in New York – Average Real Estate Prices

As mentioned, NYC is expensive. You will be paying more per square foot in this city than most others in the US. As mentioned though, because these prices are increasing, this investment is one which is worth the money. So how much does real estate actually cost? In New York City, the median property costs $697.000, averaging to a price per square foot of $307. If you’re looking for a passive investment and want to rent out your property, you can exxpect a Cash on Cash return of 2,1%, with rental income being around $2.200 per month.

• Median Property Cost: $697.000
• Price per Square Foot: $307

New York Real Estate Trends: Price Development Overview

Manhattan, Brooklyn and Queens are clearly a sellers market, as agreed on by the vast majority of real estate experts. The amount of sales in real estate increased by over 20% in the past year. This demonstrates the increasing power of this real estate market. Meanwhile, to get a look at what you’ll be gaining once you have bought a property, median sales price also increased. From $275.000 to $335.000, an increase of 22%! Now, you may be thinking that homes are totally overvalued then, but this seems not to be the case, with the average real estate selling 2.6% below the price asked by the seller.

• Amount of Sales: +20%
• Median Sales Price: +22%

New York Real Estate Agents – How to find the Best Real Estate Broker

Apart from experience, there are a few important things which can make or break the quality of a real estate agent. First and foremost, you will want to find someone who will act in your best interest. This can be done with an agent who is cutthroat and willing to do what it takes in negotiating with a seller, but generally, an important attribute is that your agent is compassionate and friendly. Otherwise, it can quickly turn into a nightmare experience. You of course also want to get along on a personal level with your agent, otherwise the many conversations can become quite arduous.

Finding the Perfect Real Estate Agent – Tips

These are the three things you should keep in mind when looking for a real estate agent. If he or she is missing any of these, you quickly run the risk of a financially risky situation, or simply an uncomfortable experience. This is the 3 p’s rule. The 3 p’s are

1. Personal attributes: is the agent trustworthy, approachable, diligent, etc.?
2. Payment: What is the payment structure of the agent? is their goal to make you happy or to close on as many properties as possible?
3. Past: Take a look at the agent’s past deals to see whether they have been successful

List: Top NYC Real Estate Agents

These are, according to our research the top real estate agents in New York. They are among the best and top selling agents, but also among those with the most favourable experience reports. Remember! Everyone has their own needs, and thus need different agents, but these have shown to have quality, care for their clients, and make good deals.

1. Richard Leasure (Howard Hanna Rochester)
2. John Farrell (EXIT Realty Homeward Bound)
3. Alexa Lambert (Compass)
4. Michael Kenduck (21st Century)
5. Bryan Karp (RE/Max)
6. John Lajara (RE/Max In the City)
7. Geraldine Andolina (21st Century)
8. Daniel Axtmann (Berkshire Hathaway)

Saving Money on Real Estate in New York – Tax Deduction Tricks, Tips, etc.

Real Estaet and real estate taxes are a domain where saving money is just around the corner. With the right moves, you can save in the thousands of dollars. You may want to leave this up to a tax attorney or your agent, but it’s best to be informed yourself about the options.

New York Real Estate Tax Deductions – Save Money on Mortgage

In New York City, you can deduct your mortgage interest from the first $750.000 you owe from your tax bill. This is a massive help to those struggling to make payments, especially considering that those paying mortgage interest will likely be in a harder financial situation as is. Another option for saving on taxes is to upgrade your home, which to make it more energy efficient. Lastly, if you want to improve the state of your house by taking out a home equity loan to pay for renovations, you can deduct the interest from this loan from your tax bill as well.

• Mortgage interest can be deducted
• Home equity loan can be deducted
• Energy-efficiency upgrades

We have a full-size guide on how to use tax breaks and deductions to your advantage:

Real Estate Tax Deductions

First-Time Homebuyer Advantages

For people who are not able to pay a full downpayment, there are many support programs. Real estate purchases are generally encouraged with incentives and support programs. The best are for first-time homebuyers, meaning that if it is the first time that you buy a full residence, you will pay less taxes, and have other monetary incentives. More on that in our main article on buying a house.

• Less taxes for first-time homeowners

Step-By-Step Guide – Buying Real Estate Process

These are the steps you will take when buying real estate in New York. They are by no means the most detailed (for details see buying apartment New York, and buying house New York), but cover the broad overview of what you should be keeping in mind when thinking about buying real estate. The process for all real estate will be similar, with differences only existing in the details.

1. Save up for the Downpayment
2. Find a Mortgage Broker
3. Get Mortgage Preapproval
4. Get your Team Together: Attorney, Real Estate Agent, etc.
5. Start looking at Listings
6. Go to Viewings
7. Submit an Offer
8. Close

Condo? Apartment? House? – Type of Real Estate Decisions

So you’ve decided you want to buy real estate. Should you invest in a house or an apartment? What has better resale value? There’s thousands of questions, so below we summarize the most important facts you have to know about what type of real estate you should invest in. There are some important questions though, which we answer below.

Buying real estate? Don’t forget about the…

• 3 Taxes – Buying a House

Do I want to Live in my Real Estate Investment?

Or using the lingo: Investment or owner-occupied properties? If you’re investing in real estate, you will know whether it is for a profit via e.g. rental, flip, appreciation, etc. or whether you want to live in it yourself (i.e. as owner-occupied property). This distinction is important when deciding what type of real estate you want to invest in. For example, buying a house to flip means different taxes than when you use it as a primary residence. This is an important part of the discussion, and therefore will be mentioned often further on. The most important difference for investors is between single-family residentials (e.g. a house) or multi-family residentials (e.g. an apartment building). Note, financing with e.g. mortgages is less lucrative and more difficult to attain for investment properties.

Financing is more difficult for investment properties!

Real Estate Investment – Forming a Business Company, Types of Entities

If you’re going to invest in real estate, you will want to reduce real estate taxes, and reduce liability. This is important so that you do not become involved in a costly legal battle which can cost you your livelihood. Forming a company which rents our property means that the company is liable, and not you. There are many forms of real estate business entities, so check out the full list below:

• LLC
• Limited Partnership
• General Partnership
• S Corporation
• C Corporation
• Multiple Entities
• REIT

What Types of Real Estate are there?

There are 4 different types of real estate: residential, commercial, industrial, and land. We here focus only on residential real estate. This includes many types of buildings, which often have different names in different regions. Our list will go through the top 4 types:

1. House
2. Apartment
3. Condo
4. Townhouse

Of course, if you are deciding on a residence, you will know whether you want to live in an apartment in the city, or a house in the suburbs. Below, we focus on which type of real estate is most profitable.

Should I Rent out my Property?

This is one question which you may not be certain on. After buying real estate, you have two main options: Sell it on, or rent it out. Of course, you can leave it empty to avoid costs of repairs and reap the benefits of appreciation later, or any other number of things, but here we will focus on these two options as they are most popular. There are pros and cons to both sides, and the answer to the question depends on a few factors.

Financing

Buying a property to rent out has different tax implications, as well as different effects on your mortgage. Almost everywhere, investment properties are encouraged, and incentivized via tax deductions. That means lower taxes on the income you make from rental properties, than from selling/flipping. Looking at rental properties, you are entitled to deduct most of the expenses of your property your tax sheet. Repair services, the expenses of home office, insurance and mortgage insurance, are all deductible. The biggest advantage is likely depreciation though, where you can write off the consistently sinking value of a property from your taxes.

• Biggest advantage: Depreciation!

Involvement

The dream of real estate mogul is connected with passive income. That is, letting your investment make you profit, without the pressure of having to run a business or go to the office yourself. That’s called passive income, and it sounds quite comfortable (more comfortable, of course, than it actually is). That’s the type of income you have with rentals, where apart from repairs (which your property manager will take care of), you have little to no involvement yourself. Active income, the opposite of passive, is what most people do in their day job, working for every cent you receive. If you plan to sell your property, you are likely much more active in the process. If you plan on flipping your house, i.e. buy-renovate-resell, you can consider this a day job, as it requires much more consistent work.

Risks

If you are looking to rent out property, there is of course the risk of not finding tenants. On the other hand, there is a similar risk for flipping, when you fail to sell the house above acquisition price (i.e. the cost of buying and renovating the property). In any case, a real estate investment only carries risks if the decision to buy is made without looking at extensive information.

What Type of Real Estate Should I Invest in?

Now that we have all that cleared up, we go on to the different types of real estate and the advantages of each.

House

The so-called single-family residential. This is something everyone is familiar with, and needs no introduction. Typically when you buy a house, you pay a percentage of the full price up front (down payment), and then monthly pay off the rest of the price (the mortgage, more on all this in our article: Mortgage Explained Easily).

Advantages

Lower up-front cost means that at the point of purchase, you have to invest less money than you would for other types of real estate. There’s also the factor that you can quite freely decorate or renovate, without worrying about a building coop breathing down your neck. Another big advantage, you’re buying land at the same time as your house. Even without the house, this appreciates in value.

• Freedom & Privacy

Disadvantages

You’re the person in charge. The same way that carries advantages it also has disadvantages. You need to do repairs, servicing, etc. Of course, there’s also the price. Houses are of course much more expensive than apartments, even when finding a good mortgage. The location, with houses often being situated in suburbs, means distance to the big events or the inner city life. Of course this is also desirable for some, such as young families.

• Responsibility & Work

Apartment

Apartments are often the first step for first-time home buyers. An apartment is any form of residence which is situated within a larger apartment building. Although they are not always the most spacious, they are relatively cheap, and offer a good choice for those people looking to live in the city, as opposed to the suburbs. People often think that it is only possible to rent apartments, and although this is definitely the most common choice, it is also possible to buy and sell an apartment.

The advantages listed above are of course the most convincing. On top of this, you have people like the property manager, who come take care of issues such as plumbing. That means less responsibility for you, the resident. Additionally, the modern apartment building has amenities such as a pool or a fitness room. Lastly, it’s much less lonely, with the common spaces giving room for interactions with your neighbours. Looking at finances though, your apartment is less likely to appreciate in price, meaning that you won’t make profit when selling it.

Condo

A condo is for many the in-between option of apartment and house. It offers the size and relative privacy of a house, without the responsibility of owning a free-standing house. Attached to condos are often things like concierges, and security. Again, here it is also possible to rent, but also buy a condo.

Like apartments, this form of real estate is also less of a risk, as well as less of a commitment, than buying a house. People often neglect the fact that, just like in apartments, you will pay fees for repairs, or to the building managers. These ‘condo fees’ are somewhere between $100 and $700 a month. Another disadvantage is also the close proximity to neighbours.

• Condo Fees: $100-$700 /month

Townhouse

A townhouse is the often-forgotten fourth option. Here, just as with a house you own the property, i.e. the land as well as the building in which you live. This is advantageous because it allows you to build equity over time. So what’s the difference to a normal house? Townhouses are usually set up in a row, wall to wall with the neighbouring houses. That means less privacy, and common issues. Yet, for this reason, and because these are usually smaller than your average house, townhouses can be cheaper to finance. Additionally, they are great options for more space in more populous areas such as downtown city centers.

If you’re thinking about buying a condo, make sure to inquire in the other condos in the association/development. At least 90% should be owner-occupied. Even if you’re renting, ask around and find out how the rest of the owners are doing financially. An association means that if a singificant proportion of tenants are unable to pay, or are simply not paying, you will have to shoulder the load. So if they don’t pay you may suffer.

• >90% of Condos should be Owner-Occupied

Invest, Sooner or Later

No matter when you do decide to invest. Real estate is often the right choice, given that the necessary leg work is done beforehand. That means, getting informed, knowing about the options, and the dis- and advantages of all these options. Our guides on mortgage, property taxes, and costs, give you a strong foundation for what you need to consider.

Looking at real estate in Germany? Our encompassing guide tells you all:

• German Real Estate – Everything you Need to Know