Should You Buy a Co-op Apartment in Your 20s in NYC?

Should You Buy a Co-op Apartment in Your 20s in NYC? Learn More: https://www.hauseit.com/buy-a-co-op-apartment-20s-nyc/

Save 2% When Buying in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
Save 6% When Selling in NYC: https://www.hauseit.com/agent-assisted-fsbo/

Let’s start with the first question: Does it make sense to buy an apartment in NYC?

Buying an co-op apartment in NYC is a great way to start building equity over time and stop wasting your money on rent. However, the devil is in the details. Not all apartments in NYC are good investments, and many young buyers in their 20s don’t factor in closing costs when debating buying vs. continuing to rent.

The truth is that buying in NYC is a very bad investment if you don’t hold onto the property for long enough. This is because combined buyer and seller closing costs for a co-op can add up to anywhere from 10% to 12%. For starters, co-op buyer closing costs are close to 2%. When it comes time to sell, you’ll be on the hook for at least 8%. This includes city & state transfer taxes as well as the traditional 6% broker commission. Moreover, if your co-op has a flip-tax, this could add 1% to 3% to your closing costs.

By definition, this means that the co-op apartment you purchase must appreciate by at least ~10% before you break even. So if you buy an apartment and decide to upsize or move out of NYC after just two or three years, chances are that you’ll actually lose money when selling after factoring in closing costs, meaning it would have been a better idea to rent all along.

Can you really afford a co-op in NYC?

Most buyers in their 20s gravitate towards co-ops because they’re much cheaper than condos. Co-ops are anywhere from 10% to 40% less expensive than condos on average. Moreover, co-ops have lower buyer closing costs of ~2% compared to ~4% or more for condos.

However, co-ops have several financial hurdles which are particularly relevant for someone in their 20s. These include:

A minimum down payment requirement of 20%, and in some cases, significantly more
A debt-to-income ratio requirement of ~25% or less for most buildings
A post-closing liquidity requirement of 1-2 years on average

If you’re short on assets, keep in mind that some co-ops may allow you to receive a gift to fortify your finances. Some co-op buildings may also permit co-purchasing, guarantors or parents buying for children.

Are you willing to undergo the board approval process?

In addition to the steep financial requirements, co-ops in NYC have a rigorous board approval process which is particularly challenging for young buyers. This is because co-op buildings often hesitate to approve buyers who look young due to the stereotypical perception that young people are immature and like to party, make noise, cause damage, etc.

While age discrimination is obviously illegal in New York, co-op board aren’t required to disclose the reason for a board rejection. As a result, young and financially qualified buyers routinely get rejected all the time by co-op boards in NYC for baseless and discriminatory reasons.

Can you live with the rules and restrictions of a NYC co-op?

While both condo and co-op buildings in NYC can have fairly strict house rules, co-ops are more likely to have the strictest rules and to engage in the most aggressive enforcement of such rules. For example, one West Village co-op prohibits owners from having overnight guests unless the owner is also residing in the apartment. This is just one of many examples of overbearing and neurotic co-op boards attempting to meddle with and regulate every aspect of life in the building.

The perception of you being a young homeowner may also result in neighbors or building management singling you out and treating you much more harshly compared to other owners when it comes to enforcing rules. You’re also much more likely to be specifically accused of noise complaints as a young homeowner in NYC.

What are the steps to buying a co-op in NYC?

The entire process of buying a co-op in NYC from start to finish takes around three months from the time you’re in contract on an apartment. Check out this article for an in-depth review of the co-op closing timeline in NYC: https://www.hauseit.com/co-op-closing-timeline-nyc/

So there you have it! We hope you enjoyed this video, and if you did, please like, subscribe and leave us a comment. We’d greatly appreciate it. I’m Nick at Hauseit, and we’ll seen you on the next video!

Save 2% When Buying in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
Save 6% When Selling in NYC: https://www.hauseit.com/agent-assisted-fsbo/
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Hauseit LLC, Licensed Real Estate Broker
Tel: (888) 494-8258 | https://www.hauseit.com
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