Why it is Cheaper to Buy than to Rent

There is a reason 90% of the World’s Millionaires create their wealth through Real Estate. Our largest expense in our lives happens to be real estate and whether you know it or not, you are always paying a mortgage, even if you are renting.

Why not turn that expense into an investment?

The general rule in New York Real Estate is that you will put down 20% of the purchase price. While 20% of $500,000 is a lot, the good news is that you are actually retaining that money and each month when you pay your monthly mortgage you aren’t throwing that money into a black hole, you are putting all that money into the property which appreciates each month. You are paying this amount each month regardless of if you own or not, so it makes sense to keep it in your pocket rather than your landlord’s.

On average, NYC real estate appreciates 4.75% each year.

In this chart, both people earn the same income and invest 10% of their yearly income into the stock market (with 10% annual returns). Even after paying 3% in closing cost, and having a lower return than the stock market, you can see by owning your net worth skyrockets compared to renting at the same price.

As an added bonus, when you do sell your property you avoid taxes on up to $500,000 of profit, where in stocks you will always pay capital gains tax.

Tax Deductions

With home ownership, you are also awarded many tax benefits. One huge benefit is the ability to deduct your property tax and interest payments. This means your monthly payment is even less than what it is on paper, saving you even more money.

Consistent Payments

When you own your home, you no longer are in the rent race. Year over year, rents are increased throughout New York. There are luxury 2 bedroom condo’s in Williamsburg purchased in 2005 that have a monthly mortgage payment of $1,200. To rent that same apartment it would cost $6,500+ in today’s market and the property appreciated from $455,000 in 2005 to $1,400,000 in 2020.

Luxury 2 bedroom appreciation over 15 years

Source: StreetEasy

With all this knowledge, what is stopping you from purchasing your first home? If you are thinking about taking the next steps and getting your dream home, do not hesitate to reach out to us!