Real estate investor Ryan Serhant has been in New York City real estate for almost 20 years, and he recently said how much you have to make if you buy a $1 million apartment in the city.
“I think you have to be earning somewhere around $250,000 to buy a $1 million apartment in Manhattan, if that’s where you want to live,” he said on the “Iced Coffee Hour Podcast.”
He explained why you need that much money to make it in the Big Apple with your own apartment.
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Make A 30% Down Payment
Conventional mortgages let borrowers make down payments as low as 3% to buy properties, but Serhant believes you should put more money into the down payment to reduce your monthly expenses, despite a challenging housing market.
“Typically you want to put down at least $300,000 so you are borrowing 70% of the purchase price, so you don’t have to pay any private mortgage insurance,” he said on the podcast. “The baseline is a little bit insane.”
A higher down payment also reduces your monthly mortgage payments. It can take several years to save up $300,000, but it goes to show how difficult it is to live in New York City, especially if you want to own property.
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Co-Op Nightmares
While the monthly mortgage payments on a $1 million property will be high, Serhant said that it’s all of the co-op costs that surprise people the most.
“It’s the monthlies that get you, not the purchase.”
Serhant then talked about HOAs, real estate taxes, and appliance repairs as some of the regular costs that can catch people off guard. Even if you have enough money for recurring expenses, it may not be enough to buy a co-op due to their rules.
“The co-op board can turn you down for anything and they don’t have to tell you why,” he said on the podcast.
Co-ops can be difficult to exit once you get in. These entities can prevent you from selling the property a few years down the road if they don’t like your potential buyers or don’t like you. Condos are a bit more flexible. If they reject a buyer that has agreed to buy the property, the condo must buy the property from the seller at the agreed-upon price.
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Extra Costs Tacked On To The Sale
New York City puts on several extra costs on the sale price that go beyond regular closing costs. These additional taxes shut more people out of buying homes in the city. They also demonstrate that a couple needs to earn far more than the average person just to establish roots in the city.
“In New York City, the mortgage recording tax is 1.925% of the loan,” he said on the podcast. “It’s New York City. Everything is taxed, and taxes are only going higher. The mansion tax goes up to 4% in New York City now.”
The mansion tax applies to any city residential property that sells for $1 million or more, and it’s a tax equal to the percentage of the total purchase price. The buyer is typically responsible for the mansion tax.
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