You have just found out you’re moving to New York City!
“Holy Cow, what do I do? Where do I go?”
First things first, you need to find someplace to live. To that end there are a number of questions you need to ask yourself and, based on the answers, determine what options are available to you. Obviously, I can’t answer everyone’s questions in this one post, so I’ll give you a general overview and go into greater detail later on.
Questions to ask yourself:
1) What is the most important element in your new home? ( Example: If you have children then school might be the most important. Perhaps it’s proximity to the office or public transportation? Maybe it’s a view or, dare I say, storage space?
2) Should I buy or rent an apartment?
3) How much can I afford to spend?
#1 – Most Important Element?
Only you know the answer to our first question, and yes it will make a material difference in what options you will have as you search for a place to live. I STRONGLY recommend to all of my clients to do the following exercise:
Exercise – Take a blank piece of paper and fold it in half. On one side write the word NEED, on the other side write the words WOULD LIKE TO HAVE. Now, be honest and write down those things you absolutely will not waiver on under NEED and those things you may be willing to compromise under WOULD LIKE TO HAVE.
Congratulations! Believe it or not, you have just done 80% of the work in finding a new apartment. Well think about it….If you have a pet and are bringing him with you, you just eliminated all possible buildings that don’t allow pets. If you want to be within walking distance to the office, you have just eliminated all other areas but those you can walk from.– We would all love to have a penthouse, with a wrap around terrace and a washer / dryer in the unit. If your budget will allow for this, great, but for the rest of us, identifying the necessities will help us obtain a clearer picture in our own minds of what will make us happy and what will make your relocation a success.
#2 – Buy vs Rent?
Now with your list of most important elements in front of you, it’s time to evaluate your current financial situation. Most people who are coming to New York for the first time, opt to rent for at least the first year before deciding to purchase an apartment.
Renting allows them the time they need to get to know different neighborhoods and to learn the City more intimately before making a large financial commitment. Then, in year two or three of living in New York, they may look to find something more permanent. For those of you who are unsure and contemplating buying right off the bat, let me not dissuade you per se, but it may be worth your while to check out a Rent VS Buy calculator to see if it makes sense.
Regardless of your ability to purchase or rent, one thing is certain — you must know the current condition of your credit report.
In my 10 plus years of helping folks find homes in New York City, nothing is as sure to getting you rejected than having BAD credit. Please note I say BAD credit, because many of you reading this may have NO credit, or are even yet to obtain a Social Security number. These are different situations from having BAD credit. It is far better to have NO credit than to have BAD credit. NO credit means you’re new to town, BAD credit means you don’t pay your bills on time.
#3 – How much can I afford?
How much can you afford on a monthly basis isn’t so much a question of what you are comfortable spending as much as it is a question of what will you qualify for. Take the following rules of thumb as a loose guidelines in determining your threshold when it comes to either purchasing or renting property.
Purchase – Banks, generally, will not allow for your monthly housing debt to exceed 28% of your income (known as debt to income ratio). For the simplest of guesstimates take your annual income and multiply it by three. Assuming you will be financing 80% to 90% of the purchase price, this will give you a starting point in gauging what you can afford.
Tip- Speak to a lender long before you look at any apartments. They can help you better understand not only what you can afford, but the financing options available to you as well.
Rent – Property owners look for the applicant(s) to earn an annual income of between 40 – 50 times the monthly rent. ( Example: $2500 X 40 = $100,000.00 annual income). I say 40 to 50 times simply because more lenient owners require less and the more strict owners require more.
Tip – When determining what you’d qualify for on a rental property, only use your base salary and GUARANTEED bonus. Owners will not factor in discretionary bonuses into the equation.