After 20 years of renting a life on the East Coast — that’s what you do out here because purchasing an apartment or a house is incredibly expensive because the AVERAGE price of a one-bedroom apartment in New York City is now a cool $1,000,000.00 USD — we are now thinking it might be best to look into buying our share of the American Dream instead of renting it away.

99.99% of the people we know rent. Where do we start to buy? Can you do it all with a bank loan or do you have to bring a chunk of your own saved money for a down payment to the table first? Do you find a real estate agent at the start of the process or only at the finish? Is now a good time to buy an apartment or a house?

Is there a New York neighborhood or town or village reachable by train near New York City that would be more affordable than Manhattan or Queens? I know there are books and magazines dedicated to this topic, but sometimes there are hidden self-interests in those publications.


  1. Hi David,
    Since it is your first time buying a home, I’d check to see if your financial institution has any first time home buyer programs that provide some nice breaks.
    Also, check into getting a FHA loan that won’t require the huge downpayment that is often required when buying a home with a conventional mortgage. HUD has information about the FHA programs on its website:
    I’ve even heard about no-downpayment programs, but I don’t know a lot about them or what they involve.
    I don’t like interest-only mortgages, but I could see how you could use one to make some money in a hot housing market, such as Las Vegas. You’d buy a house and pay only interest on the mortgage for a couple of years, then sell it when it had appreciated enough to make a nice little profit. I wouldn’t use an interest-only mortgage for a house that you intended to keep for a long time since you’ll need to refinance at some point. Also, the housing market is cooling, so it might be a couple of years before it would heat up again if the housing “bubble bursts.”
    Good luck with your home purchase. It’s always nice to have the American dream of owning property.
    Once you have your housing squared away, you can also look for deals on property, if you wanted. My wife and I bought some land from the county at a commissioners’ sale. Every so often, the county sells off property it has acquired from tax sales. We paid a small price at an auction — the county wanted to get it back on the tax rolls — and are hoping some one will buy it at the full market price one of these days for a nice profit.

  2. Hi Chris!
    I appreciate your expertise in this matter.
    The HUD website you offered is excellent, thanks!
    The interest-only mortgage is an enticing idea. If you had talent you could live in a place for a couple of years, fix it up, and sell it for a big profit and move on up the chain of home ownership. Really cool idea…
    I will check into the first-timer deals. Our tax guy says the only way to go is to pay to own something — renting is a slow death with no end. The IRS gives home owners big tax breaks. The government wants you to own property. It binds you to the land and vests you in the community with powerful a financial stake.
    Knowing when and where the housing bubble is or was creates great confusion. What’s hot here might be cold out there.
    Congrats on your land deal! That was a smart move!

  3. The nice thing about owning a home is that in 99% of cases, the value appreciates. Once you’ve paid for a couple of years, you can always get a home equity loan.
    Homeownership is the only way to go.
    We’ve refinanced a couple of times to take advantage of the falling interest rates. We pay the same on a 15-year mortgage as we did when we first started out with a 30-year mortgage. It will be nice to have the house paid off before my son reaches college age.
    The sad thing is that my wife and I might have the house paid off before I pay off my student loans — I consolidated them into the U.S. Government’s Direct Loan program for 25 years to lock in a low interest rate. The student loan interest rate is slightly lower than the interest rate on the mortgage, so it’s not a bad deal.

  4. Hey Chris —
    Yes, owning is important but where you live makes a big difference in what you can afford. When a studio apartment in Manhattan rents for $2,400 a month you realize getting your hands on something you can afford to buy is going to be rough.
    Owning property is important and I begin to appreciate the old tradition of the parents of newlyweds putting down money on a house so the new couple can move right in and start off on the right path of actually owning land and not rending space.
    Refinancing sounds like a smart way to go and I’m glad you were able to get such a great deal!
    Direct Loans is a great thing and we’re in the same situation as you — we have, and will continue to have, a long-term relationship with that program!

  5. Location, location, location is always the cry of the real estate agent.
    That’s why we live in Indiana instead of Illinois because of the insane housing costs there. Don’t tell anyone — but we can get to the Loop in Chicago faster than people living in some places in Chicago can.
    I wonder if there are any affordable places left in the New York metropolitan area? Maybe the housing slow down will help people get into the market at a low point and ride it back upward.
    I like that you were asking if people knew of any neighborhood or village that might be more affordable than living in Manhattan or Queens. Sometimes the places no one thinks about are the best bargains.
    My area is starting to see home prices in certain places reach into the $350,000 – $550,000 range as people move from Chicago looking for lower housing and tax costs. I read about new housing in Gary going for $150,000 because people moving from Illinois are used to paying a lot in rent. People from Illinois used to make fun of Indiana. Now, they are moving here.
    It’s nice for us because we bought low and the housing boom is pulling up all of the other housing in the area.
    My wife and I thought homeownership was so important that we bought our house before we had our wedding. Blowing huge bucks on a single day event seemed wasteful when we could invest in our future.

  6. Chris —
    Right. Location is all. There is one Rutgers faculty member who commutes 2.5 hours each way from a farm in upstate NY to Newark, NJ because he loves the land and he has a barn and he enjoys the wide-open spaces.
    Sometimes he stays a couple of days during the week in a rented artist’s studio that costs him $200 a month. He isn’t supposed to sleep overnight there – so he takes “extended evening naps” on a couch he bought for the place. He has no bathroom or kitchen, but he can walk two blocks to the Rutgers gym to shave and shower. It works for him. It wouldn’t work for me.
    There are pockets of undiscovered places in and around NY — you just have to know where to look — and we need to start asking around to get pinpoints on those spots for future exploitation.
    We have family who live in Kentucky but own a business in Cincinnati. The state border crossings always fascinate me as yours does — but then I think about the “Tri-State” area of NY, NJ and CT and we’re crossing the borders to work and play all the time! Our tax guy says NJ is rotten for taxes and that if we moved back to NY we save a lot of money.
    We were offered help in a down payment on a house but it was conditional. We had to live in the Midwest. If we wanted a house on the East Coast the deal was off. That was an unappreciated squeeze that still harbors hard feelings on both sides.
    We were married in a NYC courthouse. Blowing $20,000 on a fancy wedding wasn’t something we could ever justify. You were smart to plow your wedding money into a house. We poured ours into expensive Columbia and NYU graduate degrees.

  7. Wow, it always amazes me about the cost of living in some places. $2,400 is more than twice my house payment! 😯
    Of course, I have no knowledge of New York neighborhoods, so all I can offer is a good luck with your search. My husband and I lucked out because we got a kick-ass agent who really knew her stuff. We bought in a new subdivision, and if we had listened to the building company’s agent, we would have ended up with one of the harder to sell lots in the neighborhood. Thanks to our agent’s eagle eye, we got a good deal on a bigger house that had been started but the financing fell through.
    So in my opinion, having an agent is the way to go, but I had good experience. My brother, on the other hand, had not-so-good experiences when he bought his first house and bad experiences when he sold that house, but I think his problem was more of going with less experienced agents to help out a friend rather than listening to the advice of others and going with a more experienced agent. Of course, the majority of advice was coming from my mother, so that might have been a blocker. 😉 But in this case she was right!

  8. Hey Ms. Carla —
    Yeah. $2,400 is just insane to rent a place. People pay, it though. They want the convenience of walking in Manhattan without having to worry about a car or its insurance. I would never pay that much to rent a space.
    You are lucky you found a good agent. When we moved from NYC to Jersey City we had a really smart agent who found us the perfect place on the first visit. She told us a lot of agents will poke you around a few times until getting you to the right place — but she prefers to ask a lot of questions and slot the person in the best place on the first shot so no one wastes any time. She is wonderful. We wish she handled NY properties!
    I am happy to hear you have a great house at a good price. It should serve you well as a fine emotional and financial investment.

  9. I have no knowledge of the NYC housing market because we live in Seattle — but I’d like to add my 2 cents to the realtor question.
    Go with one.
    Interestingly enough, I do some freelance writing for our realtor, and have gotten some tips. Even though this ends up being marketing material for her, some tips are interesting:
    1) Go with a realtor because they will know about upcoming properties before you will. (We saw and made an offer on our house before it was posted online.)
    2) Find an agent you’re comfortable with. Interview them the way you would a job candidate and ask for references. This will not faze an experienced realtor.
    3) Get qualified before you start the process. It makes life easier.
    4) Be prepared to get a divorce during the process.

  10. I have no knowledge of the NYC housing market because we live in Seattle — but I’d like to add my 2 cents to the realtor question.
    Go with one.
    Interestingly enough, I do some freelance writing for our realtor, and have gotten some tips. Even though this ends up being marketing material for her, some tips are interesting:
    1) Go with a realtor because they will know about upcoming properties before you will. (We saw and made an offer on our house before it was posted online.)
    2) Find an agent you’re comfortable with. Interview them the way you would a job candidate and ask for references. This will not faze an experienced realtor.
    3) Get qualified before you start the process. It makes life easier.
    4) Be prepared to get a divorce during the process.

  11. zia!
    Thanks for the advice on securing an agent.
    When you say “get qualified” before you start the process you mean — what? Have the money in hand and the bank in your pocket? Does a bank require to know exactly what you are purchasing before they approve you for a loan?
    When you say a divorce — do you mean from your agent or from your beloved other?

  12. When I say get qualified, I mean go to the bank and get preapproved for the loan. This basically shows the seller that you have the money in hand and that you’re serious — and it also means you can move very quickly if you see something you want. Often, if a buyer has two offers, they will choose the person who is prequalified because it saves time. The bank doesn’t need to know what you’re buying to be preapproved.
    And when I say divorced, I mean from your beloved! Seriously. Buying a house is really, really stressful, even if you both agree on exactly what you want. It seems to elicit a lot of my-life-is-changing-can-I-handle-this-transition (as well as oh-my-god-we’re-in-major-debt) angst.
    Good thoughts at you guys …

  13. zia!
    Thank you for explaining the merits of being pre-qualified. That helps a lot!
    Wow! Thanks for the heads-up on divorce proceedings! I’m glad you and Steve AND HARRY are still one big family. I have enjoyed watching you fix up your house. Your experience is inspiring.

  14. I rented for about 5 years after college in the suburbs of Chicago. The final 2 years I lived with an old high school friend. After the lease was up, he tried to coax me to split the rent of an apartment in the city.
    At the time, I didn’t appreciate downtown Chicago as much as I do now. But I also knew the benefits of owning versus renting. So we parted our ways; He rented an 3 bedroom apartment in the city, I bought a 3 bedroom townhome in the suburbs.
    Five years later, and my life had moved on. I was getting married and it was time to buy an actual house. When I put my townhome on the market, I couldn’t *believe* what the realtor suggested to list it for. I thought no one in their right mind would pay that much.
    Four days later and after a bidding war, I sold my townhome OVER my asking price. In my five years of living there I made a 43% profit. And since the profit made went towards the downpayment on my new house, it was completely tax free.
    I have to admit though, if I knew as much about the city of Chicago as I do now, I may have moved with my friend. I guess if I could do it over again, I would have chosen to rent in the city for a year or two, then pursue owning a home in the suburbs.
    I guess the only advice I have is find a realtor that you are comfortable with and that you can trust. You don’t have to stick with the realtor you choose first; I went through two realtors when I bought my townhome, and three when I sold it! Good luck.

  15. Hmmm, I don’t know about out there, but here in Vancouver, you can actually buy a Condo, and pay your Mortgage as you would a rent payment for not much more than what you’d pay to rent a place out here. That’s something that myself and my partner plan to look into once we’s back working in the Film and Television Industry in April. If we can get a Condo and pay not much more than what we pay for rent each month, it’d definitely be worth it.

  16. Hi Karl!
    Zonkers! You did a great deal flipping one place for another, congrats!
    I will keep all of this in mind — you know how to play the game and you have done well.

  17. I’m so glad you enjoy the house progress!
    Karl, it’s amazing, isn’t it? We bought this house a year and a half ago. Nine months after we bought, a house up the street, which is about the same size and same age sold for above asking price and within three days–and for about 15k MORE than we paid. This, despite the fact that the house has more issues than ours and isn’t (not that I’m biased) nearly as attractive or as well-laid out.
    Everyone is talking about the real estate bubble bursting. And it’s something worth considering, especially if you’re going to get suckered into spending more than you want. Which you will. We certainly did.

  18. Hi Dawn —
    Yes, what you mention is the theory behind the home ownership madness here in America.
    The trick is coming up with the downpayment to get into that sweet pay-to-own-instead-of-rent situation.
    Down payments can be like $20,000 to $30,000 I hear from friends around here and that’s way out of the range of savings possibility — unless you have help — because you really can’t save that much money on your own living and renting on the East Coast.
    A while back I read the hot thing for parents to do for their college-bound kids was to BUY them a condo ore even a house near campus because at the time it made more long-term fiscal sense to buy a property than to rent a dorm room with no return. Those parents had the money to buy a second residence — so it isn’t for everyone — but the kids had a place to stay after they graduated that they already “owned.”
    One of our friend’s parents — they have money — bought an apartment in Hoboken for their daughter when she graduated from school fresh out of school and went to work in New York. She pays a bank instead of a landlord so she’ll eventually get back every dollar she puts into the place. You can’t swing that unless you have parents willing to part with money and who also understand the value in owning property instead of merely renting it.

  19. David-
    A relative of mine just purchased a home in Red Hook, Brooklyn in the mid-$400,000’s. It is a large brownstone-like building which they split into upper and lower flats. They can rent out one half for a nice chunk of change to offset the mortgage payments. They had been renting in Williamsburgh, but much of the real estate is now too expensive to buy. Red Hook lacks the convenience of the L to lower Manhattan, but it is well on its way to be the next “it” neighborhood in Brooklyn. There are also nice places to be found in Greenpoint as long as you dont mind the Polish :)!

  20. If you can find a division outside the city being developed, build from the ground up. You might think it’s costly but it’s actually cheaper since you won’t be paying the inflation of the home based on the assessment of the previous owner who is only looking to make money!
    Real Estate Agents are good to have when you SELL. I’d keep them out of the process till you have a home you like. It minimizes the house becomming the home the AGENT wants you to have vs. the home YOU reallly want.
    Now is a good market to buy. The interest rates are climbing though so jump in or get out now while the picking is still good. The days of 6.0% interest rates are long gone, along with gas for $2.00 or less.

  21. Dear Mr Peeves —
    You have given me a whole new track to think about and I welcome you here and thank for your information.
    I appreciate your advice on building outside the city, on an agent’s role and how now is the time to get in the game!

  22. I live in California, not in NY, but I’ve been told by realtors to wait a bit because prices will fall soon. But that’s a bit like constantly waiting for the next model car or TV to come out. Eventually, you just have to do it. Good luck, and great blog. This is my first time here. I was very touched by your Wendy Wasserstein post.

  23. I can’t believe it! You basically have to be worth a million bucks over the next 20/30 years in order to get a mortgage on a one bedroom place in New York. That’s pretty insane.
    I paid less than $250,000 for my two bedroom duplex, 75m2 floorspace – that’s 800 square feet ! I’m less than half an hour from the outskirts of Paris in the rush hour, and evenings I can make it to the Arc de Triomphe in less than half an hour. I’m right in the centre of town, and have a supermarket, church, baker, school, vet, dentist, and doctor within 5 minutes walking distance. In 10 minutes walk you’re at the mall with the hypermarket and all major brand stores.
    American property values boggle my mind. I’d hate to make you guys jealous, but I have a 15 year mortgage and the payments are less than 1/3 of my wife and I’s combined salary. I borrowed 100% of the price of the place and on top of that took a loan for the solicitor’s fees (legal document creation, title deeds, etc).

  24. Neil —
    It’s wonderful to meet you and I thank you for your fine comment.
    I, too, have heard the California housing market is swollen and that prices may burst over the next couple of years.
    Thank you for the kind words about this blog and I especially appreciate your thoughts on my Wendy post.

  25. fruey —
    I’m moving to Paris to live in your closet! Gee, what a great setup you have there, my friend! Do you own the land beneath your duplex — or do you only own the duplex?
    I know the great temptation for Europeans to immigrate to America when the country was young was the draw of actually owning your own piece of land in addition to the house above it.
    In the UK the land has been owned for centuries by royalty and landed families in antiquity and you can never own the land itself — you just rent the airspace above the earth — and that sets up a curious sort of conflict where you own the house but not the land on which it is seated.
    What’s a “hypermarket” — is that like a grocery store or a big chain store or a mall?

  26. freuy!
    Thanks for the lessons! I learned a lot from you in that message.
    I don’t think I’ve ever been to a “hypermarket” here in the USA. 40 checkouts! Wow. I haven’t seen that here but I’m sure it exists somewhere — probably a Wal-Mart or something else as monolithic.

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