Before You Buy
Can a foreigner purchase real estate in Manhattan?
What makes Manhattan real estate such a good investment?
Would I be better off buying a Manhattan condominium or a co-op?
Do I need to have a real estate agent assist me in buying my Manhattan apartment?
The Basics of Buying
What should I expect when buying a Manhattan apartment?
What will my expenses be as an Manhattan property owner?
Should I pursue a mortgage on my apartment?
How can I ensure that my purchase is legitimate, safe and legal?
What You Need To Know
The Manhattan apartment I want to buy has a tax-abatement. What does that mean?
I keep hearing about “closing costs.” What are they, and who pays for them?
How are property rights registered for Manhattan apartments
I would like to rent out my Manhattan apartment after I purchase it. How can I do that?
Yes, and many do. The percentage of Manhattan condominiums owned by foreign nationals fluctuates from year to year, but roughly 15 percent of Manhattan apartments are owned by foreigners. But while there are no legal restrictions for foreigners looking to buy Manhattan real estate, some Manhattan co-ops require would-be apartment buyers to present United States tax returns as part of the application process. No such restrictions apply on Manhattan condominiums or townhouses, though, and many foreign buyers prefer condominiums to co-ops for that reason.
It’s something of a cliche that the three most important things in real estate are “Location, location, and location.” In Manhattan real estate, though, the old saying happens to be true. Manhattan apartments can be expensive, but they are among the most popular real estate investments in the world for good reason, and a large part of what makes Manhattan apartments such a safe investment is, simply, the fact that they are located in Manhattan. Investing in an apartment in an emerging Manhattan neighborhood such as the Financial District, Harlem or the westernmost reaches of Midtown West may be a more aggressive move than buying an apartment on the Upper East Side or a condominium in Greenwich Village, but virtually any apartment in Manhattan will retain its value as long as New York City remains America’s capital of arts, culture, finance and cool. And for all the ups and downs in the Manhattan real estate market, New York City will always be New York City.
That depends on what kind of Manhattan apartment you’re interested in. More than three-quarters of Manhattan’s housing stock is co-op, but the balance has shifted slightly in recent years. While virtually all of the Manhattan’s classic pre-war apartment listings are in co-ops, many of the new construction apartment buildings in Manhattan are condominium. Co-ops tend to be slightly less expensive than condominiums -- usually about 10 percent less -- although co-ops charge maintenance fees that can increase the cost of living significantly. Living in a co-op does have its perks, although the famously complicated process of being approved by Manhattan co-op boards can be difficult for foreigners who do not pay taxes in the United States, as U.S. tax returns are often required as proof of income during the approval process. It’s also difficult for everyone else -- Manhattan co-op approval processes are notoriously onerous, often taking weeks or months, and many co-ops are strict about the amount of financing buyers are allowed. Condominiums do not have such restrictions, and are as a general rule much easier to buy and sell than co-ops; additionally, new construction Manhattan condominiums offer generous tax benefits for buyers, which can result in significant savings. For more on the differences between co-ops and condominiums, check out our Buyer’s Guide.
Are you required by law to use a real estate agent if you’re going to buy a Manhattan apartment? No. Should you have one? There are many reasons why the answer is yes. First and foremost, both for foreign buyers interested in a Manhattan condominium or co-op purchase and for native New Yorkers, having an experienced agent on your side offers the benefit of having someone who has been there before helping to coordinate the process. Finding a Manhattan condominium isn’t all that difficult -- and if you’re at New Construction Manhattan, you already know this -- but the process of purchasing a Manhattan condo can take weeks or months, and involves many moving parts and different participants. An experienced real estate agent can greatly ease and expedite the process, and spare the apartment buyer plenty of stress and anxiety. Given that sellers will be employing their own seller’s agent -- whose job is to work on behalf of the apartment’s seller -- it can help a great deal to have a similarly experienced agent on your side, whose fiduciary duty is to you. Also, you’ll owe your buyer’s agent no money on the deal -- in New York City, both the seller’s agent and the buyer’s agents’ fees are paid by the seller.
Once you’ve found the Manhattan apartment that you want to buy, the process begins. It can be months from the moment you settle on an apartment for sale to the day that the apartment is yours, and the process has numerous stages. But, especially if you’re working with the right real estate broker, buying a Manhattan apartment doesn’t have to be difficult.
- Getting Ready: Buying an apartment in Manhattan is easier when you have everything ready beforehand. With this in mind, the first step should be organizing your finances so that you have the necessary ten percent down-payment ready, which may entail opening a United States bank account, if you don’t already have one. It’s also wise to get pre-approved for any mortgage or home loans you plan on taking out before making your offer -- it smooths the financing after the offer, and helps make you a more attractive buyer. It’s also a good idea to retain an attorney who can help you understand the various contracts with which you will be presented during the apartment-buying process. Finally, you’ll want to find a tax advisor who can offer some insight on the most advantageous purchase structure for you. Your attorney can help on that account, as well. Needless to say, you will be depending on these people a great deal, so make sure you work with attorneys and advisers you trust. If you don’t have an attorney or financial advisor, your real estate agent should be able to put you in touch with one who speaks your language, and with whom you feel comfortable.
- Finding the Right Manhattan Apartment: With all the pre-purchase requirements squared away, you’ll be able to search Manhattan apartments with confidence. With the help of your real estate agent, you should be able to narrow your search to a specific Manhattan neighborhood (or two) and a specific type of apartment, be that a new construction condominium, pre-war co-op or something else entirely. Once you’ve found the Manhattan apartment you want, make your offer to buy it. The offer is not binding, and chances are that you and your agent will make more than one offer in an attempt to get the best price on the apartment. Once your offer is accepted, the buying process begins in earnest. The seller’s representative will send you the contract for your lawyer to review. It’s time to negotiate.
- Negotiation and Signing: Along with the contract, the seller’s representative will let you know how long your attorney will have to review the contract -- industry standard is five to 10 business days, but the number of days will vary from one apartment listing to another. It’s important to go over the contract carefully with your attorney, and to understand the specifics of what it contains: this is a big investment, and the terms in the contract -- even seemingly minor details -- will define your apartment purchase. Once you’re clear and comfortable with everything in the contract, you’re ready to pay your deposit. That down-payment -- it will almost certainly be 10 percent of the final purchase price -- will go into an escrow account designated by the seller. If you wish, you can ask your attorney to negotiate terms under which your deposit is refundable. Although this can be a complicated and time-consuming process, many buyers find that it gives them peace of mind.
- Getting Board Approval: Whether you’re moving into a Manhattan condominium or a Manhattan co-op, the approval process is going to happen -- and it’s probably not going to be much fun. But while no one enjoys the board-approval process -- and while some Manhattan co-ops are famously onerous in their approval processes -- it can be made that much easier by a thorough preparation of the sort mentioned above. The board is going to ask you for a lot of information, from personal references to bank statements to (in certain instances) tax returns from previous years. There are certainly more enjoyable ways to spend one’s time, but if you work with an experienced buyer’s agent, an attorney you trust, and a financial advisor who has done the Manhattan apartment-buying process before, getting approved by your board should not be all that difficult.
- The Closing: You’re almost there, now. Once you’ve signed your contract, you’ll begin the process of applying for your mortgage, which will involve an appraisal of the apartment and a review by your attorney to ensure that your Manhattan apartment is free and clear of any liens or other issues. Once everything checks out and your financing is set, you’re ready for the closing. At the closing, the various parties -- buyers and sellers, attorneys and bank representatives and others -- will sign the final documents and make all the payments. After that, the title and keys to your Manhattan apartment are all yours.
In addition to your deposit and regular mortgage payments, you will have several other payments associated with your new apartment. If you have purchased a Manhattan co-op, you’ll have monthly maintenance fees; if you opted for a condominium, you’ll face slightly less steep common charges. And at year’s end, you will have to pay real estate taxes. The seriousness of the real estate taxes will depend on the size and type of apartment, but those real estate taxes can be deducted from your annual income for tax purposes, which can come in handy at tax time. In addition, many new construction condominiums carry tax benefits of their own. At closing, though, those buying a new construction condo will also have to pay the New York City real property transfer tax (which ranges between 1 and 1.425% of the purchase price), as well as the New York state transfer tax, which is 0.4% of the purchase price. Apartments above $1 million in price are also subject to a 1% “mansion tax” at closing. Other expenses at closing include title insurance, assessment fees, mortgage tax and various attorneys’ fees, although those are one-time costs. A good tax advisor can also explain how some of the expenses associated with your new Manhattan apartment can be tax deductible, and a good real estate agent should be able to put you in touch with a good tax advisor.
Virtually all Manhattan apartment buyers do opt for a mortgage, if only because Manhattan apartment listings tend to be too expensive for outright purchases. International apartment buyers can get mortgages from U.S. banks, and can finance up to 60% of the apartment purchase price. International buyers who opt for mortgages should be prepared to supply copies of their visas, as well as verifications of employment and financial viability and four financial references. There are various taxes associated with mortgages, as well, but it is difficult to overstate the advantages of a good mortgage for those looking to purchase a Manhattan apartment. If you’re buying a Manhattan apartment as an investor, obtaining a mortgage can confer sizable tax benefits. And if you’re buying a Manhattan apartment to live in, a good mortgage can still be a great help -- by making your dollar go farther, and by making it possible to purchase a more expensive apartment than you might otherwise be able to afford. Given the cost of the average Manhattan condominium or co-op, that’s no small consideration.
This one is simpler than it sounds -- and it all begins and ends with working with the right people. Having an attorney you can trust is essential here, as it is the attorney’s job to investigate the title, tax status and other fine points of the Manhattan apartment you hope to purchase. If you are working with the right attorney, everything should be explained to you in detail, and the entire apartment-buying process should be transparent and comprehensible. And if you need help finding the right New York real estate attorney -- or the right appraiser, surveyor, mortgage banker or any of the other players involved in the Manhattan apartment-purchase process -- your real estate agent should be able to put you in touch with one.
There are a number of tax incentives in New York City that can come into play on a Manhattan apartment purchase, and a good financial advisor and real estate agent should be able to explain the tax benefits of any apartment listing. If you’re searching for a new construction condominium, there’s a good chance that the condo development participates in New York City’s Tax Exemption Program. For condominium conversions, apartments can have the J-51 tax abatement; new construction condominiums have 421-A tax abatements -- the most common tax abatement in New York City real estate -- or a 421-G tax abatement. A 421-A tax abatement benefits apartment buyers by phasing tax exemptions over the course of a 10-year period, with a 100% exemption from real estate taxes on the first two years of home-ownership, and abatements decreasing by 20% every two years until, by the 11th year of ownership, the apartment owner is paying the full real estate tax amount. Apartments with a 421-G tax abatement -- which is available only to apartments south of Murray Street, primarily in Manhattan’s Financial District -- enjoy even more generous terms, with tax benefits phased in over a period of 14 years. Other abatements can provide up to 25 years of tax relief. Given New York City’s real estate taxes, any tax abatement is helpful, especially coming on the heels of the expensive process of purchasing a Manhattan apartment. A qualified real estate agent should be able to explain your tax abatement with you, and put you in touch with a financial advisor who can help you get the most out of your tax abatement.
“Closing cost” is a catch-all term used to describe the myriad of one-time fees that come with buying an apartment in Manhattan. While a Manhattan co-op apartment will have different closing costs than a Manhattan condominium, both carry with them considerable closing costs -- costs which can range up to 8% of the final apartment purchase type, depending on the circumstances. Among the constants for any Manhattan apartment purchase are attorney’s fees (generally between $1,500 and $2,000 dollars), taxes -- from a 1% “mansion tax” on apartment listings above $1 million to New York City and State transfer taxes of the sort discussed above, which can range up to nearly 1.5% of the purchase cost -- as well as a move-in deposits of up to $1,000. Mortgage taxes and title insurance fees, among others, impact Manhattan condominium buyers only, while Manhattan co-op buyers have to deal with various co-op fees and bank fees.
At the closing, your attorney will record the title for the apartment you have purchased with your information, at which point he will submit those documents to the New York City Register. At the closing, the title for your apartment will be photographed, copied and filed for the public record, and those documents will be available to anyone who needs to see them.
To a great degree, this depends on what kind of Manhattan apartment you purchae. Manhattan co-ops are notoriously unfriendly to rentals, but Manhattan condominiums offer much more latitude. A good real estate agent should be able to assist you in listing and renting your apartment. Many international buyers choose to rent their Manhattan apartments in order to cover their monthly taxes and the various fees associated with apartment ownership, and rental fees can also help defray monthly mortgage costs. Make sure to check with your building’s board before attempting to rent your apartment -- most Manhattan apartment buildings allow for only long-term rental agreements (that is, leases of 12 months or more), although a few do allow month-to-month leases. Whatever your choice, the right Manhattan real estate agent is just as vital in helping you rent your apartment as in purchasing your apartment. Which is another reason, if you still need one, to work with a real estate agent you can trust.