Buying Your First Home in NYC

NYC Starter Homes: Advice on What to Buy First in the Big City

nyc starter home

This 1-bedroom co-op is asking $330K with a monthly maintenance of $873, making it a quintessential NYC starter home. It’s located in Forest Hills, Queens, the top NYC neighborhood for first-time home buyers according to a recent StreetEasy report. See the listing here.

There’s truth in the old adage that New Yorkers operate on a later schedule than residents of other places. We get to work later, eat dinner later, get married later, and have kids later. When it comes to real estate, we often buy our starter homes later, too — if we buy them at all.

In New York City as in most places, a starter home is an entry-level property that first-time buyers can purchase with modest savings. Usually a stater home is relatively small, and meant to be occupied for only a few years, until the owners trade up for a larger, long-term place. Price is a key factor, too: CNBC cites the cost of a typical American starter home as between $150,000 and $250,000.

Starter Homes in New York City Are Different

“It’s a whole different story here,” says Daija Arias, a New York City-based broker with Berkshire Hathaway Home Services. Finding a home in New York City for around $250,000 is not impossible — there are some surprisingly nice options in the Bronx. But in a city where the median asking price is $999,000, that amount won’t get much, even in Inwood or in Upper Manhattan, where Arias specializes. 

According to Ben Willig, director of sales at Anchor Associates Group, there are two categories of starter homes in New York City: studios and 1-bedrooms ranging from $500,000 to $600,000, and junior-fours and 2-bedrooms ranging from $800,000 to $1.2 million.

Potential Starter Homes in Manhattan on StreetEasy Article continues below

Recently, Willig has noticed more of his clients skipping over the lower-priced starter home and going straight for a 2-bedroom or larger. “It could be due to student debt, uncertainty among millennials, or the desire to rent over buy,” Willig says. “But at the end of the day, it ties back to how expensive properties are here.” Forgoing that 1-bedroom starter home has allowed some of his clients more time to save, pay off debt, and arrive at a stable point in their career, when they are certain to be in the city for a while.

New Yorkers Own Their Starter Homes for Much Longer

The length of occupancy also distinguishes starter homes in New York City from those elsewhere in the country.

“A starter apartment here makes no sense,” says Micky Lalchandani, a real estate agent with Level Group. In other markets, buyers may look to occupy their starter home for two or three years. In New York City, Lalchandani says, it’s more like six or seven years. It just takes longer for the benefits of homeownership in New York City to pay off, in part because of higher closing costs.

“When you get around to selling,” Lalchandani explains, “You’ll spend about 10 percent of the sale price on closing costs.” If your starter home hasn’t significantly appreciated in that time, you could actually lose money after all is said and done. That’s why he stresses the importance of buying a place that offers flexibility and room to grow over the long term.

Potential Starter Homes in Brooklyn on StreetEasy Article continues below

How Realistic Is Buying a Starter Home and Trading Up in NYC?

According to Willig, the practicality of buying a starter apartment and trading up depends on how long a buyer plans to occupy the property, and what happens with the market.If a buyer has longer than a six-year horizon, chances are they will have the opportunity to ride out any waves in the market, pay down their equity, and see some tax advantages,” he says.

One of the first things Willig asks clients is whether they are open to being landlords in the future. “If you view your starter home as a long-term asset, buying early and trading up can be much more lucrative over time,” he says. If buyers need the sale of one property to finance the purchase of the next, and are only planning to occupy the apartment for three years or less, buying a starter home may make no sense. In that case, “Just wait,” Willig says.

Ultimately, buying a starter home is a personal decision, and one of the most basic rules of homeownership is that you should view your home as a home, not an investment. With that in mind, if you’re looking at buying a starter home, here are some aspects to consider.

What to Look for in a NYC Starter Home

[This post has been updated and republished.]


Inspired to find your next place in New York? Whether you’re looking to rent or to buy, search NYC apartments on StreetEasy.

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