NYC - higher maint/cheaper apt or cheaper maint/ more exp apt?

Question

Curious what people think. I'm looking at 2 different apartments in Manhatan. Both are good and I would be happy living there in terms of location/building/ apt/ etc. One is about 30% more expensive than the other, but it has 1/2 the monthly maint costs. The other one is cheaper obviously but the maint is high. I'm going to have to renovate both apartments. I'm trying to decide which one is the better purchase financially. I was comparing both apartments but adding the total purchase price + renovation costs + 7 years of maint and using that to compare the two since I feel like I'm likely to live there for 5-10 years. At some point I think I'll move, so I don't envision this being my home for 30 years or anything (although I could live there less than 5 or more than 10...7 seemed like an ok timeframe to think about). The total costs are lower for the cheaper apartment but my monthly bill will be slightly higher (thanks to low interests)! What do people think about them? I realize I am not including any appreciation, but wonder if I should.

Farrah Ahmed · Answer

Thanks Jason. That was my concern as well (buyers will not like the maint being high). Just to throw some numbers out there, the one apt has ~$1k/mo maint and the other is ~$2k/mo. But the difference in prices between the apartments is $200k. I agree resale worries me a little w/ the $2k maint apt, but with such a low initial price to buy in, feels like I’d still overall spend less with the cheaper apartment unless I lived in this apartment for almost 20 years (and that’s highly unlikely). I’m most likely going to move in 5-10 years. SALT cap going to be an issue unless they change the tax rules.

Jason Lee · Answer

Without having more details I would probably lean towards the more expensive apartment with the lower maintenance. Maintenance only goes up. You can roughly expect it to go up similarly to inflation but I've seen plenty of buildings where there have been huge increases in certain years. While you're calculating the monthly costs you might want to also figure out the tax consequences for each. Maintenance is typically around 50% tax deductible while mortgages will be mostly tax deductible interest payments in the earlier years, so my guess is there's more tax benefit to having more mortgage over higher maintenance. But maybe AMT and the SALT cap make it moot... consult your accountant. Buyers seem to have an aversion to high maintenance. It might give an impression that there's something wrong with the building finances or that the building isn't run efficiently. Regardless you can see the drag on prices now and so you can expect that when you try to sell in the future.

NYC - higher maint/cheaper apt or cheaper maint/ more exp apt?

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