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How to Buy

A New York City Apartment

Very occasionally, condos and even some co-ops are offered with a rent-to-own option in which some or all of your rent over a certain period of time--typically 6-12 months--is applied to a pre-negotiated purchase price. It's an option worth considering in a market where it's cheaper to own than rent, though keep in mind that the option usually is presented only on an apartment that's taking too long to sell or a new development where the developer is anxious to move a lot of apartments, so due diligence is key.

You might consider a rent-to-own deal if you have a stable job with rising income but you're 1-2 years from being able to afford the apartment you want, or you need to build up your credit history in order to get a mortgage, or you want to kick the tires of a new-construction condo to make sure it isn't riddled with construction defects.

A few things to remember about rent-to-own deals:

  • Rents are often higher than market-rate
  • If you're planning to get a mortgage, you'll only be able to apply the portion of the rent that is above market-rate rent toward the downpayment. The rest can be applied to closing costs and the purchase price.
  • Terms vary greatly. Get a lawyer to review your contract to purchase, make sure it's valid and binding, and help negotiate fair terms. Negotiate all the terms of the purchase now, when you have the most leverage, not when it's time to buy a year from now.
  • You may be obligated to make repairs instead of your landlord.
  • Be wary of a contract that obligates you to buy, and make sure your purchase agreement includes a financing contingency in case you can't get a mortgage.
  • In a co-op, make sure the board approves the contract and you as a purchaser so that you don't get rejected after a year of rent payments.

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