Pros and Cons of Buying New Construction in NYC
If you are into high ceilings, plaster ornaments on the walls, and unique charm, prewar construction buildings are for you. And you wouldn't have to worry about the old age of these structures. Their construction was solid. However, if you prefer more contemporary architecture and more modern style, then you are probably looking into buying new construction in NYC. Like anything else, there are positive and negative aspects of such a choice, and in this article, you will learn what they are and what to pay special attention to so you avoid buyer's remorse.
What's the Difference Between Buying New Construction and Resale?
If you wish to buy a condo in a brand-new building, it means that you will have insight into floor plans and materials used before the building is finished. You may even get a chance to make some revisions. When you go to the developer's sales office, you will put down a reservation deposit and pay the rest upon completion. That is typically within the next two years.
Resale means that you are purchasing a flat from the current owner. These are the most frequent transactions. In many parts of New York City, Manhattan, for instance, the supply of new construction is minimal. That is because there is very little space where developers can build new projects.
Also, resale is a suitable and simple option for many as there is no wait time between you purchasing a property and hiring residential movers to take you and your belongings there. Perhaps, this is the most significant disadvantage of buying new construction. Still, it is very case-specific.
What to Pay Attention to?
When purchasing new construction, you need to consider several factors:
Developer's reputation - Developers sometimes fail to maintain their financial obligations toward that building. It means that they stop covering for their part of the shared costs on the units they haven't sold yet. In that case, current residents cover the entire expenses.
Your readiness to handle some fixes - New buildings need to settle, and it may take some time. So, the appearance of cracks and similar defects is normal. You need to be aware of this, so there are no surprises later.
Your willingness to live in a condo - If you are buying new construction in NYC, it most likely means purchasing a condo. This also opens up many opportunities for real estate investment in NYC.
Deadlines - If you are on a particular timeline, you need to understand that timing may cause some trouble with new construction. Check when the building should be finished and factor in possible delays.
Downpayment - It is possible to pay 10% for the downpayment for an unfinished apartment instead of the usual 20%.
Pros of Buying New Construction in NYC
There are several advantages to buying a condo in a brand-new building in New York City.
You May Buy at a Discounted Price
If you purchase a condo in a building that is in the pre-construction stage, you will typically get a process that is lower than what the property will cost upon completion. If we speak numbers, it can mean that by the time the building is completed, the value of your condo will have increased by 10-15%. You get such a good price for a condo in the pre-construction phase because you take on certain risks. The developer may delay construction, for instance. Also, you are purchasing something that currently only exists on paper.
The Reservation Deposit You Put Down Is Usually Pretty Small
Just like when getting a mortgage, you will pay a 20% deposit to reserve the property. The rest will be due at closing. In New York, you won't have to pay for anything during the construction.
The deposit you make will go to the developer's lawyer's escrow account. The developer cannot use that money until the building has been completed. So, this is a pretty safe investment as the developer has an incentive to complete the project.
Your New Building Will Come With Fantastic Facilities
New construction buildings in NYC feature incredible amenities. For instance, you can expect a restaurant lounge, a fitness center, a beautiful roof deck, even a swimming pool. If you have kids or pets, you will also not be disappointed with facilities explicitly aimed at them.
Condos in New Building are Very Space-Efficient
Although smaller than units built in the past, new condos feature fantastic floor plans that use the space available to the maximum. Kitchens and bathrooms sport a very space-saving design while still preserving high functionality and having ample storage.
Most New Buildings are LEED-Certified
LEED certification means that the new building fulfills a range of different criteria. For example, one of them is the location - how far from public transportation options it is. It also has to meet specific sustainability standards - water and energy efficiency.
Cons of Purchasing New Construction in NYC
Wherever there are advantages to something, there are also some disadvantages. It is crucial to look at a matter at hand from all sides. Only then can you be confident you can make the best decision for you.
New Construction Condos are Often More Expensive Than Resale
Although you can get a new construction condo in NYC at a discounted price, it is still higher than the cost of a resale property. A significant reason for this is inflation. Labor and material costs are much higher now than they were 20 years ago. Moreover, construction material prices went through the roof when the pandemic hit. One of the reasons for that is the shortage of these building supplies. And the deficit happened because all production halted in one moment, and there was trouble keeping up with the demand, which also increased significantly.
There Is Some Uncertainty Attached to Purchasing New Construction
We have already mentioned that one of the reasons why you get a discounted price for your new construction condo is due to the risks you take. As stated, when you make a reservation and put down the deposit, the building only exists on paper. So, you can never be entirely sure that the developer will complete the construction. Also, you can be almost sure that they will finish it later than promised.
It's Hard to Predict the New Building's Future
When you purchase a condo in a new building, you will have incredible amenities, a luxury vibe, and a hotel feel. So, at the moment, the downsides of buying new construction are few. However, it is hard to predict how the new building will age. Also, you never know how the culture in the new building will develop and whether it will match your sensibility, lifestyle, and family.
Finally, gentrification is a positive thing. But if you are buying in one such neighborhood, you can't predict with absolute certainty whether the condo will generate excellent ROI. Then again, is there anything you can predict with absolute certainty?
There are pros and cons to everything. Putting them down on paper should be one of the entries in your homebuyer checklist. What's important is to consider them all before you decide whether buying new construction in NYC is the right option for you at the given moment.
