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Real Estate

Rent in the city or buy in the 'burbs?

Two couples share how they chose their perfect home.

For Brooklynite Michael Franklin and his wife, moving to Westchester County seemed like a dream. They imagined their life in the New York City suburbs: a big grassy yard with a bird feeder and neighbors who couldn't hear their two daughters practicing their musical instruments. They had contemplated moving across the river to Manhattan, where they both work, but in the city, affordable apartments meant cramped spaces and waking up to the neighbor's alarm every morning.

Ready. Set. Renovate.

"Having enough space was our primary concern, especially as our daughters got older," explains Michael. "Imagine three women and one man sharing one bathroom!"

But after researching the costs and benefits of getting a mortgage and moving to suburbia, the Franklins decided that their Westchester dream was going to remain just that...a dream. The convenience, aesthetic, and amenities of renting a home in Brooklyn's Park Slope neighborhood, they decided, was a better match for their family's needs.

The cost of the commute

One of the first questions the Franklins had to consider was their commute. They weighed a variety of factors, such as the time, cost, the reliability and quality of the transportation, and the nature of the job at the end of the commute. For Michael, who works in midtown Manhattan, Brooklyn provided the most workable balance, even though the choice wasn't ideal. "The time commuting from Brooklyn versus somewhere like Pelham is roughly the same," he says. "The difference is that commuting from the suburbs is a lot more pleasant. The Brooklyn commute is mostly standing in a crush."

But Michael also sees benefits to living in Brooklyn. Subway trains run frequently and afford easy access to night events in the city, which saves the Franklins money over a car loan and other expenses. "Both my wife and I have monthly subway passes, which is pretty cost-effective compared to car payments, repairs, and gas," he says.

When it comes to evaluating your potential commute, think about your lifestyle and what factors are important to you. The time, comfort, and costs of commuting can have a direct impact on your wallet and your emotional well-being. Ask yourself: Is my commute tolerance 30 minutes? An hour? Over two hours?

The impact of children

For many people, children are a big factor in the decision to move to suburbia. This was the case for Anne and Daniel Sullivan, who live in Arlington, Va. and work in Washington D.C. "When we looked at places to raise a family, the first and foremost consideration was a convenient area that had great schools and access to nature and parks," Anne explains. "The fact that we were still close to a metro stop was a bonus."

Children also weighed heavily in the Franklin's decision. "Schools are important, so we knew we needed to find a district with quality schools," Michael says. Park Slope, they decided, offered the best possible educational environment for their children.

If finding a good school for your children is a factor in your decision to move, be sure to do your research. Websites like SchoolDigger.com and GreatSchools.org are excellent resources, as is talking directly to parents and teachers involved with particular schools.

Taxing questions

Choosing between the suburbs and the city is also a matter of money. Michael says that the houses he and his wife were looking at in the New Jersey and Long Island suburbs cost about half the price of two-family homes in Brooklyn. "Rental income from a two-family would make the monthly payments roughly equivalent, but having renters adds an entirely new set of concerns and obligations," he added.

Taxes were also a consideration. In metropolitan areas like New York City, high income taxes can place an extra burden on residents and renters. Yet, high income taxes in cities are often offset by the high property costs of the surrounding suburbs. That weighed into the Franklin's decision to rent in Park Slope instead of buying in the suburbs.

Closing a deal to buy a home can also add to costs. “Closing costs can easily reach another 5 percent of the purchase deal," says Michele Hammond, a home lending advisor at JPMorgan Chase. For that matter, purchasing a home in the suburbs can also be complicated by fees tied to homeowner associations (HOA) fees and other property-related costs.

Short-term convenience? Long-term investment?

The long-term benefits of homeownership versus the sunk cost of renting are evident to both the Sullivans and the Franklins. For the Sullivans, getting a mortgage and living in the suburbs fit into their financial goals. "The most important thing for us was a solid long-term investment," says Anne Sullivan. "Arlington was hot at the time, and still is. But we lucked out."

Paying rent in the city, the Franklin family sees the other side of the buying/renting balance. "We constantly have that nagging feeling that we are missing the real estate investment train," says Michael." Assuming there is no appreciation in housing prices while we own it, it would take 7-10 years for us to cross the inflection point where buying is better than renting. But it's hard to know if we are on the cusp of an upturn in pricing or in the middle of a downturn."

Though renting in the city offers many lifestyle and economic benefits, the prospect of owning a property that increases in value over time is undeniably appealing. But, whether you're most interested in space or convenience, city living or suburban investment, the key is finding the mix of factors that will make a place your home.

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