How to Buy a Second Home in NYC

Is buying a second home in NYC a good idea? What are some pros and cons of buying a second home? Should you rent out your second home instead of treating it as a personal residence? We’ll discuss all this and more in our detailed guide on buying a second home in NYC.

7 min readMar 12, 2019

Benefits of Buying a Second Home to Rent Out

Buying a second home to rent out can be a great idea not just economically but also from a tax perspective. If your second home is an investment property vs a personal residence, then you can treat it like a standalone business for tax purposes.

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This means all expenses associated with your investment property are tax deductible. Your mortgage interest, property taxes, common charges, maintenance fees, home owner’s insurance, property management fees, repairs costs and any other fees associated with maintaining and operating your investment property are deductible expenses against your rental income.

Most importantly, you can depreciate residential investment properties fully over 27.5 years.1 That means you can take approximately 3.6% of your cost basis as a paper loss against your rental income every year until the property is depreciated to zero. This is a massive benefit as rental yields and cap rates in hot markets like Manhattan are generally below 3%.

What if you have a net loss on your investment property? You can apply your net loss to your other active income without limit if you are a qualified real estate professional according to IRS rules. Even if you aren’t a qualified real estate professional, you can still deduct up to $25,000 of losses against your other active income as of this writing.

Pro Tip: Don’t forget about the added diversification benefits of adding real property and assets to your portfolio. Stocks and investment real estate have produced similar returns over the past one hundred years. While investment properties may take more work to maintain, they have produced similar returns to the stock market with much less volatility.

As you can imagine, being a qualified real estate professional and an active real estate investor or developer presents enormous benefits through our rather convoluted tax code. The ability to deduct all expenses plus the ability to depreciate real property to zero and offset net losses against other active income enables some real estate investors and developers to have negative tax rates year after year. In fact, some developers and real estate investors accumulate so many losses which they are able to carry over that they don’t pay any taxes for years!

Technically, only the structure and property built on the land is depreciable but the land itself is not depreciable. However, for all practicable purposes the value of the land that a single condo or co-op unit owns is typically negligible given that there can be hundreds of units in a single condominium or cooperative building. As a result, many tax accountants have told us that they treat the value of the land for a condo or co-op as zero, meaning that the entire value of the apartment is depreciated.

Pro Tip: Don’t forget about the tangible, economic benefits of earning rental income and a positive cash on cash return! Check out our handy Rental Property Calculator to analyze your cap rate and cash on cash return or yield.

Buying a Second Home to Live In

What if money isn’t an issue and you don’t mind having a second personal residence that you’ll only be able to occupy part time? If that’s the case, then you may simply not care about the economic and tax benefits of renting one of your properties out as discussed in the previous section.

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If lifestyle considerations are your main concern, then we recommend buying an apartment in NYC with a doorman, front desk or at least a live-in super. Especially if cost isn’t an issue, you’ll want someone on site you can call if you won’t be residing there full time.

Having staff on site will help tremendously for letting friends and contractors in, accepting deliveries and fixing any issues or emergencies that come up while you are away. It’s much cheaper to tip your building superintendent for his help than to hire a property manager which would be overkill if you aren’t renting out your property.

As an additional benefit, you won’t have to worry about being caught by the IRS if you actually intend on using the property vs legitimately renting it out full time. From what most tax accountants have told us, if you use an investment property personally for more than a few days or say 10 days, your property’s tax status as an investment property may be disqualified.

Note: There are no special tax benefits to owning a second personal residence. The rationale is if you can afford to own a second home, you don’t need any tax breaks in the first place. Keep in mind that some tax breaks that apply to primary residences may carry over to your secondary residence. Read our guide on NYC real estate taxes and consult your tax attorney for advice.

Carrying Cost Considerations

Most buyers of second homes will need to take carrying costs into careful consideration before buying a second home in NYC. Property taxes, common charges and maintenance don’t come cheap in the city. If you’re financing your purchase, you’ll also need to be watchful about your mortgage principal and interest payments, especially if interest rates are rising.

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The amount of monthly carrying costs that come with owning a condo or co-op in New York City can come across as a surprise to most foreign buyers and suburbanites. Unlike a free-standing house in Westchester where you’re only responsible for property taxes and perhaps HoA dues if you have a neighborhood homeowner’s association, you’ll also be responsible for common charges or maintenance in NYC in addition to the occasional special assessment levied by your building.

Your lawyer will help you to carefully diligence the building’s financial statements and board meeting minutes before signing the contract. Your lawyer will also order a title search if you’re buying a condo, or a coop lien search if you’re buying a cooperative apartment. Your lawyer will also review the original condo or co-op offering plan, though this may not be as relevant for older buildings.

The point of all of this diligence will be to uncover any hidden or potential future issues with your building. For example, will the façade need to be repaired because the building recently failed a Local Law 11 inspection? Is the elevator 40 years old and barely functioning? Has the board discussed any pending litigation at the last board meeting? There are a variety of red flags that can be uncovered during due diligence which will help you avoid buildings with large future special assessments or maintenance increases.

Buying a Co-op vs Condo for Your Second Home

If money isn’t an issue, buy a condo for your second home. Having a condo vs a co-op eliminates all sorts of issues and potential nightmare scenarios you don’t want to deal with if you can afford not to. For example, condo buildings will almost never have primary residence requirements or limitations on renting out your property. If you own a condo, it’s up to you to use it when and as you please. You don’t have to consult the board if your sister wants to live there for a few days, nor do you need board approval to rent out your property. You can even leave your condo empty if you wish, and no one will make a fuss if you don’t immediately move in after closing.

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In contrast, the only benefit to buying a second home in a co-op building is that co-ops are generally 10% to 40% cheaper than condos of comparable size and quality. However, co-ops are designed for primary, owner occupancy and come with a whole host of house rules and sublet policies that generally do not favor those wishing to buy a second home or rent out their apartment.

Furthermore, many co-op house rules require a minimum number of years of primary occupancy before a shareholder is even allowed to apply to sublet their apartment. Also, many co-ops discourage and do not allow pied-a-terres, which means they won’t allow you to purchase even if you’ll be in NYC every weekend to occupy the apartment.

The last thing we’ll say about co-ops is that in the event that you do end up subletting your apartment, any potential subtenant will have to go through the same onerous coop board approval process. Furthermore, you’ll typically have to pay a meaningful fee to the co-op or managing agent just to process your application as well as an ongoing tax for as long as you sublet your apartment.

Note: Some coops will not allow subletting period. You heard correctly. Some coops won’t allow you to sublet your apartment at all, even if you have to move due to a job change. If you need to move, your only recourse will be to sell the apartment and incur hefty co-op seller closing costs.

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Disclosure: Hauseit ( and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. The services marketed on are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).




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