6 Tips for parents buying starter homes for their children

On Behalf of | Jan 12, 2024 | Residential & commercial real estate transactions |

The average Manhattan apartment rents for about $4,000 per month, or $76 per square foot. This is terrible news for those starting their career with an entry-level job in the city unless they work on Wall Street. The price tag can lead college graduates and other 20-something arrivals to move to the city’s far reaches or choose a neighborhood riddled with crime. The other option is multiple roommates sharing a space, perhaps two to a room.

Dorm living and adversity can certainly build character, but parents with the financial means may consider buying a starter home for their child. This generosity may seem like the behavior of the wealthy; still, some may argue that buying a property is a wise investment in their child’s future. Each parent can work out their deal, but it may make more sense to build equity than flush $48,000 yearly on rent. Buying a home is complicated, particularly if the parent/buyer is unfamiliar with New York City’s real estate market. Here are some tips on finding the right fit and avoiding being taken advantage of.

  1. Have a clear plan: Make sure the offspring understands the deal’s key points, such as the parents paying a downpayment of half, leaving junior to pay a modest mortgage. Other vital points can include issues surrounding utilities, extra expenses, renting out a spare bedroom, parents’ visitation privileges, who has the final say on location, and choosing the property.
  2. Determine priorities: Establish buckets of needs and wants. The parents’ and child’s will differ, but parents may establish non-negotiables like a safe neighborhood or a doorman building. The child may want a reasonable commute to work, outdoor space or in-suite laundry.
  3. Look out for restrictions: Non-New Yorkers may be surprised by the long list of restrictions associated with co-ops (which can include the buyer being the primary resident or not allowing parents to buy a unit for their children). A workaround for rules could be co-purchasing the apartment or acting as a guarantor. It’s important to remember that rules will differ from one building to the next. And finally, don’t try to pull a fast one with the board – it will get ugly, and your child will have to deal with fallout if they live there.
  4. Look at condos: They typically have fewer restrictions and require no board approval. They can also be turned into investment property if the child outgrows the space.
  5. Find a good broker: Let them know the details of the situation. Chances are they’ve had experience finding apartments for children and may have insight specific to your situation.
  6. Use an experienced attorney: Attorneys can draft the terms of the deal and better ensure that the terms are equitable. They can also handle the closing if the parents live elsewhere.