Does It Ever Pay to Buy a Studio Apartment?

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  • If you're on a budget and are looking for a city home, you may be thinking of buying a studio apartment.
  • Doing so might result in a more affordable mortgage, but you might run into trouble when the time comes to sell.
  • It might make sense to buy a studio apartment in a city with high housing demand, such as New York City, as you'll likely be able to sell it in the future. 

It could be a good investment, but not always.

When you think about buying a home, it's easy to imagine a detached house with a fence, a yard, and plenty of space to roam around. But if you're looking to buy a home in a city, then you may have to limit yourself to an apartment. And in some cases, that could mean buying a studio apartment, depending on housing prices in the city you're looking at.

Now, the cost of a studio apartment will vary based on your local market. In New York City, the average studio cost is $553,734, according to data from Miller Samuels. But in a smaller or less expensive city, you might spend a lot less.

The upside of buying a studio apartment is clear. You might pay less for your home and have lower monthly mortgage payments to work into your budget. But there are a number of downsides to buying a studio, so you'll need to proceed with caution. 

The problem with owning a studio

It's one thing to rent a studio apartment when you're single or live alone, you want city access, and you don't particularly need a lot of space. Also, rentals, by nature, tend to be temporary. You may decide you can deal with a studio for a year or two if doing so makes it possible to spend less on rent and bank some savings.

But buying a studio apartment is a very different story. Any time you buy a home, you're making more of a commitment to staying put. That's because it can take some time to recoup the costs of putting a mortgage into place, so you generally shouldn't buy a home unless you think you'll live there for a handful of years before selling.

Meanwhile, living in a studio apartment for years on end may be less than ideal. You might come to resent the lack of space and start hating the idea of staring at the same few walls day in, day out. And if your family situation changes -- say, you partner up with someone and/or have a baby -- you might quickly run out of space.

Even more problems might arise when you decide to sell your studio apartment. As you might imagine, studios don't tend to be as high in demand as larger spaces. So you might really struggle to find a buyer.

Does buying a studio apartment ever make sense?

If you're buying a studio apartment in a market where housing demand seems perpetually strong, and where smaller living spaces are the norm, then that's a move that might work out well for you. New York City is a prime example here. Those who opt to dwell in NYC often go in with the understanding they're not going to get much square footage for their money. But they're willing to pay a premium for access to theater, restaurants, and other amenities. 

In a city like that, you might have no trouble selling a studio apartment once you're ready to move on. But be careful when buying a studio in a smaller city, because selling in that situation might end up being more of a struggle.

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