Tips for International buyers

If you are an international buyer looking for an investment property in the confusing Manhattan real estate market, there are many things to consider but here we have one simple tip. Consider buying in a new construction building that is tax abated.

A tax abated building will give you a higher rate of return of your investment due to the low monthly charges in comparison to a similar building without the abatement. A 20 year tax abatement will mean you pay probably around $100 or so per month instead of nearly $1500(at least). By year 12, the taxes begin to adjust upwards with each 2 year cycle the taxes going up as per the below.

Year 12 20% of fair market taxes
Year 14 40% of fair market taxes
Year 16 60% of fair market taxes
Year 18 80% of fair market taxes
Year 20 100% of fair market taxes

So for example a $3mm apartment with 2 bedrooms/2.5 bathrooms with common charges of about $1800 and 1300 sqft (120m2) of living space might rent for about $7000. With a tax abatement, your monthly return is about $5100 or $61,200 annually assuming taxes of $100 per month. Your rate of return is just above 2% on the $3mm investment. These would be the numbers for 50 Riverside boulevard aka One Riverside Park on Manhattan’s upper west side. Now if the building was not tax abated and you were paying $1500 per month in real estate taxes then your monthly return goes down to $3600 or $43,200 annual. The rate of return of approximately would be approximately 1.4%. Over the course of 10 years, the savings from a tax abatement would be approximately $170,000.

So if you are an international investor or even a local real estate investor purchasing new construction in Manhattan, take a look at tax abated buildings. Certainly, there are not a ton of them but they do exist and will increase your rate of return both now and long term.


Real estate representation simplified

So you walk into an open house and there is a broker at the open house, who does he represent? What should you tell him or not tell him? You meet an agent who you emailed through streeteasy about a loft in Soho, who does she represent? In whose interests is she working? An email through yields a flurry of calls from agents wanting to “work for you”, are they really working in your best interests?

A real estate transaction is complex and can be made even more challenging by ambiguous representation. Legally, the agent has to disclose to you in writing who they are representing be it for a purchase, or a rental.

NYS agency disclosure form with explanation

For Manhattan real estate, typically, the agent represents the buyer, seller or both. Huh? How can an Manhattan real estate broker represent both the buyer and seller? Well, they can not give undivided loyalty to either but they can practice what is called dual agency.

The broker can represent the buyer in which case she negotiates on the behalf of the buyer, trying to convince the other side as to why the terms of the buyer are appropriate and should be accepted. Represent yourself as a buyer? Usually, this is a mistake because the agent at the open house likely is representing the seller and will negotiate the terms most favorable to the seller.

In the case of the agent at the open house, most likely they are representing the seller and will secure the best terms for the seller. For example, if you tell the seller’s agent that you will offer a price but are prepared to go higher, by law, the broker must tell the seller that. So be careful what you say to a seller’s agent. It is the same if you tell the seller’s agent that you need to move in a one month because of a job transfer, they will tell the seller that information and that may weaken your ability to negotiate a better sale price.

In all cases, the real estate broker that represents you will among many other things owe you confidentiality. So anything that you disclose can be kept to himself unless you instruct him otherwise.

So next time you meet an agent for the first time, see if they disclose to you who they represent and if they do not, ask them. It is the law.