Category Archives: Taxes

How to minimize the taxes on the sale of your Manhattan property

One of the easiest way to save money on the sale of your Manhattan investment property is to do a 1031 exchange also known as a like kind exchange. The gist is you sell an investment property, and purchase a property of similar value. The property must close within 6 months of the sale of the first property and you need to identify it within 45 days of the closing of the sale.

Let’s take a look at an example.

You have an investment condo worth $2 million that you have owned for 20 years that you bought for $500,000. Instead of paying tax on the profit, you buy another property worth $2 million and roll over the gain. The purchase can be another condo, multi-family, vacant land etc… When you close the sale of the condo, you have 45 days to identify potential purchases and 6 months to close or you lose the opportunity to do the 1031 exchange. Speak to your CPA and attorney for details on how to execute this process. But once you execute the purchase, you trade one property for the other and have deferred the taxes. With the typical Manhattan condo investment property returning 2-3%, you can probably buy another property either in New York or another statement that will return two to three times the net cash flow. In addition, if you have owned an asset for a number of years, it is likely you have depreciated it possibly even to the max. By starting over, you can begin depreciating anew. Again, speak to your CPA.

Keep in mind that a 1031 exchange is not for your primary residence but rather a property that you have rented it as an investment with one exception. The 1031 exchange can be used for your primary residence if you own a townhouse where you live it but rent other apartments. So in the case of a 3 family, your primary residence is the unit you live in and if you rent the other two units, the 1031 exchange can be applied to the rental portion of the building.

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every Manhattan market from Battery Park City to Washington Heights.

Thinking of buying a tax abated NYC apt?

I am constantly searching for apartments for clients and occasionally come across buildings that are tax abated. Generally speaking apartments above 96th street had 20-25 year tax abatements and below 96th street the length of the abatement was only 10 years. As a result, in the last several years, the abatement is phased out, and the taxes go up substantially.

When the monthly numbers are lower, buyers will pay more for the apartment which helps developers of new condos make more profits. But how do you analyze the value of a condo with a tax abatement expiring shortly and how much time is enough that is left on a tax abatement?

Let’s look at an example of a well known building on the west side- The Atelier which is located at 635 W 42nd street. This building has 1 year left on its abatement. Note the below table and all numbers are monthly taxes and for a certain unit with about 800 sqft(75m2)

2016 $600
2014 $400
2012 $200
2010 $28
2017 ???

As a result, and after looking at this example, I would not recommend buying into a tax abated building with less than 5 years left on the abatement unless you are fully aware of the risks associated with purchasing and factor that into your offer. Additionally, think of the tax abatement like the wind that pushes the sailboat either forward or in the case of headwind stops you in terms of appreciation. If you are buying at this time when the market is close to a peak, and you buy in a building with an expiring tax abatement, you may take a loss to sell if you need to liquidate in less than 5 years.

Here’s another example- 100 Riverside boulevard aka The Avery is an amenity rich building located at 100 Riverside boulevard right in front of Riverside Park. See the below example of the monthly taxes of an apartment with slightly more than 1000 sqft (92m2), and  2bd/2ba.

2016 $1000
2015 $680
2014 $374
2009 $200
2019 $1700 or more?

Accordingly, the taxes would be $21,000 or $1700 per month without the tax abatement. So an apartment with 1000 sqft 2bd/2ba, $1100 in common charges plus $1700 in taxes for a total of $2800 is going to be a tough sale if you need to sell soon.  As a result, said apartment has stayed on the market for more than 4 months with the current broker and in 2014 was on the market with another broker for 8 months. despite the current ask being a reasonable $1500 per sqft.

Based on these numbers, what do you think? Does it make sense to purchase in a Manhattan condo with less than 5 years left on its tax abatement? How much would you adjust the price for the expiring abatement if you are selling?


New York City property owners brace for higher taxes in 2015

Due to the robust real estate market, values have increased in the last year and as a result, New York City is raising the property taxes on all types of property. The largest increase will be weathered by Coop and condo owners who are taxed at a different rate.  Continue reading New York City property owners brace for higher taxes in 2015