Seems like a very silly question. The obvious answer is if the taxes are lower than  usual, you should it buy it, no? Well, the answer is not that simple. Recently, on a showing of a convertible 3bd condo on 5th avenue, I contemplated the question myself. There are 8 years left on the tax abatement for this building. So that means in this case the taxes will go up 20% every two years until they reach the market rate for taxes for the area. I think this is a point that not every buyer truly understands.

The higher the taxes and overall monthly charges, the more downward pressure on your market value of your property. So right now the market is hot and inventory is low, so people don’t question the tax abatement period as much. But fast forward 8 years and the buyer wants to sell and now the taxes are let’s say 4 times the current amount. That’s going to make it harder to sell the apartment without question. So I think buyers need to consider how much time is left on the tax abatement in understanding their future market value. Appraisers will make an adjustment occasionally due to a higher than normal monthly charge.

Generally speaking above 96 street 15,20 and 25 year tax abatements were given. Below 96 street, 10 years is the amount. So many of the building on Riverside blvd (Trump Place) now have or will soon have abatements that expired. So taxes either are or will be market rate which is a drag on value if those amounts are higher than similar apartments.  An extreme case where monthlies can be a drag on market value can be seen throughout Battery Park City. Take a look at 2 South end avenue aka The Cove Club for example and you can purchase a 1 bedroom for under $500k but the monthly charges are approximately $2300 which is only $300 more than the apartment would fetch as far as rent.

So while the kitchen may have lacquer cabinets and a viking stove, and the building amenities are spot on, consult with your real estate broker about tax abatements and monthly charges associated with the apartments.

I will never forgot the first apartment I almost bought on the Upper East side. I was so excited to begin my Manhattan existence just off Madison avenue in the 80’s. I was blinded to many obvious downsides to the apartment including it being a walkup and a bedroom with a view of air shaft. But thankfully, my CPA saved me the trouble because after reviewing the financials of the building, he said that under no circumstances would he allow me to buy there. Plainly speaking, he told me that the building was spending more than it was taking in and my maintenance would be going up.

So discuss the impact of the monthly charges and if considering a tax abated property, ask how much time is left and get an approximate idea of the charges when the abatement ends.