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I am considering buying a new construction apartment The one in particular I like has a starting tax rate that is relatively high. In addition, it has a J-51 "benefit" that will raise the tax payment as soon as next year by almost 40%. Watching the market, it seems apartments with abnormally high taxes or maintenance payments stay on the market until the seller slashes the price. This makes me hesitant to buy into an apartment I could possibly lose principle when I try to sell it. I am not looking to flip the property for some big profit. By today's standards, I would simply be happy to get out even and have a nice home to live in until such time I decide to sell. Any perspective is greatly appreciated.
stay away!!! at least till a couple of years of high carrying costs, that's the best antidote to get sellers to price their assets at realistic levels
Remember, you can never recover the expense of common charges, maintenance or taxes (except in the form of tax deduction, which you may not benefit from). That money is always out the door, gone, for everyone.
By contrast you can recover your purchase price, and possibly more, (or possibly less), when you sell.
Occasionally I find buyers group these kinds of money together as if they are indistinguishable. So, they are willing to spend $6000 a month for housing, say, however that comes out in mortgage+monthlies.
Your observations are completely accurate, it's often harder to sell a property with high common charges, taxes or (in co ops) maintenance, all things being equal. Which of course they never are....but owners end up cutting the price again and again, because they forget to factor in their high monthly charges when they demand a certain listing price.
The only thing that might tip this is if there is something really special about this apartment, or this building, or if it is at a price point where there is not much sensitivity to such things. Otherwise....
...forget about it...
take the annual tax difference and divide it by current mortgage rate and subtract that amount from comps to get to reasonable price. make sure the tax diff calc uses fully loaded tax amount.
A lot of the newer construction will have exorbitantly high monthlies once the tax abatements expire. At the same time, the building will be under pressure to reduce amenities to keep the monthlies within a normal range, and all of the new finishes will start to lose their lustre.... I'd stay away.
The real estate taxes in NYC don't seem as blatantly unfair as in other places I've lived, and fortunately I'm not sure I've ever seen "low taxes!" advertised here the way it often is in other places. I will always be wary of paying a premium for anything with "low" taxes, as there's no guarantee they'll stay low forever.
In general, the higher your odds of an above-market tax increase (and it's 100% in your case), the more hit your property value could take. I think the safest road is always to stay within the "normal" range of monthlies. Too high, and you could wind up with an albatross around your neck. Too low, and you could end up paying a premium only to get socked with an imminent increase.
I have to say that I truly hate tax abatements. (To NYC's credits, ours are not the worst I've seen.) They artificially inflate property prices, line developers' pockets, and keep taxes higher for the rest of us. And, eventually, when the bubble bursts and the values of these new construction properties plummet, taxpayers will pick up the tab somehow. It's the same old crap of privatized gains and socialized losses. Tax abatements should not be allowed in anything but the poorest of neighborhoods, in my opinion.