Flip Tax - %of gross vs % of profit

I think it's easier to know the gross amount of the sale rather than the profit that was made on the sale. I say gross. That's how income taxes are figured as well, of course.

1% of total sales price, as long as the sales price is greater than or equal to the purchase price. That way, if values go way down and someone has to sell due to hardship and take a loss, they don't have insult compounded on injury by having to pay a flip tax as well.

% of profit seems much more reasonable, especially as prices start to level. Let's say you bought at 800K and are selling at 850K. Isn't it better to pay a % of the profit --1% of 50K is $500 vs 1% of 850,000 which is $8500.

Flip tax will lower the value of the apartments in your coop.

No it doesn't - it's a relatively common occurance now. Normally, the flip tax 1% - 2%. Over that, I do agree that it would becaome a negative in terms of resale. But especially at 1%, it should have no bearing.

Flip tax will lower the value of your apartment. . as a buyer, i can find other units without them. Get real!

OP here. I agree that they could be a negative when selling. Once of the attractions of the place when we bought was that there was no flip tax.

Maybe at the low end (studios, one bedrooms), but at the higher end, if it's a modest charge like 1%, that ain't stoppin' nobody.

It's stopped me before.

Cant talk for anyone else but it gets in my craw how badly managed the revenue of the co-op was that they needed flip taxes in the first price when they already had a high monthly.

Cheers,
Dean

Flip tax definitely lowers value of apartment, but a limited or phased out flip tax (example, pay 2% if you flip in year one, 1% if in year 2, and no flip tax after year 3) can help promote stability in a building. Promotes ownership by people who want to live there for an extended period of time, rather than people who just want to flip for a quick buck.
It can be successful if used sparingly and not as a substitute for a building's financial accountability.

Would imposing a flip tax lower the monthlies? The building needs X $'s total for its expenses. If the get a portion of that from a flip tax wouldn't the maintenance fees be less? Poorly managed buildings need more than well run ones but this doesn't factor into this equation.

I used to live in a coop on west 86th...15% flip tax paid by the seller and the "monthly" would still go up every year. Flip tax is for poorly managed coop buildings.

Even supposing a flip tax did lower the monthlies, so what? Over the time you own the apartment, you're still paying the exact same amount of money to the board. It's not just your neighbors and "greedy investors" who have to pay the tax -- eventually, it'll hit you too.

I think the point is you have to take all the fees, monthy mainenance and flip taxes and the history of assesments into account when determining how well run a building is and what the newly imposed flip tax would due to property values.

OP, am I understanding this correctly - your building wants the flip tax to generate "operating revenue"? I thought a flip tax was to replenish the building's cash reserves, which is on the balance sheet.

You better check on that. Operating revenue is typically maintenance fees, commercial lease income, laundry $$, etc. In other words, ongoing $$. I would think that a building relying on a flip tax for revenue may raise a red flag.

Anyone else have an opinion on this?