Posts

Showing posts from February, 2016

Legal Line Question: Ground Leases

February 18, 2016 Q: I am a licensed real estate salesperson and I am representing a purchaser who is considering a co-op apartment in a building that has a Ground Lease. Can you please clarify exactly what a Ground Lease is? Also, are there any particular considerations that should be made before purchasing a co-op apartment in a building that has a Ground Lease? A: If a co-op building has a Ground Lease (also known as a Land Lease) it means that the co-op corporation does not own the land under the building.  Rather, the co-op corporation leases the land from the owner of the land. About 100 buildings in Manhattan have Ground Leases, many of which are co-ops. Generally the terms of Ground Leases are quite long, varying from terms of 50 to 99 years. Several important considerations should be made before purchasing a co-op apartment in a building with a Ground Lease: Can the rent payable by the co-op corporation increase during the term of the Ground Lease? 
If the rent can increase duri…

Legal Line Question: The Mansion Tax

Image
February 25, 2016 Q: I am a licensed New York state real estate broker and I am representing a purchaser who is considering buying an apartment for $999,999.00. My purchaser is worried that she will be required to pay the Mansion Tax on the sale. Can you please tell me what the Mansion Tax is and whether she will have to pay the Mansion Tax if the apartment closes at $999,999?  A: The Mansion Tax is a fee paid by the purchaser of residential real property in New York State, when the total consideration is One Million ($1,000,000.00) Dollars or more. Residential real property is defined as "any premises that is or may be used in whole or in part as a personal residence at the time of conveyance, and includes a one-, two-, or three-family house, an individual condominium, or a cooperative apartment unit." The Mansion Tax is equal to 1% of the total "consideration." New York State Tax Law defines "consideration" as the price actually paid or required to be pa…

Legal Line Question: 1031 Exchanges

Legal Line Question: 1031 Exchanges February 11, 2016 Q: I am a licensed real estate salesperson and I am representing a seller who is selling a three family investment property. She is interested in reinvesting the proceeds from the sale in a 1031 Exchange. What is a 1031 Exchange? Will the seller be able to avoid paying capital gains tax by participating in a 1031 Exchange? A: The term "1031 Exchange" refers to Section 1031 of the Internal Revenue Code (the "Code"). A 1031 Exchange affords the seller of an investment property (the "Original Property") the opportunity to defer paying capital gains on the Original Property if the seller reinvests the proceeds of the sale in the purchase of a "Like Kind" replacement property (the "Replacement Property"). It is important to note that the seller does not avoid paying capital gains on the sale of the Original Property. Rather the capital gains taxes on the sale of the Original Property are …

New York Property Capital Gains Tax (and other taxes)

Here is a summary of the major tax categories when buying property in New York.  Besides capital gains, there is also monthly property tax, income tax and estate (inheritance) tax.  

Property Tax Property tax is provided as a monthly amount with each property but paid quarterly.   A rough guide is $1 per sqft per month but it varies with the apartment and building.  For example, a 1000 sqft apartment may have monthly property tax of $1000.  This is the second largest carrying cost after common charges each month (excluding mortgage). 
Newer buildings usually have a tax abatement, which means a decreased property tax amount lower than the $1 per sqft per month example, during the first 10 years of the property's life.  This is commonly known as a 421-A tax abatement.  During the first 10 years, taxes typically increase every two years linearly and by year 10, it would be what taxes should be without the abatement.  

Income Tax This depends on the owner's income level but assuming th…

Real Estate Purchase Overview for Foreign Buyers

1 Why New York Manhattan is the most expensive, most stable and most recognized market in the US.  The recent Knight Frank Wealth Report 2015 ranks Manhattan as the top real estate market in the world based on factors including economic environment, political climate, knowledge and quality of life.  Globally, Manhattan is a bargain when compared to cities like London, Paris and Hong Kong.  
2 Can foreigners buy property in Manhattan, New York? Yes. Our foreign clients buy property in Manhattan because of brand value and appreciation potential. They often purchase as a pied-a-terre (vacation home), or as an investment property.


3  What type of properties are popular among foreign / international buyers? There are two categories of apartments - condominiums and cooperatives. We recommend condos because of the higher appreciation and investment values. Co-op buildings often restrict ability to rent and perform renovations.  This reduces their attractiveness as an investment property. The proc…