Interesting Landlord Rant

August 27, 2008 by
Filed under: Greenpoint Magic 

This angry communique comes from the wailing wall of the New York Shitty collective consciousness. In other words it can be found on the Craigslist online real estate classifieds. Diana G (who found this missive) writes:

I am astounded by the real estate taxes in particular that have skyrocketed so high and wondering if that is true about the developers.

My answer: it probably is. Property taxes are such that many mom and pop landlords in Greenpoint are now “property rich” but cash poor. The most troublesome thing is this landlord’s woes are hardly over. When all the condos being built here (with the help of major tax bennies) start getting dumped into the rental market (and they will) this man could very well lose his shirt.

Miss Heather

Comments

6 Comments on Interesting Landlord Rant

  1. Jimmy Legs on Thu, 28th Aug 2008 9:51 am
  2. does it seem odd that the landlord in the response pays 2 grand a month mortgage on a house they bought 18 years ago? you’d think that buying in greenpoint so long ago they’d have gotten a deal, or if not, by now they could have refinanced or something? this certainly belies that notion that smart folks bought in brooklyn long ago, sounds bad no matter when you buy!

  3. jake_tuff on Thu, 28th Aug 2008 10:41 am
  4. Those tax incentives are actually passed onto the consumer. So the effect is that developers can charge more for an apartment in price since the buyer will pay less in taxes. The tax benefits have no direct affect on the initial financing of the project.

    Also, assessed values on rental buildings are largely based on income and comparable building sales. Should his income fall due to depressed rents from more supply his taxes SHOULD fall. They should also fall as properties look less attractive as investments or developable land. If these adjustments don’t happen then there are going to be big problems around the borough.

  5. suzyO on Thu, 28th Aug 2008 10:58 pm
  6. yo, jimmy legs, let us do some simple arithmetic.

    2K/month, purchased 18 years ago, considering the price of money at that time, translates to a purchase price of 280K. that 280K is a bit high, as this number is over the going price for a 4 unit building in greenpoint circa 1990. ergo, the property holder likely did refinance the mortgage, and likely paid about 200K for the property.

    the 3K he has leftover per annum is certainly swallowed up by repairs to the usual suspects … leaking sink, crumbling stoop, anything you might imagine that a 100 year old building might require for upkeep.

    to jake:
    Should his income fall due to depressed rents from more supply his taxes SHOULD fall.

    yeah, when pigs fly.

    the developers cause tax inflation, and do not pay a penny of said inflation.

    it is a wicked game.

  7. Dave Goldsmith on Sat, 30th Aug 2008 8:16 pm
  8. Firstly, the new developments are not permanently immune for Real Estate taxes, it’s just that the onset of them is deferred and phased in (yeah, over what seems like a long time, but not as long as this guy owns his house for!!!). But as far as “Also, assessed values on rental buildings are largely based on income and comparable building sales. Should his income fall due to depressed rents from more supply his taxes SHOULD fall”, there is a lot more to it than that.

    For most smaller buildings, there is an “actual” and a “target” value. For various types (especially one and 2 family houses) there are limitations on the yearly (or over a five year period) increases and often the “actual” assessed value is and will forever be playing a game of “catch up” with the target value (NB the target value is what one would really think of as the “actual” value”, while the “actual” value is the artificially deflated value being used to “actually” calculate taxes – I know this is all very confusing and I’m sorry if I’m not explaining it in a way that’s it’s easy to understand).

    But here’s the real kicker that most don’t know about: firstly, the assessed value of almost all residential property has very little to do with the actual market value. houses that are selling for $5 million have assessed values of like $300,000. Secondly, the assessed values are really only used as a RELATIVE thing when it comes to actually paying taxes. When it comes to actually decding on the taxes to be paid, the City adds up all of the assessed values for ALL properties in a tax class, decides how much taxes they can/want to charge, and DERIVE the tax rates by backing into it. the assessed value just determines what chunk of your class’s burden you end up paying.

    But there are all sort of tricks and foibles along the way: for example, if the landlord above wanted to bring a screeching halt to his tax increases, he’d let his siblings have those apartments, but he’d do it be converting the house into a 2 family and letting them live “in the same apartment with him”, but on their own floor. this would bring the building back into a tax class where increases in assessments are capped at 20% over any 5 year period!!!!!!!!!

    You know who found this stuff out the really hard way? The people who have been buying one and two family brownstones/row houses over the past 5 or so years partly based on how low their taxes were, then, since they can’t afford the mortgage, making them into 4 families. BOOM!!!!!! They change the tax class to one without that cap, and their taxes quintuple overnite and now they can’t afford the place.

  9. d on Sun, 31st Aug 2008 1:41 pm
  10. Wow, great comments, I learned a lot. Thanks for posting my find, Miss Heather! It’s good to hear perspectives of property owners since so few of us can afford it ourselves.

  11. xdx on Tue, 2nd Sep 2008 7:14 am
  12. to this i must add, my parents bought a house in greenpoint way back in the day.
    me and my 7 brothers and sister grew up there, and in the end my mother had to sell it
    cause on a fixed income, she sould not afford the taxes, water,heat, insurance and all other city costs. please dont think your landlords are making a fortune off you. yes some are, but they are a rarity. new york is an extremely expensive place to own, and most are cash poor, living on the rent check each month to clear there costs. this is a combination of things, but the uncontroled development and over assement of the greenpoint area is the main problem. there should be a call to re-zone greenpoint like those in carol gardens got, to smaller dwellings, lets be honest we havent got a damn thing from the re-zoning, “promised” parks and water front access, and moderate income housing which now will be delayed at least until 2012… that is if the next mayor even keeps the deal that bloomberg made. all i can say is goto your communtiy boad meetings, speak with your landlord, as for mine she is very reasonable, and will always not raise the rent as much as she wants.

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