CMB Realty, New York and You
Reasons to Invest In Manhattan
- As one of the most densely populated cities in the world, New York has a powerful real estate market that attracts Investors from all over the world.
Manhattan has been considered a center of culture, art and business for decades, and the borough’s reputation drives its rental and real estate markets. The most expensive property ever sold in manhattan went for $110 million and the city continues to set records for property values, rental rates and other Important Investment Indicators.
A Resilient Housing Market
During the housing market crash of 2008, for example, New York real estate prices showed extraordinary resilience. While New York properties depreciated by about 4.8 percent In 2008, the state fared better than the United States as a whole, Where average property prices fell by 6.28 percent according to the House Price Index HPI.
Factors in Manhattan Real Estate Prices and Cost
- There are multiple aspects that affect Manhattan real estate prices. It is possible to observe an increase in the general level of prices over the years.
The gradual Increase in sales prices can be partially attributed to Manhattan’s strict zoning laws, which greatly restrict the number of available residential properties in the borough. Other factors Include New York City’s growing population, currently at 8.24 million in NYC as a whole and 1.6 million in Manhattan alone according to the United States Census Bureau
- High average incomes.
- A varied, International business climate
- Strong culture and superior public transportation..
Rental Property Investments in New York City
- New York has one of the most expensive rental averages due to low vacancy rates.
Rental properties in the city of New York are historically a strong investment. Statistics show that Manhattan rental prices soared to $3,418 in 2011. For investors, rising rental prices Indicates strong demand and the viability of rental property ownership, especially for those who intend to sell properties at some point.
- Points to Consider
- Property type. Many co-operative apartments restrict property owners subletting rights.
- Good Investment properties will attract stable, long -term tenants.
- Property statistics. Neighborhood amenities, transportation, property age and community features will affect Investment potential.
- Neighborhood-specific markets. Property Costs, yield and capital appreciation vary from street to street and from one development to the next.
- There are several ways that non-resident aliens can acquire U.S. real estate. At CMB Realty, we frequently act as buyer’s agents for NRAs and help our clients organize their goals, evaluate properties and choose ownership alternatives to maximize the value of their new properties.
1. Direct Ownership
No Second Tax Levels for Rental Income – NRAs pay a second level of taxes on their repatriated operating earnings, which Includes rental Income, through some of the other ownership options listed below. By directly owning properties, NRAs avoid this consequence.
Capital Gains Tax Advantages – Non-resident aliens typically have more favorable capital gains tax rates upon selling their properties through direct ownership than they might get through other options.
2. Buying Through U.S. and Foreign Corporations
Many buyers choose to purchase property through a U.S. based or foreign corporation.
- Non-resident aliens get liability protection by owning real estate through a United States-based corporation. You pay a 35 percent federal income tax rate for operating the corporation.
- The corporation needs to list the address, taxpayer Identification number and the name of any person who owns more than 50 percent of the corporation’s stock to the IRS.
- However, the corporation owner does not need to file personal income tax statements.
- Repatriated funds (any money sent back to your home country) are subject to double taxation unless you decide to end the corporation and liquidate its holdings.
- As with direct ownership, you are subject to estate taxes when you own property as a United States corporation.
You can also form a corporation in another country to own U.S. real estate, but the Foreign Investment in Real Property Tax Act (FIRPTA) comes Into play. Here’s what you need to know about this option:
- You pay a 35 percent federal income tax for operating a foreign corporation Inside of the united states.
- Any repatriated operating Income on your real estate is subject to an additional tax of 30 percent. This applies to all of your holdings.
- FIRPTA taxes don’t apply to stock sales, but they do apply to real property Interest.
- You do not pay estate taxes or gift taxes on real estate owned by a foreign corporation.
Buying Through Limited Liability Companies
- You can form an LLC alone or with partners to purchase property. If you are the sole owner, United States tax law treats you as a disregarded entity. This means that for tax purposes, you are not a separate body from your LLC.
- A Limited liability corporation serves as a partnership when it has multiple owners.
- Many countries do not have a limited liability corporation designation or assess more of a tax liability for people with LLCs. Your Home country’s tax laws will play an important role in determining whether ownership through an LLC is worthwhile.
1031 Tax Exchange
- Investors use the advantageous 1031 Exchange law to optimize their investments.
A 1031 tax abatement, also known as a Like -Kind exchange, allows buyers to avoid paying taxes during the process of selling and buying investment property. It is meant to assist property Investors in purchasing higher-priced property after a sale. As a concrete example, Imagine an Investor purchasing a piece of property for $3,000,000. A year later, he sells the property for $4,000,000 and then buys another property with that $4,000,000. Under normal circumstances, the Investor would have to pay taxes on the capital gain ( the $1,000,000 profit), leaving little money to buy a better piece of property. Under a 1031 abatement, however, he can defer paying taxes on the gain until a later time, and use the entire $1,000,000 profit to invest in a bigger or better piece of property. The concept of a 1031 exchange is the trading of properties (one bought, one sold ) without reporting whether there was a loss or gain on the transaction. In essence, this exchange allows buyers to borrow the amount of the gain from the government as an interest-free loan.
- 1031 Exchange: Timelines and Restrictions
With a 1031, there is a solid timeline that must be followed between the time that a property is sold and another exchanged. This timeline is divided into two distinctive periods, the identification Period and the Exchange Period. The Identification period is the first 45 days of the exchange; In this time the property to be exchanged has to be officially recognized. As such, taxpayers who have multiple properties and identify the wrong property for trade must stick with their choice. In addition, if mother nature steps in and destroys the home that was to be exchanged, the 1031 will have to be dismissed. The process of exchange is very stringent.
The exchange period ends when a replacement property has been successfully exchanged with the original property, not to exceed 180 days from the start of the identification period.
- Following Through With a 1031
The hardest part of following through with a 1031 exchange is finding a replacement property within the 45 days given by the IRS after relinquishing the original property. However, there are some guidelines that can increase a person’s options. First, a taxpayer may choose up to three replacement properties, of any value, from which he/she must acquire at least one of those before the 180-day deadline.
Frequently Asked Questions
I live outside the US and would love to buy new york real estate. Can I buy in NYC?
The New York real estate market is Friendly towards International buyers. Indeed, countless foreign Individuals and companies are taking advantage of this opportunity. New York condominiums and townhouses are the most popular choices among International buyers. Since purchasing coops and other special types of housing requires buyers to show US tax returns, these options are more challenging for foreigners.
Can you explain the concept of condo living? Is condo ownership a possibility for International buyers?
A Manhattan condo offers a comfortable, contemporary lifestyle for Individuals or families. Within a condominium, a buyer owns an apartment but shares common areas with other residents. Condo living is gaining Immense popularity with US residents as well as foreign buyers. Within recent years, New York has seen the construction of new condos as well as the transformation of older buildings into modern condominiums. The new condos have the latest modern conveniences, feature luxurious touches, and offer a host of services. Also, buyers of new condos can receive depending on the property tremendous saving through tax relief for the initial 10-25 years. In the midst of an ever-growing market, New York condos comprise over-quarter of all its real estate. Contact Us to find a newly-built condo or state-of-the-art restoration.
Condominiums – the Popular Choice For International Buyers
Easy Approval- Every condominium has a Board, comprised of residents, which makes decisions about building Issues such as use, repair, and rules. Every purchaser has to be approved by the board, but the process is more a formality than a complicated process.
Minimum Restrictions – Condominiums have minimum restrictions regarding use or ownership. Part-time residence (pled-a terre’s), as well as rental arrangements, are permitted under condo regulations.
Attractive Investment – Even though condos are priced higher than co-ops, they make up for the difference in convenience and flexibility. In addition to providing elegant style and excellent design, condominiums are an attractive Investment. Since it is so easy to buy or sell a New York condo, more International buyers are eager to experience life in a Manhattan condominium.
I want to own real estate in New York. What will be the associated expenses?
Real Estate Taxes – Depending on the property, real estate taxes can range from hundreds to thousands of dollars. Whether you are an average owner or an avid Investor, seek Information about decreasing your taxes through available deductions.
Common Charges/Maintenance Fees – Common charges and maintenance fees are monthly expenses. While co-op owners are responsible for maintenance fees, condo owners pay common charges. Monthly charges will vary from building to building but can cost from hundreds to thousands of dollars per month. A higher level of amenities in residence translates into a greater monthly charge ($1/square foot on the higher end).
When buying NYC real estate, what will be the closing costs?
Buyers and sellers have to pay closing costs during a real estate sale. This expense can add up to between 1% and 8% of the purchase price. Legal, registration and federal/state/city fees are in addition to a down payment. Tese charges must be at closing.
NYC Real Property Transfer Tax – When purchasing a new NYC condo (referred to as buying from a sponsor), the buyer must pay the New York City Real Property Transfer Tax. This charge can range from 1% ( for condos less than $499,000) to 1.425% (for condos more than $499000).
New York State Transfer Tax – The New York State Transfer Tax amounts to .4% of the purchase price.
Seller’s Attorney Fee – The seller’s attorney fee will fall between $1500 and $3000.
Title Ownership – Title ownership lays claim to a buyer’s right to ownership. With title ownership, a third party can never claim to be the owner of the property. The cost of title ownership is $450/$100,000 of the purchase price.
Mansion Tax – Mansion tax is Imposed on property which costs over $1,000,000. The fee is 1% of the sale price
Application Fees– Certain buildings charge an application fee of $200.
Managing Agent Fee– A managing agent fee will run between $250 and $500.
Move-In Deposit – A move-In deposit can range from $500 -$1500.
Attorney Review – An attorney’s services Is needed to review a buyer’s documents. Depending on the complexity of the sale, the review fee will be between $2500 and $5000. An Additional $500 will be required to pay for recording costs.
Mortgage Loan Origination Fees – For those with mortgages, the mortgages fees can range between .5% and 3% of the mortgage value.
Lieu Search Fees – Lieu search fees run between $300 and $400.
Mortgage Tax – The mortgage tax can be between 1.8% (for mortgages under $499,000) and 1.925% (for mortgages over $499,000).
Appraisal – Appraisals cost In excess of $500.
Credit Report – Credit reports range between $30 and $100.
Loan Application – Loan applications cost In the range of $500.
Bank Attorney Fee – Bank attorney fees come In between $1500 and $2500.
Miscellaneous Bank Fees – Miscellaneous bank fees (such as home Insurance and escrow) can add up to between $400 and $1200.
Does it make sense to buy under the name of a domestic US company?
Although there are benefits to buying through an LLC (Limited Liability Company), certain treaties between a foreign country and the US can minimize the advantages. Foreign buyers should enlist the help of a tax adviser specializing In International law. CMB Realty can put a buyer In touch with a tax adviser who can assess Individual situations.
Top 5 List – Things You Need To Know About An LLC
- It takes approximately one week to form an LLC.
- The LLC must be created In the same state as the location of the property.
- An LLC can have unlimited membership Including non-residents and US residents.
- The LLC is required to file tax returns (local, state, federal).
- At the time of sale, owners can sell or transfer LLC shares to a buyer. Learn More: Acquisition Vehicles
Could you explain brokerage fees in NYC? Does the buyer have to pay them?
When International buyers choose an CMB Realty agent, there is zero Commision to pay. Foreign buyers do not pay brokerage fees in NYC. The general rule for residential and commercial real estate sales is that the seller pays the brokerage fee which is then divided between the brokers for the seller and the buyer. We are compensated as any other Broker and paid through the proceeds of the sale.
Customarily, fees for real estate brokerage have been build into the purchase price of the property. This means that a typical purchase will result in no additional out -of-pocket fees for you! When an apartment sells, half of the 6% commision Is paid to the real estate company that brings In the Buyer and the other half is kept by the company listing the property for sale, representing the seller.
I understand the most sellers use a broker. Do I need a broker’s services?
The majority of sellers have a broker. Since having an agent offers protection, buyers and sellers should have their brokers. A seller’s broker will not represent a buyer’s rights. Foreign buyer need a broker to work specifically on their behalf. A broker can request concessions or Intercede for a reduction in price. Having an agent In your corner Is essential In finding the right property for the right price. Since a seller pays for a buyer’s should not risk making expensive mistakes by doing it on their own. Foreign buyers needs the services of a qualified broker.
Buyers Should Hire Brokers – Top 5 Reasons
- Using a broker makes buying a less time-consuming process.
- Brokers have access to every NYC property in the marketplace.
- Brokers can help with presentation of documents and applications.
- Brokers coordinate the team of professionals needed to complete a sale
- Brokers simplify the buying process
Do you provide property management should I choose to purchase an Investment property?
Yes, CMB Realty ensures a hassle-free process when Investing in the largest real estate market in the world. New york City is an investment goldmine, offering high returns as property values regularly increase. We manage every aspect of buying, leasing and selling property in New York City, so you enjoy a profitable and stress-free experience.
CMB Realty. also assists in finding tenants should you wish to rent out your Investment property, and provides full property management services. Whether you live locally or abroad, we specialize in managing Individual condo and co-op units, so we can provide the hands-on service and staff to meet the needs of our discerning clientele.