How do we encourage private real estate investors to stay in New York when the property taxes are so high?
New York is notorious for its high property taxes, and high taxes in general. When you add that to current high property prices, and concerns over whether we’re reaching a new peak in the rental and property market it’s no secret that many real estate investors are thinking about leaving the state.
The financial hits never seem to end either. If it’s not the new tax bill and cap on property tax deductions, it is the latest efforts to clean up cesspools across Suffolk County on Long Island. Here 75% of the homes are not connected to the sewer system. New regulatory requirements and goals for taking nitrogen out of the water system, could mean a new cost of $20,000 per property, or more. That’s just upfront, and does not count ongoing maintenance. Suffolk County’s new septic tank plan is of course largely going to be funded by new real estate taxes. You get taxed more if you buy or sell, and that money goes to fund grants or loans to other property owners to upgrade their sewer treatment systems.
With the blows keeping on coming, many real estate investors are thinking of cashing out while the going is good. They are scared the market is over the top of its peak, and are very interested in moving to other states with lower prices, lower taxes, and better returns and more safety.
While in some cases investment activity can hurt affordability and big developers may have gotten too many tax breaks in the past, we need private investors. The northeast is still home to much of the nation’s distressed real estate and blight. We need individuals to stay, inject their investment and to put in the work to improve, maintain and manage properties.
Of course, we only seem to be headed for more and more taxes in this state. For now this means that it is up to these individual investors to make it work for themselves. So, what can you do as a real estate investor to make the numbers work better and stay in New York, near family?
A refinance to lower payments is still viable with current interest rates if holding on long term. Or there is the ability to use equity lines to release equity and purchase and diversify out of area, without selling your New York assets.
While short term rental rules are still diverging, some may use additional units like basement apartments to increase income or find higher rents through Airbnb. That can compound the affordability problem and future taxes, but some may find it essential over the next year.
By investing in New York property through 1031 exchanges and self-directed IRAs individual investors and families can reduce overall taxes and offset property tax increases, by lowering income taxes and taxes on investment gains.
For many the biggest immediate difference in making ends meet and ensuring assets continue to deliver positive returns is going to be to challenge your property tax bill and have those assessments lowered.
What are your plans for your New York real estate investments?