Hi all, 

I need some help deciding if now is a good time to sell my co-op in Manhattan. I bought it in 2015 because I worked in Midtown and thought I could save on rent. I no longer work or live there so currently it's being rented out. I lived there for a little over a year before I rented it out. A real estate broker once told me this changes the property type to an investment property. I'm not sure what this implies... Anyways, I net about $100 each month after maintenance and sublet fee. I realize its really low ROI and knew that I need to sell at some point.

My initial plan was to wait until the co-op have appreciated a little to sell so I can at least break even after the flip tax, broker's fees and other fees associated with the sale of the place. I have been tracking the price of properties in the same building on Streeteasy for 6 plus months and the prices have not changed much. I don't know if I should continue waiting, hoping for appreciation or just sell it at a cost so I can take back my down payment and invest elsewhere. 

The place is located near grand central around tudor city area if that helps. I have been confused by the low prices of the apartments in these buildings because the location is so convenient to everything and it's right by the water. 

Another question I have is what will my taxes look like after I've sold the property? Will I be able to get any type of refund for selling it at a cost? 

Apologies for the long post. Hope to get some helpful feedback.

Best,

Jinyu

The price always goes up in Manhattan but who knows when that will happen in your particular building. It sounds to me that you have not waited very long for the value to increase though since it was a recent purchase.

What is your living situation now? Do u need to sell in order to buy a new property for yourself? Also have you checked with a broker to find out if you can rent your apartment for more to increase your profits?

Hey Jinyu, I am a broker in NYC and if you need a property evaluation PM me to see what prices are saying in the building. If send me the details I'll run the comps.

@Jinyu Shao

historically prices in Manhattan always seem to go up. However, I would caution the outlook for the next couple of years. There has been a large supply of buildings built in the past couple years with more in the near future.(LIC, Greenpoint, Williamsburgh, South Bronx, Jersey City, Hudson yards etc).

The increase in supply will likely drive stability in prices for at least the near future.

I am a NYC Resident and I invest out of state. In my opinion - there are other areas that will generate a better rate of return.

In regards to the taxation portion. it depends on what your basis is in the property.
considering the property is now a rental property - you are depreciating the property and the basis of the property every year.
So when you sell the property you dont take selling price minus purchase price = gain. You take
selling price + depreciation taken - purchase price to calculate the gain.

Let me know if you have any other questions.

if you live in a place for two year out of the past five years, the place is considered as your primary home. the capital appreciation up to 250k is tax free for singles and the limit is increased to $500k for married couples. 

to keep the place or not, depends on what you want to do with the downpayment. just speaking of return, besides of the $100 you keep, the mortgage is also getting paid from the rent..slowly you are building equity; after 30 years (assuming you got a 30 yr mortgage), you will own this place free and clear. on the other hand, if you have other investments with higher returns in mind, selling at a cost is also a good option. 

@Jinyu Shao if it isn’t hurting you financially to just make a small monthly profit, I vote HOLD the property until you can sell at a profit. Manhattan always goes up eventually and rent always goes up, so your cash flow
will keep increasing. As long as you sell within that 5 year window so that you can skip capital gains taxes (have to live there 2 of last 5 years) you should hold on until you make a profit from the sale and let your tenant pay down your mortgage and give you $150/mos in the meantime. Good luck with it!

Hi Jinyu,

It's always a little more complicated in a coop in NYC. First, you need to check the coop rules regarding subletting your apartment. Most boards restrict this. Second, check the flip tax the coop gets upon sale. (If there is none, you are very lucky). Next is the NYS and NYC transfer tax, and then broker fees. 

I would be happy to discuss your options and help you with this decision. Please PM me if you would like to discuss.

George

It scares me when it is mentioned that something always has to happen...
Yes - Historically Manhattan prices have increased.
However, Manhattan prices in the future can increase, stay flat or even decrease.

Income is negligible. There is little reason to hold now that you have moved. Since it does create a unnecessary drain on your time and priorities I would sell and move on. Waiting may produce no benefit.

Move on with your life.

Don’t forget the rezoning get of midtown east especially if you are in a small older building. Large potential buyout opportunity there.

@Jinyu Shao There are a few factors I'd consider before deciding to sell:

1. How long will the co-op allow you to sublet? If the co-op limits the amount of time you can sublet, you will lose your rental income at this point. I know many of the buildings in the Tudor City area have liberal or unlimited sublet policies, but I'm not sure what building you are in.
2. Have you factored the sublet fees (some co-ops increase these every year you sublet) and vacancy (including board approval time) into your ROI?
3. Are you planning to buy another home or investment property once you sell? I'm assuming you put at least 20% down, which could be a good down payment for an investment property that may generate a higher rental yield.
4. Have you factored in NYC transfer tax into the cost of selling? This is 1% if the property sells for under 500k and 1.425% for over 500k.

Generally, I advise my clients to hold onto a property for around 7 years if they are hoping to sell for a higher price from appreciation, otherwise the costs of selling can wipe out any increase.

Overall, your decision to sell or hold depends on your goals and if you have a place to put the money that better aligns with those goals.

I'm going to side with @Ericka Grant here.  If you don't need the cash, hang on to it.  You stand to gain significant $ by waiting it out for at least a few more years, all the while your tenant is paying down your loan.  While I am no NYC market trend expert, I can't imagine the buildings going up in the boroughs will impact your value.  Your place is in a fantastic neighborhood where there will always be demand.  Sure, people are moving out to the boroughs, but demand for Manhattan will always be high...especially because there is nowhere else to build but up.  I know from personal experience, as my entire [co-op] building was bought out by a developer last year.  I never would have left had that not happened.  All the more reason I want you to keep your place.  :)

Wow thanks everyone for the feedback! I'll try my best to reply to everyone.

@Gregory B.   Could you elaborate on the rezoning? I could not figure out why the the prices in my neighborhood have not been appreciating much, do you think is a possible reason?

@Thomas S. That's true. It's unlikely I'll move back into the co-op. I'm fortunate enough to have a tenant who pays on time and have not caused any trouble, fingers crossed of course. 

@George Hermann Thanks George. My co-op allows sublet, but with a hefty subletting fee of 30%. 

@Basit Siddiqi Everyone I ask tells me the prices of my co-op will go up and the reason they use is always because historically real estate in NYC always does. But I think you have a point with the increasing supply of housing in and around Manhattan. 

If you don't mind me asking, where do you invest out of state? That's my plan after selling the co-op. I'm still looking at different potential cities. Seems like everywhere else, except SF, have better returns than NYC. 

@Amy Beth The co-op has already been rented since March. I currently have a place to stay in NYC. I'm selling so I can invest else where and increase my cashflow. 

@Diana Tian I don't plan to own the property because I no longer need to live in the area. I'm planning to reinvest the downpayment. 

@Ericka Grant Thanks for the feedback. It will be difficult for me to skip capital gaines taxes since I have not lived there for 2 years. I would have to move back and pay the maintenance and mortgage myself if I want to take advantage of that. As I'm not sure how much the property will appreciate, I'm not sure if it's worth it.

@Jinyu Shao

My suggestion would be that if you did not to buy the coop as an investment then you should sell it now that you do not live there anymore. You can put the money into something out of state, or more than likely be able to buy a solid cash flow producing multifamily in let's say the Bronx, or Lower Westchester. If you're looking for higher cash-flow then you can look in other areas. It really depends what your goals are moving forward. How much cash and buying leverage will this free up to purchase another property? Can you possibly buy more than 1 property with what you have invested in this apartment? Going over your goals and coming up with a plan is essential for you to make the right decision. If you need help with that feel free to PM me. Good luck!