investing in high tax areas outside NYC

Multi-Family and Apartment Investing
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investing in high tax areas outside NYC

Alex AllevaPro Member
Rental Property Investor 路 Mamaroneck, NY 路 Member since 2017 路 24 posts 路 5 votes

Hello 

My siblings and I have recently taken over our grandparents 4 family home. I have more or less been running it for sometime now but I want to expand our portfolio. I am nervous about investing in the area I live in (Westchester County NY) because of the high tax rates. We are currently paying roughly 19k in taxes on our 4 family home. With the new tax code we are only allowed to deduct up to 10k on this home now which really sucks. 

Part of me wants to sell everything a move to a cheaper state but then again this is home and where the rest of my family is. How do you all feel about rental properties in NYC suburbs or other super high tax areas? 

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  • Victor SteffenBusiness Member
    Investor 路 Austin, TX 路 Member since 2017 路 352 posts 路 374 votes
    8y

    There are a few pockets of properties with (relatively) low taxes in Westchester county, however, they are few and far between. Maybe check out Connecticut. Lower taxes, and prices are not as inflated as Westchester.

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  • Percy N.
    Developer 路 Philadelphia, PA 路 Member since 2015 路 2k+ posts 路 905 votes
    8y

    @Alex Alleva, is this an investment property?

    If so, check with your accountant if the $10k deductible limit still applies.

    https://ttlc.intuit.com/questions/4144891-will-i-still-be-able-to-deduct-property-taxes-on-my-rental-property-under-the-new-law-if-i-already-reach-10-000-salt-cap-deduction-through-personal-home-property-tax

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  • Alex AllevaPro Member
    OP
    Rental Property Investor 路 Mamaroneck, NY 路 Member since 2017 路 24 posts 路 5 votes
    8y

    Thanks for the responses. If we keep this house it will be an investment property. I am currently living in one unit and looking for another tenant for a vacant apartment.

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  • Michael Gansberg
    Investor 路 New York City, NY 路 Member since 2015 路 388 posts 路 563 votes
    8y

    @Alex Alleva - the limits on that deduction are for homeowners, not investors. The recent tax bill was written with the real estate investor in mind(wonder why??? 馃馃馃) Check with your accountant, of course. 

    I think it'll be a high hurdle to sell and reinvest- you'll pay fees coming and going, and will probably have some taxable consequences as well. If there's a good deal of equity in the house, maybe consider a HELOC to pull some equity out and recycle that into another property or two in an area which hits your metrics more effectively.

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  • Jared W SmithBusiness Member
    Architect 路 Westchester County, NY 路 Member since 2018 路 684 posts 路 476 votes
    8y

    @Alex Alleva $19k is nothing for a 4-family. I pay $13k for my own single family in Westchester. (Grieving taxes as we speak to a more manageable amount.)    

    As I've heard on the podcast and within my own research, the taxes are just part of the expenses to consider in a prospective property. Check with your accountant for legality of deductibles.   

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  • Christopher Polanco
    Yonkers, NY 路 Member since 2016 路 23 posts 路 9 votes
    8y

    The $10k limit applies to homeowners and not investors. Seeing as how this is an investment property you are not limited to the $10k deductible. I would even argue this to be true even with you occupying one of the units and renting the other 3 out.  For tax purposes income from the rentals would be treated as rental income which is again not subject to the $10k limit. In addition there are a host of other tax benefits and deductions which you would be entitled to claim depending on your income. I am not a professional accountant so I would check with one for the details but I am almost sure this is the case. 

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  • Basit SiddiqiBusiness Member
    Accountant 路 New York, NY 路 Member since 2015 路 8k+ posts 路 3k+ votes
    8y

    @Alex Alleva

    Alex - If you are currently living in the house and the total property taxes is $19,000 for the total 4-plex.

    The property taxes allocated to you as an itemized deduction should be $4,750. 

    When you convert this to an investment property - the $19,000 would be a business deduction. It would not be limited to the $10,000 limitation.

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  • Steve Kontos
    Investor 路 Great Neck, NY 路 Member since 2016 路 679 posts 路 467 votes
    8y

    @Alex Alleva

    Truth be told, your money will go a lot further out of state hence why I live in New York and invest elsewhere.  I think the best option (based on what you have presented here) is that you should try to refinance this asset and use that money to invest elsewhere.  Considering how crazy rent is here and how difficult it is to have a place to live, you should keep and leverage it.

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  • Dan HandfordPro Member
    Investor 路 Lexington, SC 路 Member since 2018 路 779 posts 路 501 votes
    8y

    Never look at just one expense category, like taxes, to determine if it is a good idea to keep the asset.

    Always look at the overall underwriting to see if the investment would make sense if you were starting with a fresh 80% LTV loan.

    It might be a good exercise to figure out how to pull out some equity vs selling it to re-invest in a different property that could be more passive income without all of the hassles.

    0Reply
  • Alex AllevaPro Member
    OP
    Rental Property Investor 路 Mamaroneck, NY 路 Member since 2017 路 24 posts 路 5 votes
    8y

    Thank you all for the responses!

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