Experience owning rentals in New York? is it worth the taxes?

7 Replies

I have an opportunity to invest with a partner who lives in Syracuse, NY.  There are some really good deals to be had with good cash flow, and he is willing to do a lot of the work.  I'm worried about possible tax issues since I live in Virginia.  New York is super aggressive on taxation.  Does anyone have experience owning rental properties in New York (not NYC) that can tell me if it is worth it?  I'm not sure what I don't know that I should know before getting involved with NY.  Anything I need to avoid or know about?  Thanks for your advice and experience!  

Rob my man, I live in Raleigh the #2 market in the country and I do my investing in Syracuse. There is certain areas to stay out of . I would also consider SF if out of state. And if you don't want yo partner with him I can😊

As long as you are factoring taxes for the property into the numbers, it's not any different than anywhere else.  There are counties in the Albany area with low taxes compared to downstate, just need to know the right places to look.

My concern is that being out of state, New York might have some law that allows them to tax me for more than just the income from the property in New York.  They have a law that if you have a 2nd home in NY that is vacant then they consider you a resident and tax all of your income.  I know that doesn't apply here, but I don't know if there are any other "get you" laws like that that I don't know about.  I'm curious to know if somebody that is currently investing in rental properties in NY who doesn't live in that state has had any problems or has any recommendations to avoid taxation beyond just the income made in NY.  For that matter, any recommendations on anything that would have made the process easier.

Hi Rob,

I live in NY currently, but I used to live in NJ before and worked at NY.  I'm pretty certain that NY taxes any income that originates in NY only (and NJ taxes you for all income if you live there, thus most people living in NJ and work in NY pays taxes to both states).  I'm obviously talking about income taxes here, but I wouldn't imagine there is a specific different tax code for rental income. 

If you really want to be sure, you can try punching in some hypothetical numbers in turbo tax and see if it generates tax on more than just your rental income.  turbo tax should be free until you actually submit the taxes so you should be able to see the taxes you would owe on your hypothetical numbers without actually submitting/paying.

Despite the already borderline abusive tax structure, I would not trust the NY politicians to leave the taxes as is.  As the demographics upstate shift (high-income earners leaving, subsidized non-tax payers moving in), there will be a margin call as to how to pay for all of these people.  Already the middle class is feeling the squeeze and people are leaving in droves.  Beware the "bigger fool" theory;  I would not consider upstate NY as a long term play.  I would not be investing in upstate NY if I did not already live here (and both of those things will be changing for me at some point).  It's not hyperbole when I say MOST of the people I know with an education older than 35 have some form of plan for leaving.

@Robert Cosman

You are correct - New York can be quite aggressive for tax purposes. However, that was done for a reason. A lot of people want to live in New York and not pay NY State income taxes and as a result look for ways to scheme the system.

I assume some would live in NY, buy a vacation home in Florida but claim Florida to be their resident state.

The difference between a resident/non-resident of new york is that if you are considered a resident of New York - you have to report worldwide income on your NY Tax Return.
Non-residents only have to pay tax on income that is earned within the state.

If your only activity in New York is being a limited partner in a fund that invests in property in Syracuse - you will be considered a non-resident and only report the income from the partnership to New York.