All Forum Posts by: Jason Lee

Is this a co-op or a condo? You mention both forms of ownership. Are the back taxes real estate or income? If it's a co-op it doesn't matter what any portfolio lender will allow, the co-op will limit the housing debt-to-income and your friend's total debt-to-income (they would include back taxes owed too when looking at his liabilities) in what they will allow for a refi or cash out refi (the board would have to approve it). If it's a condo, I'm still not sure what his options would be with 65 housing DTI. I'm pretty sure lenders in NYC don't want to go over 40%. Also, it appears the bulk of the expense is the maintenance or common charges and those won't change (they'll only go up). Really not sure what the point of the cash out refi is unless the tax debt is significant (and accruing interest and penalties) as his monthlies would still increase. If his income fluctuates (which is pretty common for most of the self employed folks I know) or the building implements special assessments (most do at some point), your friend could really find himself in an even tougher spot.

I'm sure his 3mm apartment is pretty nice, but it's really costing him too much based on his current income. He could sell it, downsize into a 2mm condo paid in cash with no mortgage, with monthlies of around $2500, pay off his debts (depending on what they are), and get his housing DTI to 40% or less... and sleep better at night.

You’ve said you didn’t provide us with many facts. The one fact you did give us is that the listing broker told you the seller would not accept an offer with a financing contingency. I tried to answer the questions you asked. Not sure what we’re supposed to do about material facts you omitted.

Btw, you don’t need to consult your counsel to speak to the listing agent. That’s the one person you are allowed to speak to.

Also you've made assumptions about what I do and don't know. I've been doing this for 10 years. I'm a member of REBNY and Brooklyn, and also NAR where I'm a member of 4 other MLSs. You sound like you're new at this. (Being an experienced buyer or investor doesnt mean you're experienced at brokerage).

There’s an easy way to figure out if the listing agent is lying. Ask him what offer the seller will accept and the make that offer. Anyways, I’m sure you’ll figure it out.

There are so many things wrong with this. If I'm understanding you correctly you don't have an accepted offer (you never actually mention that). If that's the case that's why no contract was sent to the buyer. The offer was not accepted because the seller does not agree to a mortgage contingency and your buyer's offer has a mortgage contingency. This should really end here. If you're a member of the RLS, you should know the RLS rules which prohibits you from directly contacting the owner of an exclusive listing without the permission of the exclusive listing agent. Also, the RLS is not a part of NAR and so NAR code of conduct does not apply. The RLS does not allow you to present your offer in person. Lastly, the seller's attorney has a fiduciary duty to the seller and you want to contact them to try to get info that might help you negotiate against the attorney's client or to get some proof the seller's broker is breaking real estate license law?

Instead of focusing on things that are purely speculation (the listing broker doesn't want to co-broke with you so hasn't submitted your offer), focus on the things you know (the seller will not accept a finance contingency). Work with your buyer to try get their offer to be more attractive. Do they really need the mortgage contingency? Are they worried about the property itself and the lender funding the building? Is it that it might appraise too low? Has your buyer gone through complete underwriting with their lender (not just a pre-qual or pre-approval but a full doc underwriting)? Break it apart and see what, if anything, can be conceded. Maybe it can be framed in a way that is acceptable to the seller. Or let your buyer know the contingency is a deal breaker but perhaps it isn't at a higher price. If your client is ok increasing their offer, have them increase their offer!

Ultimately both you and the listing agent should be  trying to facilitate a meeting of the minds. I would suggest you try to view the listing agent as someone you can work with collaboratively to get your buyer to a deal. Good luck!

It depends on where it is. Some areas have peaked and plateaued, while others are still appreciating.

The people I've seen buying negative cash flow condos don't care about cash flow... and a lot of them don't even care about appreciation.

I hadn't heard of rootstock but just looked at their site and read all the reviews here on BP. If you can find a single package with them (or someone else) for the exchange then that obviously makes it a heck of a lot easier. 

Did you ever occupy the condo as a primary residence? If so, when? If you don't qualify for any exclusion of the gain, I'd still probably go ahead and lock in your profit. As you've experienced, the reval has wreaked havoc on cash flow for older downtown condos. I suspect appreciation on those properties is going to be limited going forward.

It's hard enough timing one 1031, but trying to do multiple? It's not going to be fun, and you'll probably end up feeling forced to make deals you wouldn't otherwise because of the timing pressure. I would sell and then take your time finding properties that actually meet your goals.

Case-Shiller data is worthless for NYC. Their "New York" data is made up of counties in NY but also NJ, CT, and even PA(!). It also only tracks single family re-sales. No new construction or multi-families. Percent of single family home sales in Manhattan is about 1% of all sales so despite being labelled New York, it doesn't cover Manhattan at all. Manhattan average and median sales prices are actually down in Q1 YOY. Q2 numbers will probably be worse. As others have noted, the data is backward looking and some of these March numbers are for deals that could have very likely been accepted in 2017. If the data is skewed and worthless for NYC, it might be in these other "cities," too. 

Yours Truly,

"Nay sayer ;D"

If the current rent covers half the maintenance, then how are you coming up with a 10% return when there's negative cash flow? Or is this after you're able to evict or buy out the tenant?

The thing is, not everyone has a price. A lump sum buyout might sound great but where can a tenant on limited income find new housing, when most tenants are vetted by income? You can always try to buyout the tenant but in a situation like this I would always prepare for the worst. Not sure you could underwrite the tenant in any meaningful way. The current tenant could have a young relative or grandchild that moves in and takes over the lease.

There are investors that specialize in rent controlled apartments but they buy in bulk to try to mitigate many of the risks. 

You can not evict a rent controlled tenant to use the apartment as your primary residence in a co-op or condo that was formed in a non-eviction conversion plan. If it were that easy, these types of apartments would not be trading under market. I would move on.

The only time this even remotely makes sense if you can buy the unit next to yours with the possibility of one day making a great combination, or you buy them in bulk and play the numbers game with a very long time horizon.