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For those who have kids, one alternative would be to give or rent the property to them. I believe there are some tax advantages to that; the gift tax law allows up to about 10 or 12 grand per year so possibly the parents could give that toward the maintenance/mortgage. That way it all stays "in the family," and I can't think of a better gift than a piece of NYC real estate.
just the opposite, giving it to kids is the worst way tax wise ...the kids retain your cost basis and can end up owing taxes where if they merely inherit it they get a stepped up basis to current value... thats especially true if its not their primary residence. you also run the risk of loosing a part of it to divorce or law suits if they are your partners.
nothing sucks more then having your childs ex spouse as your new co-owner in a divorce settlement.
Last edited by mathjak107; 06-11-2010 at 03:58 AM..
It might be worth noting that social security is only 50 percent taxable. So you might be in a retirement tax bracket where you pay no taxes or even get a refund.
I know property taxes in NY/LI are outrageous, but as I said for a coop you only reap the advantages from the coop corporation paying property taxes and mortgage interest...in the form of a tax deduction for the shareholder.
And though it's possible to get a dud tenant, the good thing about coops is that you need board approval so you know your neighbors, both shareholders and tenants, have been screened financially and otherwise.
again the tax deductions are no bargain,they are expenses just like utilities, insurance and every other expense...the fact you may get some back is a good thing but expenses are expenses... halve my maintaince and pay off the building mortgage, ill gladely give up my deductions.
in fact even a renter gets the same standard deduction so all benefit calculations if you were comparing would have to start for a married couple at over 10,000 bucks in deductions..
a renter couple with 5,000 in actual payouts gets a 10,0000 buck deduction.he is 5,000 a head
the owner may actually be spending 10,000 in mortgage interest and real estate taxes,he is even
im not saying owning isnt a good thing im just saying becareful certain myths like tax deductions are good...it only means you spent money over and above the property costs and are getting back maybe 1 of the 3 bucks you pulled from the ole piggy bank
Last edited by mathjak107; 06-11-2010 at 03:59 AM..
Florida and other states took quite a hit in the economic/real estate downturn, but NYC is the exception to the rule. Yes, there was some temporary depreciation, but it was modest compared to other areas of the country. Florida, Las Vegas, and most other areas of the country were hurting, and I imagine still are.
i had the worst market timing of anyone,i bought my first investment co-op in 1987 in kew gardens..closed 2 weeks before the stock market crash..real estate in nyc especially co-ops were crushed..i saw my new apartment plunge 30% in value by the time the smoke cleared.... banks were totaly turned off to co-op lending because your mortgage was 2nd to the buildings..
it took a decade for the price to come back but the worst part was at 3% rent increases it took 10 years for the rent to finally cross over to where the rent was more then my costs.
typically in nyc the day you buy ,rents are usually 25-30% less then the expenses of buying and take time to catch up... its rare someone will buy an investment co-op and be closer to even then that compared to the rent
the good news is that today the apartment is worth a little more then double what i paid (not so great compared to other investments) but it does generate an income.. if i had to do it over---nah ..... that was also the apartment i had to evict the tenant from
Last edited by mathjak107; 06-11-2010 at 04:03 AM..
Just wanted to say again that social security is only taxed at 50 percent which depending on your other income might mean that your taxable income puts you in a good spot tax wise.
no ,your confused..the 50% applys to figuring out how much your social security will be taxed... its actually taxed as much as 85% depending on what your income comes out to when 50% of your social security and all the rest of your income are added together....
more than 34,000 in total taxable income including 1/2 the ss for a single has the ss taxed at 85% , more than 44,000 in total income when figuring 1/2 the ss for a couple has ss s taxed at 85%..
that means above those figures your full ss is taxed as much as 85%
one of the things i always caution folks about is taking financial or legal advice from internet forums.. we all know only what we know and believe to be true.
many times its based on bits and pieces of what we heard or read or myths passed down in the family.. thats true of myself and everyone else when it comes to areas outside our expertise.
i caution about anyone even listening to my advice because again its based on only what i perceive to be true, maybe it is maybe it isnt but its what i think is true for me.
please seek professional advice when you really want to do something and while you can get an assortment of opinions on the internet very few of us have the expertise to guide you unless its our profession and even then you may not get the corrrect advice.
For those who have kids, one alternative would be to give or rent the property to them. I believe there are some tax advantages to that; the gift tax law allows up to about 10 or 12 grand per year so possibly the parents could give that toward the maintenance/mortgage. That way it all stays "in the family," and I can't think of a better gift than a piece of NYC real estate.
see my warning on this above, you may create tax liability where there is non if its merely inheireted and not gifted ....this is especially true where the kids arent using it as a primary residence or there are more then one child and only one will actually make it their primary residence.... there are no advantges to gifting this unless your sooooooooo over the threshhold for estate tax purposes but there are a whole lot of disadvantages.
see my warning on this above, you may create tax liability where there is non if its merely inheirited....
The part about gifting them the rent/maintenance is interesting and seems like a good idea.
If you had to choose between keeping a co-op in a great NYC neighborhood that will probably improve over the next 15 years (proposed retirement date) or selling it it in a couple of years to buy a cheaper house in a not-so-great neighborhood (forget about tenants -- this move would be to reduce monthly expenses, and the gain on the co-op is nil) which would you choose and why?
BTW, I own some REITs, a real estate securities mutual fund and a fund that invests directly in diverse properties. I'm a former financial services professional/Series 7 so I feel well-informed enough to direct my investments properly.
its all up to your finances... if you think you are on track and will meet the goals you will need to retire stay where you are..
if meeting those goals are close but may not quite be there id go for what will enable me to save more and retire and take a step downward now for a better life tomorrow....
its really a personal choice most of the time.....
heres the problem,our homes are not investments, they are consumption items.. they cost us money....until the day comes we can pocket cash for other uses they are consumption items and represent our cost of housing. even if your residence appreciates you still need a place to live... if you can buy a cheaper place somewhere else and pocket a few bucks then thats your profit but many times it dosnt work that way..
we have a 2 bedroom apartment in bay terrace... we bought a retirement home in pike county pa.... but now we needed a 3 bedroom house because when the kids come we need a place for them to stay unlike living in the city.... the 2 bedroom apartment is pretty much a wash with the 3 bedroom house. we just get a whole lot more but the money was the same .in this case how much things may have gone up was a moot point on paper it still didnt leave money to live on from it.
Last edited by mathjak107; 06-11-2010 at 05:59 AM..
problem is that they arent real estate tax free or city income tax free. We have rediculous utility costs , auto insurance thats absurd and the cost of medical care, long term care insurance thats thru the roof . long term care in nyc is double the rest of the country .... then we get nickled and dimed into big bucks with city sales tax,parking meters ,
surcharges on everything from parking to hotel rooms...
....
just the cost of doing things in this city are soooooo expensive....20 bucks for museums, almost 100 bucks for 2 at the zoo, we went to wave hill in the bronx. a simple little botanical gardens.. with tolls,parking and gas probley cost 75 bucks ......
over a certain amount pensions that are non ny are taxed...
the list goes on and on...thats why as much as we would like to stay in nyc its just to cost prohibitive if you like to do stuff.
A lot of these "extra" expenses assume a certain lifestyle.One of the reasons I won't leave NY on retirement is because I don't want to ever again OWN or maintain a car.NYC is one of the few places in the whole country I can actually do that.So forget car insurance,parking,gas,tolls,meters.For 90 bucks a month you can get to almost anywhere in the whole city faster than in a car.The subway is 2 blocks away.
Re museums,zoo,etc.... buy a membership for 75.00 and you get unlimited visits plus 5 or 6 guest passes and parking permits.I go to The botanical Garden and The Zoo constantly and it costs me almost nothing.Most of these places have free days anyway open to all.
Utilities : They may be higher per kwh or whatever but nothing is going to be more efficient than my 1,000 sq ft apartment .I have a 60.00/mo elec bill.Where else will I have that except an apartment in podunk where I will need a car.Certainly not a house anywhere.
All in all, I can't think of a more economically efficient retirement place than NY when you factor everything in.If I retired today with no mortgage debt I would have a very nice,comfortable roof over my head with a 550/mo coop maintenance charge,maybe 200/mo for all utilities incl internet,tv phone,etc and 90/mo for an unlimited metro card.
I would have all the essentials with almost everything within 2 blocks and all of NYC at my fingertips for 850.00 /mo. and no worries of homeownership.It wouldn't even be 1/2 of my Social Security check.Heat ? Included in co op Maint.Real estate taxes? Included.Snow shoveling?Included
And it would leave me with plenty left over to travel,etc which I love to do.
Where else could I do that ?
Also,my NYC teachers pension will be non taxed as long as I stay in NY.If I move out of state,it gets taxed by NY state.
I agree with you bluedog, which is why I'm leaning toward staying here. I rarely drive and my car stays in Westchester. My parents live down south and must drive everywhere. I rue the day when they can't drive anymore.
I live frugally so my greatest expense is mortgage/maintenance and I'm in the process of a refi now to reduce that. Hopefully it'll be paid off by the time I retire. The only thing that could screw up everything is if co-op maintenance goes sky high. This is why I'm contemplating buying a small house to lock in my expenses or to buy a co-op for cash. Of course this would mean moving to a different neighborhood but it might be worth it.
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