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When you sell, there is a flip tax that must be paid, even if you are unable to make a profit(within 5 years) also, you WILL have to pay back the money subsidized by the government agencies. For my apt that is over $80k, for the lower priced units, that will be much higher. It will be pro-rated per year that you live there, but even in year 14 you will have to pay some of the money back. It looks like we will all be neighbors for a very long time. Let us be nice to each other!
This is partially correct. The flip tax is 100% for the first three year of NET PROFIT from the apt to be used to pay down the subsidy. So if you net profit is 10k when you sell, 10K will go back to the building to pay down the subsidy. From yrs 4-15, the flip tax is 50%. So if you sell and make a net profit of 50K in year 14 of ownership, you will give back 25K to the building to pay down the subsidy or whatever is left of it.
No where in the document it states that when you sell you must pay the ENTIRE subsidy so this assumption is false. It is either eliminated by staying in the apt for 15 yrs, or is paid partially from any profit when selling. If the is not paid if full by the time you sell, the new owner assumes the subsidy payment through the same method.
Hmm, my lawyer told me different. Thanks for the heads up, I will check back with him.
Others who have bought can share what their lawyers told them.
If it is the case as you describe it, why would the flip tax fall to only 50% of the profit if you have to pay back the subsidy anyway at the time you sell if you sell before yr 15? You will have to give it all back one way or another.
If your lawyer is correct it would mean that no one can sell their apt for any reason (like you are relocating, have a family and need a bigger place, lost their job, etc) for 15 yr otherwise they will owe 1000's of dollars to HDC if they make no profit on the apt, making not a home, but a trap in my opinion.
I am for one not willing to take that gamble and would break my contract if that is the case.
Believe me, 108th St, that possible fact made me frightened for that exact reason. But, the subsidy is free money that the govt is giving us to make it more affordable, so I can see that if we had to get out, we would somehow be responsible for it. My lawyer informed me that these deals are meant for long term residency. To help long time residents of the area stay there and to encourage gentrification of the area as well. HPD does not intend for us to move in to make a profit when we sell, but to make it affordable for us to live in Manhattan. Check with your lawyer on it, and I will do the same...perhaps there is some way to pass that along to the next buyer. Just remember we CAN sell our apt at any time, but there will be consequences if we do. On the front cover of the offering plan it says there are risks involved with this project.
Let me know what you find out and I will do the same.
Believe me, 108th St, that possible fact made me frightened for that exact reason. But, the subsidy is free money that the govt is giving us to make it more affordable, so I can see that if we had to get out, we would somehow be responsible for it. My lawyer informed me that these deals are meant for long term residency. To help long time residents of the area stay there and to encourage gentrification of the area as well. HPD does not intend for us to move in to make a profit when we sell, but to make it affordable for us to live in Manhattan. Check with your lawyer on it, and I will do the same...perhaps there is some way to pass that along to the next buyer. Just remember we CAN sell our apt at any time, but there will be consequences if we do. On the front cover of the offering plan it says there are risks involved with this project.
Let me know what you find out and I will do the same.
Yes, indeed, the shareholders are responsible for PART of it when selling and that is what the flip tax is about (100% or 50% is huge). It is also forgiven by HDC at 1/12th of the sum every year after the 3rd year or something like that, so the balance diminishes every year you live in the apt so you don't have to pay the ENTIRE subsidy in any case. Don't know if you lawyer explain that aspect of it to you either.
Thanks 108th Street.. I mentioned I was told it was prorated per year you lived in the home, but if you leave in year 6, you have to pay over half of the money back. For me that would be over $50k. That is a large chunk of change. Everyone should know this about this building. I was not aware of this risk before I spoke with my lawyer. Since I read every post on here and no-one spoke of it, I wanted to make sure everyone understood this is a risk. It is still a great deal if you are willing to invest your time in the neighborhood. I for one think it will be a wonderful place to live and raise a family.
Good luck to all. Looking forward to meeting all of my new fellow homeowners!
Thanks 108th Street.. I mentioned I was told it was prorated per year you lived in the home, but if you leave in year 6, you have to pay over half of the money back. For me that would be over $50k. That is a large chunk of change. Everyone should know this about this building. I was not aware of this risk before I spoke with my lawyer. Since I read every post on here and no-one spoke of it, I wanted to make sure everyone understood this is a risk. It is still a great deal if you are willing to invest your time in the neighborhood. I for one think it will be a wonderful place to live and raise a family.
Good luck to all. Looking forward to meeting all of my new fellow homeowners!
I also read the offering plan which clearly states that there are two mortgage subsidies, one by HDC, and one by HDP. HDP is subordinate to HDC, meaning HDC mortgage needs to be paid first. HDC morgage is not per unit, but is a building mortgage.
HDC subsidy becomes due when you sell the unit, as the offering plans says, "to the extent of 1) 100% of net profits yr 1-3, 50% of net profits yr 4-15th." No where in the offering plan it says that it becomes due in FULL which is what seems your lawyer to be saying. This subsidy is NOT forgiven and must be paid by the building (meaning the mortgage must be paid off for the full amount in 30 yrs).
The HDP mortgage is forgiven after yr 15 if not paid in full by then which is possible if you sublet the apt. The HDP mortgage is also also paid at sale if before yr 15 by talking 100% of the profits on the HDP percentage profit for the unit in yr 1-5 and 50% of HDP percentage profit yr 6-15. The HDP percentages are calculated as the total amount of cash received upon resale exceeding the original cash cash purchase price up to the full amount of the HDP unit indebtedness. But this is only after the HDC mortgage has been paid.
So if you have a net profit of the sale in year 4 of 20K upon resale, you pay first 10K to HDC, and the rest, 10K to HDP. Therefore you have no profit left to yourself.
If you sell in year 6, the same 20K, you pay 10K to HDC, and 5K to HDP, and have 5K left for yourself.
If you sell in year 16, the same 20K, you keep all to yourself.
So to sum up, if you sell before year 5, you will make NO PROFIT on the sale. If you sell in year 5-15, you take only 25% if any profit. If you sell in yr 16, you take 100% of any profit.
This is designed for long term occupancy, as it should be, but you don't have to come up with 50-60-70K if you sell before yr 15.
I did not read anywhere that any of the subsidies need to be paid in full (100K or so per unit) if you sell before the sibsidies expire in yr 15th.
If your lawyer interprets differently, maybe he can post what page/section of the offering plan he is interpreting as such and I would love to be able to show that to my lawyer and questions his interpretation.
108th Street, I will talk to my lawyer and let you know what he says about the subsidies being paid off or not. My offering plan is with him right now, so I can't even look at it right now. It is my understanding the subsidies come in the form of a mortgage paid for by the city. If you sell before the 15 years you are responsible for paying the rest of it. I WILL clarify that from the lawyer. So much information has been blasted at us so quickly. For us, even picking our unit was quick. We pretty much had 5 minutes in the unit and then had to make our descision!
I DO know that the majority of the apartments(those with the highest subsidy) can NEVER be sublet as per our offering plan. Make sure you know if your unit can even be sublet, because they can evict you for breaching that.
Those same apartments must be sold to someone with the same income requirements the first buyer was subject to--that includes after the 15 year mark. You could maybe make a profit after 15 years but it has to be sold to a low income household. This was told to me by the selling agent himself. I think it is so important for all of us to know the risks that come with the building. If you are getting a highly subsidized apartment, the govt HAS a say in how you use it. It is not to be used as a way to make money eventually, but as an affordable way to live in Harlem.
So much information has been blasted at us so quickly. For us, even picking our unit was quick. We pretty much had 5 minutes in the unit and then had to make our decision!
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Indeed that why any transaction in NYC needs a lawyer. And the lawyer has to be meticulous.
I had 5 min to view the apt also - what the hell, right? At least my lawyer reviewed everything carefully gave me a summary and now will re-review it in light of the info you provided.
Indeed that why any transaction in NYC needs a lawyer. And the lawyer has to be meticulous.
I had 5 min to view the apt also - what the hell, right? At least my lawyer reviewed everything carefully gave me a summary and now will re-review it in light of the info you provided.
This is not a purchase to make money. It's a purchase to see your way through a concrete jungle with
exuberant prices. At the rate this building is going we are better off buying at market rate!!!!!!!
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