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So our landlord wants to buy us out for $75,000 (how reasonable is this exactly? I'm in the lower east side). I'm wondering what's best to take this sum of money in - cash vs. check. We're leaning towards receiving it in cash because the check could affect my financial student aid, we'd be forced to pay taxes (which I'm guessing would take up a good portion of the money). Several friends have told me to take it in cash as well. Though several said a check's the better option. Because the thing is, we're planning on taking this money and using it for a down payment in a cheaper city. So I guess my main questions are:
1. Is check or cash best for my situation? When i say cash, I mean physical dollar bills, unless there's a better option I don't know about (money order?) And then get some relatives to write us checks of less than $10,000 so that we don't have to report it?
2. Is it worth it to get a lawyer for this type of thing? Figure out what the apartment is actually worth and try to negotiate more money? Is a legal contract / agreement necessary?
Personal experiences of buyouts in NYC are appreciated too. Thanks, guys.
So our landlord wants to buy us out for $75,000 (how reasonable is this exactly? I'm in the lower east side). I'm wondering what's best to take this sum of money in - cash vs. check. We're leaning towards receiving it in cash because the check could affect my financial student aid, we'd be forced to pay taxes (which I'm guessing would take up a good portion of the money). Several friends have told me to take it in cash as well. Though several said a check's the better option. Because the thing is, we're planning on taking this money and using it for a down payment in a cheaper city. So I guess my main questions are:
1. Is check or cash best for my situation? When i say cash, I mean physical dollar bills, unless there's a better option I don't know about (money order?) And then get some relatives to write us checks of less than $10,000 so that we don't have to report it?
2. Is it worth it to get a lawyer for this type of thing? Figure out what the apartment is actually worth and try to negotiate more money? Is a legal contract / agreement necessary?
Personal experiences of buyouts in NYC are appreciated too. Thanks, guys.
Get a lawyer and get it in writing and a check. Drop this stupid NYC welfare mentality (money coming in will ruin my benefits). However it affects your financial aid pay out the difference with the money you have coming in.
And you have to report your taxes, anything less than that, particularly on the level of 75k is totally illegal. It's a serious red flag if your landlord agrees to give you that much in cash (and no legit landlord will).
Cannot imagine any LL willing to hand over nearly 80K in cash.
There is going to be a record of the transaction because the LL must account for where $75k from his finances to the IRS. Second if the apartment is RS and he is seeking to take it out of that scheme sooner or later the City or State may wish to know how this is possible.
By law any cash transaction over ten grand must be reported to the IRS, and or perhaps other bank regulators. Attempting to stagger such payments and or deposits is not only against the law IIRC as well, but likely will raise all sorts of problems for your bank, the landlord and yourself.
As for how much good a deal the amount is only you can decide. Basically you are surrendering the future value of a RS apartment. If you can afford housing in NYC without RS and or planned to leave anyway there you are then. Otherwise you have to decide how far 75K will go towards your future housing costs.
Have known persons who took RS buyouts and used the money as a deposit on an apartment/home both in NY or elsewhere. Others took the money and sorted out future housing arrangements as best they could.
Just remember if you take the money, try to run game and are caught it will be all on you. This is why am thinking regardless what you decide the LL will report/record the transaction and probably *NOT* offer cash, unless he is up to something suspect as well.
In a settlement for your lease - one where you agree to cede your rights to the apartment - monies received are considered income and you must report it. People who fail to report income are usually caught so I would be sure to report it. I would definitely get a legal contract setting forth in plain language the reasons for the payment. That sum of money might engender IRS claims of capital gains and so on.
Financial aid-wise ... isn't there something about "income averaging" ? Acknowledging the difference between a wealthy person and someone who receives an amount of money just once. You should ask the financial aid officers at your institution. I am conversant with financial aid for students but never encountered something like this.
I would strongly urge you to consult a lawyer. You do not mention your rent, suffice to say that I know people who received upwards of $250,000. This is a bargain for landlords, who make the money back in no time (and then some). A lawyer could also help with the income vs. settlement thing, there could be conditions where this would not be considered income ...? you never know.
Firstly you landlord will report the payment as an expense of doing business and he may very well send you and the IRS a 1099 form indicating the payment was made.
You won't be able to hide it and you will be sorry if you try.
It will be reportable by you as a capital gain so taxes will be modest. With NY's share expect to pay out about 28%.
I have no personal experience with buyouts but I do know that what may sound like a lot of money often isn't. You will need alternate housing, and you may find repercussions with your financial aid (only God knows how schools and banks treat capital gains windfalls.)
Practically speaking, if a landlord's first offer is $75K rest assured his LAST offer will be quite a bit higher. Few people get the best deal taking the first offer at anything. You are a fish swimming in a big sea...think twice about that first worm.
(How many bedrooms, what is the rent, location in LES? How many of you are there?)
Friday's TIMES had a good article on tenant buyouts and what awaits for the holdout and really is a must-read for you.
I think even non-subscribers can read a few articles a month. Give it a try: http://www.nytimes.com/2015/03/15/re...-be-messy.html
Last edited by Kefir King; 03-18-2015 at 02:23 PM..
Take the check, and report the income. Get a good accountant that can minimize your tax liability.
You'll regret it later if you don't and are caught. Besides all money for down payment must be seasoned and sourced - meaning it has to either sit in your bank account untouched for 2-3 months or you MUST be able to show where the money came from. Mattress money is no longer accepted as down payment funds. You want to be on a short term rental for 3 months unable to touch this money?
Be smart, take the check and document all transactions. Your loan officer will require it anyway.
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