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January 28, 2008
Four Family's Taxed Higher?
What is the penalty tax wise for four family houses? Do they pay significantly more? Enough that it would make one consider ruling out four family's as an option? Would love opinions...
Thanks in advance!
Comments
Bklynrosie, I don't mean this in a nasty way. I say this in response to your history of posts. I think you need to buy a single family that you can afford. You are not prepared to run your own business. That's what being a landlord is. It is being a small business owner. It requires a basic understanding of finance, an ability to locate and hire other professional service providers (including tax and legal pros), and inclination to get things done on your own. You can't expect the Brownstoner forum to be your unpaid advisory board. This is just not the move for you. Work your day job and buy a home. Don't start a new business.
Posted by: guest at January 28, 2008 2:59 PM
You didn't mean that in a nasty way, but it certainly came off as nasty!! I of course am contacting professionals to help me on this, but I also happen to find the "everyman" opinions of Brownstoner readers helpful as well. Sorry if I wasted your time.
Posted by: bklynrosie at January 28, 2008 3:08 PM
lighten up 2:59...don't be such an A**HOLE.
Posted by: guest at January 28, 2008 3:53 PM
I'm not being an A-hole. The truth may be nasty. I apologize if I didn't write that in a way to make the truth seem nicer than it is.
I am a financial professional. I have seen people who are not by nature or true interest entrepreneurs start businesses that fail and destroy them and their families. In this business you will also cause problems for tenants. The discussions on this website often portray being a landlord as alternately easy or evil. It is neither. It is a major financial undertaking that is just not for everyone.
Bklynrosie's screen name stands out. I remember her other posts. My impression is that she is not prepared for the task.
Posted by: guest at January 28, 2008 4:06 PM
Listen 4:06 you're being an A hole and you're are not even writing the "truth." I've owned a four family for over 10 years and it is not at all like running a small business. Yes there are the very rare emergencies like burst hot water heaters or broken steam pipes, and there is the hassle of screening tenants, but most of the time I do nothing but collect the rent. It's nothing like running a small business which requires constant work. If you're a decent person and don't look to get maximum rent, you can easily find good tenants that make you're life easier. Anybody with half a brain and can get along with people can do it. The key is finding reliable handymen which is possible.
Posted by: Brooklynnative at January 28, 2008 4:16 PM
I am one of those people who thinks it is a lot like running a small business (a part-time one perhaps), but I also agree 4:06 is being an A hole. Nothing about Rosie's posts indicates an inability to do this - just a desire to gather a lot of information (which I belive is a GOOD thing.)
Posted by: guest at January 28, 2008 4:21 PM
4:16, this person is talking about investing several million dollars. What did you pay for your place ten years ago. Presumably nothing of the sort.
I'm done. I've stated my opinion and issued my warning. If your feelings are hurt Bklynrosie, sorry. Maybe next time you post for free advice, ask only for boosters to reply rather than say you "would love opinions".
Posted by: guest at January 28, 2008 4:22 PM
What does how much I paid have to do with the amount of work it takes to run a 4 unit building? Nothing!
You're a total asshat and don't make any sense. I'm glad you're "done."
Posted by: Brooklynnative at January 28, 2008 4:26 PM
I guess the point is, if you need to get every possible rental dollar out of your tenants in order to make a very high monthly mortgage payment it is more stressful than if you can easily cover your costs with one unit empty or in arears. I bought long enough ago that my rental just makes my life easier, while friends of mine bought last year and "need" their rental to keep afloat. It would seem to me to make a difference. And nothing "guest" wrote seemed offensive to me...
That said, to answer the original question, four familes and up are taxed as commercial properties at much higher rates than single familes (one, two, three). I would imagine as you view properties they give you the tax info.
Posted by: Putnamdenizen at January 28, 2008 4:51 PM
Something else you should be aware of is that the city recently tried to significantly raise the tax on 4 families but was met with some resistance. But you can be sure that the tax rates of 4 families will go up faster than other properties. I stayed away from 4 families when I was looking because of these reasons.
Posted by: guest at January 28, 2008 5:07 PM
wrong four families are not taxed as commercial propoerties they are taxed residential
Posted by: guest at January 28, 2008 5:09 PM
1, 2 and 3 families are Tax Class 1.
4 families are Tax Class 2.
In Class 1 for 2006-07, a tax rate of 15.746% is applied to 6% of the "market value".
In class 2 for 2006-07, a tax rate of 12.396% is applied to 45% of the "market value".
That is quite a bit more tax that you will be paying for a 4 family.
You will also pay higher mortgage rates from Banks.
Posted by: Left Hook at January 28, 2008 5:22 PM
4-fams are taxed as a residential category but taxed at a different (substantially higher) rate than 1-3 family housing. As an example, we pay on our 2-fam. house about 1/4 what our old 4-unit co-op brownstone paid. In other words, we pay the same taxes on a 3100 sq. ft. house that we did for our unit's share of the building's taxes on our old 850 sq. ft. coop just a few blocks away. There are certainly other reasons for the difference, including assessed value of each building, but the main one is the different rates applied by the City. If the taxes are an issue, look for a 2 or 3 family house instead.
I think Putnamdenizen has it about right in the 4:51 post -- if you need to squeeze every last dollar out of the rental, it will be awfully stressful. You have to be prepared for gaps in rental income when there are vacancies, the cost of repainting and fixing up as needed, as well as emergency repairs, not to mention not getting the rent you hope for out fo each unit. If there is room in your budgeting for those contingencies, and you feel you have the wherewithall to deal with it, then the rental income is a good way to get a living space and property you want that you wouldn't otherwise be able to afford. You need to analyze it both as a living option and an investment option and make a well-rounded decision. Rate of return alone shouldn't drive it if you get a house you really want to live in.
Good luck on your decision.
Posted by: slopefarm at January 28, 2008 5:23 PM
I stand corrected on the terminology, if not my point...
Posted by: Putnamdenizen at January 28, 2008 5:33 PM
If you buy a 4 family and duplex 2 apts to use it as a 3 family, what do you need to do to get taxed as a 3 family?
Posted by: guest at January 28, 2008 9:37 PM
you obviously get the building designation changed to a 3 family..
Posted by: guest at January 29, 2008 1:23 PM
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