$125 a Share Flip Tax?
I am looking to buy a coop in Clinton Hill, and I’ve narrowed my search down to the Clinton Hill Co-Ops or the two buildings that make up Willougby Walk (195 Willougby Ave and 185 Hall Street). I’m getting familiar with the concept of a flip-tax, and I know that the Clinton Hill Co-Ops charge…
I am looking to buy a coop in Clinton Hill, and I’ve narrowed my search down to the Clinton Hill Co-Ops or the two buildings that make up Willougby Walk (195 Willougby Ave and 185 Hall Street).
I’m getting familiar with the concept of a flip-tax, and I know that the Clinton Hill Co-Ops charge sellers 5% of the gross sale. From looking around, I can see this is on the high side, but not unheard of.
However, I was just informed that the flip tax at the Willoughby Walk apartments is $125 a share – and when dealing with apartments like this one http://www.halstead.com/sale/ny/brooklyn/clinton-hill/195-willoughby-avenue/coop/1947946 that have 155 shares, you’re talking about a $19,375 fee – which works out to about 6.5% of the gross sale.
The issue I have with this flat fee is that the property market has yet to hit bottom (by most reports I’m reading), and my concern would be when it came time to sell an apartment at Willoughby Walk (in appox. 5-8 years)that this fee would be seen as a huge negative for potential buyers (especially since the fee per share will only increase from here) as you’re immediately operating with a $20k loss.
Just looking for some feedback on whether this fee structure is as crazy as it appears to me.
Thanks!
Thanks for all your responses! I actually put an offer in on the apartment and it was accepted! The flip-tax wound up being worth it for me in the end, as the apartment is a major fixer-upper, so the low price gives me enough wiggle room to swallow that high fee (when it comes time to sell down the line). The apartment has fairly high maintenance (mid $700s), but this all creates a very stable financial picture for the building – certainly not worried about the place going broke! And the board is known for being fiscally sensible (it’s not a case of them charging high fees because they’re bleeding money).
Oh boy – let the crazy journey of board approval begin! Looking forward to becoming a regular contributor here as I become a homeowner!
There are nice pre-war coops in Jackson Heights that have low maintenance and no flip tax. They also require 25-30 percent down. They are also in Jackson Heights — drawback.
One more reason not to buy a coop.
A way of getting revenue for what? Coops…cooperative living…generally have only four sources of income, all of them shareholder driven, and lots of expenses. You’ve got maintenance, you’ve got assessments, you’ve flip taxes, and then you have lines of credit.
When capital projects need to be done (and they will) money has to be found somewhere. Is it fair to ask current shareholders to pay full freight? Probably not. Similarly, is it fair to put everything on the “credit card”? Likewise not a good idea. Flip taxes spread it out a bit.
I agree, you want low maintenance, but at a better way of looking at it is that you don’t want artificially low maintenance if things are being deferred too long, because things will will hit the fan. If not outrageous flip taxes aren’t necessarily a bad idea,
Flip taxes in coops don’t discourage flipping, (Who is flipping now anyway?) They are simply a tax…a way of getting revenue.
My rule when I bought a coop was no flip tax. Of course, sometimes a flip tax can keep maintenance low. But my rule was no flip tax AND low maintenance. And I found it. Not all buyers are so patient and demanding. But I can tell you that any flip tax is a buyer turn-off.
The average flip tax is about 2%-4% of the gross, but there are all sorts of exceptions to the rule. I’ve heard of coops where the flip tax is 20-30% of the gross (or the profit)–I’ve heard both, and some with extremely low per share flip taxes.
I myself am in favor of something in the 2-4 range, but presumably if one stays settled for sometime, even something in the 6-10% range is copacetic. Think about it this way: it’s a way of spreading out the cost of financing capital improvements. And if it’s on the high side, it probably cuts down on people trying to flip.
if you think prices will drop that much in the next 5-8 yrs, then dont buy now and instead rent then buy later. if you market is flat to up, this fixed rate is great for you