SRO conversion - change c of o, impact to property taxes?

Thanks for this info! I ended up making an offer, but went in much lower thanks to all this insight. We’ll see if they go for it, if not, I’ll feel much better about walking away.

In the meantime, please keep sharing. This is all incredibly helpful

Guest User | 6 years and 1 month ago

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Guest User | 6 years and 1 month ago

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Thinking of purchasing an SRO property, without a CONH. I don’t mind keeping it as an SRO for a while, after some cosmetic renovations, but do want to convert it to a 3 family eventually.

1. What things should I keep in mind when it comes to maintaining an SRO?
2. Am I able to use 2 units for myself?
3. Since the cap on property tax increases no longer applies after a C of O change, is there anything I can do to help keep the taxes reasonable? Avoid a 20k+ tax bill?
4. Does anyone have experience with converting or maintaining an SRO? How much did it cost you to convert? How long did it take?

I’ve read the existing threads here that have answered some of my questions above, just checking in for updated info.

Thanks!

cate | 6 years and 1 month ago

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One thing to keep in mind is that the cost of the CONHs is impossible to predict. Another thing to keep in mind is that you may need to go without rental income for a very long time during the CONH and conversion process. It would seem to be easier and less expensive to keep it as an SRO or to buy a building with the occupancy you already want.

yudashasom | 6 years and 1 month ago

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If you are still considering an SRO after reading prior threads, read them again. There’s a very good reason why they sell for 1/2 or 1/3.

resident2 | 6 years and 1 month ago

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Without a Certificate of Non Harassment you are buying landmine. You literally have no idea what might crawl out from under a rock.
Will the building be delivered vacant? If yes, why is the seller/current owner not getting the CONH ? SRO tenants are Rent Stabilized, slightly different than class A housing, but you cannot so easily evict them & you have restricted rent increases etc. Under the new NYC anti AirBnB laws you cannot rent out rooms on a temporary basis.
When it comes to converting from SRO to class A, keep it to no more than a two family. A 3 family is supposed to be the same tax class as a 1 &2 but it seems that the City is taking the position that they are entitled to 1/3 of the gross rent in property taxes + your units value!. You cannot challenge the new tax assessment on a new C of O from an SRO to a Class A and the City does not offer J51’s on SRO conversions, even though your tenants would then be Rent Stabilized!
How do you keep the reassessment low? Only by having years of experience and using the right team…. they are not going to work with newby’s because the whole route is an illogical nightmare!
There is always a reason that a building is cheap! They are never cheap, it is a question of can you deal with the reason it seams cheap… SRO’s look cheap, but they are NOT!

Guest User | 6 years and 1 month ago

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Thanks, all helpful information!

What if the DOF already has it listed as a 3 family? Will this help me avoid the huge tax increase? C of O on DOB is where its listed as SRO.

“A 3 family is supposed to be the same tax class as a 1 &2 but it seems that the City is taking the position that they are entitled to 1/3 of the gross rent in property taxes + your units value!.”
If both 2 and 3 family are taxed class 1, what is the difference between the two?

yudashasom | 6 years and 1 month ago

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You need to go back to the drawing board – an SRO is not for you.

Guest User | 6 years and 1 month ago

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@no-permitz its probably not, but I won’t know unless I ask questions and dig into it – thanks for your honest feedback (no sarcasm)

mozeeatupu | 6 years and 1 month ago

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>If both 2 and 3 family are taxed class 1, what is the difference between the two.

The difference is assessed value, market value and the tax bill.

resident2 | 6 years and 1 month ago

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If the DOF has it as a 3 family tax class 1 ; you will need to get down on your knees and pray that they do not penalize you for under paying all these years…. yes, you assume everything the seller did wrong.
An SRO is a much higher tax rate…. yes, the poorest rental buildings pay the highest tax rate! Illogical!
Now that the City is computerized, it will go from the DOB to DOF normally in a about 18 – 24 months after completion, depending on the tax cycle..