Tax advantages of 3 vs. 4-family brownstone?

I currently own a 4-family brownstone (technically a commercial property). My family occupies the lower duplex, and rents out the two top floors. For property tax purposes, are we better off keeping this as a 4-family, or reclassifying it as a non-commercial 3 family? Also, does this have any impact on utilities? Finally, are there any disadvantage I’m not considering? (Resale value, etc.) Would love any insights the forum might have. Thanks!

desperatelyseekingbrownstone

in Landlord 13 years and 10 months ago

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rebox | 13 years and 10 months ago

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you won’t have to install sprinklers necessarily. A lower assessed value will not necessarily lower your taxes.

iminbkln | 13 years and 10 months ago

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I had the same question and the point Slipper makes is exactly what put it on hold for us. The change of C of O will trigger a reassessment of your property value. I’m not sure on this, but I think a change of C of O might also force you to comply with new requirements such as sprinklers throughout the building, etc., which would negate any tax savings for a while for sure. Anybody know on this point — does a change of C of O (with no or very little work done) open you up to full inspection and require you to comply with all the latest code changes?

rebox | 13 years and 10 months ago

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Once you renovate, or change your C of O, the cap on taxes is lifted for that year or so. The Dept. of Finance trolls for permits. So there is absolutely no tax advantage, and in fact you’ll be paying more. Property taxes in NYC are kept artificially low by the cap.

Bklnite | 13 years and 10 months ago

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Hard to say without knowing the details – where’s the property, what’s the tax, etc.
By commercial, do you mean you can have a store in one of the units, or you just mean it’s tax class 2, not tax class 1 (residential property up to three units). There are different formulas nyc dof uses for class 1 and class 2, but I doubt there’d be a big change in your tax bill by changing to a 3 family. You can browse your block on the dof website and see what similar sized 3 family properties are paying.

Another factor to consider is the maximum loan sizes for fannie backed mortgages. As of Oct. 1 2011 those will be (for high cost areas):
Units     Max Loan   
1    $625,500
2    $800,775
3    $967,950
4    $1,202,925

For resale value, I’d think it would help for a purchaser to be able to borrow a higher amount for a 4-family.