BUYING A NEWLY BUILT TAX-ABATED CONDO IN LIC

Things to keep in mind when buying NEW:

Sponsors (Developers) are required by law to issue an offering plan that contains all information relevant to the sale of units, such as description of the neighborhood, details on construction, design and materials, projected operating budget, reserve and working capital funds, procedure to purchase, unit prices, monthly charges, and closing costs. It is important to engage a real estate attorney to perform due diligence on the project. 

Start asking around for a NY Real Estate Attorney who is comfortable with closing you on a new construction. Here are my Real Estate Attorney Referrals. I’ve been to closings with both, and find that they are really thorough in explaining the laws of Real Estate do’s and don’ts in this city. Give them a call, doesn’t hurt to chat.

Many buildings are on a 15 year tax abatement. The abatement phase out scale shows that on the 11th year of a 421a tax abatement, your taxes will increase to 20% of what your current market taxes for the unit are. ( Source: NYC Dept of Finance) Interesting article we were referencing at the Jackson, “Could A perfect Tax Storm Strike Your Condo” .  “The tax projections in the offering plans can be optimistic in an area in the midst of rapid residential growth like LIC, BUT chances are taxes will go up.” 

If you'd like to take a try at outlining what your potential taxes would be after a 421-A abatement expires here is also a link from the NYC Dept of Buildings. It's almost impossible to project what taxes in a newly built up neighborhood like LIC will be 15 years into the future, but you're best start is to have your agent (me) share what current similar properties are paying in taxes. We can then identify what tax bracket the property in question is located and come to terms with what your taxes could potentially be in 15 years. 

Below is an example of the phase out schedule used for a 421-A, 25 year tax abatement. These don't exist anymore and are not being given on newly built buildings as of 2016.  Today's 15 year tax abated buildings basically start to phase out on the 11th year, at 20%, 40%,60%, 80%, and on the 16th year the unit is expected to pay 100% of the real market value of property taxes. 

Team up with an experienced agent who can research into the current tax bracket and value is for that neighborhood and share what the phase out percentage scale will look like for you as a potential new owner. Are you going to wait 5-7 years before taxes start increases? What will your taxes be after 15 years? Can you afford this unit as it stands? These are all valid questions I can assist you with.