Eric Fleming – NYC Real Estate

I wish you all a Happy Tax Day! I hope your filings were swift and your returns bountiful. Today, I’m not going to talk about income tax however, but property tax. Not the sexiest of subjects to discuss but it’s come up in a few deals I’m currently working on and something which is obviously important. Recently while negotiating a buy-side deal for an investor, the attorney representing my buyer noticed the taxes were incorrect. They were higher than what was listed in the seller’s broker’s listing. Terrible I know, but thankfully not too much where it became a deal breaker. On a quest for knowledge and truth, I decided to seek out the information for myself. But how I do this? In the past, it could take days to go down to the county clerk’s office and confirm the property tax for the unit. Today, it couldn’t get any easier. By using the handy NYC Dept of Finance website, you get this page:

Follow the link thats states look up BBL (Borough, Block, Lot) and punch in the address you’re inquiring about. You can actually get the most recent quarterly tax invoice that was sent to the owner. How cool is that!!?? It’s probably the easiest bit of due diligence you can do on a property. It’s free and takes all of about 2 minutes.

So Happy Tax Day to one and all. Let us relish in the free flow of information available in the Golden age of the Internet.

You guys remember this scene from the crime drama neo-classic “The Usual Suspects”? Del Toro remains one of my favorite actors to this day because of it. Such delivery and timing. Sorta like putting this unit on the market for sale. I know what you’re saying “Eric, you JUST rented that thing!! Why sell now?” Well, I’m glad you asked. First off my owner is a serious investor with big plans and this property was never thought to be a long term hold. He is looking to buy land for a new development and truth be told, could use the cash more than the apartment. Also being a non-US citizen, re-financing in order to pull the cash out isn’t really a worthwhile option. Secondly, I took a hard look at the market and came to the conclusion, “What else is out there in a top tier building, under a million bucks, that I would rather own???” Nothing, quite honestly. Smallish units like this just don’t exist in many of the best buildings. The key phrase here is “top tier building”. If you’re looking at 2BR co-ops on the UWS with proximity to Riverside Park and little Joey’s pre-school, my friend, you’re not really a part of the target audience for this property. But all the best to you and give a call if you need some help with the search. I’ve got your back and can get that done too.

Make no mistake about it, this is an ambitious flip attempt. The chat boards and blogs don’t usually take too kindly to flippers, but we’ll let the market decide on this one. My take on the deal; don’t go by what my guy paid, because as discussed throughout the Project Investment series, we severely underpaid for the unit. You simply cannot duplicate the deal that we put together back in July 2011 today. You need to look at market positioning and ask yourself the same question – What else would you rather own for this price? Lastly and most important, look at the rental performance. We’re offering this unit to the next buyer a choice of taking it vacant, or with our tenant in place. Our tenant happens to be AAA qualified and a true gent. Selling properties with tenants in place is hard enough, so having their cooperation is a must. Thankfully we do have it, and can go either way with the deal. At the full asking price with the current rent roll, we’re selling at a 4.5% cap which is well above average and should satisfy the needs of the most discerning investor. Also, do you remember how much work we put into it??? Trust me when I say, it didn’t look like this when we bought it! Hundreds of painstaking hours and thousands of dollars were put into the property. The finished project is nothing short of amazing. How amazing? We’re about to find out….

The Vault of Horror may be a stretch, and our closing table was looking a lot more pleasant, but man this deal was tough… It only took 5 contracts, but who’s counting? Take a look at the Streeteasy sales history….

The sales price will go public in a few weeks on ACRIS and Streeteasy, so for now, lets just say <10% off ask.

This was a tight fit... The market has produced a number of <$800/ft sales in the building and I'm asking $840/ft, so I know I'm going to take a beating when it comes to the offers. But I need to keep my asking price high enough, or there wont be enough cash in the kitty. Nothing is really out of bounds when it comes to a short sale, so we take our lumps and over the course of the listeing period, we find some real buyers. The unit happened to be gorgeous, so it sold itself. But it was the stigmata surrounding the short sale that I think kept most people away. Those 4 contracts that we had signed prior all failed in typical short sale fashion... Loan servicers countered too high, buyer did not increase the bid, time runs out on the contract, buyers walked. Two were direct deals, the other two had buyer's brokers, but regardless of that, I was always singing the same tune... “you must be patient… these deals take time… stick around. it will be worthwhile. please stay. i love you….” Not so much the I love you part, but some of the buyers were great guys and I really enjoyed working with them. They weren’t vultures, they just wanted a killer deal. Who doesn’t? In the end, the deal wasn’t sweet enough for them considering the time and aggravation associated. We’ve covered this before in prior posts…

Without getting into too much detail, there were 5 features on this track. 1st loan servicer satisfaction, 2nd loan servicer satisfaction, common charge lien, buyers broker, and moving our tenant out so we could deliver the unit vacant. The deal doesn’t get done without everyone taking a haircut. That’s why they’re called “short sales”? Because everyone gets shorted. It starts with the banks, and it works it way down to every principal and player involved. Everyone looses or at least settles for less than what they thought they’d get going in. It’s kinda sad when you think about it and I don’t know who is to blame, but we’ll keep it moving rather than dig deeper into the cause/effect of the financial policies of the mid 2000′s.

So you can imagine, this took quite a long time. Far longer than what you’d consider lucrative on a man-hour basis, but quite frankly, I’m fine with it. As a craftsman or an artist, I feel like sometimes its more important to look at the finished product, rather than the finished profit. I’m continuing to hone my craft. It’s what I’ve been doing for the past 11 years. This is just another finely crafted deal. It’s not saving lives or changing the world, but there is an inherent satisfaction that comes from closing a challenging deal. That’s reward enough. Sort of.