Home Buying in New York>Question Details

Renee, Home Buyer in Montauk, NY

If you sell an 60/40 HDFC in the city, is the profit calculation based only on share price, or share plus

Asked by Renee, Montauk, NY Fri Oct 3, 2008

improvements? The apartment we want to buy is uninhabitable and needs gut reno. Will the $100K in renovations it needs, figure into the equation if we ever sell and need to pay the city 40% of the profit? Otherwise, of course we can't buy it...can't afford to eventually pay the city 40% of a "profit" we didn't actually make. The HDFC was formed in 1991 and fully paid off its mortgage in 2007. (We're not planning to buy it as an investment but life changes, who knows where we'll be in 10 years.)

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Chris had great answers - but be very aware (and talk to your board and UHAB about this if necessary) that limitations on how much you can profit from those renovations may apply.

For example, just because you spent $100K on those renovations doesn't mean you will get them fully reimbursed in a sale - not if there's something in the board's rules of resale or in a formula for resale you may not know about, that was created for such a purpose.

If you have concerns, be sure you talk to the board and possibly contact UHAB - or look up "resale guidelines" on their site - if you need more information.
Web Reference: http://www.uhab.coop
0 votes Thank Flag Link Wed Feb 11, 2009
Jennifer,
The renovations for capital improvements must be fully documented. Contractors bills for the renovation supported by proof of payment are generally required. Dated photos of the before and after are important. With this documentaion, upon sale you will then demonstrate that the "cost basis" of the property to include the purchase price plus renovations.
To the cost basis, you cannot add a paint job or replacement of an item that wears under normal use.
To compute your profit, simply subtract the renovation cost from the sales price. If you make a large profit, its good for you and the city.
As a point of interest, I've never seen a $100k renovation ever cost $100k. It is often 20-50% higher than the original estimate. Good luck and keep in touch.
0 votes Thank Flag Link Sat Oct 4, 2008
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