Bronx, Home Buyer in Upper East Side, New...

What are the risks in buying an HDC financed coop?

Asked by Bronx, Upper East Side, New York, NY Thu Jun 21, 2012

HI, I was recently selected through a lottery to be allowed to buy an new construction coop sponsored by the HDC. The development is in Harlem and is for middle income families (upper limit is 142K). The development is beautiful and prices are very reasonable (below market) and this all looks very tempting.

I am a first time home buyer and am super nervous that I am missing something and that there are a lot of potential issues when buying an HDC sponsored building.

If I buy this will be my primary residence but there is a possibility that I will have to move in 3-4 years and dont know what I would do with the apartment - could I sublet it ? What policies guide renting and selling HDC sponsored apartments?

I am not even sure how a coop board will be formed- how does that process work? Basically I dont know anything about buying in such a building an am very nervous of potential pitfalls.

Can anyone shed any light?

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4
Aileen Gross…, Agent, New York, NY
Thu Jun 21, 2012
Generally, my experience has been VERY HIGH FLIP TAXES paid by seller when you sell!! Preventing you from making a decent amount of profit. Also, when selling, it limits you to only a handful of buyers... other than these 2 things, I don't think there are any other issues with it...
:-0
1 vote
Yes, my mortgage broker said that the flip tax the first two years is 100% yr 3-5 is 50% of profit, and it goes down from there. I am OK with not making a huge profit from it since I will be living in a brand new building and the payment is lower then my current rent.

Do you know anything about the subletting policies in buildings of that sort?
On the limited number of buyers, for a one bedroom the upper limit is high enough (143K) - are there not that many people who qualify? The marketing agent actually mentioned something of this sort (many applications but few qualify) but arent there enough young couples that dont make that much?

D
Flag Thu Jun 21, 2012
Elena Ravich,…, Agent, New York, NY
Tue Jun 26, 2012
142K income restruction is pretty high and there will be easier to find buyers who make this much than if the restriction was 60K or 35K. You have to check coops Rules and Regulation and clarify with the management on the sublet restrictions, how long you have to live in the building before subletting and how long you can sublet for. If they allow sublet for 1 or 2 years - you have more flexibility on what to do with the apartment if you have to move. Interest rate and part of the maintenance (check with the management about actual %) are tax deductible,
0 votes
Ella Chavers, Agent, New York, NY
Fri Jun 22, 2012
You must ask the management what the re-sale and rental policy is. Very often there is a time frame on when an owner rent or sale. Also read the buildings rules and regulations.
0 votes
First Last, , 90002
Fri Jun 22, 2012
The major downside is your probable inability to make a profit when it's time to sell the apartment, and the probable income restrictions on who can buy in the future. The latter makes it harder to sell.

So your major financial benefit is the tax deduction and the recovery of your investment on sale (we expect). The major risk is a potential loss on sale or difficulty selling. You are guaranteed to lose the money you spend on interest on your loan to purchase.

However---these factors can be compared to paying rent for another 3-4 years: You have no hope of recovering any of your rent money when you move.

The HDC will take a role in organizing the co-op, as sponsor. I don't think you need to worry too much about that aspect, but you should ask your lawyer.

Karla Harby
Licensed Real Estate Salesperson
Rutenberg Realty
kharby@crrnyc.com
212-688-1000x146
0 votes
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