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Category: Apartments, Multifamily Tags: New York, New York City, Property Tax

Multifamily FAQ: Top Questions From New York Property Owners

Owning a multifamily property in New York City can be equally challenging and rewarding. Not every owner is an active investor, but all owners can benefit from an investment mindset. Multifamily landlords can maximize their investment opportunities by learning the tax landscape and staying on good legal terms. Here are the most common questions and mistakes among New York’s multifamily property owners.


Disclaimer: Matthews Real Estate Investment Services™ does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Personal tax, legal, and accounting advisors should be consulted before engaging in any transaction.


How Well Is a Property Performing?

Many property owners do not clearly understand how their property is performing compared to other investments. The most common reason for this is that they are passive “investors” who have inherited or otherwise become owners of property generationally. The property may have been used for a family business, which may no longer exist, but the property keeps producing cash flow for the owners.


Additionally, most owners do not see their properties as part of an overall investment portfolio, but simply a cash-producing vehicle. In a classic 60/40 portfolio, one that is composed of 60% equities and 40% bonds or other fixed-income offerings, real estate holdings should be considered part of the 40% allocation. These investment strategies require periodic rebalancing.


The best way to do this is to “mark” holdings “to market” annually. Brokers can help give actual valuations of each owned property. From there, determine the return on investment a property is producing. The calculation is simple: Divide the amount of cash pulled out of the building annually by the net market value (the mark-to-market value less taxes and costs incurred in a sale). To take a step further, perform a 10-year projection to see an investment’s future performance.


Is It Necessary to File an RPIE?

The short answer is “probably,” though there are some exceptions. Most income-producing property types in New York City are required to file a Real Property Income and Expense (RPIE) statement, and failure to do so can result in penalties. The Department of Finance (DOF) requires annual income and expense information to value a property accurately.


Owners of income-producing property with an actual assessed value of more than $40,000 are required to file an RPIE or claim an exemption. The assessed value is based on a percentage of market value. A shorter RPIE statement can be filed for non-hotel properties with actual assessed values of $250,000 or less. Rent roll information is required for properties with an actual assessed value of $750,000 or more.


While some properties, such as co-ops, condos, vacant lots, owner-occupied buildings, and vacant buildings without leases, are legally excluded from filing an RPIE, they must file a claim of exclusion. The following properties are not required to file an RPIE or claim of exclusion:


  • Properties with an actual assessed value of $40,000 or less.
  • Residential properties containing 10 or fewer dwelling units.
  • Tax class 1 or 2 with six or fewer dwelling units and no more than one commercial unit.
  • Special franchise properties.


Which Tax Mistakes Can Be Avoided?

Real estate taxes are a property’s biggest expense, so it’s important for property owners to minimize the amount of taxes paid. Here are the most common mistakes landlords make that can be avoided.


Mistake #1: Failure to File an Annual RPIE

Most, but not all, properties are required to file an annual RPIE. If an RPIE is not filed on time, property owners lose the right to a tax appeal hearing at the New York City Tax Commission.


Mistake #2: Failure to Contest the Assessment

The only way to minimize the amount of taxes paid is to contest the assessment by filing an annual appeal of the assessed value with the New York City Tax Commission. The best way to do this is by engaging a professional, usually an attorney, who typically charges a nominal out-of-pocket fee plus a contingency fee based on the result.


Owners can access their property’s assessments, tax bills, and historical information online through the New York City DOF. Available information includes statements showing the metrics used to determine a property’s market and assessed values, which can also be used to project a property’s future real estate tax obligations.


Mistake #3: Ignoring the Assessment

Many landlords ignore assessments because the tenants are responsible for paying real estate taxes. But realistically, lower taxes make a building more valuable. When a lease expires, the next tenant pays more in rent if taxes are lower. Conversely, if the assessment is not challenged, taxes increase, and owners are responsible for paying higher taxes when the lease expires.


A not-for-profit business occupies a building that’s up for sale. The tenant is exempt from paying taxes, so no real estate taxes are paid. The owner doesn’t see the need to contest the taxes. When the tenant finally vacates and the building is sold, the owner faces extremely high taxes and an eroded property value.


New York’s multifamily landscape is rife with opportunities for landlords who understand the mechanics of property ownership. While questions about property performance, common tax mistakes, and income and expense statements are among the most pressing for city landlords, their answers serve as a reminder that output is equal to input. For owners to truly maximize their investments, they must prioritize learning the local tax climate, treat property as a true asset, and partner with experienced real estate professionals.

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