All Forum Posts by: Masashi Borges-Silva

I have roughly $40k in student loan debt, and I live in NYC.

My question is what strategy should I follow given the financial situation I have?

Below are facts:

-I am 34, and working as an engineer.

-I pay roughly $500 a month (close to the minimum payment) for my student loan.

-I don't have an emergency fund to cover 3 to 6 month expenses, noir putting the money for it. I want to have the buffer soon, but not sure how...

-I have 401k with a match and also I am putting away $5.5k/anually for IRA for retirement.

-I don't have saving fund for a house downpayment, but I do think I need to start one.

-My fiance and I are talking about having a child, but I don't have any savings for it.

At the current budget, it seems it is impossible to save up any for emergency fund.  How long does it normally take to save up that much??  I know it is depends of how much needed and how much you are putting away.  I just wanted to know if that should be less than a year or over a year...?  If I focus on emergency fund, it seems I can't pay off my student loan faster or save for anything else.

I am also interested in financial advisor/planner and the recommendation to find one is to ask around with my family, friends, or co-workers, but none of them use financial planner.  What would be the next step?  Find one in major banks such as Chase or Fells fargo?

I know there are lots of questions I have here.  I think I am little confused myself.

Thanks in advanced!

 I think that's a good idea.  I will try to look for more with "no fee".

@Jason Lee, Thank you for the perspective.  I didn't think that the management company (owner) has hundreds of units and not renting out of it is not an issue.  I am not sure if it is considered co-op, condo, or larger rental building.  I don't think it is a co-op since the agent hasn't mentioned about any co-op interview and rules.  It could be a condo, but could be a larger rental building...?  The unit is in an appartment building, which is 6 floors and probably 6-8 units in each floor.

After thinking about the fee, the way the agent was so quick about reducing the fee now kind of make sense.  This was for another place, but the broker was asking for 15% of annual rent.  The rent was $1895 and the fee was $3411 and he was so "kind" to make an easy number and offered me $3000 in fee.  If he expects a month worth as a fee then it is $1105 more than what he would normally get.  7.5% would be $1705.50 and he would have gained almost $1300 from my ignorance... haha

Where is this 15% come from?  Is this dictated by law or just the industry standard??  Would I have any leverage to bring out that the agency should only get 7.5% since I am representing myself as if I am paying myself the agency fee and the split the 15% with him.

@Steve Genna, than you for your quick reply!  I didn't know that rent is negotiable until now...  For past 4 years in New York, I was always paying full asking price.  Well, now I know that it can be negotiated!

That's a good idea about telling them about being a great candidate.  We have a very steady income and usually fix things in apartments if it's a small issue.

In the past, I always managed to find a place without an agent fee, but this time I couldn't find much on craigslist so I tried to use Trulia.  I even thought I ask the agent for the fee and I suppose we had a miscommunication somehow about the fee.  (I was under the impression that the management company pays for the commission).

Doing 24+ months lease is another good idea!  However, we are not sure how long we are staying in NYC (possibly considering to move away in next summer).

Also, crime rate in the area is not ideal according to Trulia either.  I will be fine at night but I am not sure for my fiance...  She usually come home late from DAMBO (home by 8:30 or 9:30pm).  Another variable to consider!

I need your help/inputs!

I am shopping for an apartment in Harlem area around 150th and Bradhurst, and I need your opinion in where I can negotiate in terms of monthly rent and commission fee charged by an agent.

Below are the facts:

-The 1 bed room apartment is listed on Trulia.com for 80 days

-Original asking price was $1850 and recently reduced down to $1750.

-We are offering $1650 for the rent.

-Based on the rent, the commission fee is $2475, which is 12.5% of Annual rent (The agent already told me that it is reduced from 15%) . He also said that previous fee reduction offer was rejected.

What would you recommend in terms of approaching an offer that is beneficial to all three parties?

I would like to know offer example such as offer to pay full 15% of commission, but lower rent or offer asking rent price with lower commission (such as 10%).

Just a quick math, if I paid 12.5% in fee and $1650, then the equivalent rent would be $1856.25 = ($1650 x 12 + $2475)/12

Another example would be, 15% in fee and $1550 is $1705 = ($1550 x 12 + $1860)/12

10% in fee and $1750 in rent is $1925 = $1750 x 12 + $2100)/12 (this would be higher than the current offer...)

So I guess the math says, lowering the rent will help over all cost for me...?

Any input will be appreciated!

So I called the numbers on the listing, but I did not get a hold of anyone plus all the voice messages were full.  So I emailed them about the clarification of condo or coop.  I will keep you updated!!

By the way, what is the difference between condo and coop?  I will do my research on these topic myself, but I wanted to hear your opinions as well.

Also, I see a lot of foreclosures on zillow.com.  What are your thoughts on that as a first investment?  It is very new idea to me and I feel not comfortable about buying it since I don't know anything about it! :)

@Raul R.  I am not sure if it is a condo or even coop.  How is coop or condo defined in Bronx area?  Is that something I can research or confirm with a realtor?

@Dirk S.

@Dirk S. 825 E 232nd is the address.  I am just analyzing this unit for educational purpose.  The asking price is $125k.

@Ceasar Rosas I am not sure if this unit has an HOA. I was on Raltor.com when I was searching for units. I suppose one way to find out if the unit has HOA or not is to call the agency that is listing? If the agency's info is not available, what would be a best next step? I would think that contacting an agency near the area can also give me the info...?

Am I way off to estimate HOA insurance to be roughly $200/mo. in Bronx, NY?

I am trying to get comfortable with analyzing deals in Bronx, and I am just guestimating all the numbers.

Asking price for this place is $125k and my analysis shows that it will have a negative cash flow.

Then I lowered the purchase price to $75k, and I still have $40/mo. cash flow and 1.78% COC ROI so I quickly had to let this go. However, I just want to learn that if HOA estimate is a spot on or way off.

Thanks in advance!

First of all, I am still new to this forum and REI, and I am doing my own research about REI

One of many questions that I have in REI is how do you accurately estimate the property tax that you might potentially buy?

I think this is one of many key important questions to ask for a beginner like me and also one who has decades of experiences in REI. So where do I start? That was the question I had, and I learned something that I didn't know about property tax in NYC. I would like to share the information here, and hopefully someone can learn something new or points to a right direction to answer your specific needs.

Below is what I learned today: (**Disclaimer** Please use this as a guide only since I am not a professional CPA or expert in NYC tax codes. Please seek a professional CPA for your REI evaluation.**)

There are 4 property tax classes in NYC as below:

• Class 1: one (1)  to three (3) residential unit properties
• Class 2: Three (3) or more residential unit property including cooperatives and condominiums
• Class 3: Utility Company Equipment and Special Franchise property
• Class 4: All other real property

Table below is the tax rates for each class for 2017 fiscal year.

I believe that this rate is changed every year, and I confirmed that the tax rate for class 1 for 2018 is 20.3850%.  As you can see there is a slight tax rate difference between class 1 and class 2.  I was considering to purchase muti-family property in NYC and this tax rate difference make a difference in how I want to proceed with buying multi-family property.  If you are buying a property that is less than 3 units, your tax rate will be roughly around 20%, and if you buy 3+ units, then your tax rate will be roughly at upper 12%.  I think this information is helpful for me to estimate potential deals with more accuracy.  (Later I learned that assessed value is calculated with different cap in class 1 and 2.  That adds another complexity in this estimation and your future property evaluation)

So next question is, "what do you do with this tax rates??".  Knowing your tax rate is important, but I need to know what that means in terms of purchasing a property.  So I researched around for a little more and found out how to estimate your annual property tax.

In order for you to estimate the annual property tax for your potential REI, you need the followings: Market value, Assessed Value, and Taxable Value (exemptions).  You might be thinking, what are those terms mean...  Believe me, I had the same question!  Here are what I learned:

• Market Value  This is a value that NYC will determine for you.  NYC uses a magic formula (statistical analysis) to figure out how much your property is worth based on comparing size, style, and age of your unit with your neighborhood.  If you are interested in doing a search, search "property address search in NYC" and you can find Department of Finance Web App to find out Market Value.  It can be little tricky to find out where to find it, and if you need a little help, let me know.

• Assessed Value  This is where things get little more complicated...  In general, Assessed value is a calculated value using market value.  The formula used is (Market value) x (percentage) = Assessed Value.  The percentage is different in different classes.  For class 1, the percentage is 6% and for class 2, the percentage is 45%.  For the sake of simplicity, I will use Class 1 as an example here.  Let's say the property you are buying has a market value of $100,000 (again, this is the number determined by NYC), then your assessed value would be $6,000 ($100,000 x 6% = $6,000).  However, NY state law limits the increase in assessed value is capped at 6% in a year or 20% in five years.  Again, this can be confusing and not really sure what it means to me...  I will try to explain what this means by using example used by NYC DOF.  Table below is the sample used to explain the cap rate increase in one year or 5 years.

First year is straight forward.  Again, assessed value is (Market Value) x 6% so assessed value is $6000 in year 1.  In year 2, NYC decided that the market value is increased from $100,000 to $150,000.  Using the assessed value formula ($150,000 x 6%), assessed value is $9000.  However, this is more than 6% increase from previous year (50% increase from $100,000 to $150,000).  So this is where this "Capped rate" comes in handy for us.  To determine the assessed value for year 2, simply multiply 6% to previous assessed value plus previous assessed value ($6,000 x 6% + $6,000 = $6,360).  Similarly, year 3 is calculated as follows:  $8,400 = $140,000 x 6% and $6,741 = $6,360 x 6% + $6,360. In a summary, your worst case taxable assessed value can be $6,000, $6,360, and $6,741 in year 1, 2 and 3 respectively.  Furthermore, if your assessed value is more than $7,200 in the first five year, you are capped at 20% increase over 5 years.  That is, since assessed value is $6,000 in year 1, 20% increase of $6,000 is $7,200 ($7,200 = $6,000 x 20% + $6,000).

Anyways, for this example, lets say your assessed value is $6,000 for your first year.

• Taxable Value (Exemptions)  Now you know your assessed value (for this example, it is $6,000), next step is to calculate your taxable value.  In NYC, I found out that there are four exemption categories as follows: School Tax Relief (STAR) Basic STAR, Enhanced STAR, Senior Citizen Homeowners Exemptions (SCHE), and Disabled Homeowners Exemptions (DHE).  I am just simply borrow the definition and the benefit from NYC DOF as below:

So, to calculate your taxable value, simply use the following: Taxable Value = (Assessed Value) - (Exemptions).  Let's say you are eligible for Enhanced STAR exemptions, then your taxable value would be $5,400 ($5,400 = $6,000 - $600). 

• Annual Property Tax  Finally, the number you have been looking for...  Now, you have calculated your taxable value, this is the last step to figure out your annual property tax.  For class 1, the formula is as follows: Annual Property Tax = Taxable Value x Tax Rate.  For class 1, tax rate in 2018 is roughly 20% so your annual property tax is... (drum rolls, please!)  $1,080!  Woohoo! now we figured out the annual property tax for our example property which is worth $100,000.  Oh by the way, in case you are wondering where $1080 comes from, it was calculated as $5,400 x 20% = $1,080.

A lot of this information comes from brochures provided by NYC Department of Finance.  I will add the links for class 1 and class 2 brochures in below:

Property Tax Class 1

Property Tax Class 2

Please comment what you think.  Was this helpful or did you like the content/examples?