Buying Guide

What is the CEMA Loan? And Who Qualify for the Loan

Are you a New York (NY) property owner who needs a refinance or tax relief? You should certainly learn about and consider the CEMA (Consolidation Extension and Modification Agreement) loan.

Let’s go through what this loan is, those who qualify for it, and some of the things you must consider when applying for it.

What is the CEMA Loan?

As most New Yorkers already know, the state is not a tax haven for property investors, especially those who live in the southern part where property values and mortgage tax rates are considerably higher. The CEMA loan can best be defined as a contract between a new lender and an existing lender. Both lenders decide to create a unique, consolidated loan by combining two or more without filing any cancellation on the current mortgage.

After completing this process, the property owner’s credit report will appear in the new CEMA mortgage, and it will show that the existing mortgage has successfully been transferred. Then, the homeowner is allowed to pay the tax calculated on the additional amount above what they initially borrowed (the difference between the two loans), which consequently decreases their mortgage tax.

Who Qualifies for the NY CEMA Loan?

Only residents of New York are eligible for the CEMA loan. In most cases, the loan acts as a refinanced mortgage, even though there is a slight chance that you could use it to buy your dream property. The main challenge that NY residents encounter when applying for a CEMA loan is finding a lender who offers such loans if their current one does not provide such a loan. Besides, changing lenders is not always the best choice because it is time-consuming and it could also be expensive.

Upon realizing that you qualify for a CEMA loan, you must consider a few factors before beginning the application procedure. These include:

  • Time: CEMA loans take time to complete, usually 30-90 days. This could be because you have to switch lenders to get the best deal. The NY regulations may also slow down the approval process. If your case is dire, and you can’t wait that long to get a refinance, think about taking a conventional loan instead.
  • Fees: A CEMA refinance is not devoid of costs. How much fees you pay when applying for this loan boils down to your lender. If they have experience working with CEMA mortgages and are ready to process yours, count yourself lucky. The cost you’ll incur will be much less. With new lenders, you might have to part with a few more bucks than anticipated.

Why Is CEMA Loan Popular?

Hopefully, this piece enlightens you about the popular CEMA loan that can offer the tax relief you badly need as a property owner in New York. Note that CEMA is not an ideal option for loans perceived as second mortgages, Home Equities or HELOCs. CEMA loans also don’t mean that your mortgage will be discharged. Before you make up your mind about applying for this loan, make sure to consult a competent loan officer in the state. They can help you decide if the loan fits your current needs and guide you through the application process.

Buying Rentals

Buying a New York City Co-Op

New York City has one of the most complex and expensive real estate markets in the world. Co-op housing or cooperative housing is the most common alternative in NYC (over 75% of apartment buildings). If you are looking to invest in your first co-op apartment successfully, there are certain things you need to understand before taking this giant step. Below is s a short guide on everything you need to know about buying a co-op in NYC.

What Is A Co-Op vs Condo?

A co-op is a form of residential housing whereby buyers do not own a housing unit in the building but rather buy shares in a corporation that owns the building. Unlike a condo, you do not get a property deed after purchase. What you get is a propriety lease which gives you access to a specific apartment.

This form of investment is considered a personal investment rather than a real estate investment as you are buying shares in a company and not real estate property.

Are you wondering if this form of investment is worth it? Worry not! We will outline both the advantages and disadvantages of Co-ps in the paragraphs below.

Advantages of Buying a Co-Op

  • Low Cost: Compared to condo units and houses, co-ops are 20 -30% cheaper. That is what makes them such a go-to option for those looking to settle or invest in NYC real estate.
  • Security: Co-ops are run by boards that carry out thorough background checks on individuals before agreeing to sell. Once in, you have an assurance that your co-op neighbors are safe.
  • Low Closing Cost: As mentioned above, co-ops are considered a personal investment. Therefore, you will incur lesser fees if you decide to sell. Selling your property involves a transfer of shares; therefore, it will not be subject to any mortgage recording tax, and you won’t need an insurance title.
  • Price Stability: Co-ops have strict requirements that contribute to the stability of the real estate market in NYC. Usually, not less than a 20% down payment (each co-op sets its range) is requested. Potential buyers equally need to have a debt-to-income ratio higher or equal to 25%, nothing less (a few go up to 30%). 
  • This system prevents banks from making aggressive loans. It preserves the value of a co-op building from reducing in case one owner has to sell.
  • Combined Property and Maintenance Costs:

With co-ops, both your shares of maintenance charges and property taxes are billed together and paid to the corporation. It is then in charge of settling the building’s property tax with the state.

On the other sides of things, here are a few considerations to have before making your purchase:

Disadvantages of Buying A Co-Op

  • Limiting Subletting Rules: While they cost less to acquire, co-ops have strict renting rules. Most prefer owners to occupy their premises over renters who could cause damages. The board may equally restrict the number of years you are allowed to sublet your property.
  • High Flip Tax: If you decide to sell your coop shares, you will be subject to a flip tax. This is a fee you pay to the co-op. They average 2% of the total sales price. This fee is less costly with condos.
  • Board Application Approval: Unlike houses and condos, buyers are screened and approved by the co-op board. This limits room for negotiations and the procedure can be invasive. Some boards may reject co-applications or gifted contributions to the down payment.
  • Post-Closing Liquidity Requirement: In addition to your down payment, the board equally requires you to disclose how many months of payments you can afford to have in cash, stocks, and any other liquid assets after you close. This excludes retirement savings and property investments. Most buildings demand 12 or 24 months of post-closing liquidity.

After looking at the advantages and disadvantages of this housing option you are willing to invest in, your next step will be to place an offer. For this, it is advisable to find a real estate broker to help review your application to be sure you meet all the criteria. Once your offer is accepted, all you need to do is wait for the board’s approval to close and move in.


1031 Exchange Rules & How Does it Work?

Some of the savviest real estate investors have taken advantage of the 1031 exchange to grow their net worth and improve their portfolios. The 1031 exchange is a convenient procedure that enables you to swap an investment property for another of the exact nature while you put off capital gains tax. This program only succeeds if all its requirements are met, regardless of whether the like-kind property an investor picks has equal or greater value.

Are you looking to learn more about the 1031 exchange? Worry not! This blog post will discuss the rules of a 1031 Exchange and how it works. Keep reading!

1031 Exchange Rules

The 1031 exchange comes with several rules that property investors must follow to enjoy the program’s perks. These are:

180 Day Rule:

This is another rule that real estate investors must adhere to when using this common tax strategy. They must close on the newly-acquired property within 180 days after selling the old one.

One noteworthy aspect of these two 1031 exchange rules mentioned above is that the periods run simultaneously. Therefore, one must start counting the days immediately after the successful sale of their initial property.

200% Rule

This rule of the 1031 exchange permits investors to identify as many replacement properties as possible, but there’s a catch. Their total value should not exceed 200% of the original property’s value.

How the 1031 Exchange Works?

A 1031 exchange is a process that entails several steps. Here are some of the things that the property investor should do when performing it.

  • Make up their mind about selling their property and opt for the 1031 exchange.
  • List the particular property for sale.
  • Start looking for worthwhile replacement properties.
  • Choose a reputable intermediary.
  • Begin negotiations with potential buyers, evaluate offers and settle for the best one.
  • Close on the sale of the old property.
  • Select up to three replacement properties within 45 days.
  • Sign an agreement on the first-choice property they choose.
  • Close on the desired replacement property.

The 1031 exchange procedure is pretty straightforward, right? This is partly why most property investors don’t mind doing it time and again. It is the perfect way to defer paying taxes and build wealth faster than if they paid the required taxes every time they acquire a new property.

Buying Guide Rentals

New York City Housing Lottery [2021]

Finding affordable housing is a near-impossible feat in New York City, where the average price for a one-bedroom apartment is $2,980. Therefore, debates have sprung up to determine ways to provide affordable housing in New York City. One way is through the New York City housing lottery (NYCHL). The idea is to provide affordable housing that costs individuals a third or less of their household income as rents. It only applies to buildings whose developers are getting tax breaks for setting aside some affordable apartments.

As we move forward, we’ll discuss the New York City housing lottery guide.

Check If You Qualify

To know if you qualify for lottery programs, check each building’s guidelines. Generally;

  • Your age is a crucial factor as you must be 18 years old.
  • Have a good credit score and a history of paying your debt and taxes in time. If your credit score is low, you can start working on it immediately.
  • Your household income has to lie within a specific range depending on the total number of people in your house.

Apply for The Lottery

You do not pay a broker or developer fee to apply for the lottery. You can either apply online through the NYC Housing Connect portal or offline through the mail. Note that developers will discard incomplete or fraudulent applications online or offline. Make sure you sign the application mail before sending it back. Developers may discard your application if you apply more than once for an apartment in the same building. Also, they will not consider your application if you submit it after the application deadline.

Although your chances of winning the lottery are higher if you have a small log number, there’s a way to improve your chances. Each building has preferred groups of people in the selection process. Some of which include:

  • Current community board residents
  • Veterans
  • Some disabled applicants
  • Municipal employees

If you fall within any of these groups, include this in your application to increase your chances of winning.

Getting The Results

Generally, applicants are contacted roughly 2 to 10 months after the application deadline. A developer may reach out to you for one of many reasons.

  • In case there was a flaw in your application for a lottery.
  • If you submitted more than one application for the lottery, and they have disqualified you.
  • The developer will contact you if you are selected to move on to the interview stage.

In some cases, qualified applicants do not go to the interview stage because of the enormous number of people who apply for this housing lottery.
If the developer randomly selects you after the interview, you may sign some more documents and wait for the HPD’s approval before signing the lease. Or you may be put on the waiting list until there is a vacant apartment. Within the waiting period, you have to write to the developer twice yearly to show your continual interest in the apartment.


What Is NYC Flip Taxes? And How to Avoid Flip Tax

Flip taxes are a foolproof method to raise funds for a building without incurring additional costs. It is a transfer fee that a buyer or seller pays the cooperative after selling or transferring an apartment. Additionally, flip taxes provide funds for capital improvements. Cooperatives and co-ops have to treat all shareholders equally to ensure the courts approve of the flip tax. Averagely, transfer taxes in NYC range between 1% to 3% of the building’s final sales price. Flip taxes are part of the building’s closing costs.

What Are the NYC Flip Taxes?

There are multiple flip taxes from which to choose. Carefully weigh the pros and cons of each flip tax before making a decision.

The flat fee and per share amount types of flip transfer taxes are similar. Both require that the cooperative sets a fixed flip fee for all shareholders. Also, the flat fee flip tax requires cooperatives to set a flat fee amount for all shareholders. The per-share amount requires shareholders to pay a fixed dollar amount per share.  This policy is beneficial to shareholders to a larger property and those who bought buildings years ago at fair prices. It is a total disaster for shareholders who have smaller buildings and those who bought buildings a few years ago. Nonetheless, it helps maintain a certain degree of order when calculating flip taxes. It is important to know that the flip tax is different from the NYC mansion taxes.


The percentage of the sales price is not so different. Here, the cooperative demands a percent of the total amount made from selling the building.

Another method is the percentage of net profit. It is the most stressful method for cooperatives because it is not easy to calculate only the gain from selling a property. After which, they request a certain percentage of the amount.

The combining method is a less popular method cooperatives use to collect flip taxes. It requires combining two or more flip tax methods. Although it works, it is quite tedious.

Who pays the Flip Tax?

Sellers typically cover the cost of flip taxes. Nevertheless, buyers will pay if the cooperative demands the payment of this tax. Therefore, buyers have to carefully read through their real estate contract to know if the seller will pay the NYC flip taxes.

The amount a seller or buyer pays as flip taxes depends on how much the cooperative requires. Since there is no specific amount that cuts across all cooperatives, they demand different amounts. Some cooperatives make a higher demand if the seller sells the property at a high price. The goal is to add funds to the cooperative’s reserve funds.

Cooperatives can change their flip taxes by voting. Every shareholder has to vote before the board makes a final decision. They can only change the flip taxes if the majority agrees to it.

In summary, flip taxes are a fee cooperatives request for maintaining buildings without incurring additional costs. Family members may not pay house flip taxes depending on the cooperative’s policy. Seek the assistance of a real estate agent if you need clarification on your real estate contract.

Buying Guide

NYC Transfer Tax Guide [2021]

The NYC Transfer Tax affects all transfers of cooperative shares or real estate property worth over $25,000 from one party to the next. Condos, single-family homes, and all other residential property are subject to this tax.

It is one of the most expensive parts of the closing costs of a transaction. It is also applicable to transfers of majority shares within corporations.

What is the NYC Transfer Tax Rate?

The NYC transfer tax depends on the sales price of the property or shares.

The NYC transfer tax is 1% if the sales price is below or equivalent to $499,999. For NYC, the transfer tax is 1.425% for properties with a sales price above $500,000.

Who Pays the Transfer Tax?

It depends on the deal between the buyer and seller. Generally, the seller is responsible for covering the NYC transfer tax. Some sellers put this forward to attract buyers and keep them glued. However, the buyer may end up paying the NYC transfer tax if tax authorities do not know the sellers’ whereabouts. For new development property, a buyer may pay this tax if the sponsor demands it. In this case, the buyer has to bring the cash at closing. Buyers cannot finance it through other methods.

What is the Reason for the Transfer Tax?

Generally, taxes play a role in increasing government revenue. No matter how small the figure may look initially, it all adds up. The NYC Transfer Tax helps fill government coffers. Tax payer’s money enables the government to achieve some of its goals and improve the city. New York City officials take the transfer seriously because the government has raised impressive amounts in previous years. Therefore, they do a thorough follow-up on the transfer tax and ensure the buyer or seller makes the complete payment. Failure to do so may attract dire consequences on either party.

How to Avoid Paying Transfer Tax?

Many people seek ways to either reduce the transfer tax payment or to avoid it. Here are some tips on how to achieve any of them.

  1. Assess Closing Cost

    Assess how much of the closing costs the developer of a new development building is willing to shoulder. You need this information because the buyer usually pays the NYC transfer tax for a new development building. However, a developer may pay the NYC transfer tax if they are desperate to get the property out of their hands.

  2. Seller Purchase of CEMA

    Sellers should purchase CEMA to minimize their transfer tax. Sellers can cut costs if they do not hire a real estate agent to put up their property for sale. They can put it up themselves on real estate platforms and still find buyers.

However, you can only avoid payment if you qualify for an exemption. You can be eligible for an exemption if you are using the property as collateral for a debt. Also, you are exempted if you are selling or buying the property for a non-profit organization. Government institutions may not pay the tax for various reasons. You are also eligible for an exemption if you sell or buy the property for some US affiliated international organizations.

To conclude, paying your tax is crucial. It would be best to learn more about all the taxes you need to pay to avoid getting in trouble with the authorities. Failure to pay taxes has severe consequences we all should avoid. Consult a real estate agent to get professional advice before buying or selling property in New York City.

Buying Guide

What is NYC 421-A Tax Abatement?

Are you planning to invest in real estate in New York City? We guarantee that you’ll love the NYC 421-A tax abatement program, especially if you, like most people, are not a fan of taxes. So long as you are a property developer in NYC, you can easily get the NYC 421-A tax abatement, but your goal must be to offer affordable housing for the city’s residents. The program reduces your property tax bill for a specific duration. In most cases, it lasts for ten years, but yours could be 15 or 25 years, depending on the code it is registered with. For instance, codes 5117 and 5110 provide a ten-year term, while code 5114 comes with a 25-year period.

If you’d love to know more about the NYC 421-A Tax Abatement, read on!

We’ll start with the program’s history.

The History of the NYC 421-A Tax Abatement

The NYC 421-A Tax Abatement began in 1971. Its objective was to encourage NYC property developers to make the most out of underutilized land in New York City by investing in affordable residential buildings for families. The program prompted the construction of thousands of condos in Manhattan and other NYC boroughs. Today, the NYC 421-A tax abatement is still incredibly popular. The buildings benefitting from this tax abatement are twice as many as those with other property tax programs.

Home buyers will be delighted to know that the buildings they plan to purchase come with a 421-A tax abatement. Research all the essential information about this program because it has six codes, each offering a different property tax reduction percentage. Some people have often wondered if buying a building with an NYC 421-A tax abatement is an excellent idea. The answer to this is; it depends solely on the buyer’s preference.

What to Expect When Investing In a Property with a 421-A Tax Abatement?

A property with tax abatement is undoubtedly better than one without, but things could get a little complicated. For starters, expect most home sellers to sell apartments with a 421-A tax abatement at a higher cost upfront. They already know that you will spend a lot less on property taxes. While this might not be a problem for real estate investors with a high and flexible budget, those with low, tight budgets may not see it that way. You should always evaluate the home seller’s asking price for a property with tax abatement and the cost of one without. When that’s done, ask yourself the question; Is it really worth it?

When buying a house with tax abatement, you should also anticipate dealing with certain risks. A home seller could choose to sell their co-op or condo because the 421-A tax abatement period is close to expiring. If you purchase the property blindly, you might not enjoy the tax reduction benefits you hoped for.

After reading through this article and understanding the NYC 421-A tax abatement, you could take advantage of it as a real estate investor. The main advantage of purchasing a property with this tax abatement is that your property’s tax bill will be considerably reduced. Ensure that the apartment or condo you are buying is worth it. Before paying for the residential property, ensure that there are a good number of years left in the tax abatement. 


New York City Mansion Tax Guide [2021]

Are you a potential homebuyer looking to purchasing a home or apartment in New York City? You must have heard of the NYC mansion tax, a closing cost that many property buyers in the city have incurred. Supposing that the residential property you wish to buy is worth more than $1 million, prepare to pay this tax, which dates back to 1989, the year this tax was created by former Gov. Mario Cuomo. The NYC mansion tax was meant to enhance the New York State’s budget, like all other taxes.

If you’re a first-time property buyer, it may all be a little confusing, but you need not worry. This guide provides essential information about the famous NYC mansion tax. Read on.

Who Pays the NYC Mansion Tax? And how much is it?

As a homebuyer, it is prudent to know the mansion tax you have to pay before becoming a legal homeowner in New York City. It helps you to manage your budget correctly. The value of your home determines the tax rates.

If your property’s cost is $1-$1.999 million, the tax rate is 1%, meaning that the tax amount will be $10,000. The percentage soars as your home’s value increases. For instance, should you be buying a house worth $20-$24.999 million, the NYC mansion tax rate will be 3.75%.

Remember that this tax is payable during the closing on your new home, but you can also pay it within the first fifteen days of closing. If you don’t do it by then, the home seller will also be in trouble.

After calculating the NYC mansion tax amount, you are required to pay, begin the process of paying it.

How to Pay the NYC Mansion Tax?

Since the NYC mansion tax is considered a real estate transfer tax, the necessary tax documents must be submitted together with the Form TP-584. The title company can hand in the filing on your behalf, regardless of whether you buy a condo or townhouse. If you are purchasing a housing cooperative (co-op), work with your real-estate lawyer when submitting your tax fillings.

NYC Mansion Tax Rates

$999,999.00 or Less0.00%
$1,000,000.00 to $1,999,999.001.00%
$2,000,000.00 to $2,999,999.001.25%
$3,000,000.00 to $4,999,999.001.50%
$5,000,000.00 to $9,999,999.002.25%
$10,000,000.00 to $14,999,999.003.25%
$15,000,000.00 to $19,999,999.003.50%
$20,000,000.00 to $24,999,999.003.75%
$25,000,000.00 or more3.90%

How to Avoid Paying NYC Mansion Taxes?

The NYC mansion tax can be insanely expensive, especially for home buyers who have just enough money to purchase their new one or two-bedroom home. Like many others, you must be wondering if there is a way you can avoid paying this tax. Unfortunately, there isn’t. The law requires you to pay the NYC mansion tax to be a legal homeowner in the United States’ most populous city.

Even so, there are exemptions when it comes to homebuyers paying the NYC mansion tax. When a government body purchases a residential property, the organization doesn’t have to pay the tax. The same case applies to closings that are as a result of federal bankruptcy.

This guide aims to shed more light on the NYC mansion tax for homeowners looking to invest in your dream residential property in New York City. Make sure you pay the tax during the closing, or at most 15 days later. Otherwise, you and the home seller will be held responsible. It is worth noting that houses with a value of less than $1,000,000 are exempted from this tax.