charles weiner of aka the handsome home
buyer and on this week's episode we are
talking about
all things real estate tax related in
new york
so a couple things been going on that
inspired this video first i'm getting a
ton of dms from people who are like
charles
should i can i 1031 my flip how do i set
up my business so i don't have to pay
taxes
taxes taxes obviously taxes are high
everywhere they're extremely high
in new york and then on the flip side i
just did a deal in queens
and the transfer tax literally made me
fall off my chair
so i want to do in this video is review
a discuss
uh taxes for flippers in regards to
income tax
and then just talk about transfer tax
and mortgage tax and the different taxes
that you as a real estate investor or we
as a real estate investors
deal with in new york so taxes taxes
taxes
in new york the fourth first is mortgage
recording tax right so there's two
levels to this
mortgage recording tax as a whole if
you're lent to by an entity
is 1.05 percent so essentially if you
borrow
a hundred thousand dollars right from a
if you borrow a hundred thousand dollars
towards your project right somebody
funds that
you're going to pay 1.05 percent in tax
to new york state for the privilege of
recording that mortgage for that
particular amount now
if it's in a person's personal name it's
actually 0.25 percent
less so it saves you money there but if
somebody is lending to you in their
personal name
they're capped at a certain amount of
loans per year and people that typically
lend
at a decent amount of volume they do it
out of an entity and they turn into some
type of a business
so if you're dealing with a traditional
lender you're definitely paying 1.05
percent if you're dealing with somebody
that lends a decent amount and they have
an entity and they have it set up that
way which is the right thing to do
you're going to be paying 1.05 percent
transfer tax right so those are you
don't know what transfer tax is
when you sell a property a percentage of
the sale price
goes to new york state as the new york
state transfer tax now there's new york
state transfer tax
which is four dollars for every thousand
dollars so if you sell a house for 400
000
you're going to pay new york state
transfer tax in the amount of sixteen
hundred dollars pretty straightforward
simple makes sense now
if you start to get into properties that
are in the burrows that's when it starts
to get crazy and that's ultimately what
made me
fall off my chair all right so to put
this grid together we have
residential column we have the
commercial column
we have properties under 500k we have
properties over 500k
so you're paying this four dollars per
thousand to new york state regardless of
where you are in new york
if you're in the boroughs you know
queens brooklyn manhattan the bronx et
cetera
this is where the additional tax comes
in so if you are selling a house
that sells for under 500 000 you're
gonna pay an additional one percent
so that 400 000 sale you paid 1600
in new york state transfer tax here now
you're gonna pay an additional
four thousand dollars here for a total
of fifty
six hundred dollars on the commercial
side
it's four point two five percent all
right this is where i ultimately got
smacked
because i sold the property at seven
hundred and four thousand dollars
is you pay four dollars per thousand
dollars here
and then you're going to pay 1.42
to new york state on top of that all
right
if it's commercial it gets even worse
it's 2.625
so it's a big big big big number uh
last and final i want to talk about
flipping tax so
people reach out to me again all the
time and they say listen i don't want to
pay the taxes
how do i do this here's the unfortunate
rate can i do a 1031
10 30 ones i'm going to do a follow-up
video about 1031s and everything there
is to know about 1031s
1031s are not something you use to flip
properties with
they are used for long-term hold there's
very strict
regulation and time constraints behind
the 1031.
it's not conducive to to flipping houses
you have to identify three properties
you only have x amount of time to
do your due diligence to close on them
etc it's
or you ultimately get whacked for
everything before that
so it just doesn't make sense when you
start flipping properties what happens
is
your properties become your inventory
and you become a dealer of houses
in the eyes of the irs so there's no
difference between
when i was in mako painting cars if
you're selling cameras selling widgets
offering any type of service
you are going to pay tax just like
everybody else there's no
there's no benefit to being in real
estate at that point you're obviously
allowed any of the standard deductions
for business operations that the irs
legally allows but at the end of the day
you are not going to be paying
short-term or long-term cap gains on
these things
you are going to pay full boat
as if it's ordinary income so that's the
unfortunate reality
we got moore's recording tax you guys
know what it is we got transfer tax
it's upsetting but you know what it is
and we have faced the unfortunate
reality of if you are flipping houses
at scale you are going to pay real taxes
on the income but like my accountant
steve oak says
there's worse problems to have than
having to pay taxes on money
that you actually made so with that said
we appreciate you obviously like
subscribe share this video and we'll see
you on next week's
educational vlog
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