Hello! In this video we're going to show you
how to assess and evaluate a
property for sale that has a J-51 Tax
Exemption and Abatement in place.
This video and model is meant as a rough guide
for buyers who would may find it
helpful to get a sense of what exactly
they're looking at in terms of taxes in
the coming years. Again, if you need
something much more in-depth, we always
recommend consulting your lawyer as well as
your buyer's broker and during
your purchase and if you are very
curious budget if you want or even want
to get this exemption done for your
building then you should certainly
consult a J-51 consultant.
So the first step is to figure out what's
specific J-51 benefits your building or the target building is getting currently.
So to do that, let's go to google
you can search
for NYC Property Tax Bill online, BBL lookup,
NYC property tax. Those, any variety of
places will get you to the same place,
gets you to the same place. You can
search by borough, block, and lot. Those are specific ID numbers most people will
prefer to search by address.
Remember to read the instructions here carefully.
Most important thing as of
this writing is this system is a bit
finicky. So whatever number you put, let's
do an example, you will want to write the
complete correct address with the
exception of TH. You don't want to put
140th but 140 street and this way you
won't have an error. You'll come up and
see a summary of information about the property.
This is an account history,
you'll see that in fact it's been paying no tax.
Notice of property value this is
an interesting statement from the city.
If you take a look you see a J-51
alteration is indeed in place. You can see
the current assessments projections for
next year from the city. Very interesting
though is often in this notice of
property value you will see an estimate
from the city of the square footage.
So, they typically pull this number from say
the condo lot declaration or the
original offer plan. So, this is a good
place to verify the square footage.
You go up property tax bills, you can see the
latest property tax bills that are
actually mailed to the owner. Again, zero
taxes paid. If you go through, this part
is very interesting. So this shows you
that the assessed value before any
exemptions and abatements is fifty two
thousand something.
These would be the taxes but because of
this J-51 alteration, so this
part is actually the exemption, remember
that an exemption lowers the assessed
value whereas an abatement is actually a
dollar-for-dollar reduction in the
property taxes owed. So, the exemption
portion reduces dramatically the
assessed value. At the same tax rate you
get a huge reduction in taxes and you're
left with 152 and then the abatement as
we talked about as a dollar-for-dollar
reduction in your taxes and it abates it
completely in this case to zero.
So keep these numbers handy. You go through this
page will actually give you information on
the abatement, the j-51 abatement, you
will see that again this number matches
with the forty five thousand that we saw previously.
That this is the reduction in
the assessed value and this is the
abatement that was applied that you saw
in the property tax bill previously.
This is important, this shows you when the
J-51 program started for this building.
This is the amount of abatement.
that is left or I'm sorry this is the
total amount of abatement given and this
is the amount left. And you'll see that
this figure is 90% of the alteration cost.
So the city won't give you credit,
a 100 percent credit ever, and in fact this
is 90 percent of the city's estimate of
the alteration cost. So, this is also
known as the CRC. Which is the
certified reasonable cost. So, the city
has a schedule and they have a cost for
each type of
work done so this is what they say the
cost of the work should be. So this could be very different from what you
paid out of pocket. So, anyway this is what the city says it costs.
You have given a percentage quite a bit,
90% in this case that was 20,000 and you have
12,000 left. So, keep these numbers handy
as we're going to use them now in the model.
so going back to the model you'll
see all of the numbers that we
previously saw. This is the current year,
assessed value, this is the current year
the exception, so the reduction in
assessed value.
This is the obviously the current year
this is exemption phase-out year so this
year you have to figure out for yourself
and this is pretty easy so unless it is
an affordable housing type project
usually it will get the 14 year
exemption phase-out with the first
ten years being full and then the last four years being a phase-out to normal values.
So, if you just do the math
this project as we saw earlier started in
2010 so then by 2020 current year
you know we're gonna start seeing the phase-out, some the phase-out is going to
start in 2021 and in the 2024 so last four years.
And the tax rate you solve from the property tax bill.
This is the current year abatement so 953 was
applied to completely zero out the taxes.
This is the remaining benefit that you saw.
This is the CRC, the alteration the
cost, that we saw earlier.
And this is the maximum in percentage so
usually you will see that for these type
of residential properties it often be
eight and 1/3 percent is the maximum
that you're able to take as an abatement
per year with the maximum lifetime of
twenty years to use up the abatement.
So, that in this case is an example and it would
be roughly nineteen twelve.
This is the percent of the CRC.
So, anyway, the model really does the rest
for you know for conservatism we've and
for simplicity we've actually assumed
that the assessed value the headline
assessed value stays the same throughout
the period again assessed values usually,
we'll say, it will increase but sometimes
they can decrease like in a soft
market now it can decrease. So for the
sake of keeping it simple and being
sane we assume that the assessed value
remains the same.
Now, the j-51 exemption here it starts
out with whatever you have in this
statement the first year and then
afterwards it's a rather complex formula.
So, what happens with this formula is
essentially what we're doing is it'll
take the quarter of the original
forty-five thousand exemption value and
reduce it by a quarter essentially
unless until there's nothing left.
So if it detects that the exemption year
has started then it will start taking
off a quarter per year of the exemption
amount until it goes to zero until it
phases out in four years and this is
obviously just a simple formula of what
the reduced assessment value is
obviously this phases out after four
years in this case. Tax rate stays the
same
and then property taxes again this is a
straightforward formula of just what job
you know just the previous two
multiplied by each other. The abatement about the first year is given.
Afterwards, it's a bit of a complex formula so
essentially what happens is it, we'll take a look.
So, it checks whether the property
taxes for that year are greater than
this Max abatement amount and if it is
greater then obviously it can only be
a max abatement amount. Otherwise, it is
is the property tax amount of that year
So, this is a rather complicated formula
but as you can see the point is over
time once it gets to a point where
the remaining abatement amount
goes down. It does correctly take that
abatement amount and then use that
instead and then of course these are the
actual property taxes paid and this is a
rather simpler formula. This is
what's you know just what's left and as
you can see it's zero for the first year
can never be negative but then it starts
creeping up and then it goes to full market. And the remaining
amount same thing it gets decreased over time, down until it's completely used up
by this year. So please feel free to take a look and play around with our model.
If you do have any questions please always consult us. We have a large team
of partner brokers, lawyers, and other real estate professionals who are here
to help you and we'd be happy to explain this especially if you are looking to
buy a property that has this very unique to New York City tax abatement and exemption in place.
Anyway, if you've enjoyed this video please remember to
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Thank you so much for watching and we hope to hear from you!