New York’s commercial real estate and multifamily landlords are being hit with several converging trends, including property tax hikes. All of which is putting them in a strained financial position.
What do you need to be watching out for? How can you navigate these changing times, and survive?
Rising Interest Rates
The Fed has again indicated that it will continue to press forward with more interest rate hikes. Even after acknowledging previous hikes have already been successful in bringing down the real estate market.
This is making financing new acquisitions and refinancing much more expensive. Or even impossible. Especially with other deteriorating factors, and vanishing equity.
Minimal Rent Hikes
The NY Rent Board narrowly approved a 3% increase for annual leases on stabilized apartments. A dramatic revision from the 14% that landlords had been seeking.
With real inflation up 30% in many cases, that means landlords that can’t sell and get rid of their properties face deep cuts to net income. With many likely to be falling deep into the red.
Bleeding Customers & Businesses
The number of small business tenants behind on their rent was recently reported at around 40%. Big businesses like Twitter don’t seem to be able to make their rent either.
The tenants commercial property owners have left may not be there for long either. Many restaurants and others are having to limit hours and face rising costs due to rising crime. Others are finding there are few customers left in once busy areas, and are having to relocate to where their customers have moved to.
Of course, this substantial restructuring of where people are living and are moving too is also impacting property taxes.
Your Property Taxes
Where people are flocking too, property taxes will rise even more. Where they are fleeing, property tax assessments ought to go down, even if tax rates are being hiked.
In addition to trying to repurpose buildings for income and profitability, like from offices to medical, challenging your property taxes can help you make ends meet.
You should be appealing your annual property taxes on properties that you already own, and are trying to hold, or want to make attractive for resale.
You should be trying to reduce the tax bills on new properties you are acquiring too. Lock in the best affordability and profitability from the start.