At 464 Broome Street, tenants get $20,000/year.
An article in The New York Times over the weekend introduced us to a concept that seems almost too good to believe: the Big Apple has co-op buildings where residents pay no maintenance fees and also make money off the property’s commercial tenants.
If you have walked around New York, you are no doubt aware that many residential buildings in the city have ground-floor retail tenants. As it turns out, a luxury shop in a high-end district could potential pay enough in rent every month to completely offset maintenance fees for homeowners in the building, and in some cases, provide the owners with a sizable yearly dividend.
Until 2007, however, this wasn’t all too common as a federal tax law capped the amount of income that co-op buildings could generate from their retail tenants; according to the law, in order to qualify as a housing cooperative, 80 percent of the income of a co-op had to come from the owners themselves (and no more than 20 percent needed to come from the retailer). The 80/20 rule was the only way for co-ops to maintain their tax status as a housing cooperative. So, in order to maintain the 80/20 ratio, many co-ops rented their retail spaces for below market rate.
After 2007, the law was loosened. The Mortgage Forgiveness Debt Relief Act of 2007 gave co-ops a couple other ways to maintain their tax status, like proving that 80 percent of the square footage in the building was used by tenant shareholders or that 90 percent of the expenses were spent in the benefit of tenant shareholders.
As a result, many co-op buildings started increasing the rent on their retail tenants. Some buildings renovated their retail spaces in order to attract higher-end stores, and tenants have been able to really cash in. According to the Times, a building at 464 Broome Street in SoHo, earns so much retail rental income that owners receive a $20,000 annual payment.
From the Times:
“The building has just eight apartments,” said Henry Hershkowitz, a broker at Douglas Elliman who represented a seller [of one unit], “so the revenues from the two stores on the ground floor cover the real estate taxes, the building’s upkeep, even a full-time super, and then there is money left over for an annual dividend.”
The federal tax law adjustments apply across the country, so presumably DC buildings are taking that under consideration.
This article originally published at http://dc.urbanturf.com/articles/blog/is_it_possible_to_live_in_a_maintenance-free_coop/6932
Most Popular... This Week • Last 30 Days • Ever
Landmark Theatres is in the final stages of negotiations that would have it operating... read »
The housing market last month was not as hot as September 2020, but that is probably ... read »
The next phase on the Center Block would deliver 166 apartments and 221 hotel rooms.... read »
DC's crane count still ranks as one of the highest among U.S. cities despite a declin... read »
The latest installment of Above Asking revisits two recently-featured listings in the... read »
UrbanTurf has compiled virtual looks at large new developments around the DC region.... read »
The preferred mortgage product among most home buyers is the fixed-rate mortgage. How... read »
STAY DC provides rental aid and utility payment grants to at-risk District residents ... read »
The yet-to-be-built home may set a new bar for luxury in the residential real estate ... read »
Federal Realty plans to eventually file a planned unit development application for th... read »
With this weekend's DC houseboat tour a day away, UrbanTurf thought it only fitting t... read »
President Obama travels to Denver this morning to sign the stimulus bill that has bee... read »
In this week's installment of Ask An Agent, a reader wonders if there is a rule for h... read »
As The Wharf prepares to begin construction, DC's houseboat community heads to its ne... read »
In this week's installment of Ask An Agent, a reader asks a fairly common question th... read »
DC Real Estate Guides
Short guides to navigating the DC-area real estate market
We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!
Intro guides for first-time home buyers
Awesome and unusual real estate from across the DC Metro