As the months waiting for DOB approval have been clicking by we’ve been telling ourselves “it’s no problem, it doesn’t cost us much at this point”… Relative to what it will cost once we have the rehab loan, that’s true, but a couple days ago we added up the costs and were a little shocked at how much we’re actually spending on an empty building…
Our taxes are relatively low… $3,441/year or $286.75/month.
It’s worth saying that we’re lucky we have low taxes. Some of the places we saw in our search were paying over $2,000 per month in taxes, though $3K to $6K per year is more typical for Harlem townhouses.
Assuming we get construction started before the end of the year, one trick I learned from a friend is that you can file the change of occupancy with DOF as soon as you start construction – you don’t have to wait for construction to be complete. That means our taxes will drop to the rate for 2 family before we’re done with construction, so next year they’ll be even lower and will go up more slowly than they do now.
The “Building Super”
The apartment building next to us has a bodega with rather messy customers. Unfortunately the prevailing wind drives their garbage down the block in front of our building. Also, by the time some of them walk past our building they’ve gotten their purchase out of it’s bag or wrapper and they throw what they don’t need in front of our building. We’re not on some brownstone-only block that’s relatively clean. As a result, it’s cheaper to pay someone $200/month to keep things clean than it is to pay the ECB tickets for garbage.
The first day we owned the building we went to it and there was a $100 ECB ticket waiting for us – the snow was melting and we got a ticket for the garbage that was in the melting snow. The City needs money and they’re pretty aggressive about ticketing for garbage.
Paying the $200/mo also helps build relationships with our neighbors. We went with the (self-appointed) super of the apartment building next to our townhouse (the building has a mostly-absentee landlord, so he approached the landlord and worked out a deal to watch over the building). He has a group of guys who watch that building and they now watch ours. Those eyes are worth something. We plan on continuing to use him even after we move in (though at lower rate).
Our Line Of Credit
We bought our place mostly with cash, but we took out money from a line of credit to make up the difference between what we had available and what we needed. Our accountant suggested taking out more than we needed since he was seeing lines of credit get reduced and didn’t want to see us in a position where we didn’t have access to cash. We took out $80K, and a fair amount of that is sitting in our checking account which means we’re paying interest on money we’re not really using… Luckily, the interest is low since it’s tied to the prime rate (lower than the rate we’d pay on a mortgage – and with a MUCH lower principle amount), so we’re just paying about $345/month in interest on the money.
So that means we’re spending about $835 per month on an empty building – not including all the architectural fees, permits, etc. for the actual rehab of the building. It’s not a huge amount, but it does add up. Still that’s a lot less expensive than getting something wrong and having costly delays and change orders during construction. I’m sure we’ll have some, but the fewer the better.