How much do I need to purchase my NY apartment?

We aim to get you a 1 bedroom apartment, fully restored, for a maximum of 210 000 USD (on a 190 k purchase price), all costs, title deed, and broker fees included. Since we manage to source the apartments well below market value and rehab them, they typically get estimated around 200 000 USD afterwards.
Count on spending about 80 to 100 000 USD, if you get a mortgage, as a non US citizen.

US citizens can have bigger LTV, so expect to deposit less if you are.

Do I physically need to come to New York?

While you are always welcome to visit the team and have a tour of Parkchester, there is no actual requirement to travel to NY.

Everything can be done via email and whatsapp in cooperation with the legal team of Fisher Stone, and through Power Of Attorney. In case you would like to take a mortgage in the US, you do have to physically sign and notarize some documents, but you can sign in any US embassy.

After the purchase, we do not foresee any situation where you would have to travel to NY to handle any matter related to your property. You are of course always welcome to do so, should you wish, but our property management is very efficient, and capable.

How should a foreigner own property in NY? What about tax?

While you can technically own under your own name, the necessary paperwork is a bit complex. We recommend creating an LLC to own your real estate, for tax benefits as well as for liability protection.

Most European countries will not tax you on your real estate in the US, however we recommend checking your home country tax treaty with the US in case of any doubts.
Tax returns for an LLC are fairly simple.

The accounting team of Grassi & Co can easily assist you for a very fair price. ( https://www.grassicpas.com ). You are of course welcome to hire your own CPA.

How work-intensive is this investment for me?

Once set up, the investment is quite effortless and allows you to fully focus on your job, your family, or other interests.

Luca’s full time job for the last decade has been exclusively to acquire and manage the large portfolio of Parkchester units. Some of the investors that have worked with him for years only need to speak to him once or twice a year!

That being said, all transactions and activities are fully documented and posted on a dedicated secure drive where you can access everything (closing documents, copies of checks, deeds, tax bills, contractor invoices, etc) in real time from anywhere in the world.

You have the opportunity to check and manage everything, but you don’t have to if you don’t want to.

How much do you charge for property management?

In the total purchase price, a broker fee is included for our work. This includes a free year of property management (rent collection, dealing with tenants if needed, utility payments, ... ). After that, Luca can provide management for 75 USD per month.

Why do we think this is a better investment than gold during recessions?

Gold can be a nice chaos hedge, but as Warren Buffet says, you can look at gold, store it, dress in it, but it does not produce anything. You simply bet on selling it at a bigger price in the future, than what you paid for it.

With these apartments, you can also expect a reasonable capital gain due to their location, inflation, the dynamics of the NY real estate market, but more importantly, it produces in the meantime, it provides cash flow, it works for you. It provides income replacement.

But as always, asset diversification and a well balanced portfolio is key.

What impact does COVID-19 have on this investment?

As of now (April 2020), most activities are on a standstill in NY. Rents are paid by the Government of NY, so the cash flow has not been affected, and the net return of 6% Is still ongoing. Some property sales are still closing even now.
We do not have a precise idea when activities will go back to normal, and what the situation will be when they do, but we do expect to see an increasing amount of apartments come on the market.

Meanwhile, the government has increased the speed of approval for Section 8 tenant files dramatically, confirming that we will have an increasing need for affordable housing in the future.

What taxes do foreigners pay when they sell their NY property?

The capital gains taxes are the same as for locals, between 25 and 30% of any gains, depending on a few variables like ownership structure etc.

You can avoid paying capital gains tax by doing a 1031 exchange. You can roll over the gain of one investment property, to buy another similar property, in which case you will defer your capital gains. This can be done in perpetuity.
If you sell your property with a capital gain, you can designate a replacement property within 45 days (you can designate 3 as long as you close on one of them). You must close on the replacement property within 180 days of selling the old one.

For any detailed tax information, we will always recommend consulting a CPA.

Is it possible to scale my investment, and how?

We will always find apartments for sale, below market price.
One very effective strategy, if financing was taken outside of the US or the property paid for in cash, is to refinance the first, existing property, owned free and clear in the US.
Refinancing one apartment would clear up enough money to have down payments for 2 new properties, and still be well above neutral cash flow.

(Currently, our personal game plan is to build up as much equity as possible in 2020, so we can refinance in Q1/Q2 2021 at ultra low fixed interest rates, and redeploy the refinancing amount to buy as many more apartments as we can at distressed prices)

If I'm not a US citizen/resident, how do I avoid paying a hefty commission on currency exchange and wire transfers to and from the US?

Digital banks like Revolut and Transferwise are extremely effective and cheap to operate. These banks offer currency exchanges at the exact spot rate, and offer free or very inexpensive international transfers.
We highly recommend you set up a Revolut and/or Transferwise account, in case you haven’t yet.

We will assist you if you need more help setting up these tools.