Financial Benefits to Home Ownership

In the past, owning a home was part of the ‘American Dream’; however, with the rise of a global economy which can require professionals to pick up and move for their job on a moment’s notice and with the turbulence of the housing crash of 2008, the love affair for home ownership as a means of fulfilling a vision of success and integrating one’s self into the community has become antiquated and somewhat distrusted. Therefore, I like to present a different side of home ownership to prospective purchasers or renters sitting on the fence, which is the financial benefits of owning a property. In other words, how can the home work for you rather than you work for the home.

One of the main financial benefits to owning a property is the creation of wealth over time. Owning a property can be an investment, particularly if you analyze the type of property which fares best in your market. And like the stock market, holding onto properties as investments for the long term and weathering any short term downturns, generally rewards the property owner with appreciation. As you pay down the debt, you build equity, which is like a forced savings account.

Secondly, home ownership is a way of controlling costs or expenses. We all have to live somewhere. As inventory fluctuates, the price of rent will also. When you own your home, the monthly payments are fixed. You will also have more control over cost saving choices. For example, if your utility bills are high, you can invest in energy saving appliances or automated controls which will lower your usage. And with historically low interest rates to boot, you can leverage someone else’s money through a home equity line to pay for those cost saving initiatives.

Which brings me to another major benefit of home ownership, tax deductions. Speaking of home equity lines, the interest portion of those payments are in fact deductible, as are the interest on your mortgage, the origination points of your closing costs and property tax. Furthermore, if you buy an owner-occupied multifamily (which tends to be my recommendation in the NYC area) you can also claim itemized deductions on the investment portion of the property for your utility payments including water/sewer, fuel and electricity, and what is referred to as depreciation. Depreciation is the reduction in the value of the property with the passage of time due to wear and tear, and you can write this off.

Continuing on, homeowners benefit from the capital gains exclusion when they sell the property. The federal and state authority will tax a homeowner on the profits of their home sale, similarly to how they tax your earned income each year. However, for a single filer selling a primary residence, there is a $250K exemption, and for a married couple, there is a $500K exemption! This illustrates how many homeowners turn their home into a retirement egg. And if an elderly homeowner doesn’t wish to sell their home, they can use the equity in a reverse mortgage and remain in the property.

In addition to the more obvious benefits already mentioned, there are plenty of others including how home ownership reduces your car insurance payment, improves your credit and aids in obtaining loans. There are already so many benefits, could there be more? Of course! As I mentioned previously, I highly recommend multifamily properties in the market I service and for a lucrative reason. The rent is very high in New York City. In fact, this city was ranked as the second most expensive city in the U.S to rent, which for a property owner, means you can collect a substantial income from your rental units. This passive income can pay for you to live!

In the age old debate of whether to rent or buy, it is especially true here in New York City that in the long run it is better to buy, and because of all these financial benefits of home ownership!

Housing Market Forecast

Opinions abound as to the future stability of the housing market and whether there is another housing bubble; however, most forecasters agree that certain factors should be assessed in forming your opinion. Those factors which affect the market most are interest rates, price, wages, taxes and cost of living, inventory, and demographics.

Interest rates are at an all time low since the housing bubble burst and the recession hit. The federal government implemented the stimulus plan in order to help the economy stabilize. As this stabilization takes effect, and the recovery continues, the FED will eventually taper off the stimulus program and raise interest rates. We saw this briefly in the 3rd quarter of 2013, when the FED announced they would begin raising interest rates. The momentum of the market stalled, and the FED quickly renounced that intention. However, as the economy strengthens, unemployment rates decline, and job growth increases, the inevitable will eventually happen, and interest rates will slowly climb into 2015. Predictions range near 6% towards the end of 2015, and thus prices will either level or drop depending on the increase.

With historically low interest rates and inventory, prices skyrocketed in parts of the country, specifically major metropolitan areas. This in turn caused certain would be buyers to drop out of the market due to lack of affordable homes for the lower and middle income brackets. This trend is further propagated by an increase of new development in the luxury sector primarily. However, there is still a significant portion of homes which are bank owned that are unable to be released to the public due to government restriction on the banks. Once the government relinquishes control of these REOs and the market is flooded with more inventory, home prices should decline.

As the prices rise, so do the taxes, which puts additional strain on the average Joe homeowner to maintain their monthly housing expense. In addition to taxes, the cost of living greatly effects the housing sector. If  the cost of gas suddenly rises to a high percentage, the number of foreclosures will increase too. Current indicators show that inflation has leveled, despite signs of increase earlier this year.

Another indicative factor of the health of the market is earnings or wages. Although we see continued job growth, the positions being created are in the low income bracket, and hence, overall average wages are falling. This is reflected in proposed demographic models which show trends for a lower skilled and lower paid population over time.

So what factors that will insure a stable housing market? Higher wages, smaller monthly payments achieved through a 50 yr model, easier qualifications for lendees and more efficient construction to name a few.



How To Determine A Good Investment Property

As we get older, we begin to think about how money actually works and not just where we spend it.  The concept of residual income is often an intriguing and enticing idea of generating revenue while you can expend energy doing something else, whether that be working at your job, going on vacation or more to the point doing whatever you wish.  One specific means of generating residual income is an investment property.  In my opinion, most ideally would be to start with a four family. My reasons being that there are several units which can provide a stream of income allowing for extraneous variables such as one unit failing to pay rent, a vacancy, or perhaps occupying one unit yourself, and not too many (6 or more units become subject to rent stablilization/control laws in NY) as to cause a landlord considerable time and energy. Several factors will need to be examined when determining whether a specific property is a wise investment, and the rules will change as you become more experienced as a landlord, but to begin you will look at the rent roll of the property which is the income generated from the rental units. In addition, you will need to determine the expenses required to operate the property which includes the property taxes, fuel, insurance, water and sewer, repairs, etc.  After deducting the expenses and any debt service (if the property is financed) from the rent roll, you can determine the net operating income which will be generated each month on the property. If you divide the annual net operating income by the price of the property, the result yields a capitalization rate or rate of return.  Generally speaking, cap rates of 10% and greater are considered an extremely good return.  If you ever doubt the attractiveness of investing your money in real estate, just remember that the bank will only give you a measly 1%. Then apply the rule of 72 which is take 72 divided by the interest earned, and that is how long it will take your money to double. If you’re interested in purchasing an investment property or finding out more information, contact me today.

Bunna Cafe: Ethiopian Pop Up Cafe in Bushwick

Bunna Cafe: Ethiopian Pop Up Cafe in Bushwick

Bunna, named after one of the essentials in life, coffee, this Ethiopian pop up cafe in Bushwick hosts monthly secret parties and dinner parties.  Check out the link above on the upcoming event, Fasika, on May 4th, celebrating the Ethiopian Easter celebration! Dinner, coffee making, live music & more!


Brownstoner’s Building of the Day: 683-691 Bushwick Avenue

Brooklyn, one building at a time.

Name: Row houses
Address: 683-691 Bushwick Avenue
Cross Streets: Myrtle Avenue and Suydam Street
Neighborhood: Bushwick
Year Built: 1890
Architectural Style: Queen Anne
Architect: Theobald M. Engelhardt
Other Work by Architect: Much of Bushwick and the Eastern District, including row houses, tenements, mansions, churches, schools, breweries and factories.
Landmarked: No, but part of a proposed William Ulmer Historic District

The story: William Ulmer was perhaps Bushwick’s most well-known brewer, which is saying something, as by the 1890s, Brooklyn, the fourth largest city in America, had 45 active breweries. By the turn of the 20th century, his large brewery complex on Belvidere and Locust Streets in Bushwick produced over three million gallons of the frothy brew a year. Brooklyn’s German and, more and more, non-German population had made beer the king of beverages, and William Ulmer was certainly one of the princes of beer.

The success of his business made Ulmer a millionaire, and like many rich men, he began investing money in real estate ventures. He never seemed to be too interested in it, however, and aside from his own homes, he seems to have bankrolled only one project, this group of five large Queen Anne row houses. But, like many property owners in Bushwick, for all of his projects, he relied on the talents of only one architect – the most talented and prolific architect in the region: Theobald M. Engelhardt.

Mr. Engelhardt has been featured here many times; he was one of Brooklyn’s most important and prolific architects of the late 19th century. He was the son of German immigrants, and grew up in Williamsburg. His father was a builder, and early in his career, young Theobald began building, and later designing breweries. His career took off from there, as brewers needed houses for themselves, their workers, they needed clubs and places of worship; all kinds of buildings were needed in the growing Williamsburg-Bushwick-eastern Bedford district.

Engelhardt designed most of William Ulmer’s brewery complex, now a landmark. He also designed the Ulmer mansion, and this row of houses. He was obviously Ulmer’s architect of choice. It’s unclear if these were built to be sold or rented to the top management of the brewery, or were just speculative housing, but his target buyer here was a person of means. These are large, beautiful examples of upper middle-class housing, and were all single family houses, when built.

They soon became a “Doctor’s Row,” with physicians occupying many of them for at least the next ten or so years. 683 was home to a Dr. Robert Daniels, Dr. William Runger, in 1896, Dr. Herman Bender in 1899, and son Dr. Philip Bender in 1911. 687 was owned by Dr. Theodore Burr in 1898, Dr. Frederick A. Cook, in 1899-1902, and Dr. Frederick Cordes, in 1903. 691 was home to Dr. Benjamin Maggio in 1917. It was also home to a judge before Dr. Maggio, Magistrate Higginbotham, from 1903 to at least 1905. The house in the middle, number 685, belonged to Henry Eppig, son of another prominent brewer, Leonhard Eppig. Henry was big in the ice business, and the principal stockholder of the Eastern Ice Association.

One name in the group may also be familiar, as well. Dr. Frederick Cook was the famous arctic explorer who was a member of several important expeditions to Greenland and the North Pole, as well as an ill-fated expedition to Antarctica in 1897. When he wasn’t out in the world exploring, he was a successful surgeon living here for at least three years. He and Robert E. Peary both claimed to be the first to the North Pole, in 1908, and popular regard is that Peary won, causing the beginning of Cook’s decent into disgrace and misery.

Before that, in 1902, Cook married his second wife, and the newlywed couple moved from 687 Bushwick to the mansion that is generally associated with his name, the old Frederick Lipsius mansion, at 670 Bushwick Avenue. This mansion also designed by Engelhardt, for yet another successful brewer, but is generally thought to be the William Ulmer mansion. In reality, the Ulmer mansion was just across the street, and was torn down in the 1990s. A tale for another time in a neighborhood full of interesting stories.

Green Space in and around Bushwick

With the commencement of Spring, many New Yorkers are ready for a change of weather and more time outdoors.  Although we are surrounded by a lot of concrete, we are blessed in New York City with wonderful parks such as Central Park, Prospect Park, Highline, Fort Tyrone and more. It’s even more wonderful to stroll down the block and grab some rays of sunshine in a grassy spot in your neighborhood.  Not to mention, your pets will love you more if you find one close to home.

So here is a list of some parks in the Bushwick area and their highlights:

Maria Hernandez Park located between Knickerbocker and Irving Avenue from Starr to Suydam Street.  This is a newly remodeled park in the epicenter of Bushwick with lots of activity surrounding it.  Plenty of restaurants nearby to grab a picnic lunch if you didn’t bring your own.

Irving Square Park located between Knickerbocker and Wilson Avenue from Weirfield to Halsey Street.  This is a low key park with a lot less activity than Maria Hernandez.  Mostly occupied by children during the daytime being that it’s located adjacent to a school.  If you’re looking for a more relaxing outing, this is a good place.

Cleveland Park located between Fairview and Grandview Avenue from Stanhope to Dekalb.  This park is good for all ages and my personal favorite.  Located in the family oriented neighborhood of Ridgewood, just north of the L, this park offers a large soccer field with turf, playground, jogging paths, tennis, racquet, and basketball courts, as well as plenty of trees and benches for lounging.  In the morning, you find the 50 and above crowd getting in their daily exercise.  There is no better motivation than watching a 75 year old play racquetball.  In the afternoons and evenings, the park is filled with young kids and adults playing soccer and having family outings.

Highland Park located between the Jackie Robinson Expressway and Jamaica Avenue.  This is a large park which feels forest like and is better suited for the outdoorsy type.  A great place to go hiking along the footpaths.  There are also several picnic areas with grills available for entertaining a larger group.  There is also a lake, fountain, flower garden, recreational areas with tennis, football, baseball and skating during the Winter.