Most of New York City’s houses are old: brownstones and row houses in Brooklyn and Harlem, two-families in Queens and the Bronx, frame houses on Staten Island. Many still have original wiring, plumbing and layouts, and a full renovation can add a great deal of value. The financing has to cover the purchase, the whole renovation, the closing taxes, and a timeline that includes Department of Buildings approvals and, on landmarked blocks, Landmarks Preservation Commission review.
How the loan is sized
A fix and flip loan combines a share of the purchase price with the renovation budget, and the total is capped at a share of the after-repair value (ARV).
| Purchase price of a two-family | $900,000 |
| Rehab budget | $250,000 |
| After-repair value | $1,600,000 |
| 90% of purchase | $810,000 |
| 100% of rehab | $250,000 |
| Loan | $1,060,000 |
| 75% of ARV ceiling | $1,200,000 |
| Cash to close, before costs | $90,000 |
The rehab money is not paid at closing. It is held back and released in draws as each stage of work is inspected and completed, so you or your contractor need enough cash to start each stage.
Closing costs that are specific to New York
- Mortgage recording tax when you buy. In New York City the borrower’s share is about 1.8% of a loan under $500,000 and 1.925% at $500,000 or more on one- to three-family homes and condos, and 2.8% on commercial property and buildings of four or more units at $500,000 or more. On a $1,060,000 loan on a two-family that is roughly $20,400.
- Mansion tax when you buy. On one- to three-family homes and condos priced at $1 million or more, the buyer pays a mansion tax that starts at 1%.
- Transfer taxes when you sell. The seller customarily pays the city transfer tax, 1% up to $500,000 and 1.425% above that on one- to three-family homes, plus the state transfer tax of 0.4%. On a $1,600,000 sale that is about $29,200.
- Attorneys. Each side is represented by an attorney in New York, so budget legal fees at both ends.
Permits and landmarks
Work that changes structure, plumbing, electrical, the layout or the number of units needs Department of Buildings filings, usually through a registered architect or engineer, and a change in units needs a new certificate of occupancy. Large parts of Brooklyn and Manhattan are landmarked, including Park Slope, Brooklyn Heights, Fort Greene and much of Harlem, and exterior changes there also need a Landmarks Preservation Commission permit.
- Ask your architect for a realistic approval timeline before you make an offer.
- Choose a loan term that covers approvals and construction. Our flip loans run 6 to 24 months.
- Carry the monthly interest for the whole period in your numbers.
What old New York houses hide
- Lead paint. Paint in buildings built before 1960 is presumed to contain lead, and lead-safe work practices apply. If you rent the property, Local Law 31 requires an XRF test of the rental units.
- Unit count. The legal number of units on the certificate of occupancy decides what you can sell. An illegal basement or cellar apartment is a liability, not income.
- Old systems. Original wiring, galvanized and cast-iron pipes, old boilers and oil tanks are frequent replacements.
- Structure. Party walls, rear walls, sagging floors and brownstone facades can need engineering.
Tenants in place
A building with tenants can limit what you can do. Many buildings of six or more units built before 1974 are rent stabilized, and Good Cause Eviction protects tenants in many other New York City rentals unless an exemption applies, such as an owner with 10 or fewer units statewide. Ask for the rent roll and registration history, and talk to your attorney, before you sign.
The exit
Most flips end in a sale to an owner-occupant, so your after-repair value should come from recent sales of renovated homes nearby. If the market slows, a DSCR rental loan can replace the flip loan and turn the house into a long-term rental, with a cash-out refinance at up to 80% loan-to-value.
Common questions
Up to 90% of the purchase and 100% of the rehab at a 720+ credit score, within 70 to 75% of the after-repair value.
The mortgage recording tax and, at $1 million or more, the mansion tax when you buy, and the city and state transfer taxes when you sell.
Long enough to cover Department of Buildings approvals, any landmarks review and the construction, with a cushion. Our terms run 6 to 24 months with no prepayment penalty.
No. Co-ops are shares in a corporation, not real property, so we lend on houses, condos and buildings instead.