Coops vs. Condos

Condo Overview:

When you buy a condo, you buy real property. You receive an ownership deed for your specific unit along with an undivided interest in the common areas. A condo is managed by a Board of Managers, which holds significantly less power than a co-op board. Technically, the board has the right of first refusal to every apartment that’s offered for sale, but this option is rarely exercised.

The biggest barrier to buying a condo is cost. Condos typically cost ~20% more than co-ops on a price per square foot basis, but finding a true comparison is difficult because condos often have larger floorplans and better amenities because they were built more recently. Condos are great for buyers looking to purchase in newer buildings who want to own their unit outright. With unlimited sublet policies, Condos also make great investment properties.

Co-op Overview:

When you purchase a co-op, you purchase shares in the corporation that owns the building instead of buying the real property. You then hold a proprietary lease to occupy the apartment. Co-ops are managed by a Board of Directors, who have the final say in all transactions. Prospective buyers must put together an extensive application and go through an interview with the co-op board.

One benefit of living in a co-op is that the board- resident relationship is that of a landlord-tenant. Under State Law, shareholders have the right to safe and sanitary living and can withhold monthly payments if conditions become unlivable. Co-ops are great for buyers who plan on establishing full-time residency and do not make good investment properties because sublet policies generally require owner occupancy for at least 2 out of every 5 years.

COOPERATIVES (OR CO-OPS)

In New York City, 85% of all apartments available for purchase (and almost 100% of pre-war apartments) are in co-operative buildings. When you buy a co-op, you don’t actually own your apartment. Instead, you own shares of a co-op corporation that owns the building. The larger your apartment, the more shares within the corporation you own. Monthly maintenance fees cover building expenses including heat, hot water, insurance, staff salaries, and real estate taxes

Advantages of Buying a Co-op:

• Co-ops are generally less expensive than comparable condominium apartments.

• Some of your monthly maintenance fees are tax deductible.

• Cooperative ownership offers a more stable community environment. Residents tend to stay for longer periods of time, and few Coops allow extensive subletting, preferring a high owner-occupancy.

Disadvantages of Buying a Co-op:

• All prospective purchasers must be approved by the Co-op’s Board of Directors. The Board approval process is often time-consuming and rigorous - requiring information regarding finances, employment, and personal background.

• Monthly maintenance fees for co-ops are much higher than for condos. This is because the monthly fee includes part of the underlying mortgage for the building.

• Many co-op boards limit the amount of the purchase price that can be financed and require higher down payments than are usually required for condominiums.

• It is harder to sub-lease a co-op. Each co-op building has its own rules, but many limit or forbid subletting.

CONDOMINIUMS (OR CONDOS)

Condominiums are becoming more popular in New York City as new residential buildings are constructed. Unlike co-ops, condo apartments are "real" properties. Buying a condo is much like buying a house. Each individual unit has its own deed and its own tax bill. Condos offer greater flexibility but are often priced higher than comparable co-op apartments.

Advantages of Buying a Condo:

• In most cases, buyers can finance a larger portion of the purchase price (up to 90%) and put less money down.

• With a condominium, you don’t have to deal with board approval.

• Condo apartments can be freely sublet, giving you more flexibility.

• Monthly maintenance fees for condos are much lower than for co-ops.

Disadvantages of Buying a Condo:

• Condos are generally more expensive than comparable co-op apartments.

• Monthly maintenance payments are not tax-deductible.

• There are fewer condos available in the New York City real estate market, which limits your options.