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Todd E. Crittenden's Blog

By Todd E. Crittenden | Broker in New York, NY

NYC Real Estate || Condos and Co-ops: Apples and Oranges

   
                   
I could go on and on forever about how Condos and Co-op's are different but instead I will attempt to be as simple and concise to highlight the major differences.  Regardless of whether you buy a Condo or Co-op it's important to buy smart and understand what you're getting yourself into.  

CONDO

  • Own real property - four walls, floors, ceiling and your percentage of community space
  • Bylaws - governed / managed by a board of directors elected by the owners
  • No restrictions about whether owners are investors, use the apartment as a pied-a terre.  Owners can purchase an apartment and rent out apartment at their leisure.
  • Each individual pays their own mortgage and taxes
  • Board of directors have no right to block, prohibit or accept property transfer / sale
  • Mortgage interest and property taxes deductible

CO-OP

  • Own shares in a corporation - personal property
  • Governance based on business corporation law - managed by a board of directors
  • Underlying mortgage of the entire building not your specific apartment
  • Restrictions on foreigners, investors, pied-a terres and renting apartments
  • Property Taxes are included in the maintenance fees
  • Board of directors have ultimate power to block, prohibit or accept transfer  / sale
  • Mortgage interest and a percentage of maintenance fees and property taxes are deductible from your income

What does this mean?

Condos:  You purchase an apartment and as long as you get a mortgage, pay the monthly maintenance fees you're free to live in the apartment, rent the apartment, visit as often or seldom as you like.  You can also sell the property whenever you want and at whatever price you feel is appropriate to whomever you wish.  

Co-ops: When you purchase in a Co-op the board has the right to accept you or reject you for whatever reason; they don't actually have to give you a reason why they reject you.  When you purchase an apartment the board will go over your finances in great detail and often times require you to have multiple years worth of mortgage, taxes and maintenance fees in reserve.  Many Co-ops will only allow you to get a mortgage for 50% or 60% of the purchase price.   

EXAMPLE: 

Imagine purchasing an $800,000 Co-op; putting down (50%) / $400,000 and then having to have another $150,000 in reserve to cover your mortgage, taxes and maintenance for the next 24 months.  

TOTAL REQUIREMENT: $550,000 plus you still have to be approved by the board of directors

Same $800,000 purchase but with a Condo you qualify for the mortgage put down 20% / $160,000 have (about 5% of the purchase price) to close the deal and transfer the property and you're on your way.  You pay your mortgage and monthly maintenance fees as the come due. 

TOTAL REQUIREMENT: $200,000

These are broad strokes and there are nuances I haven't explained as well as exceptions where a Co-op board is more lenient but it's important to understand there are two forms of ownership and they are vastly different.  There is actually a third form of ownership called a Condop but that's a discussion for another day.  Most of Manhattan's older Pre-war buildings are Co-ops whereas the newer sleek glass towers are Condos.


For those of you not familiar with the different forms of ownership I hope I have shed a bit of light on the topic.  If you have additional questions please feel free to reach out and I will be glad to answer any questions you may have.


NYC Sales and Rental Listings


Todd Crittenden
917-885-7465
Todd@linkrenyc.com
Associate Broker
Link Real Estate



  


Comments

By Jennifer Fivelsdal,  Sun Mar 11 2012, 19:51
A co-op ownership is more restrictive the board has way too much power.
By Torang | Save $10,000's,  Wed Dec 12 2012, 11:34
Great Information & thanks for sharing it!

Happy Holiday
By Robert Baker,  Fri Nov 29 2013, 07:13
Good info

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