Are there any advantages to purchasing into a co-op with cash versus taking a mortgage? What about condos or?

Asked by Jason_els, Warwick, NY Tue Mar 25, 2008

townhouses? I'll be buying for the first time in the next two to three years but perhaps sooner. I've a history of low income for the properties I'm shopping (minimum 2-3mil), but will have that amount, and perhaps more, when the time comes along with a high steady income after being unemployed for two years. I was stuck in a dead-end job then went out on my own and, if projections prove true, I'll be in the top 2% of earners. I'm 42 and single so I'm not a rowdy college kid, but I still wonder if co-op boards will question my sudden high income. My perfect place will have 1 bedrooms, allow dogs, and be downtown (prefer SoHo/Tribeca/Village/Flatiron/NoLita). The catch is I really want lots of private outdoor space (nothing under 300 sq ft.) and that, given a safe area, is my highest priority. I'm in no hurry though so I can wait for the perfect place to appear. Patience I've got.

Many thanks for your kind assistance!

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Don Cummins,…, , Katonah, NY
Sat Mar 29, 2008
The answers given are right on point. I just want to emphasize speking with your accountant because 1M in mortgage interest as a tax deduction can be very useful and fruitful. In addition it will make the cooperative board happy you kept all that accessable liquid cash for them to attach if you suddenly stop paying maintenance. So talk to the account, talk to your private mortgage banker or a mortgage pro. and start shopping. If you find it great if not wait

Hope this helps
2 votes
Dino Klein, , New York, NY
Mon Dec 10, 2012
Just an aside regarding buying a co-op with all cash: as no recording is involved with co-op shares, the transaction won't show up on Trulia or any site like it.
0 votes
Alen Moshkov…, Agent, New York, NY
Mon Apr 28, 2008
Jason Hello.
You are going to spend Minimum of 2 to 3 Mil on a home? One million dollars is a very big difference when choosing a property. Ronnie is correct when he said that Townhouses which are in good shape will be 5M and up. I had a couple that I was working with looking at townhouses and we have seen probably 7 of them under 5 mil, and every single one fo them needed work.
Can I ask why you are going to wait 2 or 3 years to make a purchase? As you know right now is one of the best times to buy something, you have no idea where the market will be in 2 or 3 years. Downtown area is one of the hottest areas in the city. If you are under the impression that in two years everything will be cheaper, you may be in for a disappointment. You did mention your projections, so I'm guessing that you aren't in the positon to make that large of a purchase at the present time?
Condo's will give you much less trouble when it comes to a cash sale, where as coops it will depend on the specific building and what their requirments are.
You also mentioned that you are in no hurry to purchase now until that perfect property comes along. 1 bedroom, dogs, downtown does not cost 2 or 3 Mil dollars, you are looking to spend MUCH less. Have you considered a loft apartment, you can have your one bedroom and a huge space to do what you please to it, otherwise you are looking at 2 to 3 bedroom apartments.
That perfect apartment for you may be sitting out there right now and waiting, but if you aren't ready to commit and put in an offer on it now, than we can safely rule that apartment out and pretend it isn't there.
Jose shoot me an email at work or give me a call, and I can send you the downtown market report, which will give you a better idea what 2 to 3 Mil can buy you.

Kind Regards
~Alen, M.
0 votes
Fred, Home Buyer, New York, NY
Thu Apr 3, 2008
Don is right on. the interest deductible once you get into that range of mortgage is equivalent to leaving money on the table. all of this presumes you can get a good fixed interest rate which frankly may be the issue for Jumbos. best jumbo rates I've seen in manhattan are in the 7.5% range all the way up to 9.5% which approach punitive if you take a conservative approach to future price appreciation over time.
0 votes
Ronnie Shuma…, Agent, New York, NY
Sat Mar 29, 2008
Mitchell is dead on with his comments. The first thing which determines weather you will be looking for co-ops, condos or townhouses is what you are looking to spend. Co-ops are significantly cheaper than condos and most townhouses are upwards of $5M unless it's a gut rehabilitation.
The areas you indicated will likely have very strict co-op boards who indeed will want to see two years of liquid funds and thus likely frown upon a cash purchase. If you can find a small co-op (see a recent conversion), that is not too formal, perhaps it can work well for you.
The best bet for what you describe your needs to be, may be to do a co-op conversion with a few other investors. This will gie you the flexiblity you need to purchase something rock bottom, renovate, form your own co-op board and also see a return on your investment over ten years.
This is a lot to swallow in one question on Trulia, but EVERY real estate purchase in this city is a long term investment. If I read correctly and you are looking to spend 2-3M cash and have time for hte perfect place, you may need to think outside of the box.
Feel free to write me and perhaps we can put my ideas to work for your needs.
0 votes
Mitchell Hall, Agent, New York, NY
Wed Mar 26, 2008
The advantage of paying cash is that you won't have monthly mortgage payments. It might make the transaction close quicker because there is no bank involved. You will lose the tax deduction on mortgage interest. In a coop it can be a problem. Many coops prefer shareholders to have a mortgage rather than using up all their assets to purchase the coop. They like shareholders to have liquid assets after the close. If you pay cash and your income to debt ration is 25% and you have two years of maintenance in liquid assets that might suffice. Coop boards have the 1st lien on coop units. Coop lenders have the second lien. Coops will question everything financial. Condos do not. Feel free to contact me with any other questions.
0 votes
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