Is it better to buy a coop instead to rent?

Asked by Nina, Purchase, NY Mon Jun 1, 2009

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Tim Honeycutt’s answer
Tim Honeycutt, Home Buyer, Bloomfield, NJ
Sun Jun 7, 2009
Nina,
Buying over renting is always a tough decision. I guess Suzie Ormond said it best. If once you add up all the monthly cost of buying it comes to at or below your current rent payment, then it is an excellent time to buy for you.



First off, understand that the difference between co-op’s, condo and full ownership of a property. With Co-ops you do not own the property out right. Anything you do to the property will have to be cleared with the coop board which is comprised of other tenants in the building. Before you even offer a bid, get the prospectus on the property in question as well as the coop list of rules for living in the coop. I know in my own coop building we are excluded from owning washing machines and our floors have to be 80% carpeted. For 10 years, I have lived with rusted washing machines and the guy upstairs must wear lead in his boot and must not have anywhere to sit. I laughed (and continue to laugh) at the sign on my building that says “luxury living in Washington Heights’

The board has great power to affect your style of living in your home--So talk to the current residents in the building to see how well they match your style of living. In a co-op you will have to carry the mortgage on ‘your’ apartment as well as maintenance fees which in my coop run about ½ of what I would pay out in a mortgage. The coop board can also raise your maintenance fee for updates in the building such as new windows, new elevators, or electrical upgrades. Additionally, a coop board usually has to approve your purchase, as well as most require a substantial down payment in the 10% to 20% range. Then in 30 years when you have paid off that mortgage you are still paying out that maintenance fee which to me is still a rose by another name that stinks.

However, for many many people the idea having a staff to take care of your apartment is a big plus. I don’t know about up in Port Chester, but do not forget to examine the cost of transportation/garage as well as determining if heat/hot water, air conditioning, electricity, gas, water and/or cable are carried in your maintenance fees. Play close attention to the electrical service, as I know in my apartment we often overload our 1948 fuse box with our microwave.

A friend of mine just bought a condo instead of the coop. He has greater control of his apartment but still finds dealing with his neighbors a bit of a head ache. He is still faced with condo fees though they are somewhat less than what a coop building charges.

I elected to go for full ownership myself. True, I will be having maintenance cost associated with it, but I will have full control. I dream of having my own soil and washing machine.


Tim
0 votes
Deborah L. A…, Agent, White Plains, NY
Sun Jun 7, 2009
By owning a co-op you are able to deduct your loan interest on your unit from your Federal and State taxes each year. You can also deduct a portion of the maintenance fees that you pay monthly (percentage that is deductible is based on any underlining mortgage interest on the building and property taxes on the building). Right there you have saved yourself some income taxes and increased your take home pay. The goal would be to see that co-op go up in value over time so additionally you would gain equity from your purchase that you can take to a larger home when ready.

With interest rates low and sellers willing to negotiate on their homes, it is a good time to buy. If you qualify through your income level, you can possibly earn tax credits up to $8,000 for purchasing a home if you are a first time buyer or if you have not owned your own home within the last three years.

If I can help further just let me know.
0 votes
Anna M Brocco, Agent, Williston Park, NY
Mon Jun 1, 2009
There has never been a better time to buy, interest rates are good and if you're a first time buyer don't forget the tax credit, so why make a landlord rich.

Anna
917-576-5376
abrocco@laffey.com
0 votes
Christopher…, Agent, Tarrytown, NY
Mon Jun 1, 2009
Hi Nina, I'm thinking from your question that you are wondering if it is better to rent or buy a coop..if so I would segguest buying. Renting is like flushing your money down the toilet every month. There are alot of things you need to know about buying a coop if you are a first timer. First, you don't own the unit your purchase entitles you to shares in a corporation (made up of all the leaseholders in the building). You will get a stock certificate and a proprietary lease. You will pay a monthly maintenence fee which includes your pro rata share of the buildings property taxes, maint of the building, etc. You must pass a board interview in order to complete a purchase of a coop. The board looks deep into your financials, things like good credit scores, low debt to income ratios, healthy reserves in the bank after making the required down payment starting at 10% and up (depends on the building) and also after paying closing costs, they want to see good monthly income. Basically they want to make sure you will not become a financial liability to the building over time.

I have written a blog post about buying a coop in Westchester on Trulia. Feel free to go to my profile and flip through the blog posts until you find it.

Buying a coop will allow you the possibility of selling and making a proifit at some point, when you rent, you own nothing and make nothing.

Sincerely,

Christopher Pagli
Associate Broker
Legends Realty Group
914.406.9023
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