Looking into buying a coop or a condo .. which is better to buy and sell later, and how do they appreciate?

Asked by Elly, Brooklyn, NY Wed Aug 19, 2009

My fiance and I are looking into buying a coop or a condo in brooklyn (midwood, sheepshead bay, bensonhurst areas). We have about 80k for a down payment and make about 5500 in combined income a month. We dont have any debt to pay off and were concerned about how much we could afford. We were wondering what price bracket we should be looking for and in the long run which would be better if ever thinking of selling it 5-10 years down the line? I was also wondering if there is any difference in the way condos and coops appreciate in value and which one has a better rate of appreciation?

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6
Pierre S King…, , Brooklyn, NY
Thu Aug 27, 2009
Elly:

On Tuesday, August 25, I received a call from a buyer calling from Beth Isreal Hospital. The number provided by this person was incorrectly copied. If you were the one please call me again at 917 407 6697 or email at MrRealEstateKing@yahoo.com.

Thanks

Pierre
Web Reference:  http://www.kandhHomes.com
0 votes
Rhonda Holt, Agent, New York, NY
Wed Aug 26, 2009
Hello, you have one problem with your question. In order for anyone to answer your question about the price range is to know your gross annual combined income. Usually banks allow four times your annual salary and since you don't have any debts you can qualify for the max.

What's I can tell you is that you have a generous down payment that will be taken into consideration when determining your price range. Also, if your credit score is in the 700+ then you will get a good interest rate as well.

Now, to answer your question about what is the difference in the way condos and coops appreciate is a difficult question because it will depend on location, condition and the price you pay for the property today. Also what you can do is have your agent find some comps to compare prices a few years ago to what they went for in the high market and today in the low market. This way you can see how the price changed over time and how much the property appreciated.

So, I hope my answer made things a little clearer for you.

Rhonda Holt
Full Time Top Sales Agent
Co-ops and Home Sales
Weichert Realtors, HP Greenfield
Brooklyn, NY
Email: HelpMeRhonda1919@yahoo.com
http://www.KandHhomes.com
Web Reference:  http://www.KandHhomes.com
0 votes
Pierre S King…, , Brooklyn, NY
Sat Aug 22, 2009
Hi Elly:

Before I address your question, I am just uncleared about your income. Is this your GROSS or NET? This is crucial to know because it helps understand what loan amount a financial institution will qualify for this investment. Depending on the price of the unit, you do have at least 20% as your initial investment plus your closing cost. ie If the unit cost $300,000 or less. If you put down 20%, you cost savings begins immediately (Not paying PMI or MIP) which would have been included in your Mortgage payments.

Your Debt to Equity Ratio is crucial when a financial unit review your credit report or history. Having low debt and timely payments, make you a stronger candidate with low risk tolerance. If you're excellent, your interest rate will be low.

If you're a First Time Home Buyer, the FREE $8000 TAX CREDIT could be used to buy down your interest rate i.e. if you meet the requirements and close on or before November 30th, 2009.

Read: http://www.trulia.com/blog/pierreking/2009/08/buy_now_or_reg…
http://www.trulia.com/blog/pierreking/2009/07/home_prices_on…

Higher resale values for either co-ops or condos depend on various things. Some are:

Location
Demand
Security
Appearance
Turnover Rate
Vacancies Rate, etc.

Each play an important role when you decide to sell and will definitely increase or decrease the value of either one.

I will close by recommending that you read an article written by Joseph Himali.
This will give a thorough insight and answers to all your questions.

Read:http://www.washingtonsbestaddress.com/Condos_v_Co-ops.pdf

Thanks.

Pierre S. King, Associate Broker
Weichert Realtors H P Greenfield
917 407-6697
http://www.kandhHomes.com
http://www.twitter.com/CRealEstateKing
Web Reference:  http://www.kandhHomes.com
0 votes
Mitchell Fel…, Agent, Brooklyn, NY
Wed Aug 19, 2009
Dear Elly:

I wrote an entry in my Brooklyn Real Estate Blog titled "What is the difference between a Co-op and a Condo in Brooklyn?" about 6 months ago, check it out and I think it will answer your question: http://tiny.cc/Oen5Z

Also, with regard to the price bracket you should be looking in, check out my other Brooklyn Real Estate Blog entry titled "If you want to purchase a home, the first thing you need to do is prepare a budget!" Keep in mind that interest rates have gone down since I wrote this blog entry and the numbers are less now. If you are qualified you can probably get a 30 year fixed mortgage for about 5.25% right now which means you will be paying $5.52 per month for every thousand dollars you borrow. Hence, If you borrow $100,000 the mortgage will cost you $552.00 per month. Check out that blog entry here: http://tiny.cc/pf7E4

Given your income I would say that with a co-op you should be looking at spending no more than $235,000 because most co-ops will require that you go 20% down and based on your income you will qualify for a mortgage of this size. With regard to a condo, I would say you can spend up to about $325,000 because the monthly common charges are less for a condo as compared to a co-op giving you more buying power. These figures are based on common guidelines, however, if you speak to a mortgage broker or banker you may find out you can afford to spend/qualify for more. Keep in mind that with both a co-op and a condo you will have to pay monthly maintenance/common charges so you want to factor that into your budget (I already factored those in when I gave the estimates in this paragraph). I would also suggest you browse through all the articles in my Brooklyn Real Estate Blog, you will learn a lot!

Aside from that here is some food for thought:

1) Condo typically cost more than co-ops as far as the sales price, however the monthly common charges on a condo are much less that those on a co-op.

2) Because co-ops cost less as far as the sales price, buyers on a budget may have no choice but to go with a co-op.

3) Most co-ops require you put 20% down which can limit your options. Condos do not have such restrictions.

4) When you go to sell a co-ops sometimes the co-ops policies may make it harder to sell. As an example, if the co-op does not allow you to sublet the apartment, basically they shut out all potential buyers who may want to purchase it to use as an investment. Also, if the co-op has a no pet policy it will eliminate all buyers looking to purchase who have pets. Nobody will get rid of "Fido" just to buy your co-op!). These restrictions will shrink the size of the buyer pool. The good side of these types of policies is that they help the stability of the co-op and help to maintain the peace and quiet within the co-op, at least in some peoples opinion. :)
Condos typically do not have any of these restrictions, whether that is a good or bad thing is up to you to decide.

As far as the resale value down the road, there are so many factors that come into play it is very hard to tell. Whether it is a co-op or condo is not as important as other factors such as condition of the unit and the building, location and market conditions when determining future values. It is very subjective and some people prefer co-ops while other prefer condos. Also, depending on where you are looking, you may find that there is a much bigger selection of one or the other which would also be a factor in a buyers decision making process.

Sorry to be so long winded but your question was a good one and inspired me. Good luck and If I can be of further assistance, please let me know. If you like I can try to find you a good co-op or condo to purchase as I do business in the areas you had mentioned.

Sincerely,
Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, inc.
Office: (718) 645-1665
Email: MitchellSFeldman@aol.com
0 votes
First Last, , 90002
Wed Aug 19, 2009
In general condos cost more than coops for the reasons Ralph very nicely explained. It is often harder to sell co-ops because they often (not always) require purchasers to meet financial requirements that may be higher than those required by mortgage lenders. For example, a co-op may demand a 25% down payment while your bank is totally happy with 10% from you. I am told that some fancy co-ops on the Upper East Side of Manhattan require 100% cash for the apartment, and then demand that you have the same amount in liquid assets. Whew!!!

Many buyers chafe at co-op's subletting restrictions. On the other hand, it's rarer for co-ops to be hit with problems because of residents who can't afford to live there anymore; in a good co-op it's almost unheard of. In a condo, if many residents did enter foreclosure, that would ultimately affect your carrying costs; the other residents would have to pick up the tab. ( I personally own a co-op. )

What you need right now is an approval letter or equivalent from a lending institution. This may cost you $20-$50. You can go to your usual bank, or go to a mortgage broker, and/or just go to a bank that does a lot of mortgage business (e.g. M&T Bank, which, among other banks who do, handles Sonymae here in New York State).

Based on that letter and your gut feelings you can decide how much you want to pay. My humble personal advice is you will be happier if you buy less apartment than the lender says you can afford.

Have fun looking!
0 votes
Ralph Windsc…, Agent, Hauppauge, NY
Wed Aug 19, 2009
The first thing you should do is sit down with a reputable, trustworthy mortgage person that will be able to outline exactly what your payments might be factoring in either property taxes and common charges on a condo and maintenance fees on a coop. Depending on what your long term goals are, that will help you decide what to do. With a coop, you do not actually own your unit. You own shares of the cooperative corporation which entitles you to live in a particular unit. Coops are generally more restrictive because most of the renovations or changes you might make to your unit generally have to be approved by the coop board. With a condo, you actually own the unit you live in, and also have a bit more freedom with the inside of the unit. You merely have to follow the guidelines set forth in your offering plan. Coops usually seek at least 10% to 20% down payment. Condos for the most part don't have those restrictions. Generally speaking, coops are easiest to buy, but hardest to sell. Appreciation will depend on the desirability of any particular property you look at. If I can help you or if you have any additional questions, please feel free to contact me.

Ralph Windschuh
Certified Buyer Representative
Senior Real Estate Specialist
Associate Broker
Century 21 Princeton Properties
631--467-0009
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