Condo vs Co-op:

Asked by John, Parsippany, NJ Sat Jan 10, 2009

I recently took a new job in NJ and I am looking for either 2bed/2bath condo or co-op in Fort Lee/Palisades Park area. I aleady have a single family home in Washington DC which I will continue to maintain. I would like monthly payments under 2k (includes all fees) and will like to eventually either rent out the place when I purchase a signle family home in NJ. Can you explain what additional fees are associated with either condo or co-op? what restrictions are there with renting?

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7
Walter Burns, Agent, Hoboken, NJ
Sat Jan 10, 2009
John,

When you purchase a co-op, you do not own any real property. As previously mentioned you own shares of stock in a corporation and the corporation is the building you are living in. Most co-op in this area do not allow you to rent out your unit. Some allow you to rent out the unit only after living there for a year. I have seen co-ops that only allow the owner to rent out the unit once. It is best to check with the board of each co-op to see what their restrictions are. In most co-ops all of the utilities are included. Also, most co-ops have an underlying mortgage. Many of these co-ops went through a renaissance and renovated their common areas. The building took out a mortgage to cover the renovations so part of your monthly fee goes to paying off that loan. Each co-op only has one tax bill associated with the building so the monthly fees include each shareholder's portion of property taxes.

In condos you own real property. There is rarely a restriction where you cannot rent out the unit. Most condos have separate utilities so the monthly maintenance fee only covers the common amenities like doorman gym, etc, along with the water, sewer, and common building insurance. In a condo you will pay your own separate property taxes.

The biggest issue with co-ops is that they are difficult to finance. I recommend speaking with Wells Fargo, Chase, or Citi Group. Smaller banks rarely finance them. Stick with large major banks. Financing is something to consider in the future when you go to re-sell. There are many more financing options for a condo buyer out there versus a co-op. The pool of people who can get a condo mortgage is much larger than ones who can get co-op financing and receive board approval.

I hope this helps. Please let me know if you have any additional questions.

Sincerely,

Walter J. Burns
Realtor-Associate
Weichert Realtors
1 Newark St.
Hoboken, NJ 07030
201-653-8488 Ext: 230
201-694-8946 Mobile
201-653-4154 Fax
wburns@weichert.com
1 vote
Gregory Bain, , Ocean County, NJ
Sat Jan 10, 2009
The last time I heard about a guy from Washington DC wanting to buy a Coop things didn't work out so well.

http://gawker.com/5031231/upper-east-side-co+op-board-reject…
Web Reference:  http://RealEstate.com
1 vote
Robyn Porter, Agent, Bethesda, MD
Sat Jan 10, 2009
In a follow-up to another answer...not all lenders lend to co-ops. However, National City Mortgage is one of the few that do. Also, be sure to find out if the co-op requires a certain downpayment. Many require at least 5-10%. In addition, FHA does not allow for co-op purchases.

As for renting, many co-ops severely limit the number of units that can be rented. Please read the co-op docs prior to settlement.
Web Reference:  http://www.robynporter.com
0 votes
Vita Strakhm…, , 07446
Sat Jan 10, 2009
John, the one thing I forgot to mention, is that banks are very wary, especially now, about giving out mortgage for a co-op as a second residence. With condos it doesn't seem to be an issue. So you might want to talk to your mortgage lender, which might help you decide.
Web Reference:  http://www.vitastrakhman.com
0 votes
Vita Strakhm…, , 07446
Sat Jan 10, 2009
With co-op, you don't own property you own shares; you are dependent on a co-op board for all the approvals, including an interview to ensure you are qualified to live there among others. Most co-ops do not allow you to rent out the place until you have lived there for a year and co-ops in Fort Lee are definitely in that group.
When you buy a condo, it's like buying a house; you own a piece of property.
With both co-ops and condos you have to pay maintenance which usually includes exterior grounds, heat, and electricity.
If you are interested, I can email you the link to both so you could get an idea of the prices.

Good luck in your search!
Web Reference:  http://www.vitastrakhman.com
0 votes
Peter J Roge…, Agent, Mahwah, NJ
Sat Jan 10, 2009
Co-ops are mainly in Fort Lee and Palisades Park and condos are the rule almost everywhere else. With a condo you pay the real estate taxes and utilities yourself pkus a monthy maintenance fee the amount of which will vary depending upon the facilities available in the complex (swimming pools, tennis courts, gyms etc).
With a co -op you do not pay the real estate taxes but they are included in the maintenance so the maintenance fee on a co-op is considerably higher. The purchase price on a co-op is a lot less than a condo.
The co op board will have very precise rules as to what you can and cannot do whereas with a condo you can do pretty much want you want to do withing reason since you own the property.
2 Examples - In the Pembroke in Fort Lee a 1498 sq ft co op (2 beds 2 baths) is offered for $220,000 with monthly maintenance of $1521. A Condo in the Winston Towers in Cliffside Park (again 2 bed 2 bath) similar size is offered for $347,000 with taxes of $7373 and maintenance of $604.
So the condo carrrying costs are slighty lower but offset by the higher price.
It usually comes down to owning bricks and mortar rather than shares in a corporation and not having to deal with the co op board.
0 votes
Roy Low, , Wawa, PA
Sat Jan 10, 2009
John,
At first glance your plan seems reasonable...But, since each building is managed differently, here are some things to consider. How is the Co-ops cash reserves? Are there any assesments due? What is the state of the U/L Mortgage? What is included in the maint. fee? Many Co-ops include utilities, taxes, and additional services in the maint fee, is this the case with your unit? They also have individual policies regarding renting the unit after purchase. Some buildings even require the potential tenant to interview with a rental board.
I service Fort Lee and Pal Park as well as all of Bergen County. please feel free to contact me at royalow@msn.com if you have additional questions.
0 votes
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