Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
Real estate 101: before buying a home or renting one in New York, you must master these concepts. Condo vs. Co-op in NYC: what to Buy? If you’re purchasing a home in NYC, it’s essential to understand the pros and cons of buying a “Condo” versus owning a “Co-op.” Condo Vs. Coop ownership in NYC remains an important topic.
Our guide will explain the differences between them. We are going to go over the following questions. Also, pay attention to air rights.
If you buy an apartment in a cooperative building, you won’t own your specific unit. Instead, you’ll own shares of a co-op corporation that owns the building.
These shares come with what’s called a proprietary lease. This lease gives you the right to live in the unit. The larger your home, the more shares you own within the corporation.
Monthly coop maintenance fees cover building expenses, including utilities, insurance, and staff. Another difference is that the entire cooperative building receives one instead of individual tax bills for each unit.
To account for this part of the monthly maintenance charges, pay the building’s property taxes. As monthly maintenance includes taxes, you’ll typically see higher maintenance charges in coops vs. condos in NYC.
This is a wash when you combine condo maintenance fees and property taxes.
The most significant benefit of purchasing in a coop building is that co-ops are less expensive than their condo counterparts. There are a few reasons for this: they comprise about 75 percent of New York’s housing inventory.
They also require an additional layer of approval. Coops are more restrictive with who they let in, and co-ops have higher owner-occupancy rates than condos since most co-op boards typically disallow investors.
Due to this, conventional wisdom says there is more stability in a co-op. Co-op boards rigorously vet potential buyers and have the right to approve or deny each purchase.
Co-op buyers will endure a more rigid approval process, including an in-person interview with the co-op board. After searching for an apartment for months and going through the grueling approval process, a buyer can get rejected for any reason.
Foreign buyers typically cannot purchase co-ops, don’t have the necessary history with U.S. banks, and generally lack sufficient U.S. credit history.
Co-op boards also require higher down payments, and most coops require a minimum of 20% of the purchase price. Some more selective co-ops require even more (up to 50%), while others don’t allow purchasers to get loans.
Each cooperative property has its own rules. Most tend to be restrictive regarding how to use your unit, and you will often be limited or forbidden from subletting your apartment. Some co-ops will also disallow use as a pied-à-terre.
When you sell your co-op apartment, the extra approval can make it more hassle to sell the place. You could lose a great buyer due to a board rejection and have to return to the market.
Additionally, most co-ops have a flip tax due at closing and can range from 1 to 3% of the sale price, and this tax beefs up the building’s financials. Remember that even with a high flip tax, co-op closing costs are significantly lower than condo closing costs.
Condos are “real” property; each unit has a deed and an individual tax bill.
Coop ownership vs. condo is the main difference. Therefore, you own a condo free and clear. Like with a condo anywhere, you are subject to the rules and regulations the condo board sets.
Monthly common charges cover the condo building’s operating costs, while property taxes get billed separately.
If you purchase a condo, you own the property as opposed to owning “shares” in a cooperative corporation. This means that you will not be subject to approval by the board or the many highly restrictive rules standard in co-ops.
As you own your condo, the board cannot dictate things like the minimum down payment amount, subletting policies, or investor rules instead of being a corporate member. Owning a condo is like owning real estate anywhere else in the U.S. You own it, and you can typically do whatever you want with your property. Companies like Precondo can provide valuable resources and assistance to individuals looking to purchase a condo.
However, we recommend reviewing the condo declarations and house rules for any condominium building since the fine print can reveal some interesting information. You can purchase condos as investment properties, and unit owners can freely sublet or lease out their units.
With fewer to no-use restrictions, condos are much easier to sell. They also appeal to foreign buyers.
One thing to note is that most condo boards will disallow any rentals of less than 30 days, and some will even frown upon shorter-term rentals under one year. In some instances, when a condo has too many investors compared to owner-occupants, getting a loan may become more complex.
If this happens, the condo boards may try to disallow non-owner occupant buyers.
While condos’ incredible flexibility makes them much more desirable, they are also more expensive. Another factor that makes them even more costly is the limited supply and insatiable demand, particularly from foreign buyers who are unable to purchase co-ops and who all want to own a piece of highly-coveted NYC real estate. Buying a condominium also means higher closing costs.
For example, a mortgage recording tax will not be required when buying a co-op if you get a loan. As fewer condos Vs., and coops in NYC real estate market are available, your options may also be limited.
Most of New York City’s residential real estate market is condos and co-ops. However, it’s also possible that you’ll encounter something a bit different during your home search: a condop. A condop is a co-op that got formed inside a condo building.
Generally speaking, the bottom of the property is typically a single condo unit that houses a mix of commercial and retail space. However, condops operate under condo rules. Above all, the residential areas are part of a single, giant condo unit in which a co-op is formed.
As a result, individual apartments can get divided via a number of shares among the owners.
The condop residents will operate under co-op rules, but the co-op has to abide by the condominium’s rules. That means that both sets of regulations are in effect for condop owners. In general, it’s fair to say that condops function more like co-ops regarding the application and approval process.
Like co-op owners, condop owners will own several shares in the building while paying HOAs, including taxes.
“Condo Vs. Coop in NYC”: that is the question. Owning a condo is like owning a house. When buying a condo, you receive a deed and specified pieces of real estate. Conversely, when buying into a co-op, you maintain shares of corporations that own the buildings where their units are.
Condos are typically more expensive by at least 25%.
Both condo and co-op boards require buyers to complete and submit a complex financial application after signing a contract, frequently using a REBNY Financial Statement. While both condos and coops will need a board review and approval of any potential purchaser, there are some crucial differences:
If you’d like more information on this or want to discuss if a condo Vs. a coop in NYC is suitable, don’t hesitate to contact us at email@example.com.