What’s the Difference Between Condos and Coops?
Micky attempts to demystify the difference between condos and co-ops with the help of little plastic friends and their tiny houses
When buying a home, there are many things one must consider—budget, neighborhood, architectural style, number of bathrooms. When buying a home in New York City though, there’s an additional layer of consideration that is a gray area for most homebuyers: what is the difference between a Condo and Co-op? Let’s dig in and clear up the confusion once and for all.
- Of all the residential units in New York, 70% are classified as rental units and only 30% are units for sale
- Of that 30% for sale, 70% are co-ops and 30% are condos
- Condos are a relatively new concept for the city, beginning in the early 1980s
- For this reason, most condominium buildings are new construction and are loaded with modern amenities
- Co-ops are typically pre-war buildings or brownstones, holding true to that quintessential New York lifestyle
LEGAL STRUCTURE (or WHAT YOU ACTUALLY OWN)
- You legally own the deed, transferred to you at the time of purchase by the previous owner or developer (if new construction)
- You own everything within the walls of your unit
- You pay common charges that cover the maintenance of the common areas and amenities
- You pay your own separate property taxes
- The building is structured as a corporation, so essentially you are a shareholder with a proprietary lease
- You do not own your unit, you own shares in the building
- You pay monthly maintenance fees which include operating costs, property taxes and in some cases an underlying mortgage
- Your property taxes are included in your monthly maintenance fees (noted above)
- Condos will normally allow you to finance up to 90% of the purchase price, however, most sellers will only accept up to 80%
- Typically no additional financial liquidity is required
- Co-op requirements are more strict, including higher down payments that can range anywhere between 20% – 50% of the purchase price
- Co-ops will also require post liquid assets (i.e. cash in the bank, assets that can be converted to cash easily), that can cover up to 24 months of your monthly carrying costs
SCENARIO: MEET JACK AND JILL
Based on the above, let’s determine which structure works best for you.
JACK is an investor, foreigner or foreign investor. He is looking for a property to purchase in NY, maybe for himself as a primary residence, with the intent of having it as an investment property that he can then rent out.
JILL is buying a home as a primary residence and isn’t necessarily interested in renting or subletting in the near future. She has also saved diligently to build up a sizable down payment.
If you relate to Jack, you would most likely be a better fit for a condo. Condos are suitable for many types of buyers because as a condo owner you can rent the unit to a tenant with little to no requirements or input from the condo board. Jack can also buy and sell as he pleases with the same ease.
If you relate to Jill, a co-op can be a good fit. Co-ops are typically priced 30% lower than condos in NYC, making them attractive to first-time homebuyers. Being that co-ops have strict rental policies, sometimes not allowed at all, it’s best to be used as a primary home. Also, keep in mind that she must also get co-op board approval to buy or sell her property.
Depending on your lifestyle and financial goals, whether you are searching for a primary residence to settle into or a foreign or local investor building a real estate portfolio, these will all dictate which type of home makes the most sense for you.
If you would like more information or want to get started finding the best property for you, please feel free to reach out below and don’t forget to subscribe to my page, where you will get to experience all things modern living in NYC.