Condos versus Coops

50 ParkCO-OPS

  • In NYC, approximately 80-85% of all apartments available for purchase are co-ops.
  • Co-ops are owned by an apartment corporation.
  • In essence, you are a shareholder who has purchased shares within the co-op corporation entitling you to a long term “proprietary lease”.
  • The number of shares you own depends on the size of your apartment and the floor it is on.
  • Because of the supply of co-ops in Manhattan compared to condominiums, the price of co-ops tend to be more attractive and less expensive.
  • Shareholders pay monthly maintenance fees to cover the building expenses such as heat, hot water, insurance, staff salaries, real estate taxes and the building’s mortgage.
  • Portions of the maintenance fees are tax deductible based on a tenant-owners proportionate share of the interest on the building’s mortgage and building’s real estate taxes.
  • A co-op Board of Directors typically dictates how much of the purchase price may be financed.
  • Typically, one will be required to put down a minimum of 20-25%. More exclusive buildings may require a minimum of 50% down.
  • Each corporation has its own rules and policies. For example, rules on subleasing, pet policies, flip taxes and assessments to name a few.
  • Typically, all prospective purchasers will be required to have an interview with the Board of Directors.
  • Prior to the interview, a detailed board package consisting of personal and professional references, as well as financial information must be submitted to the board for review. The more information you can provide to support your package, the better.
  • Co-op boards are responsible for selecting well qualified candidates and protecting tenant-owners. They make the decision to approve or reject applicants and are not obligated to provide any justification for their decision to prospective applicants.
  • In considering a co-op you will want to factor in the financing, application and interview requirements.

 
CONDOMINIUMS

  • Though there are fewer condominiums in Manhattan than co-ops, they are growing in numbers and popularity with the rise of new developments.
  • Condominiums are desirable to buyers for a number of reasons.
  • A condominium apartment is “real” property.
  • A buyer will receive a deed just as though he or she were buying a house.
  • Each individual apartment in a condominium receives its own tax bill (typically recognized as monthly real estate taxes).
  • In addition, condominium owners pay monthly common charges. These charges are not tax-deductible.
  • Common charges tend to be lower than in co-ops because by law there is no underlying mortgage for a condominium building.
  • Common charges and real estate taxes combined tend to be less expensive than a co-op’s monthly maintenance fee resulting in a higher condo unit purchase price.
  • Financing options tend to be more lenient, allowing for financing of up to 90% of the purchase price.
  • If your interest is to sublet your apartment or purchase an apartment for investment purposes, a condominium will likely be the way to go.
  • Condos are an ideal choice for non U.S. citizens as co-ops are less likely to approve a buyer with funds outside of the United States.