Condo vs. Co-Op: Which one is right for me?

January 4, 2019

 

Those on the market for an apartment will come across condominiums (condos) and co-operatives (co-ops) as viable options. Here in NYC, the market and population create a unique environment for potential apartment dwellers. There are some factors to keep in mind when trying to decide between these 2 options.

 

 

CO-OPs

Make up about 85% of apartments listed for sale in the NYC Marketplace.  Almost all prewar buildings are cooperatives.  Co-ops are more affordable for purchase and usually listed at lower price points than condos. Your maintenance and taxes are rolled into 1 monthly payment

 
Advantages of Buying a Co-op
  • Co-ops are generally less expensive than comparable condominium apartments.

  • Some of your monthly maintenance fees are tax deductible.

  • Many more are listed for sale, which means more purchasing options.

 

Disadvantages of Buying a Co-op

  • All prospective purchasers must be approved by the co-op's board of directors. The board approval process is often time-consuming and can be overwhelming—requiring extensive information regarding finances, employment, and personal background.

  • It is harder to sub-lease a co-op. Each co-op building has its own rules, but many limit subletting. The usual sublet policy (although varies from building to building) is you can sublet for 2 years after 2 years of occupancy.

     

Condos
Make up only around 15% of all apartments listed for sale in NYC. They are deeded property that you can purchased in an LLC and does not require board approval.  Although financial information will need to be provided and  be reviewed and approved prior to closing. You can sublet at your leisure with usually few restrictions (most require a minimum of a 12 month sublet). Your taxes are paid separately and not rolled into your maintenance
 
 Advantages of Buying a Condo
  • In many  cases, buyers can finance a larger portion of the purchase price (up to 90 percent) and put less money down.

  • You don’t have to deal with board approval.

  • Condo apartments can be freely sublet, giving you more flexibility.

Disadvantages of Buying a Condo
  • Condos are generally more expensive than comparable co-op apartments.

  • Monthly maintenance payments are not tax-deductible.

  • There are fewer condos available in the New York City real estate market, which limits your options.

     

Ownership

When you're apartment hunting, you have to consider your ultimate goal; are you looking to own or lease your new home? Occupying a co-op requires you to take a share in the building(s) owned by a company, and lease your apartment for the majority of the time you occupy it. Choosing a condo means you have a deed to the apartment, and legally own it.

 

Either way, you always  have the right to live in your apartment until you sell it.

 

Approval

If you decide to go for a co-op, your fate still lies in the hands of an approval board. A panel of board members will interview, question, and sometimes grill you in order to find out more about you. In the end, they will decide if:

  • You're financially stable enough to afford the apartment

  • You'd make a good neighbor and fit for their building and community

Some people naturally find this process nerve-wracking, intimidating, and discouraging. Others find no issue with it at all, and see this as a minor obstacle to a new home.

 

Those wanting to avoid the process altogether may prefer to opt for a condo, as there is no such approval process for prospective tenants. Of course, whether you go for a co-op or a condo, you will still need to disclose most of your your financial records; including but not limited to: income, tax returns, salary, assets, bank statements, stocks and shares, and other pertinent financial information.

 

Subletting

There is also a distinction in the subject of subletting your new apartment. Co-ops normally prohibit unlimited subletting; allowing subletting only 2 out of every 5 years. In addition, your tenant would have to go through the same approval board you went through, and might also be subject to fees. Subletting is generally frowned upon in co-ops, which are meant to be lived in.

 

In the case of condos, most normally enforce an unlimited subletting policy. This factor contributes to the value of condos, which are seen as "investor-friendly" properties. 

 

Purchasing

Investors are not only drawn to condos for their subletting policies, but for the fact that they are generally worth more. As of 2018, there are about 3 co-ops for every 1 condo, making them more valuable. Luckily for interested investors, condos can be purchased under an LLC or corporation instead of a single person. This last major distinction confirms the condo's status as the go-to for foreign buyers and investors, since it allows itself to be an asset in the name of a business.

 

 

Final Decision

Here's the deal: If you want to own, invest, or generally have more possibilities with your property, go for a condo. The ability to purchase under a business and to sublet the property gives you a profitable asset. 

If you want a place to call home and a community of neighbors at a more affordable price, apply for a co-op. 

Either way, making the choice is the first step to finding your new dwelling.

 

 

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