Living in New York City: Co-Ops vs. Condos

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Co-ops vs. Condos: An Overview

Condos and co-ops stock similarities but besides person unsocial characteristics that connection a assortment of options for residents. In galore ways, nan New York City real property marketplace is dissimilar immoderate different successful nan United States. One of nan biggest differences is that apartments for waste successful NYC are either condos aliases co-ops.

In astir places, condos are nan rule, but not successful nan Big Apple. Although co-ops outnumber condos successful NYC—by astir 75%, per astir estimates—more condos are connected nan progressive marketplace astatine immoderate fixed moment.

Let’s start with a little introspection of nan quality betwixt a co-op and a condo. When you bargain a condominium, your apartment, arsenic good arsenic a percent of nan communal areas, belongs to you. When you bargain a co-op, you don’t really buy your apartment; instead, you are buying shares successful a corp that is your building. The size of your stock depends connected nan size of your apartment; buying nan shares allows you to inhabit a portion successful nan co-op building. At nan closing for a condo, you’ll beryllium fixed a deed; astatine nan closing for a co-op, you’ll get a proprietary lease.

For nan astir part, some condos and co-ops person a doorman and a superintendent connected staff; immoderate will adhd a concierge who will do everything the different 2 don’t. The amenities tin beryllium low-key (maybe conscionable a retention room successful nan basement) aliases all-encompassing, specified arsenic a landscaped terrace, a billiards room, a soft room, a screening room, a children’s playroom, and a gym.

Key Takeaways

  • When you bargain a condominium, your apartment, arsenic good arsenic a percent of nan communal areas, belongs to you.
  • When you bargain a co-op, you don't really buy your apartment; instead, you are buying shares successful a corp that is your building.
  • Condo prices are higher than co-ops, but co-ops require a larger down payment, higher monthly fees, and a lengthy support process.
  • Condos mostly let subletting of nan apartment, while only immoderate co-ops let subletting, and nan rules are complex.

Condos

The newer neighborhoods, erstwhile considered outliers but now considered hip, are wherever you’ll find nan condos. According to Gary Malin, president of Citi Habitats, a New York existent property brokerage, "If surviving successful a solid location successful nan entity is much your style, you will apt beryllium looking astatine a batch of condos. Condo buildings didn’t go communal successful New York City until nan 1970s, truthful they are often much modern than co-ops."

“Since disposable onshore for caller condo buildings is constricted successful Manhattan,” Malin says, “the newest condominiums are apt to beryllium recovered successful up-and-coming and fringe neighborhoods connected nan acold East and West Sides. In Queens and Brooklyn, we person seen a batch of new-construction condos being built successful erstwhile business areas on nan waterfront in Long Island City and Williamsburg, as good arsenic successful Downtown Brooklyn.”

Down Payment and Price

The costs tin often thrust nan determination process for purchasing existent estate, and condos connection charismatic down payments, whereby, usually, only 10% of nan acquisition value is required. However, condos thin to person higher prices than co-ops.

Closing Costs

Closing costs connected a condo are higher than for a co-op. For details, we asked New York existent property lawyer Adam Stone to comparison nan two. Here’s what he came up with. For a $1 cardinal condo pinch an $800,000 mortgage, closing costs would be:

  • Title insurance for nan purchaser, $4,500
  • Title security for nan lender, $1,000
  • Title searches, $700
  • Recording fees, $700
  • New York State mansion tax, $10,000
  • New York State owe signaling tax, $15,370
  • Grand total: $32,270 (without lender’s fees, which alteration by lender)

For anyone wondering what nan mansion tax is, Stone explains: “New York State has a transfer tax of 0.4% of nan income price, which is charged to nan seller of immoderate residential property. It besides has a 1% purchaser’s transportation tax, besides referred to arsenic nan 'mansion tax' because it only applies to residential properties priced astatine $1 cardinal aliases more.” 

Monthly Charges

Condo owners person a monthly measure called "common charges," which are utilized for nan upkeep of nan building—common areas, landscaping, costs of nan staff, and often immoderate of nan utilities. These are abstracted from owe payments.

Condo owners make 2 common-charge payments each period (one for building upkeep and 1 for spot taxes), but often nan condo owner’s mixed full is little than nan co-op owner’s attraction bill.

The Board

Condo boards thin to beryllium little demanding than co-op boards. Co-ops person a much lengthy support process, including an interview. The committee of board decides if a prospective purchaser tin acquisition nan co-op.

"With a condo, a building tin petition a package connected nan buyer," said Warner M. Lewis of The Harkov Lewis Team astatine Brown Harris Stevens. "But location is nary interview, and nan building only has nan right of first refusal (i.e., either they person to o.k. it, aliases nan condo has to bargain it themselves), which intends erstwhile you person a signed contract—unless thing happens to nan purchaser (or nan financing)—the woody is arsenic bully arsenic done.”

Rules

Condos thin to person less rules, including restrictions connected nan usage of overseas costs for nan purchase. Condos let world investors to bargain and rent retired their spaces; usually pinch immoderate caveats, but nary that are onerous. Condos besides let nan flat to beryllium sublet aliases leased retired to different statement comparatively easily, compared to nan subletting process for co-ops. However, immoderate condo associations whitethorn enforce much rules than others. As a result, it's important that prospective buyers do their investigation to find what is and what isn't allowed.

The Buyer's Preference

According to Gary Malin, president of Citi Habitats, “If you would alternatively march to nan hit of your ain drummer—and you worth flexibility—then a condo whitethorn beryllium nan wise prime for you. However, understand that this state comes astatine a price. Condos are astir ever much costly than balanced co-ops. In addition, if seeing caller faces successful nan elevator connected a regular ground is an rumor for you—look elsewhere. Renters tin beryllium communal successful condo buildings. Owners do often return advantage of a condo’s much wide policies.”

Co-Ops

Generally speaking, nan older, established residential areas person a preponderance of co-ops. As Gary Malin explains: “If you for illustration historical properties, you are apt to extremity up successful a co-op, arsenic astir each prewar buildings are organized successful this way. Also, because co-op buildings thin to beryllium older than condo developments, they are often located successful much cardinal locations. For example, astir each nan residential buildings that statement Park Avenue connected nan Upper East Side (a premier location by immoderate measure) are co-ops.”

Down Payment and Price

As pinch a condo, nan determination mightiness travel down to really overmuch you tin walk and person saved for a down payment. Although it's imaginable to put down conscionable 10% of nan purchase price of a condo, a co-op whitethorn require a overmuch higher down payment—in nan vicinity of 20% to 50% of nan acquisition price. The bully news is that nan acquisition value of a co-op tends to beryllium smaller than condos. Of course, prices alteration depending connected nan vicinity involved.

Closing Costs

According to New York existent property lawyer Adam Stone, a co-op has little closing costs. In nan illustration cited supra for a condo, which had complete $32,000 successful costs, a co-op conscionable has nan $10,000 mansion tax. The important quality is owed to nan truth that nan condo is real property, while nan co-op shares are personal property.

“It whitethorn conscionable beryllium semantics to some, but not erstwhile calculating closing costs," Stone adds.

Monthly Charges

Once a month, co-op owners salary "maintenance" charges. Similar to a condo communal charge, this monthly interest goes to nan basal upkeep of nan spot and nan salaries of nan unit needed to support nan building moving properly. Co-op fees thin to beryllium higher than condo fees since nan interest often includes astatine slightest portion of nan owe for nan building. Monthly fees tin alteration depending connected nan size of nan building.

However, it's important to statement that attraction and communal charges are not group successful stone. Any awesome expense—a caller roof, a caller lobby, much unit members—may trigger an assessment, which is thing that committee members determine on, and something that tin seldom beryllium reversed.

The Board

As stated earlier, astir co-op boards person a rigorous and often lengthy exertion process that tin require nan purchaser to manus complete financial information, taxable to employment verification, and perchance acquisition a individual inheritance check.

Warner M. Lewis of The Harkov Lewis Team astatine Brown Harris Stevens sums it up: “In a co-op, not only do you person to person nan money to bargain nan flat (or financing to do so), you besides person to beryllium approved by nan committee aft submitting an application, which is usually very elaborate and time-consuming. Then, pinch small to nary reason, a purchaser tin beryllium rejected aft their interview, aliases moreover before, conscionable because of thing successful their package. I person had deals and seen deals wherever location is zero rhyme aliases logic for rejections.” 

Rules

Co-op boards thin to person much rules than condos and whitethorn instruction erstwhile you tin believe your trombone, whether you tin put vacation decorations connected your door, and whether your pet tin move successful pinch you. Most rules are meant to beforehand harmony, calm, and nan civility of cooperative living.

But nan rules that discourage immoderate home buyers, and conscionable astir each world buyers, are co-op restrictions connected subletting. Policies alteration by building, but generally, erstwhile co-ops let shareholders to sublet their apartments, it is connected a constricted basis, specified arsenic for 1 aliases 2 years retired of each five. Owners typically must person resided successful nan spot for a definite play of clip earlier subletting—in immoderate cases arsenic galore arsenic 3 years. Owners typically salary a interest to beryllium allowed to sublet, and perchance subletters must capable retired an exertion and whitethorn beryllium taxable to a inheritance check. Board support is simply a must.

Another norm of co-ops that makes purchases by world individuals intolerable is that they are improbable to judge anyone whose costs are extracurricular nan U.S.

The Buyer's Preference

"Co-ops are each astir establishing a stable, in-for-the-long-run group of residents. Condos don’t look rather arsenic concerned astir that," said Lewis

When it comes to choosing your preference, Gary Malin puts it nan pursuing way:

"Co-ops are a smart prime for those who worth stableness and want to works roots in a building. Simply inquire yourself, 'Am I successful it for nan agelong haul?' Co-ops are overmuch little transient than condos, truthful they're a awesome spot to unrecorded if you want to get to cognize your neighbors. Just beryllium prepared to beryllium analyzed, poked, and prodded, but understand that this process is what keeps a co-op a unchangeable and remarkably unafraid investment."

What Are nan Disadvantages of Buying a Co-op?

Some of nan disadvantages of buying a co-op see nan rigorous support process, nan higher down payment, nan costly monthly fees, and nan strict rules astir subletting.

What Are nan Disadvantages of Buying a Condo?

Some of nan disadvantages of buying a condo see nan higher costs of purchase, nan higher closing costs, nan preponderance of caller neighbors owed to looser subletting rules, and nan location (many condos are portion of newer buildings located connected nan outskirts of desirable areas).

Which Is a Better Investment, a Co-op aliases a Condo?

It depends connected what your finance goals are. A condo enables you to ain an existent portion of existent estate, while a co-op involves partial ownership of a corp that is nan building.

The Bottom Line

In New York City, nan divided betwixt co-ops and condos is astir 75/25. However, nan number of condos connected nan marketplace astatine immoderate fixed clip is higher than that of co-ops. Both often person a doorman and a superintendent connected staff, though amenities tin scope from barebones to high-end.

When you bargain a condo, you ain your flat and a percent of nan communal area; erstwhile you bargain a co-op, you bargain shares successful a corp that is your building. Condos are often much costly but person little monthly costs. Co-ops whitethorn costs a spot little upfront but person higher monthly payments and a tougher support process. Condos besides person looser rules connected subletting than co-ops. Both person their appeal; which is champion depends connected what nan purchaser needs.

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