In New York City, learning the housing market can feel a bit like learning a foreign language. Here, you can’t just “buy a home.” Instead, you need to have at least a basic understanding of the various types of homes, and what each of them might mean for you.
Two of those housing types are the condo and the co-op. While they seem like they might be similar, they can get a bit confusing. Here’s what you need to know:
Today, about 75 percent of all housing in Manhattan is made up of co-ops. While their close cousins, condos, are owned by people, co-ops are the property of corporations.
This means that you can never actually buy a co-op. Not the physical property, at least. Instead, you buy a share of the corporation, which then allows you to lease the building, putting you in the position of an investor rather than an outright owner.
Because you’re joining a corporation, getting approved for a co-op is a great deal more difficult than getting approved for a condo. You’ll also have to pay ongoing monthly fees designed to fund your building expenses and maintain things like hot water, heat, insurance and taxes.
If the idea of going in front of a co-op board makes you a bit nervous, it’s for good reason. These boards define the parameters of their various approval processes and make the big decisions about how to manage the building. These boards might also require you to undergo an interview or a series of interviews before they accept your application. Selling a co-op can be tough, and will almost certainly require the help of a real estate attorney.
A condominium apartment is a bit more familiar to most people than a co-op. Unlike co-ops, a condominium is a real property that you own, rather than shares in a corporation. This means you’ll pay a tax bill from the city, as well as monthly maintenance charges that are pretty similar to what you’d see in a co-op ownership situation. Since these charges don’t also cover the condo’s mortgage, though, they’ll be lower than those associated with co-ops.
When it comes to the actual purchase process, buying a condo is much easier than buying a co-op. What’s more, condos offer a more flexible ownership dynamic than co-ops. It’s possible to finance the purchase price, and the owner has a great deal of freedom to sublet, rent or Airbnb the condo after purchase. This provides flexibility for families, individuals and out-of-state owners, and it’s impossible to facilitate the same thing with a co-op. The downside, however, is that condos are in high demand in NYC, and finding a good one can be a difficult process.
Condos also offer a slightly less social experience for owners. While condo owners can be somewhat alienated and set apart, co-op owners must, by virtue of the property, participate frequently with their neighbors. This is preferable to some people and quite alien to others.
What’s a better investment, a condo or a co-op?
There is no one-size-fits-all rule when it comes to figuring out if you want a condo or a co-op. Both types of buildings have benefits and drawbacks, and it’s wise to consider each objectively.
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