Condos vs. Co-ops in NYC – Know The Difference

New Yorkers have a relatively firm understanding of the real estate market and its nuances. Particularly true in regards to the trade-offs between condo vs. co-op. However, if you’re thinking of moving here soon, you may want a better understanding of the various types of apartments. The co-op ownership vetting process can be strict, but that usually translates to greater financial security for the building. However, it can also be highly discriminative, especially concerning finances. For example, depending on the neighborhood, there may be more co-ops than condos.

Although most people coming to New York feel like they must buy a condo, there are many factors to consider to purchase an apartment that best fits your needs. Understanding the difference between a condo and vs. co-op is essential before beginning your home search. Homebuyers or investors looking to purchase in New York City face a choice that those interested in other real estate markets don’t need to consider.

Should I Buy a Condo or Co-op?

Each choice offers pros and cons, but many outsiders ask themselves, “Why do co-ops still exist on earth?” However, those who already own property in the town – condo or co-op – don’t have such a flippant attitude. The co-op ownership structure in New York City effectively added another layer of regulation to the city’s housing industry. Although stringent, it helped NYC from the subprime crisis to an extent experienced by no other city in the U.S.

Somewhere between 70% and 80% of all housing in New York City is co-op housing. More condos are being built today. However, the market has continued to be dominated by co-ops for some time. The co-op ownership structure did not precisely rise from the best of traditions. It was a mechanism for large apartment buildings to screen out unwanted applicants of various types, usually of class or social lines – or even racial- though never explicitly.

Co-op vs. Condo boards is somewhat snooty, especially the wealthier ones. As a result, applying to live in a co-op is often more rigorous than getting into an Ivy League college. Fortunately – and perhaps ironically – this snootiness curbs demands for coops, so their prices are, on average, 10 – 30 percent less than the typical condo in price per square foot.

What are the Benefits of a Co-op?

The main advantages are: that co-op apartments are less expensive than condominiums. Taxes are also included in the cost, so buyers often have more straightforward billing arrangements when buying this property type. However, a co-op’s Board of Directors may require a sizeable down payment. Co-ops are very well-maintained. As the building’s owners are its tenants, there is a strong incentive to keep all apartments in good condition to increase the value of the building’s shares.

About 80 percent of the apartments available in New York are co-ops, so buyers who consider co-operatives and condominiums will have a more extensive array of choices when working with a qualified buyer’s agent.

What are the Advantages of Condos?

There is no board interview like a co-op so purchasing a New York City condo is easier and quicker. Building rules are often much more relaxed, especially regarding residency. For instance, some buyers moving to the U.S. may have money in foreign accounts. Because of this, international buyers tend to have an easier time purchasing condominiums than co-operatives. Condos vs. co-ops require a lower down payment, usually 10%. Due to the high demand for condos, lenders are willing to loan money with a smaller down payment. In NYC, buyers can often finance condominiums with a down payment of only 20%.

However, mortgage rates are sometimes higher when a down payment is relatively low. Condos vs. co-ops are also more comfortable to sublet, as renters don’t need to be approved by a Board of Directors. It makes condominiums a much better choice for buyers looking for investment properties.

Consider how your chosen apartment type will affect its long-term value when buying a home. Elika Real Estate agents will help you choose the right kind of property. Also, they can explain how the buying process differs between condos and co-ops.

What is the cost of a Condo vs. a Co-op in NYC?

Another barrier to entry that keeps the average price of a co-op vs. condo is lower because they often require more money to be put down upfront. Sometimes clauses say this money cannot be from a bank loan but has to be the buyer’s pre-existing cash reserves, thus purchasing 100% in cash. However, one good thing about co-ops is that the money you pay your share of the building’s taxes and mortgages is deductible from your income taxes.

It saves you from the possibility of living next to Kid Rock or some other similarly lovely character. Also, some of Manhattan’s oldest, most prestigious buildings are co-ops. Once a co-op shareholder, remember that all other potential neighbors will have to complete the arduous admissions process you went through.

There’s little to say about co-operatives other than those benefits, though. Condos are notably better as investments. They are easier to buy and sell; thus, they are more liquid assets. The same is right about condos, but the point is that many co-ops have a certain old-money flare to them that condos often eschew.

Condo vs. Co-op Conclusion

Since you’re buying shares in the co-op, you do not own your apartment; you own a part of the corporation that owns the building. The Board of Directors for the corporation sets the value for each apartment based on shares. Therefore, the larger and better the real estate, the higher the co-op’s number of shares will be worth.

The Board of Directors runs each co-operative building, paying its mortgage, taxes, and upkeep. The money you spend on your shares covers these expenses and contributes to the building’s reserve funds. The Board of Directors vets all applicants and ensures the co-op remains financially healthy. Each owner must be able to pay for their obligations. For that reason, the Board must approve each new member.

Condominiums are the other choice in New York City. They are easier for buyers who want to be a freehold owner and own real estate. That means that the expectations and responsibilities are less restrictive than a co-op. For example, if you buy a condominium, you must pay the property taxes separately. Or, if you purchased a condo and wanted to sell it soon after, a condo would be more accessible with less restriction.