Condo vs. Co-op the debate begins. To help you decide, it is essential to understand the differences between them. In Manhattan, there are two primary real estate options to choose between Condo vs. Co-op. Before buying an apartment, you’ll want to fully understand these two options and what each has to offer. Most of what you will find for sale in Manhattan are cooperative or condominiums.
The most crucial distinction between condo vs. co-op is that with a co-op, you do not own the property. The corporation owns the property, and you are considered a shareholder. You own shares in the corporation, much like you would in a business venture.
Our Condo vs. Co-op guide walks you through the considerations from start to finish.
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Deciding between Condo vs. Co-op
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. The larger and better the real estate, the higher the number of shares the co-op will be worth.
The Board of Directors runs each co-operative building, paying for 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 Director’s vets all applicants and ensure the co-op remains financially healthy. Each owner must be able to pay for his/her obligations. For that reason, the Board must approve each new member.
Condominiums make up the other available real estate choice in New York. They are a more traditional choice for that buyers actually, purchase the real estate itself. That means that the expectations and responsibilities are different than a co-op. For example, if you buy a condominium, you will have to pay the real estate taxes on the property separately.
Another point of fact to consider is that in New York City, there are fewer condos vs. co-ops. About 70 percent of the apartments in New York are co-operatives. Co-ops, however, are less expensive than condos. The good news is that the gap between the two is narrowing. Currently, the ratio of cooperatives to condos is 75 to 25 percent. In the 1990s, the rate was 80 to 20 percent.
In the 1980s, it was 85 to 15 percent. This gradual shift has been taking place because apartments in newer buildings tend are sold as condos. In areas with more modern developments, there are higher numbers of condos available for purchase.
Condo vs. Co-op Considerations
Most people who already live in Manhattan have a relatively firm understanding of the real estate market and how it differs from other cities. Particularly true in regards to the trade-offs between condo vs. co-op. However, if you’re new to New York City, or are thinking of moving there soon, you may want a better understanding of what type of real estate will work best for you.
For example, depending on the neighborhood, there may be more co-ops than condos available. The co-op ownership vetting process can be strict, but that usually translates to greater financial security for the building. It can also be highly discriminative, especially when finances are concerned.
Although most people coming to New York feel like they must buy a condo, there are many factors to consider so that you end up purchasing the property that best fits your needs. Understanding the difference between a Condo vs. Co-op is an essential step before beginning your home search. Home Buyers or investors looking to purchase in New York City face a choice that those interested in other real estate markets don’t have to consider.
Pros and Cons
Each choice offers its pros and cons, but many new to the city’s real estate market often ask themselves, “Why on earth do co-ops even still exist?” Those that already own property in the town – whether it be condo or co-op – however, don’t have such a flippant attitude. The coop ownership structure in the New York City effectively added another layer of regulation to the city’s housing industry, thus saving it from the subprime crisis to an extent experienced by no other city in the US.
In all, somewhere between 70% and 80% of all housing in New York City is co-op housing. While that share is falling steadily, the market will continue to be dominated by co-ops for some time to come. That said, 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 lines, though never explicitly.
Co-op vs. Condo boards continues to be somewhat snooty, especially the wealthier ones. The process of applying to live in such a place is often more rigorous than trying to get into an Ivy League college. Fortunately – and perhaps ironically – this snootiness curbs demands for coops, and so their prices are, on average, 10 – 30 percent less than the typical condo regarding price per square feet.
What is the cost of a Condo vs. Co-op?
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 up front. Sometimes there are even clauses saying this money cannot be money from a bank loan but has to be the buyer’s pre-existing cash reserves thus purchased 100% in cash. One good thing about co-ops, though, is that the money you pay your share of the building’s taxes and mortgages is deductible from your income taxes.
Also, once you are actually in one, the arduous admissions process that you went through will have to be completed by all other potential neighbors, thus saving you from the possibility of living next to Kid Rock or some other similarly lovely character. Also, some of the oldest, most prestigious buildings in Manhattan are co-ops.
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. Other than those benefits, though, there’s little to say in the way of cooperatives. Condos are notably better as investments. They are easier to buy and sell thus are a considerably more a liquid asset.