Attention newyorkers....I need help! Co-op vs condo? Here is how i understand it. Lets say $100,000 property(unlikely i know) and the co-op requires 20% down. I would put 20,000 down correct? Then there is a monthly fee that i pay the co-op, right? Okay, now here is the part that i am confused with, am i still paying a mortgage as well? And if so, what is so great about a co-op if there is down payment, and 2 monthly payments, opposed to a condo which only has a down payment and 1 monthly payment....PLEASE HELP!!!

When you buy into a co-op, it is just like a condominium except that in a condominium, you actually own the real property, usually a percentage share of communal property plus the area within the walls of your unit.

A co-op is another animal. You actually are buying shares in a company (that is the best explanation I can think of).

Both of these types are going to charge maintenance fees that are due monthly and do not accrue to buying your place or your share of the building (co-op). For many, the maintenance fees are more than their mortgage payment or loan.

There are many charges in maintaining a building in New York. Elevator, doorman, front desk, hall maintenance, taxes accruing to the common elements vs. your space, etc. etc.

LMF

Actually, with a condo you'll have 2 monthly payments -- your personal mortgage, and the buiding fees. With a coop, you own shares rather than a specific apt and so the two fees are rolled into one payment. Regardless of the number of checks you're writing, you're basically paying for the same things -- your own investment, property taxes, and building operating expenses (including staff, utilities and often an underlying mortgage for a coop).

There are great explanations of the difference at most real etate web sites; corcoran.com is probably hte biggest.

You are unlikely to find anything habitable for under $250,000.

Erg, it's early, I was wrong above -- the condo will yield a separate bill for property taxes, which will probably get rolled into your mortgage, but there will still be a building fee for both buildings. Anyway, check the RE sites, they have good explanations.

Both co-ops and condo will have costs for similar things, though they are broken down differently. As previously stated, in a co-op you're not paying the mortgage on your apartment, but the underlying mortgage on the building itself. What you own are shares in the co-op association which entitles you to a percentage ownership in the entire building. Effectively, you lease your apartment. You also have monthly maintenence charges. The mortgage tax deduction you get is your pro-rata percentage of the mortgage on the building. In many buildings, you might only make one payment. But, that one payment may be greater then or equal to the two payments you make for a condo.

In a condo, you own your apartment and have a mortgage where you get the interest deduction against your apartment only. But, you also pay a monthly fee for common area charges.

I once read a statistic that said something like 80% of the apartments for sale in Manhattan were co-ops. I believe many of the newer building are condos, so that percentage may be dated. The issue of which is better is moot as the real issue is can you find a place where you want to live that is condo, if so few are.

While condo's certainly offer more flexibility, as you can finance up to 90% of the cost, co-ops provide greater control over who your neighbors are. Tenants are restricted on sub-leases and the building's board must approve who can live there. For some, that is a real benefit.

BTW, I assume you saw the recent article that stated the average cost of an apartment in NYC passed the million dollar mark.

A very important difference is that you can legally sublet a condo whenever you want, to whomever you want. With a co-op, often you cannot rent it out at all...or you have to live there for several years before you rent it out. And then the renter often has to be approved by the co-op board.

Co-ops have a cheaper selling price, but usually have higher monthly costs. I have friends who pay $1200/month for maintenance, and I've seen higher (though a certain % - about 50%? - is tax-deductible). We bought a condo here because we hate to throw away money!

I believe we get separate bills for maintenance and taxes. Co-ops have everything in 1 bill, I believe. Property tax is very low for a condo as opposed to a suburban house. Taxes on our place are $1300/yr.

Suzanne,
When factoring in the tax for your condo versus a house in the 'burbs, you also need to factor in what you pay in NYC personal income tax. While my NJ real estate taxes are about $9,000 a year, that figure pales in comparison to what I'd pay in NYC Income tax at the roughly 6.85% rate I'd be paying.

That said, I loved living in NYC for the several years I did (and by the city I mean Manhattan as everyone who grew up in Staten Island as I did, could have only meant Manhattan when refering to "the City") and enjoy coming to work here everyday. I still enjoy some of the restaurants, culture and nightlife. But, some of us reach that point in life where quiet surburbia holds benefits for the kids that can't be matched by Wo-Hop on Mott Street at 4:00 a.m.

As everyone has noted - both condos and co-ops have 2 monthly payments - one to the bank for your mortgage and one to the co-op/condo to cover taxes, staff salaries, maintenance, heat, utilities etc. Think of the second as all of the bills you pay separately if you have a house (heat, electricity, water, garbage collection and repairs/maintenance - painting, cleaning etc.)

Some part of the second payment is also tax deductible (real estate taxes and interest on the building's underlying mortgage - for the public areas).

If you are serious about buying a condo or co-op suggest you do more reading and speak to your tax advisor on this - both have a lot of tax benefits - and you need to understand how this will affect what price you can afford.

Also, be aware of the other things to be considered along with the mortgage:

% of maintenance that is tax deductible

size of the building's reserve fund (any overall repairs - elevator, roof, facade- must come out of this - if repairs need to be done and the fund is low - the additional money will have to come directly from the pockets of the owners) (My building - 48 apartments - has a reserve fund of about $300,000 - but we will be redoing the elevator soon)

maintenance/common charge history (is this realistic and stable or is it being raised constantly due to poor financial planning - or no reserve fund)

Before seriously considering purchase get a copy of the last couple of financial statements for the condo/co-op - and go through them with a fine tooth comb

Overall, just realize that even though these are apartments it's completely unlike renting - you are really taking on the responsabilities of group home ownership

Sorry - and as someone mentioned the latest sale prices (from the city's real estate records office) are now over $1 million (this will get you a pleasant 2 bedroom - or perhaps a marginal 3 bedroom if you push it - in a middle class - not luxury - buidling.

As was pointed out, in a condo you own the apartment but in a coop you own shares in the Coop Corporation (the building). In a coop you have a Board which often has many restrictions on what you can do with your apartment and who you can sell it to. These restrictions can also act as protection for you as they obviously also apply to your neighbors. Since a coop has more restrictions the prices are generally around 10% less than a condo. Lastly, (just to confuse you more) in a coop the Coop Corporation usually has a mortgage on the building, which is one of the items you are helping to pay in your monthly maintenance charges. If the Coop Corporation defaults on the mortgage and the bank forecloses you will no longer own your apartment but you will be liable on your mortgage to the bank. This scenario is highly unlikely, but it becomes more possible if real estate falls in value. This scenario has played out before. A way to judge if the building's mortgage is risky is to see what interest is being paid. If it is higher than 7% then you should investigate closely. Your maintenance should generally be around $1- per square foot, but it will be higher in a building with alot of amenities. The questions you ask a basically irrelevant in determining whether you should buy a condo or coop. Whether you pay one or two months upfront is not the issue. The issue is, considering your tax bracket, and the legnth of time you are likely to live in the space, and your savings, does buying an apartment make sense? Please get lots of expert advice. And remember, people love to have the illusion that there are safe havens for investment. They used to say that about stocks, now they say it about real estate. Both stocks and real estate are great investments over the long term, but both will go up and both will go down over the short term. Be careful!

Don't know much about NYC real estate, but do have an associate whose family purchased a 2 BR, 2 (small) terraced apartment for her on the Upper East Side. No mortgage - the apartment was completely paid for. Her monthly fee (co-op?) was over $1000 a month. Again, there was no mortgage on the apartment - it was paid for in cash.

I found that amount astonishing given what $1000/month would buy you in my part of the country at the time!

It is indeed a shock to those not used to this type of ownership.

Both coops and condos have monthly maintenance or carrying costs. In a condo you may get a separate bill for taxes. In the coop, taxes are included in the monthly maintenance. This is in addition to your own mortgage payments. Also there's always the risk of an "assessment." If the building requires repairs or incurs other charges that can't be covered by the reserve fund, the owners are assessed extra.

The percentage you put down in cash for purchase will fluctuate from building to building in a coop. Many coops, in an effort to be "elite" require a certain amount in cash. In a coop you have to be "approved" by the board since you're in essence buying a share in the building. I understand some condos are trying to move in that direction.

Condos seem to have slightly greater value because you're freer to do what you please. Coops are strict about subletting etc.

Ryan,
NYC personal income tax is not that much. For me, it's about $1,000/year. (I know this because I recently became an "official" NYC resident after my parents moved from suburban NYS to Florida.)

But the NY State vs NJ taxes may cause the bigger difference.

In my tax bracket Suzanne, I'd be paying the full 6.85% plus the real estate tax for just the NYC. I recognize that for some the math works out differently. For me, it works out in my favor to not pay the NYC tax versus my local real estate taxes.

This info is 2 yrs old but thought it would be interesting reading for you.

http://www.newyorkmetro.com/realesta...es/affordable/

jlents,
Each coop building has it's version of the rules.
I am a coop owner, and live in a "landmark " building.
In my building we have a policy which allows shareholders sublet their apartments for 4 out of every six years effective when they buy into the building, as long as the subletter is approved by the coop board.
This is very unusual however.

And because of our landmark status, we have certain policies regarding renovations that might not hold true for other buildings.

You must put down the 20% deposit, and for a coop, the monthly fee is called the "maintainance", and is a tax advantage.

You must also (usually) appear before the coop board and meet their approval to be allowed to buy into the building, so it helps greatly to have excelllent letters of reference, and a confident presentation.

I know this limited bit of info might sound scary, but if a wimp like me can do it, lots of people can.

You can find apts under a million, they are still out there!

Corcoran is reputable, but check other agents as well, and also check neighborhood bulletin boards.

Something you need to figure in when considering a coop, are the "financials" which are the cash reserve of the building, and how carefully they are managed. Also be careful to check if there are any liens or lawsuits against the building.

Policies regarding pets, smoking, use of freight elevators, and renovations are key.

You should also check the neighborhood on different days of the week, and different times of the day.

It's true that the NY real estate market is in a class by itself, and you should be well prepared to show up ready(money wise) to make a move, because others will show up prepared for this.

If you decide to go the coop route, like everything else about living in this wonderful city, it takes passion and commitment.

All the best of luck to you.

(oh, also go to a NYC bookstore and find one of the many good reference books on buying coops and condos in NYC. They are invaluable!)

A friend has been trying to sell his co-op in Manhattan for more than 5 years. Of course, the bathtub is in the kitchen, but still...

I am going to try to explain the difference and number of payments issue [comments on availability are based on Manhattan]:

Condo
It is just like buying a house in the sky. You own real property - your apartment plus a communal interest in the common spaces of the building. You will pay your own mortgage and pay the real estate taxes directly to the city. You will also make a maintenance payment to the building that covers the doorman, maintenance guys, elevators, etc. None of your maintenance will be tax deductible.

The main advantage of a condo is freedom - you can finance as much a bank will give you, you can rent out your place to whomever you like for how long as you like.

The biggest problem with a condo is availability and expense - they cost more per sq foot and it is mostly newer buildings (last 10-20 years) that are condos. You also run the risk that your neighbor is out of control or rents to a frat, and there isn't anything the board can do about it.

Co-Op
This pretty much exists only in NY. You buy shares of a single asset corporation that owns the building. You don't directly own any real property, but instead own those shares and get a "properiety lease" for your apartment. The co-op entity (usually) has a mortgage on the underlying property.

You will pay (i) your "mortgage" payment (although it is treated as a mortgage by banks and for tax purposes, it is really more like getting a loan to purchase stock, and then pledging the stock as collateral) and (ii) your maintenance payment to the co-op. That payment will be higher than a condo because it includes the same building operations costs plus (a) real estate taxes (instead of you paying directly, since you don't actually own real estate, the building pays them as a whole) and (b) payment by the co-op of its mortgage on the property. The portion of the maintenance payment that is the taxes and the mortgage is tax deductible (usually around 50%).

Advantage of co-op - they are cheaper as far actual cost to purchase and much more available. Also, since board has much more control, you can be assured that your neighbor won't start a rock band or rent out the apartment to a college frat.

Disadvantage -- Requires a lot more money up front - most co-ops require at least 25% down and will only approve a buyer if the buyer meets the board's financial requirements - usually 2 to 3 years of the individual's mortgage and maintenance payments in liquid assets after the closing (i.e. after paying 25% or more in cash) and/or that total debt payments stay around 25% of income(Keep in mind they don't give a reason for rejecting a potential purchaser). Also, you'll have to get their approval to rent the apt out(if it is allowed), and will need to get potential buyer approved, which slows down sales and may leave you unable to take the best offer on the table.

As to "what is so great about a co-op," well, like 99% of city apartments there is little that is great about them beside the fact that they are in the city.

Sorry vacation dreamer -

What is so great about a co-op (versus renting - obviously buying a house in Manhattan is beyond almost everyone but The Donald) are the huge financial advantages. For often no more than you would pay in rent:

You are getting substantial equity every month rather than shoveling rent out the window

You are getting great tax deductions - besides interest on your own mortgage you can deduct both real estate taxes and interest on the underlying mortgage

You are benefitting from the rise in the real estate market (I bought mine for only about $150,000 and it's now worth about $600,000 - $450,000 pure profit)

What could be better?

nytraveler - your answer isn't co-op v. condo, it is co-op v. renting. obviously, if you can afford it buying is always better than renting (unless you're not going to stay long enough). i think you missed the whole point of the thread. it wasn't "should I rent or buy a co-op aparment"?