What Is a Co-op?
In New York City, about 85 percent of all apartments available for purchase (and pretty much 100 percent of pre-war apartments) are in co-operative, or "co-op," buildings.
When you buy a co-op, you don’t actually own your apartment. Instead, you own shares of a co-op corporation that owns the building. The larger your apartment, the more shares within the corporation you own. Monthly maintenance fees cover building expenses including heat, hot water, insurance, staff salaries, and real estate taxes
Advantages of Buying a Co-op
- Co-ops are generally less expensive than comparable condominium apartments.
- Some of your monthly maintenance fees are tax deductible.
Disadvantages of Buying a Co-op
- All prospective purchasers must be approved by the co-op's board of directors. The board approval process is often time-consuming and rigorous—requiring extensive information regarding finances, employment, and personal background. Even celebrities have been turned down by some selective New York co-op boards.
- Monthly maintenance fees for co-ops are much higher than for condos. This is because the monthly fee includes part of the underlying mortgage for the building.
- Many co-op boards limit the amount of the purchase price that can be financed and require higher down payments than are usually required for condominiums.
- It is harder to sub-lease a co-op. Each co-op building has its own rules, but many limit or forbid subletting.
What Is a Condominium?
Condominiums are becoming more popular in New York City as new residential buildings are constructed. Unlike co-ops, condo apartments are "real" properties. Buying a condo is much like buying a house. Each individual unit has its own deed and its own tax bill. Condos offer greater flexibility but are often priced higher than comparable co-op apartments.
Advantages of Buying a Condo
- In most cases, buyers can finance a larger portion of the purchase price (up to 90 percent) and put less money down.
- With a condominium, you don’t have to deal with board approval.
- Condo apartments can be freely sublet, giving you more flexibility.
- Monthly maintenance fees for condos are much lower than for co-ops.
Disadvantages of Buying a Condo
- Condos are generally more expensive than comparable co-op apartments.
- Monthly maintenance payments are not tax-deductible.
- There are fewer condos available in the New York City real estate market, which limits your options.