Co-ops vs Condos: Which Fits Your Budget and Lifestyle?

by Steven R. Wagner

Whether you are moving to New York City for the first time or have finally decided to invest in an urban dwelling, you will quickly come face to face with the intricacies of NYC real estate. Apartments in New York City are mostly separated into two categories: co-ops and condominiums. The two vary by means of ownership structure, financial matters, style, and price. Figuring out which one best suits your needs is a crucial first step in the buying process.

The difference in ownership
The ownership structure of a condo is vastly different from that of a co-op. Buying a condo equates to owning a particular unit and a percentage of the common areas of the building. Condo owners enjoy greater freedom and more decision-making power throughout the lifetime of their purchase. Though condos do have boards and associations that manage the property, they usually do not interfere with decisions regarding individual units. This allows for greater ease when it comes to selling, renting-out and making changes to apartment units.

Co-ops are usually multi-unit apartment buildings. In contrast with buying a condo, buying into a co-op does not mean owning an apartment unit. Instead, you are buying an interest in the entire building by owning a share and holding a proprietary lease. For this reason, a co-op owner is sometimes referred to as a shareholder. The structure is similar to owning a share within a corporation. The co-op association, which encompasses all shareholders of the building, is the actual owner of the property.

Unlike condo boards, co-op boards are the key decision-makers. They hold the power to deny a prospective purchaser, which will restrict an owner’s ability to sell and rent out their unit. The board also makes all financial and management decisions. If you choose to buy into a co-op, be prepared to disclose everything from financial history and renovation plans to pets and personal references.

Consider your personality
Condos are more likely to be found in either Manhattan or newer, gentrified neighborhoods on the outskirts of the city. Since condos buildings were not commonplace in New York City until the 1970s, the buildings are more likely to be new with modern elements. This is in contrast to co-ops, which can be found all over New York City in older, historic buildings with unique architecture.

Co-ops and condos each offer different social experiences. If you enjoy seeing and meeting new people each day, a condo, where the selling and buying process is more efficient, will offer a variety of new faces. It also allows for anonymity if reclusiveness is more desired.

Since co-ops usually lead to long-time buyers due to the lengthy approval process and stringent restrictions, owners are likely to reside in the same space for many years. Co-op owners see themselves as a whole, meaning the neighbors usually form a much closer sense of community than those in a condo.

It all comes down to cost
Regardless of which apartment-style sounds most ideal for you, the real question always comes down to price – which can you afford? There are more co-ops than condos in New York City, approximately 75% co-ops and 25% condo, which means you can expect to pay a premium when it comes to purchasing an equivalent condo. However, your decision on affordability may come down to how much cash you have on hand. A condo will allow you to put down 10% of the purchase price, whereas a co-op may demand a much higher down payment. Co-ops almost always have lower closing costs, since a co-op share is considered personal property versus a condo being categorized as real property.

It is important to remember that both co-ops and condos will charge monthly fees to cover building maintenance. These fees are referred to as common charges for condos and monthly maintenance fees for co-ops. The monthly maintenance fees for co-ops tend to be higher than that of condos because they contain the mortgage for the building. Both condos and co-ops will usually offer basic amenities, such as a storage locker or doorman. Some will add more lavish amenities, like a concierge, gym or billiards room. More amenities usually equate to greater fees.

Both condos and co-ops have pros and cons when it comes to living in the big apple. Before you buy, do not be afraid to reach out to an attorney at Berkow, Wagner & Brandt, LLP, to clarify any questions you may have on this investment.

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