Buying a Condo or Co-Op in NYC
Whether you are thinking about investing in New York City real estate, or moving into a new home that fits your lifestyle, there is no shortage of options. The primary thing is to identify your immediate and long-term objectives.
We suggest that you, and any other stakeholders, start the research process with a large legal pad for notes. it’s important to determine whether you want to buy a co-op, or buy a condo. It makes much more sense that renting, especially with monthly rentals in good neighborhoods starting at $4,000. to $5,000. on up. This translates into very expensive rent receipts.
The Important Co-op and Condo Differences
In New York City, there are more co-ops than condos. Real estate trending reports show that a majority of individual buyers and investors prefer to buy a condo even though condos tend to be more expensive. Several advantages include:
- Condo Association Rules are much less restrictive.
- Condos are easier to rent after the initial purchase although some condo boards require an initial owner occupancy of at least one year before the unit can be rented.
- Foreign buyers find it much easier to buy a condo in New York City because the financial documents required by banks and condo boards are not as complicated as co-op documentation.
- When you buy a condo, you establish ownership along with interests in common areas such as the lobby, halls, Monte Carlo rooms, Club House, fitness facilities, children’s playground, pools, and parking structures. By comparison, If you buy a co-op, you own shares in a corporation without owning any real estate.
- Condos usually require a lower down payment. The condo interview process, which takes place prior to final approval, is usually much more civilized than any New York co-op board interviews.
- Co-op boards establish strict rental rules based on the corporate structure. To cite some examples with life events such as losing a high profile position, a business failure, elderly parents in need of help and supervision, or an expensive divorce, your status in the community can quickly change. You and your family may need to rent your unit for several years, and move to another state or country. Under these circumstances, you may find yourself up against a forced co-op sale in a depressed market combined with financial stress and hardship.
- Under unfortunate circumstances such as these, you would not be dealing from a personal or business position of strength.
- Bear in mind that with a condo, rentals are easy to arrange and manage since you own the property. It is common for owners to require a rent escrow account of three to four months rent, along with move in/move out fees, elevator fees, and a modest amount set by the association board in case of damage to the building during moves, or furniture delivery.
- If you decide to buy a condo, there may be higher closing costs if you apply for a mortgage. These costs would include the mortgage tax requirement and the cost of title insurance. By comparison, these costs do not apply when you buy a co-op.
Co-op and Condo Insurance
There is a lot of misinformation about homeowner’s insurance in New York City. Many people believe that all condo and co-op insurance issues are taken care of by the respective board association.
These boards are involved in insurance negotiations, but they are not involved in individual resident insurance policies. The boards work closely with the managing agent on the building policy for the exterior, common areas, and any communal property belonging to the development, but individual apartment insurance is not included.
Additionally, boards are also involved with liability insurance for protection against incidents that might happen on co-op/condo grounds, or on common areas.
If you buy a condo or co-op, the bank will require insurance to protect its investment in your home. You might require more insurance to cover personal items, liability or shared area fees such as the lobby, or pool that may be charged to you (also known as loss assessment which can be added to your policy).
We hope that this information has been helpful.