Condo VS Co-op

Madelaine K Properties March 10, 2013

Condo – you are buying a fee simple ownership in a property with shared common areas. A very simple form of ownership – there is a monthly fee that is used to pay for maintenance of the entire building and common areas.

Coop – you are buying stock in a corporation that owns the building – you have an exclusive right to use your unit. Your monthly payment goes towards paying the mortgage on the ENTIRE building as well as maintenance of the building. Your monthly payment is usually higher than the HOA’s you will pay on condos but a portion of the monthly payment will be tax deductible. Coops are very common in NYC with 85% of all residential units being coops (if I remember correctly).

Benefits of a condo – fee simple ownership in a property, easy to transfer (sell), easy to obtain financing ,appreciation is better.

Drawbacks – more expensive to buy

Benefits of a coop – cheaper to buy

Drawbacks – monthly cost of ownership is higher – sometimes 2x as high. Financing is harder in certain areas of the country where coops are not common (e.g., San Francisco).Some cases down payments are 30 to 50%. Since you will be a joint owner with all others in the coop in the same corporation that has a large financial obligation – prospective purchasers are often screened with sometimes onerous criteria. They rules are a little stricter then a condo, such as renting condo out is limited.