Condo, co-op, investment sales

Condo Vs. Co-Op: What’s the difference?

Lower East Side Real Estate

This is one of the frequent questions I get from new investors and home buyers: “What is the difference between a co-op and a condo?”

Below is a handy cheat sheet which will help clarify the most important differences, and help you choose what is best for your situation.

CONDO

CO-OP

GENERAL:
Condominiums are multi-unit buildings with privately owned residences and shared common areas. Condominiums are classified as real property, meaning that buyers own the deeds to their individual apartment.
GENERAL:
When you buy into a co-op, you become a shareholder in a corporation that owns the property. As a shareholder, you are entitled to exclusive use of a housing unit in the building.
OWNERSHIP:
Condo owners are considered owners of “real property” and have an actual deed for their unit.
OWNERSHIP:
A co-op association — a corporation consisting of all the owner/shareholders — owns the entire building, including all of the individual units. Owners receive a proprietary lease for their unit in the building, entitling them to reside in the unit
MONTHLY FEES:
Owners have responsibly to pay their own real estate taxes and their share of the common charges for the expenses to maintain and operate the common areas.
MONTHLY FEES:
Co-op owners pay monthly maintenance to the building corporation for items such as the expenses of maintaining and operating the building property, property taxes and the underlying mortgage on the building (if any).
CLOSING COSTS:
Buyers have additional closing costs for “mortgage recording taxes” (generally between 1.8% and 1.925% of the loan amount), title insurance and “flip tax” (1% of any property over $1million).
CLOSING COSTS:
Co-ops traditionally do not have the same closing fee requirements as condos.
FINANCING:
Generally a minimum 10% down payment.
FINANCING:
Generally a minimum 20% down payment.
SUBLETTING:
Condo boards are generally not strict about renting out your unit.
SUBLETTING:
Each co-op association varies, but generally after a period of time, subletting is permitted.
SCREENING:
Condo boards are traditionally less demanding compared to co-ops boards.
SCREENING:
Co-op boards have a rigorous and often lengthy application process and are generally stricter about their financial requirements.
IS A CONDO RIGHT FOR YOU?
Condos are thought to be a good choice for short term investors and first-time home buyers because of  the straightforward approval process, lower down payments, and ability to more freely rent out the unit.
IS A CO-OP RIGHT FOR YOU?
Co-ops are thought to be a good choice for long-term owners because the board approval process ensures financially sound and respectable buyers, and there is less transition in the building because of fewer renters.

 

If you have any further questions, do not hesitate to contact us!

Eric Ferrara

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