NYC Real Estate Co-op vs. Condo: Differences between Cooperatives and Condominiums

The vast majority of apartments available for purchase in New York City are either cooperatives or condominiums. The major difference is that purchasers of cooperative apartments or co-ops own shares in the entire building corporation. Condominium ownership is more like owning a single-family home in that purchasers own their physical unit.

Pricing Differences New York City Co-op vs. Condo

In general, in New York City, cooperative apartments tend to have lower asking prices than comparable condominium apartments. But there are other factors to consider. Since co-op owners are shareholders in the entire building, the costs associated with the building such as the underlying building mortgage and the real estate taxes are the pro-rata responsibility of each of the shareholders. The number of shares allocated to each apartment is typically determined based on apartment size and location within the building.

Board Approval for Co-op Purchases

Each co-op building has a Board of Directors and its own set of requirements for prospective purchasers. Typically a would-be buyer must submit a full financial package listing all of their assets and liabilities and include copies of recent tax returns. The package is usually reviewed by the Board members or an admissions committee and then an interview is scheduled with the prospective purchaser. Boards can dictate the percentage of the purchase price that the buyer can finance. Boards can also require maintenance escrows or other forms of financial assurances. Condos generally do not require board approval.

Maintenance Fees in Co-ops and Condos

Since shareholders in a co-op own a stake in the underlying building, their maintenance fees sometimes referred to as common area charges, are generally higher than in a condo. However, since a co-op maintenance fee includes a portion of the underlying mortgage payment and local real estate taxes, a portion of the maintenance is tax deductible. Other costs covered by the maintenance charges in both co-ops and condos include staff salaries and electricity in the building common areas such as hallways and stairwells.

Other Considerations for Purchasing a Co-op or Condo

When considering the purchase of an apartment is a co-op or condo, it is important to look at the following items:

  • House Rules – In addition to containing standard language regarding noise policies and rules about floor coverings, the House Rules also set forth the building policies on pets, washer/dryers, restrictions related to apartment terraces and balconies and any flip tax requirements. Flip taxes are fees paid to the co-op or condo at the time of sale of the apartment usually by the seller but sometimes passed on to the buyer purchase.
  • Maintenance History – Find out how often the maintenance has increased in the last several years and ask why. Also find out if the building has imposed any assessments on apartment owners. Assessments are usually used to cover major building expenses such as an unexpected repair or a renovation of common areas.
  • Reserve Fund – The reserve fund is the amount of money a building has set aside for capital improvements. A prospective buyer should feel comfortable that the reserve fund is large enough to pay for foreseeable capital expenses such as building repairs and mandatory façade inspections required by New York City.

Narrowing Down Choices in NYC – Co-op vs. Condo

In the end, whether to buy a co-op or condo might well be determined by personal preferences about the actual building and unit. The majority of NYC apartment buildings are cooperatives especially the pre-War buildings. New construction tends to be built as condominiums.

Real Estate Investment Clubs Fully Explained: First Time Investors Benefit From Joining a Money Group

The news of foreclosures looming and sellers desperate to walk away brings on news of despair and sadness for many. This news also brings out many first time real estate investors. These new buyers are interested in dabbling in the art of investing and do not know where to begin. The Real Estate Investment Club is exactly the right place for these brand new buyers.

Many would be investors have lost thousands of dollars investing in properties that were presumed to be a good ideal. Up front they seem to be a wonderful chance at making money, but then the reality sets in. Too many times Realtors, anxious to have a sale, will leave out many of the details concerning a rental property. After the deal closes the Realtor is no where to be found.

The Real Estate Investment Club not only invests the money to buy new properties, they also have lectures presented by knowledgeable mentors. They teach all the members when to buy and how to buy and keep a profit.

Pros and Cons of The Real Estate Investment Clubs

As sure as there are benefits, there are also disadvantages too. According to Business Week, the investor should be aware of the pitfalls of such a club. Buying properties in today’s market can be a detriment to the new investor if he is not prepared to hang on for many years to come.

The goal of the investment club is to buy rentals and keep them and not resell. Their money is made strictly from the money received monthly. A good investment club that is run properly can provide income for the new investor for years to come.

The initial investment in a Real Estate Investment Club is very minimal. The association dues are between $200-350 normally. This money is used to pay the secretary and the rent on the building provided for the meetings. The goal is to have no out of pocket money for the association or Real Estate Investment Club.

What to Look for in a Real Estate Investment Club

When looking to choose a Real Estate Investment Club, the new investor should look for certain qualities of a club. These are some of the questions that should be asked:

  • How many members are in the club?
  • How often does the mentor or guru give lectures?
  • How much is the yearly dues?
  • Do the members have to participate in each sale?
  • Who manages the properties?
  • Do the members have to participate in management, maintenance or bookkeeping?
  • How does each member get paid?

Normally a club will hire a management team to handle all the properties and each member is paid monthly after all debts are paid, but it is best to check thoroughly all the details. In most clubs, each member is given a territory to work. This territory could amount to an entire county or in the case of a large county; the county would be split up into sections.

The member therefore can submit properties for purchase that they have located. The club will vote on the purchase or not agree to the purchase. Each club will decide on the compensation paid to the member bringing in the best weekly deal.

First Time Investors Benefit From Joining a Money Group

In a normal million dollar deal, the buyer would have to pay at least 20% down. This would amount to $200,000. In an investment club with 200 members, this amount would equal only $1000. So each member has a minimal down payment and low risk involved in the property. Each member benefits from joining the money group with the profits they acquire.

The first time investors have low down payments, minimal closing cost and low risk involved in being part of a large money group. With multiple purchases, the chances of losing out big time are minimal. Keep in mind that a low down payment also means a low monthly allowance from the property. The rents are also divided by 200 members.

There are thousands of Real Estate Investment Clubs located all over the world. Each club has its benefits and disadvantages. It is always good to interview several clubs in your area before joining one particular club. The normal investor will join for a few years and then branch out on their own.