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Co-op vs. Condo: Which One Is Right for You?

A broker dishes on why some buyers should go condo, while others should steer co-op

Nothing is easy when it comes to New York City real estate. So you want to buy an apartment, but what kind of apartment do you want? Co-op or condo?

Coop vs condo

The Dakota, 8 Spruce Street (Photo: David Shankbone/Wikimedia Commons, Jim Henderson/Wikimedia Commons)

In the simplest terms, a co-op is an apartment building that’s owned by a corporation. To “own” a co-op apartment is to buy shares in the corporation, which gives you the right to live in a particular unit within the building. Co-ops are self-governed, often self-maintained and can consist of just a few apartments. A condo, on the other hand, is an individually owned apartment much like a single-family home. Condos are usually newer, larger buildings and come with access to common facilities such as rooftops, gyms or movie rooms.

Both co-ops and condos require board approval, hold regular board meetings and come with an ever-changing set of rules for living. Co-ops, however, tend to have a more tedious approval process. A co-op board can and will ask for the most intimate details—financial to familial. There will be a face-to-face interview, which may include pets, and applications can be denied for any reason. Condo boards, on the other hand, only have the right of first refusal, which means members can stop the sale by offering to buy the apartment on the same terms.

Co-ops make up about 75 percent of New York’s real estate market, and they are generally in buildings built before the 1980s. The combination of older buildings and units, fewer amenities and the hassle of board approval mean they tend to be cheaper than condos. However, you’ll usually have to pony up 20 percent or more for a co-op down payment, while with condos you can sometimes get away with less.

Despite the financial differences between the two, it can often be hard for first-time buyers to decide which one is a better fit. To help clear the waters, Mukul Lalchandani, broker with The Modern Agent (themodernagent.com) weighs in on two prospective buyers and their best bet—co-op or condo. “In today’s market,” Lalchandani says “there is a shortage of good value condominiums; therefore we have been seeing a higher increase in sale prices for condominiums, especially new developments. On the other hand, for co-ops, there is a surplus of inventory, hence the lower asking price compared to condos.”

Dan Nainan

Dan Nainan

Buyer 1: Dan Nainan

Age: 31
Occupation: Comedian
Income: Between $150,000 and $390,000 per year
Price range for home: Up to $1,700,000
Planning to finance or buy in cash: Finance
Down payment: 20%
Marital status: Single
Children: No, but hoping to have them
Pets: Not yet, but would like to have a place that accepts dogs and cats
Area of Manhattan you’d like to stay in: Chelsea, Flatiron
Approximate size of space you’re looking for: 1,000 to 1,500 square feet
Must-have new home feature: Washer and dryer in the unit
Favorite way to relax at home: Reading, playing musical instruments (all electric and silent with headphones)
How long do you plan on living here: Indefinitely
Do you plan on ever renting the place out: Possibly

Lalchandani’s verdict for Nainan: Condominium

The reason: Nainan’s job as a comedian would worry most co-op boards, says Lalchandani. “That’s not necessarily a steady income. He might want to entertain at home, and he’s only planning on putting down a 20 percent deposit,” he says. As well, a washer and dryer, which Nainan said was a must-have, is not common in co-ops. Since condos in New York City tend to be newer, most have washer/dryer units in the apartments. It also wouldn’t be a problem if Nainan wanted to get a pet or rent out his condo, something that could be a problem in a co-op as many have pet restrictions and ban or limit rentals. “In terms of budget, Dan can afford a nice two bedroom/two bathroom in a luxury building in Chelsea,” Lalchandani said. “It would probably be around 1,200 square feet with a washer and dryer and would probably be a midsized boutique condominium with a fulltime doorman, probably even with a fitness center/rooftop.”

 

Brent Underwood

Brent Underwood


Buyer 2:
Brent Underwood

Age: 26
Occupation: Real estate investment banker
Income: $150,000 per year
Price range for home: $500,000 to $650,000
Planning to finance or buy in cash: Finance
Down payment: 30%
Marital Status: Single
Children: None
Pets: None
Area of Manhattan you’d like to stay in: Upper West Side
Approximate size of space you’re looking for: 700 to 900 square feet
Must-have new home feature: Roof access
Favorite way to relax at home: Hosting friends
How long do you plan on living here: 3 to 5 years minimum
Do you plan on ever renting the place out: I travel quite a bit, so I would most likely rent it out for the longer trips

Lalchandani’s verdict for Underwood: Co-op … with a caveat

The reason:  With his stable income and plenty of cash for a down payment, Underwood is the perfect candidate for a co-op, says Lalchandani, except for one thing: his plans to rent it out. “Renting out the apartment while he’s traveling is not going to be possible with a co-op,” says Lalchandani. “But if he’s willing to forgo that, he would be the ideal candidate for a co-op, which is what the Upper West Side is made up of, and in his budget.” In his price range, Lalchandani predicts that Underwood should be able to find a luxury prewar one bedroom co-op larger than 500 square feet. “The apartment may or may not be renovated, and he’ll probably also be able to find quite a few near the park, but not with park views.”

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