When my most recent excursion into real
estate as an investment I came across what I thought were some fairly
inexpensive condos that I could rehab and rent or sell. But a before
we had a look at some of them, a realtor friend said to me, “You
know, those are co-ops, not condominiums.” That started me down
the path of learning the differences.
When you drive by, unless it is stated
in the signage, you can't really tell one from the other. However
purchasing each is where you find that they are two different
animals. With a condo, you are actually purchasing real property.
You have a recorded deed that specifies exactly what you own... and
that you actually own the property. With a co-op, you put your money
down and get a stock certificate and the right to lease a particular
unit. This, in itself should be an immediate cost savings as real
estate closings carry a substantial price tag.
That is first major difference and all
the others flow out of that. For example, as real property that can
be foreclosed, banksters believe their money is safer and are more
willing to lend on better terms, With the co-op the collateral is
not as readily available to the lender should things begin to go
badly... and you will probably have to present a much larger down
payment. In either case, a property constructed on leased land may
be more of a hindrance to desirable financing.
Since co-op shares represent ownership
in the entire building, controlling boards, which can be elected or a
board of the whole, take a more active and energetic role in the
approval of new residents. Of course they do the normal credit check
and background report that you would find in either building, but
there is an interview process where fairness and legality are not so
highly regarded as compatibility with the existing social culture.
This can be good if you are a good match, but woe to the poor soul
who wears a MAGA hat in the presence of Clinton supporters... or
possibly the reverse. While all share holders are equal, often the
owners of the larger units are more equal in that they have more
voting power.
This leads to a closer, more uniform
community if you are a good fit. The fit is less of an issue with
condos as if you meet the published criteria you are generally
accepted to purchase a unit. From that point on, it is up to the
buyer to live peacefully with their neighbors... and they can't throw
you out simply because they don't like you.
If you are looking at the property as a
part year resident, either is particularly well suited despite the
ongoing monthly fee as there are always people around more or less
watching your property while you are gone.
If you are looking at the purchase as a
rental property you are more likely to be able to do so with a
condominium. However read the bylaws carefully, don't just take the
smiling salesman's word. Some associations do not permit rentals.
Some permit them after you have owned the unit for a year or more.
Others have no restrictions. While not quite as possessive as
co-ops, there are often attempts to retain a desired culture.
Either type of building has some sort
of governing board and either type can be led by an a chairman,
president, Fuhrer or whatever title they have chosen. Some look out
for the good of the residents and others look at the position as
being in charge of their own private domain. This is just one more
thing to check out as you talk to your prospective neighbors.
There are conflicting reports about
which one has higher monthly fees. However there are general guide
lines for a well run association. No matter which one you decide on
you should be given an information packet including the bylaws and
detailing the financial status, including reserves for such things as
roof replacement, elevator maintenance, etc. Keep in mind that you
are looking into them as much as they are looking into you.
Like the man says: you pay your money
and make your choice. Either one can be good. While finishing work
on a condo we had one of those things that comes around Florida
occasionally called a hurricane. I went over to check out the
situation the next day and found the residents pitching in, working
together, gathering the downed branches and other debris, getting the
place back to normal. Either choice will most likely give you more a
sense of community than a single family house. But then, that is one
of the choices you get to make.
