Figured I'd ask this question here since a lot of us are in NYC, but has anyone bought a co-op apartment in NYC (specifically Manhattan)? Personally I can't imagine picking one over a condo unless it was a price issue, so coops are cheaper per sq ft. than condos and there are few condos under $1M in Manhattan, or if it was one of the epic apartments facing the park, but that's mostly because there are no condos on the park. If you've bought one, has anyone actually had a positive experience with the purchasing process and then the coop board into your ownership? Every story I've heard about the purchase has been super difficult, and then once you own your unit making any changes has been near impossible and dealing with the board a nightmare.
Curious to hear what other's experiences have been. Why are the stories about coops so bad? Why do people keep moving into them then?
I own a condo and not a co-op but in the buying process I looked at both. Here are a few things to keep in mind:
1) co-ops tend to be cheaper - there are a few reasons but the main two I’ve seen are: condos tend to be newer (on average) with more amenities and as you point out, you have more restrictions with a co-op. Also know that the supply of co-ops is higher.
2) share of building rather than a unit - at a co-op you own a share of the building, not your actual unit, which is part of the reason for the restrictions.
3) land lease - while not many co-ops are still on a land lease some are, so you need to be cautious when buying a co-op if the land lease is coming up soon you’ll be hit with a huge assessment and need to pay up.
4) board and restrictions - these vary wildly by building. Co-ops have a reputation for having lots of restrictions and difficult approval processes and that can be true, but it just depends on the building. The one thing I’ve found to be pretty universal is that they tend to require larger down payments (or at least cash reserves) and have stricter policies on leasing out your unit.
The co-op process is just more complicated. You need to do a lot of research to make sure you aren’t walking into a terrible deal or are going to have restrictions that you’ll hate. You have more freedom with a condo, but again it is pretty building dependent.
So a long way of saying co-ops are cheaper on average and there are more of them so that’s why people will buy them (and more of them means some tend to be in the exact spot someone wants to buy).
EDIT: forgot to add:
1) condo closing costs are higher if you are financing - there is a tax on the size of mortgage you take out if you buy a condo but not for co-ops
2) financing on a co-op can be tougher - not just down payment but banks might require more.
This is helpful information. I guess my question is more why people would pick a coop. Location and lower price are good, but why not pay a little more and be a block or two away and not have to deal with the headaches of a coop. Plus with down payment requirements being higher on a coop I imagine that arb goes away since in some cases you're required to put more money down than for a more expensive condo.
Curious as to why their is no tax on the mortgage for the coop? Is it because you're not buying real estate that is subject to a tax but instead are buying equity in the coop and for some reason that's not treated like real estate?
Sorry I should have been more clear the price diff isn’t small. Depending what metrics you are looking at the price diff is 30-50%. Part of that is that condos tend to be nicer as they are newer and the recent construction in Manhattan has been geared toward high end buyers, but that’s not the full story.
A few reports that try to normalize the pricing say the diff is more like 10-15% but that also makes a bunch of assumptions on the value of amenities, etc.
The supply is also an issue. I believe manhattan is 75/25 co-ops to condos. So finding a condo on the lower end of the market is very tough. And as above the median price difference is usually large, finding a $1mm condo is tough in manhattan. By the time people can afford these units they usually need more space (family, etc) and spending an extra 200-300k on a $2mm apartment isn’t small.
Our anon HF friend is correct on everything. I live in a Manhattan pre-war co-op so hopefully this helps add to the convo:
The vast majority of co-ops (including almost all of them downtown) were rental buildings. When the city got crushed financially in the late 70s, building values dropped so much that building owners desperate to get away from them securitized the units and sold them off to the tenants. I've read offering plans from the late 70s / early 80s and it's extraordinary--many West Village units were purchased for $10,000 (a gamble when the world looked bleak though)
Many people prefer co-ops because they discourage renting. It's nice to be surrounded by shareholders who care about the common spaces, noise levels, etc. Renters don't always have the same buy-in (though some do and that's cool). Many co-ops have strict limits on the % of units that can be rented at any one time (usually around 15%)
Steer clear of land lease buildings, but they're easy to spot: if you see a below-market price that makes you stop and think it could be a great deal, look at the monthlies. Land lease monthlies ("maintenance," which is prop taxes + building fees) will be way out of whack with market (like $3000-4000 / month on a $700k 1BR).
Many co-ops aren't keen non-30 year fixed financing. If you're dead set on doing a 7-1 ARM or IO you should ask early because they like to reject those.
Personal preference, but avoid post-war co-ops like the plague. They're ugly and rarely become more valuable, but there are a lot of them in areas where younger people live (Kips Bay, Murray Hill, Upper East). They're less expensive and thus enticing for first-time buyers, but once you've seen a bunch of pre-war or condos, you will see why post-wars are gross.
Wow, good outcome for them.
Why are the prewar ones better than the postwar? I would assume the postwar ones have been updated more recently and were built more for the modern era. To be fair, the older ones look prettier from the outside and the new ones mostly seem to be that classic 70's white brick building.
I also did a Streeteasy search for coops built in Manhattan currently for sale build after 2000, and only 50 exist, vs. 3500 in total. Why have they stopped building them? It seems like the market wants condos and will continue to want them, hence the price discount per square foot.
do you have access of the offering plans that you can post? seems interesting to take a look at.
Regarding land leases - what would you look out when searching for a Coop that would make you comfortable/uncomfortable i.e. maturity of the lease, reassessment dates, other? Can these land leases be viewed similarly when investing in a leasehold interest of say, an apartment/office building?
I purchased a coop last year, I am also the Coops treasurer. If you have any specific questions feel free to ask.
Very generally, yes when you first buy they put you through the ringer, you have to collect a ton of info and they will know more about you then pretty much everyone but your spouse. They don't want units going into foreclosure therefore having a gap in maintenance payments that everyone else in the building is then on the hook for. After the initial application, board interview and approval your day to day in large buildings will generally feel the same between coop's and condo's. The building may be responsible for some more repairs than if you were in a condo (coop owners are generally only responsible for everything "inside" the drywall). Coops are also good if you don't want to be living next to a bunch of subleasers or airbnb's.
At the end of the day for most non family money people coops are just a necessity. In the $1M-$3M range there are a ton more coops than condos and coops are about 25% less expense on a PSF basis than condos (this is because of the foreign buyer and absent owner market). Ultimately it is what it is and well run coops (outside of a few technicalities) will feel like their condo counterpart. A poorly run coop has maybe a few more risks than a poorly run condo.
How can you tell what an easy going coop will be like? I feel like it's hit or miss on that front. Also how did you become the Coops treasurer so quickly into living there? I would imagine some old timer would have that role, and there's probably others who work in finance / real estate in the building that could have that role.
Based on your replies throughout the thread it seems that you think a coops first job is to make sure nothing gets done and that everyone is unhappy.
Coop's dont "reject buyers for no reason" you want to make sure buyers are financially suitable for the building because a gap in maintenance or added legal fees to the building hurts everyone. Buildings aren't in the business of rejecting people for no reason as that would hurt the value of the building. The board is just there to protect everyone's investment and make the right decisions to protect value.
Yes you have to get approval for the work you do but thats not to stop minor work its to have a say in unit layouts to make sure someone isnt building wet (bathrooms) or dry (bedrooms/living rooms) to minimize potential damage or moving living rooms over bedrooms which would be disturbing for the person downstairs.
The coop is protection of rogue owners, people unilaterally putting a washing machine above your bed, making sure that when you buy in a building that you're upstairs neighbor isnt airbnb'ing his place out. No one wants a bad board in the building because a bad board hurts value. The "examples" you keep suggesting sound like their are coming from old coworkers who have a 1/4 acre in the burbs.
As for how I got on the board, they needed a treasurer shortly after I arrived and were looking for competent people, since I have a finance/real estate background and am not an idiot it worked out. A board position is extra work, other owners know this and thats why some "old timer" didn't want the position, this isn't highschool student government. Its not a title for titles sake. you're there to protect everyone's equity (manage the asset).
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