Which is the “better” buy in Manhattan?
New York City was the first city in the United States to establish the idea of co-ops. Two architects built the Randolph on West 18th Street in 1876 which was the start of similar projects, known as “home clubs.”
These home clubs were owned by stockholders and the purpose was to provide wealthy people home ownerships without all the responsibilities. The term “cooperatives” or co-op was coined at the turn of the century.
The premise of buying a Manhattan co-op remains pretty much the same now. According to a 2010 report from the National Association of Housing Cooperatives (NAHC), “In the United States, more than 1.2 million families of all income levels live in homes owned and operated through cooperative associations,” and 30 percent of all housing in New York City is co-op residential buildings. Most of the pre-war buildings that are predominant in Manhattan are co-ops.
Basically, the differences between the two is that with a Manhattan co-op, you’re buying a share into a cooperation and with a Manhattan condo, you’re buying real estate with all the traditional rules that apply when buying property.
Which is better? There are advantages and disadvantages to both. With Manhattan co-ops, you’ve got to get board approval and your monthly payment includes maintenance fees which are typically tax-deductible.
There’s a co-op attorney to handle legal issues and some co-ops have financial restrictions such as down payment minimums and income requirements. Down payments are set by the board of directors and are usually around 20-25%.
Sublet apartments in New York City are an attractive option for buyers and some co-ops either don’t allow subletting or the process for board approval can take a year or more, plus there can be strict leasing terms. In addition, if you want to sell your co-op, there could be fees associated with it that are due to the co-op board before closing and the new buyer must go through the same approval process.
Manhattan co-ops are a popular and attractive option for some buyers, but because the process can be lengthy, buyers must be somewhat flexible. The landlord-tenant law applies to co-op owners, but not to condo owners.
What is the landlord-tenant law? According to Coops and Condos, “[it] exists to protect the tenant from landlord abuses.” In other words, you’ve got a group of shareholders that share a common interest to resolve problems because it affects the whole.
Still, some still prefer to buy a Manhattan condo, where you own the property outright.
About 20% of residential buildings in Manhattan are condos. There’s common charges associated with them for upkeep and preservation of the building and common areas. These charges are based on the square footage of a unit and all real estate taxes are tax-deductible.
Normally, you can finance 90% of the purchase price with good credit and sufficient income. New York condos are usually more expensive than co-ops because there’s fewer of them and the the buying/selling/rental requirements aren’t as time-consuming as co-op procedures.
New York realtors are accustomed to handling both types of property, but understanding all the rules, requirements and restrictions are crucial to determining what works for your own unique set of circumstances.
Working with a team of trusted and reputable professionals that study the trends and changes to New York real estate laws on a constant basis and informing their clients of those facts are key to a successful transaction.
What do you think of co-ops versus condo purchases? Do you believe one is better than the other? Share your comments with me!