Should I purchase a Co-op or Condo?

Real Estate Broker/Owner with Turn Key Real Estate 31RA0874656

As prices continue to escalate in the hottest market on record, interest rates have increased. A little explanation is necessary at this point to make everyone know the gravity of our financial situation. The most recent increase last week was 1/2 percentage point (1/4 point on 3.16.22) by Jerome Powell, our Fed chair. A while back he said that inflation would be transitory as we know how that prediction went. He should have started the increases in 2021 with1/8 of a point, anticipating the future with the supply chain the way it was morphing into an extremely challenging time.

I am quite surprised that the inflation factor was not taken seriously enough. As I mentioned in last week’s column, it is definitely not running at 8 percent when you add into the CPI, food and energy, but closer to 18 percent. Just look at your food, heating and gasoline bills, which are up substantially.

I remember getting gas out on the North Folk for $1.97 a gallon in 2019 prior to the pandemic. Now it’s $4.24-$4.49. Maybe they should open up the Alaska pipeline right now to ease the price for those who can least afford it. What is occurring right now may just really slow down our economy, adding to our already bloated national debt of $22.3 trillion. But actually if you add up all the IOUs, our debt is probably much higher.

Now we get onto whether purchasing a co-op or a condo is a better path to pursue. If you have been priced out of the home market, then either one will work. However, you need to sit down and think which approach will be the better investment over the long run. The only answer from my perspective is a condo, which is usually a luxury entity with a 24/7 doorman, indoor parking, sometimes an exercise room and always an elevator.

If you have the budget to purchase and possibly plan to keep it as an investment for the future, then you’ll have it when you’re ready to buy a single or multi-family home. However, the differential between an often less expensive one-bedroom and one-bath co-op and a one-bedroom, 1.5-bath condo (standard for condos) ranges from $100,000-$300,000, depending on which building you are considering comparing it to.

A one-bedroom condo usually has 1.5 baths, while the co-op has only one bath. Condos are considered real property and pay monthly common charges plus real estate taxes separately. One pays monthly maintenance fees when owning a co-op, which includes real estate taxes, daily maintenance in and around the building, salaries of the super and porters, payment of principle and interest on the underlying mortgage on the building and land.

A co-op also has stock ownership attached to it. There could be a flip tax and other expenses associated with a coop. However, as long as the financials of the cooperative building are solid, you should have no problem eventually selling. It is imperative for you and your attorney to check the current and last year’s financials, which will reveal the stability of the building, e.g., how much cash is in the working capital account, which is used to pay daily bills as well as the reserve fund, too.

You can also determine if there are any capital improvements that are noted currently or in the immediate future in the minutes that are taken when there is a board or building meeting. You or your attorney has the right to review them in the management’s office. This can determine an assessment or an increase in monthly maintenance and whether or not it is a short-term obligation or much longer.

Checking the offering plan with all the up-to-date amendments will also be very helpful. For the most part your co-op is somewhat restricted for renting out after you move on to a home. A condo has very little restrictions, but there may be some rules that you would have to abide by.

As you can see there are differences between co-ops and condos. However, your financial situation will determine which one is not only affordable, but which one will provide you the best return in the long run.

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Comments (4)

Sham Reddy CRS
Howard Hanna RE Services, Dayton, OH - Dayton, OH

Thanks for sharing great information on co-ops!!!

It is imperative for you and your attorney to check the current and last year’s financials, which will reveal the stability of the building, e.g., how much cash is in the working capital account, which is used to pay daily bills as well as the reserve fund, too.

May 15, 2022 09:18 AM
Philip A. Raices

Hey Sham, good Early A.M. to U, and thank you for your comment and of course absolutely yes your point that you have made is very pertinent  but that is what the purchaser's attorney is required to do when reviewing the cooperative's finances (also condos and HOA associations too!).  No one wants to purchase a "money pit" of financial instability.  In my town of Great Neck where I live and work, we have 114 buildings of mainly 97% co-ops, 1% condos and a handful of straight rental  buildings for those who either choose to rent (what a waste of money decreasing one's wealth and handing it over to one's landlord monthly, unless you are earning crazy returns otherwise? but I doubt it for the majority).  

May 15, 2022 10:12 PM
Eric Bouler
Gardner Realtors, Licensed in La. - New Orleans, LA
Listening to your Needs

I would rater buy condos so you can rent them. See one of my best ones here.

May 15, 2022 09:27 AM
Philip A. Raices

Hey Eric, Good early morn 2 U,

Absolutely yes very wise investment that you have made.  What did you pay for your 3:3 and also what are your common charges and R. E. taxes too?  I as well as our 12 agents always try to advise our clients to consider purchasing a condo, townhome or HOA as a long term investment and passive income vehicle, but not everyone can afford the prices.  Anything good deals by you in Alabama that I might be interested in viewing?

May 15, 2022 10:16 PM
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Hello Philip A. Raices very good helpful report about should I purchase a co-op or condo.

May 15, 2022 11:57 AM
Philip A. Raices

Hey John, Good "early morning? 2 U!

Thanks for your compliment as I always try to provide the most accurate info for everyone as well as the consumer, homeowner, investor, purchaser, renter and lessee of residential and commercial properties!  It is our duty to do so, unbeknownst to a multitude of agents in our industry, but I won't go there at this point in time!

May 15, 2022 10:19 PM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em:

Thank you for sharing the information.


Buyers and sellers in your area will benefit from your expertise. Wishing you continued success.  Have a wonderful day and sell a house.  bill


May 15, 2022 01:58 PM
Philip A. Raices

Hey Bill,  

Thanks for your thoughts and compliment.  Yes, our focus and role as Realtors needs 2 be more of educators and consultants as opposed to the typical sales people that a majority in our industry practice.  It's really about my almost copyright pending phrase: S.A.C.E.D.S. e.g. Show, Advise and Consult your clients through your concerted Efforts, Disciplined actions and the Sacrifice of your valuable time!  That's what it's all about, right?

May 15, 2022 10:23 PM