There’s a co-op in our area that we’re mildly interested in joining, mostly because of lower rent and more space. It’s privately owned and non-profit, and there are maybe twenty houses and small aparmtne buildings involved. We don’t have any experience with the ups and downs of co-op living, but both feel suspicious of anything run by a committee.
Any input appreciated! Good stuff, horror stories, whatever. HAve you done it? What was it like?
No, but I’m not really clear on the concept. Can you please explain a little more about what cooperative housing is?
I was in a co-op in college. But that was more of bed in a shared room of a huge house, than a whole house or apartment.
One of the main drawbacks to co-ops is that you do not own the property. You own a share in the corporation that owns the property.
(And I just realized you’re in Canada, so it may not be quite the same)
It’s difficult to esplain, because I don’t treally know much about it. I think the idea is that a group of people (membership fluctuating as people move in and out) buy or mortgage a bunch of proerty together, and the quasi-rent is lower because buying is corporately is cheaper. The quasi-rent covers mortgage, property tax, utilities, and repairs. It’s non-profit. Every member (every renter) gets one vote in the corporation.
Because there’s no landlord, maintenance and stuff are done by members on a rotating or assigned basis.
Yeah, we’ve been thinking about the ‘not-owing’ part as a drawback. Chances are, if we apply and get in, we’d only be doing it for a couple of years before buying. We don’t have a down payment saved up yet, and the lower cost of the co-op looks like a decent way to lower our costs so we can get to buying faster.
Here in New York City, co-ops are very common, and we live in one. In a nutshell, we had to apply to a committee that inspected all of our finances from the last several years, called references, and interviewed us before we were allowed to schedule a closing. The plus side of this is that it hopefully keeps out the crazies, but the downside is that it can make selling your apartment more difficult (because you can only sell to somebody who can pass the application process), and it definitely takes longer. In theory, if we wanted to do any serious renovations in our apartment, we’d need to get permission as well. Another plus is that here (I have no idea how it works in Canada), some of your monthly maintenance charges are tax-deductible.
I lived in a coop at the University of Toronto. But it was just a rented bedroom in a large house where you shared the kitchen and public areas. It was just a not for profit way to provide housing for students in an expensive city centre.
But that doesn’t seem to be what you’re asking about at all, so, sorry about that!
I Live in NYC as well. I own a co-op apartment and I also serve on the board.
In effect, you buy a certain number of shares in the corporation that owns the building ( each apartment in the building is permanantly assigned a number of shares based on size, features and location ). The number of shares is not tied to the price, the apartments are bought,sold and priced the same way as conventional real estate and improvements to the unit do not change the share allocation.
When you buy the shares, you receive a proprietary permanent “lease” on your unit…and you pay a monthly maintenence fee that is , technically, rent - and that IS based on the share allocation of your unit.
I have never heard of apartment owners do not do chores around the place because there is no landlord. The co-op ( via the elected board of directors) hires a management company that acts as “landlord”, taking care of tenant problems and handling stuff like accounting and taxes.
The big practical difference between a co-op and a condo is that co-ops maintain more control over what you do with your apartment. All buyers must be approved by the board …in our building the the approval and interview process is not very rigorous…we look mostly at finances, the interview is mostly to assure us that you aren’t going to be cooking meth in the kitchen. However,some Manhattan buildings have extraordinarily “difficult” boards that turn down buyers for all sorts of specious reasons.
The co-op will limit the amount of the apartment purchase that can be financed. In our building, we require that all buyers pay at least 20% down and, like the bank, we need to know the source of the down payment. This has served the co-op market very well as of late as co-op boards do not look kindly on no money down teaser rate adjustable loans. It is common for the expensive Manahattan co-ops to require that the unit be purchased without financing.
If you want to sublease the board must approve, some don’t allow it all and some have strict rules regarding the length of subleases.Some,like ours, just require applications and interviews of the subtenants.
You will also have to get any renovations and improvements approved and the board may put limits on construction work, some boards allow it only during the summer months, for example.
And some of the monthly maintenence charges are tax deductible, in additional to your personal mortgage interest deduction you can deduct the portion of the monthly charges that goes toward the underlying building mortgage.
In NYC, getting financing for co-ops is not more difficult than getting financing for a home purchase or condo…each bank has a list of all co-ops, their financing requirements and an approval or disapproval for financing. This is a good thing, if the bank will not approve financing then chances are there is a problem with the co-ops finances and you will want to steer clear.
Good luck.
I just wanted to clarify this, when I said that the apartments were priced the same way as conventional real estate I meant that prices were set by the market and the shares are not sold at a fixed dollar value.
Typical, a co-op will be priced lower than a comparible condo — in NYC that “discount” is typically around 30%.
Once the underlying mortgage on the building is paid off — or close to paid off—it is possible for the building to convert to condo status, a process that is incredibly complicated and I’m not in the mood to elaborate.
This is something to consider when making your decision though, if the building undergoes a condo conversion you will see a sharp increase in the valueof your apartment