A phenomenon that?s limited almost entirely to Manhattan, Co-ops have been the traditional form of owning an upscale apartment for close to a hundred years. In fact, in New York City, 85% of all apartments available for purchase ? and almost 100% of the grand pre-war apartments on Fifth, Park and Central Park West are in co-operative buildings.
Co-ops are owned by an apartment corporation, you don?t actually own a co-op. When you purchase within a co-operative building, you?re purchasing shares within the corporation, which entitle you, as a shareholder, to a ?proprietary lease.? The larger your Co-Op apartment, the more Co-Op shares you own.
Co-op shareholders contribute a monthly maintenance fee to cover the Co-Op building's expenses. The fee covers such items as heat, hot water, insurance, staff salaries, real estate taxes, and the mortgage indebtedness of the building. Portions of the monthly maintenance fees are tax deductible due to the building?s underlying mortgage interest. Also, shareholders can deduct their portion of the building?s real estate taxes.
A Co-op Board of Directors has the ability to determine how much of the purchase price may be financed. The minimum cash requirements vary depending on the building.
Subleasing a co-op can be difficult. Each co-op has its own rules and they should be carefully reviewed prior to application and purchase.
All prospective buyers must interview with the Co-Op Board of Directors. Prior to the interview, prospective purchasers prepare a detailed ?Board Package.? This usually contains personal and professional letters of recommendation as well as a great deal of personal information concerning income and assets.
As more and more new buildings are constructed, condominiums (condos for short), are quickly gaining in number and popularity. It?s not surprising. As opposed to a co-op, a condominium apartment is ?real? property. A condo buyer receives a deed just as though he or she were buying a house. Each individual apartment in a condominium receives its own tax bill. There is still a monthly common charge similar to the maintenance charges in a co-operative. These charges don?t include your real estate taxes and are not tax-deductible. They also tend to be lower than in co-ops because there is no underlying mortgage for a condominium building. The straightforward nature of buying a condo, coupled with the fact that in some cases, you can finance up to 90% of the purchase price and sublease at will, makes condominiums the best choice for flexibility.