The Ultimate Insider’s Guide to Buying a Coop in NYC
Co-ops come with a lot of restrictions, but purchasing a coop in nyc has some distinct advantages
Co-ops are cheaper than their condo counterparts. You can also save money in taxes by purchasing a cooperative.
Co-ops have strict financial requirements that not all buyers will be able to meet. They also have a lengthy board approval process.
Certain areas of Manhattan are primarily coops.
Thinking about purchasing a coop in nyc? This article will help you understand exactly what goes into a cooperative purchase and what cooperative requirements are so you can figure out if purchasing a coop in nyc is the right move for you.
A COOPERATIVE IS A TYPE OF OWNERSHIP STRUCTURE
‘Cooperative’ refers to a type of ownership structure where owners purchase shares in the corporation that owns a building. The size of your apartment correlates to the number of shares you own. You don't own your specific unit; rather, you have a lease to live there as a shareholder.
A beautiful cooperative apartment. Individuals who prefer a classic aesthetic often consider buying a coop in nyc.
CO-OPS ARE CHEAPER
Co ops are 20 - 25% cheaper than their condominium counterparts. Your money goes a lot farther if you’re looking at buying a coop in nyc, where you often need your money to go as far as possible.
Buying in a coop is a good idea if you are looking for that classic NYC vibe. Cooperatives can also foster a sense of community.
CO-OPS CAN SAVE YOU MONEY ON TAXES
New York City and New York State each have their own mortgage recording fees. Each of them are ~1% of the purchase price of your unit. When you are purchasing a coop in nyc, you own shares instead of real property, so the mortgage recording taxes do not apply. On a $1,000,000 purchase, that’ll be a savings of about $20,000.
COOPS HAVE STRICT INCOME REQUIREMENTS
If you’re buying a coop in NYC, you’ll have to have a debt to income ratio of 30% or less. This means that after you get a mortgage and start payments, you’re spending less than 30% of your monthly income to service your debt. Note that this includes any debt you may have, not just your mortgage.
Co-ops also require you to have lots of liquid (or easily liquidate-able assets) in your possession for at least 3 months before the deal is closed. They want to see enough money to cover the down payment plus two years of mortgage and maintenance fees. For example, if you’re buying a $1,000,000 coop unit with a $2,000 maintenance fee at a 6% interest rate, you’ll need over $360,000.
Certain areas of NYC like the West Village are almost entirely cooperatives.
COOPS HAVE STRICT RULES
Be aware that each building will have its own restrictions and house rules when you’re considering buying coop in nyc. They can restrict or allow parents buying for children, gifting, co-purchasing, pied-a-terres, subletting, etc. Once you’ve purchased your unit, you’ll often be fined if you break one of the regulations.
EXpect an onerous application process when Buying a coop in NYC
Co-ops also have a board approval process replete with an interview and a thorough analysis of all of your financial statements. Passing the board interview can be tough. Definitely talk to your realtor so you know about the common pitfalls to avoid during an interview.
While Carrie lived in the Upper East Side in the show Sex and the City, the actual building is in the West Village, where cooperatives and townhomes reign supreme.
CERTAIN AREAS OF MANHATTAN ARE PRIMARILY COOPS
If you want to live in a certain type of building in a certain area of Manhattan, you’re almost certainly going to need to buy into a co-op. For example, all of the cute, historic, idyllic, cinematic brownstones that line the streets of Greenwich Village and the West Village are co-ops.
PROS AND CONS OF CO OPS
Going through an onerous application process may seem like a con, but it actually has some distinct advantages. Everyone in the building is extremely financially solvent which means no one will ever be forced into a fire sale. Coop boards can also reject sales if they deem the sale price of the unit too low. Forced sales and low prices bring down the property values of the rest of the units in a building, so avoiding them is a big plus. If you’re buying a coop in nyc, you can rest easy knowing that your investment will be protected. During the great recession of 2008, property values in NYC stayed stable in large part due to cooperatives.
Additionally, the restrictions on subletting mean the community stays intact. Cooperative buildings are primarily occupied by owners rather than renters or Air BnBers, so common areas are respected, and there is an incentive for owners to pool resources to fix and maintain these shared spaces. Yes, co-op boards wield a lot of power, but it is comforting for many people to know that if a dispute did arise, there is a dedicated board of individuals committed to remediating the problem, potentially punishing the offender with fines or even kicking them out of the building.
Most of the lofts in Soho are in cooperatives.
Don’t Get Blindsided by 3 common coop restrictions
So, is it worth buying a co op in NYC? It depends on your financial situation and your lifestyle preferences. Now that you have an understanding of what it means to be buying a coop in nyc, your smartest next step is to download my free buyers guide. This guide will help you avoid obnoxious restrictions and to find the right realtor that will put you in your dream home.
