Purchasing A Co-op Vs. A Condo

PURCHASING A CO-O P VS. A CONDO

(Also See The Purchase example of a condo vs. co-op below)

I get this question all the time from buyers that are confused about how condo and co-ops work. Many feel that because condo fees are so low that they are in essence saving money. Others feel that when they see higher co-op maintenance fees that they are too high. Since this has become a question that is very popular for me to answer, I thought I would give you some insight.
As you read this blog, know that both the condo common charges and the co-op maintenance fees is a separate monthly bill from your mortgage payment.
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CONDO COMMON CHARGES:
When you buy a condo the common charges are low. For example a two bedroom condo common charges may cost $250.00 a month. This sounds really low doesn't it?

The fact is, condo common fees are low for one reason and its because they don't include property taxes or utilities. Also, your condo fees aren't tax deductible.

What does your Condo common charges include:
Common charges are fees that cover the common areas of the condo building or complex. What is a common area? The common areas are areas that everyone shares such as: the lobbys, hallways, elevators, tennis court, gym, the exterior grounds and the community center, etc. Also the fee includes the hiring of the staff that manages and maintains the property.

Common charges are not tax deductible and usually does not include any of your utilities or property taxes.

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CO-OP MAINTENANCE FEES:

When you purchase a co-op you will have to pay a maintenance fee. For example, the monthly maintenance fee for a co-op may cost $750 or more per month. Why is this number so much higher than the condo common charge fee?

Co-op maintenance fees have more of  your monthly costs rolled into it, such as:
-Utilities:
Usually the gas, heat and water and very rarely the electricity is included. That means, you have unlimited use of most of your utilities unlike a condo.

-Property Taxes -
Included in your maintenance fee already is your property taxes. The corporation that owns the building pays taxes and as a shareholder your portion is rolled into your maintenance.

- Tax Write Off - Since your maintenance fee includes your property taxes, your maintenance fee is tax deductible (sometimes as high as 55% tax deductible depending on the cooperative you choose to live in). Wow, now that's a big write off!

- Star Program - This is a program offered to co-op shareholders so you can get a discount on your monthly maintenance fee. You will receive an application after you close on the co-op and registered as the new owner.

In closing, both condo common charges and co-op maintenance fees somewhat are pretty even in cost. The monthly cost of a condo can cost you more since you have separate property taxes and you have to pay your own utilities and taxes which can be costly if you're not careful.

I hope this blog article has helped you better understand the difference between condo common charges and co-op maintenance fees.

If you have any questions feel free to contact me for a free consultation. Also, if you are a serious buyer looking to purchase a co-op or condo in Brooklyn before the year ends give me a call.

 

LET'S DO AN EXAMPLE OF A 2 BEDROOM CO-OP VS. A 2 BEDROOM CONDO IN TODAY'S MARKET

The amounts of both can vary depending on how much money you plan to use as a down payment, if you plan to
pay your own closing costs and the type of interest rate you can get.

PAYMENT ANALYSIS
ADDRESS: 2 Bedroom Condo In Canarsie
Purchase Price:		$350,000.00
Closing Costs:  6% of Purchase Price		$21,900.00
Total Purchase Price with Closing		$371,900.00
Down  Payment:		$37,190.00
Loan Amount:(total price-down payment)		$334,710.00
Monthly Mortgage Amount=principal + interest (4.5% @ 30 yrs)		$1,506.20
Additional Expenses:
PMI Monthly rate (when less than 20% down)		$150.00
Home Insurance Monthly		$150.00
Property Taxes Monthly		$150.00
Overall Monthly Total:		$1,956.20

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2 BEDROOM CO-OP
2 Bedroom Co-op
Purchase Price: $165,000 less than a condo in today's market		$185,000.00
Closing Costs:  4% of Purchase Price (assuming your putting closing on top)		$7,400.00
Total Purchase Price with Closing		$192,400.00
Down  Payment (10% required)		$19,240.00
Loan Amount:(total price-down payment)		$173,160.00
Monthly Mortgage Amount=principal + interest (4.5 %@ 30 yrs)		$779.22
Additional Expenses:
Maintenance-incl. gas, heat, water, taxes		$790.00
Electric		$35.00
Home Insurance		$40.00
PMI - fee charged when put down less than 20%		$150.00
Overall Monthly Total:		$1,794.22

Here's a clear summary of the two examples above and why a co-op is a great deal. 

- The price of the co-op for the same space is $165,000 less than the condo.

- Between the examples of buying a two bedroom co-op or a condo, the co-op came out cheaper and you save $161.98 a month

- The co-op monthly mortgage is approximately 50% less than the condo mortgage.

- The co-op gives you unlimited use of the utilities and includes taxes (except for electric)

- The co-op closing costs are approximately 4% and the condo is 6% of the purchase price.

 

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