A condo is a building in which individual apartment units are separately owned, while common areas are jointly owned. At closing, you’ll receive a deed. Condos make up about 25% of Manhattan housing inventory, and they typically have flexible rules allowing owners to control who rents their apartment and when.
A co-op building is owned by a corporation. Co-op owners don’t technically own property but rather shares in the corporation/building; the larger the apartment, the more shares they own. At closing for a co-op, the buyer will receive a proprietary lease as opposed to a deed. Co-ops make up about 75% of Manhattan housing inventory, and they require board approval for rental applicants. This means that co-operative rental applications are lengthier than condo or rental buildings since applicants must wait for the board to meet in order to review their applications. Owners of co-operative units must typically live in the unit for at least two years before being permitted to rent it out with board approval.
The Buying Process
The road to co-op ownership can be long one, due to the application and approval process. Purchasing a co-op requires a buyer to submit a lengthy board package of detailed personal and financial information, followed by an interview with the co-op board, during which members of the board will ask questions related to the application. Condos generally require that buyers reveal less information, so if that’s important to you, it’s worth considering.
In terms of price per square foot, co-ops are generally less. To give you an idea of the variance, in February 2019, Manhattan co-ops saw an average price per square foot of $1,096, while Manhattan condos averaged $1,876. While condos are typically higher in price, buyers can often put down just 10% for the down payment, as opposed to the minimum 20% that co-op buyers face.
Use of the Property
Purchasing a home as an investment property often means the buyer plans to rent out the home and generate rental income. If that’s something you’re considering, a condo may be a better fit. The rules about how long you can rent out your home, and how soon you can rent it out after purchasing it, are generally more lax for condos. Most co-ops, however, require owners to live in the home for several years before they can rent it out, and then the co-op board would need to approve it.
Are you going into the purchase knowing you will eventually want to renovate? Or are you someone who likes to make frequent changes to your space? The extensiveness of your renovation project(s) may influence whether you choose a condo or a co-op. Your plans will need to be reviewed and approved by a condo or a co-op board, but condo boards have the reputation of being more lenient when it comes to signing off on home updates.
There are obviously many more factors to consider to find the home that meets your needs, and it’s important to remember that your real estate agent is your most valuable resource. The buying process can feel overwhelming, but it doesn’t have to be. For more helpful tips, check out our Guide to Buying.