A co-op is a non-profit company that owns and operates a residential complex. Buyers lease one of the building’s units by buying shares of stock in the building’s corporation along with a proprietary lease that claims their rights to exclusively inhabit. The land is often leased on a 99-year land lease and renewed every century.
Purchasing in a Co-op
Most purchases are cash transactions, but you can finance a co-op with a share loan rather than a traditional mortgage. Buyers have to go through an approval process, don’t own their apartment, and don’t have ultimate control over renting, subletting, or selling. If renting is permitted, you may have to present your potential tenants to the board for approval.
Fees & Financial Benefits
Lease and tax bills aren’t sent to the co-op shareholders but instead to the corporation. A monthly fee includes mortgage payments, taxes, maintenance, and utilities. This cost is usually higher than condo fees. Co-ops often require a larger down payment than other options—but usually cost less overall. There are financial advantages of co-op living—including substantial breaks on real estate taxes, transfer taxes, and a recording tax that occurs in real estate transactions. In some cases, owners can deduct the maintenance fees from their taxes.