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Making Sense Out of Dollars

Condos & Co-Ops Pt. 4 of 6

Joel Lerner
Posted 10/21/22

What other DIfferences should the investor know of?

There are other differences between a condo and a co-op. When decisions affecting the management of the development must be made, condo owners …

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Making Sense Out of Dollars

Condos & Co-Ops Pt. 4 of 6

Posted

What other DIfferences should the investor know of?

There are other differences between a condo and a co-op. When decisions affecting the management of the development must be made, condo owners have voting power weighted according to the size of the units they own. A co--op owner has a single vote per share, and the number of shares he or she has is usually determined by the size and value of the apartment owned. 

A condo owner may sell the unit to anyone (although the management usually has the first right of refusal). By contrast, the corporation that manages the co-op has complete control over the buying and selling of apartments. You may be required to sell your apartment only to the corporation; you will certainly have to obtain permission before you can sell it to anyone else.

Co-op boards have the right to reject applicants without giving them a reason for non-acceptance. The only method of protest is to prove that the decision was based on race, creed, color, sexual orientation, marital status, or disability. Also, some co-ops will charge their shareholders a fee (known as a flip charge, usually 2 to 4 percent of the selling price) when they sell their apartments. 

Finally, the co-op board will probably also have to approve any major alter-ations a shareholder wishes to make in an apartment. However, as with a condo, any appreciation in the value of a co-op apartment-during the period of ownership will be of benefit when the time comes to sell.

As you can see, a condominium or a co-op can be a worthwhile investment. Both provide tax advantages that renting cannot offer, and with both arrangements you own a property either the actual dwelling unit or a share in the co-op that has a good chance of growing in value while you use it. Therefore, if you're currently renting the home in which you live and buying a house is either impractical or just not your cup of tea, look to the local condo and coop markets. Both are options well worth considering.

THOUGHT FOR THE WEEK

 Rents are so high now, leases are breaking tenants' time.

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