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Old 02-11-2009, 05:18 PM
 
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Quote:
Originally Posted by mathjak107 View Post
the pricing structure is usually very different to as a co-op usually has a mortgage on the building too thats paid thru maintaince...

if you take 2 identical buildings , one is co-op the other condo , and go how much?

the condo may be priced at 300,000 with a minimal amount of common charges...the co-op may be 200,000 in your personal mortgage and 100,000 in the buildings mortgage and that may run 1,000.00 a month in maintainance...

they both work out the same but they are structured differently
I did not find this to be true when I was looking. I found that if I could get a coop for 250K with a $500 common charge (where the $500 includes real estate taxes) that a comparable sized condo would be $350,000 with common charges of $2-300 and taxes at $200. So the coop worked out to be much cheaper for the same amount of space in the same neighborhood.

Granted, perhaps part of this could have to do with the fact that there weren't too many condos available at all in the 2-300K price range, and many condos in NYC are newly built which tends to raise the price. So maybe it is an unfair apples-to-oranges comparison.

However, if condos and coops were equivalent in terms of monthly output of money (for a coop: mortgage plus maintenance and for a condo: mortgage plus maintenance and taxes) then I think a lot of people would opt to buy a condo because of the less strict rules including not having to have a board approve your buyer when you want to sell...which ruins many sales!
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Old 02-12-2009, 01:56 AM
 
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Quote:
Originally Posted by Henna View Post
I did not find this to be true when I was looking. I found that if I could get a coop for 250K with a $500 common charge (where the $500 includes real estate taxes) that a comparable sized condo would be $350,000 with common charges of $2-300 and taxes at $200. So the coop worked out to be much cheaper for the same amount of space in the same neighborhood.

Granted, perhaps part of this could have to do with the fact that there weren't too many condos available at all in the 2-300K price range, and many condos in NYC are newly built which tends to raise the price. So maybe it is an unfair apples-to-oranges comparison.

However, if condos and coops were equivalent in terms of monthly output of money (for a coop: mortgage plus maintenance and for a condo: mortgage plus maintenance and taxes) then I think a lot of people would opt to buy a condo because of the less strict rules including not having to have a board approve your buyer when you want to sell...which ruins many sales!
its tough to find 2 identical buildings but its pretty much true theoretically ... the problem comparing is it takes a ton of numbers crunching.

the first issue is how much of a co-op owners equity is tied up in the buildings mortgage... an apartment will cost more the smaller the buildings share of the apartments equity.. when looking at maintaince does the building have an interest only mortgage making maintaince less? is it a conventional mortgage where your gaining equity?. is it a balloon payment due?

condos and co-ops under nys law are taxed as if they are all rentals unlike homes. because most co-ops were converted and may contain many origional rent controlled and rent stabilized tenents the rent roll may be computed to be less then a condo's rent roll and the taxes can be lower on the co-op.

on the other hand a condo can sell at a premium because it dosnt have the rules and restrictions a co-op does

the bottom line is a co-op owner rarely understands that the total price they are paying for a co-op is not just their personal end. the other part of the price they are paying is usually held by the building and in those monthly maint. fees. when and if the building mortgage is paid off all the equity transfers to the personal side and now your apartment is worth the sum of the two.

our kew gardens apart is 160,000 personal , 50,000 building mortgage on my apartment... maintaince is 600 per month, interest only mortgage. we may never see that other 50,000 in equity from paying off the building mortgage

the central park south apartments are 1.25 million and about 100,00 in building mortgage on the apartment... maintaince is 1500 a month but that is a principal and interest loan and the building has a relatively small mortgage left to pay off as a percentage of value

Last edited by mathjak107; 02-12-2009 at 03:18 AM..
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Old 02-12-2009, 03:30 AM
 
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while the condo structure gives you more freedom its a double edge sword... not having much say in who your next door neighbor rents to or even is , the inability to deal with certain issues of quality of life in a condo thats inflicted by other people etc can make condo life a bear if you have the wrong neighbors... dont forget the ease of renting and subletting in a condo can mean more defaults which you as a owner have to p/u ...... subletting is usually more controlled in a co-op so investors much prefer the condo to the co-op meaning you may have a lot more people who own in the condo but dont live there and have no vested interest in anyones happiness as long as the rents paid and they can walk away anytime
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Old 02-12-2009, 04:20 AM
 
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i wonder how many people who rent out their co-ops realize that when they take depreciation the purchase price is actually what you paid for the apartment, the closing costs and the part of the buildings outstanding mortgage thats allocated to your apartment less the land value...

bet not many realize this,,,, sad part is whether you took it or not the irs will recapture that full value from you when you sell.. dosnt matter you forgot to add the 2 pieces together and never took it. irs rules say all deprceciation gets recaptured whether it was ever taken or not
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Old 02-12-2009, 04:52 AM
 
Location: Beautiful Pelham Parkway,The Bronx
8,830 posts, read 21,387,257 times
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Quote:
Originally Posted by Henna View Post
I did not find this to be true when I was looking. I found that if I could get a coop for 250K with a $500 common charge (where the $500 includes real estate taxes) that a comparable sized condo would be $350,000 with common charges of $2-300 and taxes at $200. So the coop worked out to be much cheaper for the same amount of space in the same neighborhood.

Granted, perhaps part of this could have to do with the fact that there weren't too many condos available at all in the 2-300K price range, and many condos in NYC are newly built which tends to raise the price. So maybe it is an unfair apples-to-oranges comparison.

However, if condos and coops were equivalent in terms of monthly output of money (for a coop: mortgage plus maintenance and for a condo: mortgage plus maintenance and taxes) then I think a lot of people would opt to buy a condo because of the less strict rules including not having to have a board approve your buyer when you want to sell...which ruins many sales!
My experience was the same as Henna's.When I was looking at coops and condos in many different neighborhoods I found the condos to be at least 20 % more expensive on a sq ft basis than coops ,even in similar buildings that were around the corner or across the street from one another.I didn't even think seriously about a coop that had any kind of balloon or unreal interest rate.

I did all of my price comparisons by factoring in the share of the underlying mortgage on the coops.This is easily done by finding the amount of the underlying mortgage(s),dividing the amount by the total number of shares in a given coop building and then multiplying by the number of shares attached to the apartment you are looking at.When you add the final number to the "asking price" you get what I called "the real asking price."

Even after I did this,I don't remember a single case where the sq foot costs of a condo were not substantially more.And if the condo was new construction,way more. Real estate brokers also flat out told me that condos were always more expensive because people wanted the freedoms that came with a condo.. no board approval,no looking into your finances,no downpayment requirements,no pet hassles,no problems with washers and dryers in apartments and ability to rent out without being questioned by anyone,etc.

I think it generally accepted that there is a premium on condos and those are some of the reasons why.It was fine with me because I actually felt more protected by the restrictions on coops and felt like I was getting a much better deal because of the price difference.

It is beginning to look as though there could be a lot of problems developing in condos because of this lack of oversight so maybe people will come to realize that all those rules that they didn't want with coops are there to protect them.

Last edited by bluedog2; 02-12-2009 at 05:08 AM..
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Old 02-12-2009, 05:24 AM
 
Location: Beautiful Pelham Parkway,The Bronx
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I also found that the least expensive apartments by far (sometimes 40 or 50% less than even other comparable coops) were in buildings where there was no financing allowed at all.This is obviously the biggest restriction of all-both getting in and getting out but if you have the cash and a long term horizon it is truly the best "value" in the housing market. The apartments are not only much cheaper per sq ft but there is usually no underlying mortgage so the maintenances are really low too.As you would expect,the buildings also tend to be much better run.

Nice deals,if you can come up with the cash.
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Old 02-12-2009, 05:45 AM
 
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depending on the financing co-ops may be cheaper deals but again it requires lots of numbers crunching and looking at the maintaince to see how much covers financing and the structure of the financing ...

for purposes of this thread and explaining the differences between co-ops and condo's its easier to illustrate making them even and showing how the financing structure is very different between them.

most people dont fully understand the concept of maybe a 1/3 of their appartment equity is held in a building mortgage... they look at the apartment price, they look at the maintaince but never really understand what constitues the differences between buildings in those numbers....

that was more the idea behind showing them as equal...,strictly illustration.....
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Old 02-12-2009, 06:08 AM
 
Location: Beautiful Pelham Parkway,The Bronx
8,830 posts, read 21,387,257 times
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I understand on a certain level but the fact is that they really are not equal.

There is a premium on condos after you do all the number crunching you want.

You are right that a lot of people probably don't really understand that a portion of their equity is in the underlying mortgage of a coop but even more people who have been buying condos in the last 10 years don't understand how the tax abatements work and the ramifications to their tax bills when the abatements begin to phase out or expire.

By the way,I never saw a coop where the share of the underlying mortgage added more than 10 or 15 % to the purchase price.Never saw a 30 or 50 %. I am not saying it doesn't exist but what I looked at was much,much less.The apartment( coop) that I wound up buying had a share of underlying mortgage of less than 10 % of the "official" asking price and the underlying mortgage will self liquidate in 5 more years.No balloon,no adjustable rate or any of that kind of stuff.

Especially in light of what is happening in all financial markets now,I don't think people should be led to believe that the finances of coops and condos are "equal" just to simplify things.They should be encouraged to find the differences and do more number crunching, not to be lazy and assume that it all equals out because it doesn't.
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Old 02-12-2009, 04:21 PM
 
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actually according to quite a few studies done in new york the difference is not as great as you would think or as it should be ... it averaged around a 15% difference on small apartments and shrunk to as little as 5 % on large apartments...

considering that nyc is 85% co-op and the supply of condos is so much smaller i would have expected a bigger difference.......
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Old 02-12-2009, 04:25 PM
 
83,044 posts, read 80,524,367 times
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Quote:
Originally Posted by bluedog2 View Post
I understand on a certain level but the fact is that they really are not equal.

There is a premium on condos after you do all the number crunching you want.

You are right that a lot of people probably don't really understand that a portion of their equity is in the underlying mortgage of a coop but even more people who have been buying condos in the last 10 years don't understand how the tax abatements work and the ramifications to their tax bills when the abatements begin to phase out or expire.

By the way,I never saw a coop where the share of the underlying mortgage added more than 10 or 15 % to the purchase price.Never saw a 30 or 50 %. I am not saying it doesn't exist but what I looked at was much,much less.The apartment( coop) that I wound up buying had a share of underlying mortgage of less than 10 % of the "official" asking price and the underlying mortgage will self liquidate in 5 more years.No balloon,no adjustable rate or any of that kind of stuff.

Especially in light of what is happening in all financial markets now,I don't think people should be led to believe that the finances of coops and condos are "equal" just to simplify things.They should be encouraged to find the differences and do more number crunching, not to be lazy and assume that it all equals out because it doesn't.

when we first bought our co-op in 1987 we paid 75,000 with 25,000 outstanding in the building mortgage.... this particular building kept maintaince low by taking both adjustable rates and interest only loans so little was payed off..... each and every building is different and you would be amazed how many used creative financing from time to time to keep costs down....


although we did great with our central park units i wouldnt do co-ops again as an investor... in fact at this point i wouldnt want to be a landlord ever again once all our holdings in the family business are sold off.
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