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Old 11-05-2013, 01:39 PM
 
Location: In the city
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I am in the market to invest in some real estate. I live in the city now and want to stay there despite my job being in the 'burbs.

Many of the buildings I have fallen in love with are co-ops vice condos. These structures tend to be the "grande dames" of city real estate-- pre-war with intricate details, large spaces and charm aplenty in neighborhoods like Kalorama, Cleveland Park, etc. I am more attracted to these spaces than a lot of the rowhouse condo conversions aimed at young professionals like myself.

I have done some research on what ownership means in both a condo and a co-op but my question is more centered on the DC market. My plan is to purchase something relatively inexpensive ($500K or less) live in it for a few years and use it as an income property after. Initially, I was scared of the co-op model, so I am eager to hear from anyone who knows this firsthand.

Is it easier/harder for resale of a co-op than a condo in the DC market? Do the restrictions on numbers of renters in a building make that much difference? Has anyone experienced "approval" by a co-op board? What about financing-- are you stuck with a crappy mortgage due to the limited number of lenders?

Any help is appreciated!

Last edited by confusedasusual; 11-05-2013 at 01:55 PM..
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Old 11-05-2013, 02:08 PM
 
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Coops are harder to sell because that entire process has to go through a board, and I believe the intended buyer has to go through some sort of vetting process. Whereas a condo, it's usually easier to sell because there are less restrictions. That being said, a condo building will probably have some restriction where say...20% of the condos in the building can only be rented out. My realtor talked me out of a co-op, if I understand this correctly, you don't really own your co-op, you buy a share of it, as if you're buying a piece of one pie rather than the entire pie.

As far as pricing and the like, I know the newer condos have high HOA fees because the development is new and they have to build funds. Personally, I wouldn't buy a condo for 500K. You can get a townhome for that price and it's likely that your condo at a 500K price won't appreciate because a)condos take longer to appreciate than single family homes or even houses and b)it's half a million dollars, you'll end up losing money and it would be hard to justify (from my point of view) renting it out. No one is going to live in a 650 square foot condo for $2400 a month.
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Old 11-05-2013, 02:13 PM
 
Location: In the city
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Quote:
Originally Posted by DomRep View Post
Coops are harder to sell because that entire process has to go through a board, and I believe the intended buyer has to go through some sort of vetting process. Whereas a condo, it's usually easier to sell because there are less restrictions. That being said, a condo building will probably have some restriction where say...20% of the condos in the building can only be rented out. My realtor talked me out of a co-op, if I understand this correctly, you don't really own your co-op, you buy a share of it, as if you're buying a piece of one pie rather than the entire pie.

As far as pricing and the like, I know the newer condos have high HOA fees because the development is new and they have to build funds. Personally, I wouldn't buy a condo for 500K. You can get a townhome for that price and it's likely that your condo at a 500K price won't appreciate because a)condos take longer to appreciate than single family homes or even houses and b)it's half a million dollars, you'll end up losing money and it would be hard to justify (from my point of view) renting it out. No one is going to live in a 650 square foot condo for $2400 a month.

Actually, I have several friends who do just that in Chinatown, Logan Circle and Penn Quarter-- the highest rent is right around $2600 for a 600 sq ft condo. But I get what you are saying-- plunk those apartments into Petworth and its a no go. Its all about location. The rental market is nuts.

I would be hard pressed to find a SFH or rowhouse under 500K in a neighborhood I like. If it existed, I would be all over it. I won't consider anywhere outside the city as I don't drive and don't intend to. But I certainly agree that you get more for your money in a SFH or TH. I am just an urban dweller who needs to be near a metro.
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Old 11-05-2013, 02:23 PM
 
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Originally Posted by confusedasusual View Post
Actually, I have several friends who do just that in Chinatown, Logan Circle and Penn Quarter-- the highest rent is right around $2600 for a 600 sq ft condo. But I get what you are saying-- plunk those apartments into Petworth and its a no go. Its all about location. The rental market is nuts.

I would be hard pressed to find a SFH or rowhouse under 500K in a neighborhood I like. If it existed, I would be all over it. I won't consider anywhere outside the city as I don't drive and don't intend to. But I certainly agree that you get more for your money in a SFH or TH. I am just an urban dweller who needs to be near a metro.
Eh that's the thing though, not every neighborhood is Chinatown or Logan. I'd start with the Navy Yard/SW Waterfront area first, and then go from there. That area is still decently priced, and you might find something for less than 400K. Hey, you may even be interested in my condo!

But to answer your question, go with a condo. If you want to sell your co-op, it's like you're going to ask for your parents (the board) permission to sell. That to me is a huge turnoff.
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Old 11-05-2013, 03:12 PM
 
Location: In the city
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What about delinquencies in a condo building? I have heard that can drive up the cost of monthly fees and that there are ALWAYS delinquencies.

The approval by the board was offputting at first, but most of the places I am looking at don't strike me as places that it would be difficult to be approved. I don't think you have to ask permission to sell-- only to rent out your unit. Its my understanding that you have exclusive rights to your share of the building but that the financing is affected by how many non-owners occupy the units. Still, its a valid point. You are under more scrutiny with a co op. But I don't have a lot to hide....
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Old 11-05-2013, 03:36 PM
 
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Originally Posted by confusedasusual View Post
What about delinquencies in a condo building? I have heard that can drive up the cost of monthly fees and that there are ALWAYS delinquencies.

The approval by the board was offputting at first, but most of the places I am looking at don't strike me as places that it would be difficult to be approved. I don't think you have to ask permission to sell-- only to rent out your unit. Its my understanding that you have exclusive rights to your share of the building but that the financing is affected by how many non-owners occupy the units. Still, its a valid point. You are under more scrutiny with a co op. But I don't have a lot to hide....
My condo fees are $315 per month and that includes all utilities. It goes up like 2% a year. And there's a $50 fine for late payment. However, last I checked the delinquency amount was around 49K. I'm actually googling stuff about delinquencies and stuff, never put much thought into it. I always pay late on my condo fees, because it's due on the 15th and I get paid like 2 or 3 days after, and by then they've already slapped me with a penalty.
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Old 11-05-2013, 07:07 PM
 
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Overall, condos are lousy investments, and DC is no exception. Co-ops, with all of their various rules and regulations, are even worse. The only time I'd really recommend buying one is if you are planning to live there yourself for a while (as it usually is cheaper than renting, in the mid-to-long term). You seem to have that plan in mind, which is a good thing.

Another thing about buying apartments for investment locally: take a look at all of the cranes lining the DC skyline. In my opinion, there is WAY too much inventory under construction at the moment. In 2-3 years time, the market is going to be flooded in DC with new mid-to-luxury apartments. We're aren't NYC; demand has limits for that income bracket. Worse still, you're buying at the peak of a seller's market; there simply aren't any too many deals to be had.

If it works for you - you're much better off finding a mild fixer-upper somewhere in upper NW, Trinidad, maybe nicer parts of SE, etc and renting that while watching its value accrue over the next 5-10 years.
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Old 11-05-2013, 08:52 PM
 
2,149 posts, read 3,854,449 times
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Originally Posted by swested View Post
Overall, condos are lousy investments, and DC is no exception. Co-ops, with all of their various rules and regulations, are even worse. The only time I'd really recommend buying one is if you are planning to live there yourself for a while (as it usually is cheaper than renting, in the mid-to-long term). You seem to have that plan in mind, which is a good thing.

Another thing about buying apartments for investment locally: take a look at all of the cranes lining the DC skyline. In my opinion, there is WAY too much inventory under construction at the moment. In 2-3 years time, the market is going to be flooded in DC with new mid-to-luxury apartments. We're aren't NYC; demand has limits for that income bracket. Worse still, you're buying at the peak of a seller's market; there simply aren't any too many deals to be had.

If it works for you - you're much better off finding a mild fixer-upper somewhere in upper NW, Trinidad, maybe nicer parts of SE, etc and renting that while watching its value accrue over the next 5-10 years.
Read something on Urban Turf that between the rising mortgage rates and the new inventory of condos, if you're looking to buy one and then flip and get a return on your investment, you got 3 years.

But then I read another article suggesting that there might be about 1800 condos built within the next 36 months which isn't much.
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Old 11-06-2013, 11:23 AM
 
Location: In the city
1,581 posts, read 3,553,966 times
Reputation: 2375
Quote:
Originally Posted by swested View Post
Overall, condos are lousy investments, and DC is no exception. Co-ops, with all of their various rules and regulations, are even worse. The only time I'd really recommend buying one is if you are planning to live there yourself for a while (as it usually is cheaper than renting, in the mid-to-long term). You seem to have that plan in mind, which is a good thing.

Another thing about buying apartments for investment locally: take a look at all of the cranes lining the DC skyline. In my opinion, there is WAY too much inventory under construction at the moment. In 2-3 years time, the market is going to be flooded in DC with new mid-to-luxury apartments. We're aren't NYC; demand has limits for that income bracket. Worse still, you're buying at the peak of a seller's market; there simply aren't any too many deals to be had.

If it works for you - you're much better off finding a mild fixer-upper somewhere in upper NW, Trinidad, maybe nicer parts of SE, etc and renting that while watching its value accrue over the next 5-10 years.

That would be great but my commute would kill me. I would love to say, buy a house in Takoma Park, but again, my commute would be terrible. I am tied to Metro and my work is in Rockville.

I understand that a SFH is a better investment than a condo or co-op, but there is a lack of affordable housing stock in SFHs. So the decision isn't really 'SFH or condo'-- I am resigned to condos or co-ops. I would be curious to hear from people who had bought one or both or are in the market right now about their impressions of each living situation.
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Old 11-06-2013, 02:14 PM
 
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The co-op legal structure for residential apartments is really an obsolete form of ownership. The only place where it is still common is in New York City. With the exception of some of the old buildings that you mentioned which existed before the condo ownership structure became standard, in D.C. co-ops are typically used as a way to allow low-income people to get some form of ownership in an apartment. You often see this in old rental apartments that are being renovated and it is structured as a co-op so some of the previous renters can afford to stay in the building. It's cheaper to buy into a co-op building then a condo building.
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