If you have never been a first-time homeowner in a city, you might be unfamiliar with the co-op ownership model. In many ways, a co-op is similar to a condo; however, the two are not the same. With a co-op, you have an interest in the entire building and an agreement that allows you to occupy one unit; however, you do not own the specific unit. With a condo, the owner owns the specific unit. In both models, you have to abide by certain rules about how to decorate and live in your home. Beyond this, co-op living can seem much more restrictive. Let us explore the details.
Why Co-op Housing Exists
Co-op housing exists in areas with competitive housing, such as New York City. In most desirable locations, demand for housing can be higher than the available supply. With rising costs, individuals might opt to live in co-ops that are cheap per square foot. The legal owner of a co-op building is a corporation, and you are a stockholder and a tenant. The building’s board of directors must also approve of you before you can own the unit.
If an individual passes the co-op vetting process, he or she can take out a mortgage loan to buy the unit. Additionally, the individual will also need to pay monthly fees to the building corporation. These fees will be used to pay for maintenance, property taxes, and more.
Whether or Not to Buy a Co-op
If you get approved for a co-op in an area with rapidly appreciating home prices, you might have a great investment in your hands. However, do consider that you might find the model to be too restrictive. The co-op ownership model can make sense if you dislike doing exterior building maintenance and want a relatively easy way to break into homeownership.
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