Buying real estate means investing hard earned money into a place that one will call their home for the foreseeable future. This means it is important to understand different real estate categories and how it can affect their finances and future sale potential. Since they sound similar, many people think condominiums and cooperatives are interchangeable but there are important differences between the two that future home-owners should be aware of. While both condominiums and cooperatives are in multi-unit buildings, that is where their similarities end.
A condo is a private residence in a building with multiple units. The owner not only owns his or her own unit, but also includes ownership of commonly used areas. Their fees are usually lower than those of co-ops and they are easier to finance.
The person who owns the co-op has a share in the building and leases out units to others. This means the co-op owner does not own the unit. Since it is collectively owned by the residents, there is a sense of community in the building and an interest in its upkeep. The residents own shares in a nonprofit corporation that has title to the building and gives permanent leases to the owners.
A co-op board has to approve potential buyers and residents have to live by the rules made by the co-op association. While this allows residents to pick their neighbors, it also means sales can be delayed as co-op boards vet applicants. Co-ops are harder to rent out.
Making a choice
While there are benefits to owning co-ops and condos, such as a lower cost and less maintenance. But it also means residents live in close proximity with a variety of people and may have to adhere to rules that seem oppressive. Those who are looking to invest in real estate should consider discussing their expectations with an experienced attorney who can help them achieve their goals.