My wife and I want to buy a $700,000 co-op in New York. What could go wrong?

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I’ve lived in the city for the last four decades, but I’ve mostly been renting. My priorities are a three-bedroom apartment with easy access to grocery stores and the subway in a nice, quiet neighborhood. 

But housing prices are insane in New York City. I want a house, but my partner is looking at a co-op. And for my price range of $700,000, the best options I can find are co-ops. 

I plan to buy the home and live in it, and am not looking to rent it out in the foreseeable future. The home is for my family of four. 

So my question is this: Is a co-op a good idea? 

New York Native 

The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.

Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at [email protected].

Dear New Yorker,

For those unfamiliar with what a co-op is, it’s short for housing cooperative. A cooperative is a legal group that owns one or more residential buildings, and the residents are members of it. The cooperative can comprise apartments, but it can also be made up of single-family homes. Residents who purchase a co-op unit don’t own the unit itself and have a share in the common areas. Instead, they’re purchasing a share of the overall property, and that share gives them the right to live in a specific unit. 

When you look for homes, you may find that co-operative apartments are cheaper than comparable condominium units in the same city, or than single-family homes. And with the median home price in Manhattan being $1.2 million, according to Douglas Elliman, a co-op apartment for $700,000, if you find one, may sound like a good deal. 

But, as you already know, for a three-bedroom, you’ll be quickly priced out of Manhattan. The real-estate brokerage said that a three-bedroom co-op apartment on the island would run about $2.23 million. And only 12% of co-op sales were three-bedroom apartments, versus 38% for one-bedrooms. 

You will find deals further out. In Queens, Douglas Elliman said, the median price of a condo unit was about $720,000 in the second quarter of this year, and a co-op apartment cost roughly $310,000. 

But there are drawbacks that you should consider, if you haven’t already.

First of all, you don’t technically own your co-op apartment as you would own an apartment in a condominium. Co-ops also charge you fees, which can run $4,000 a month, as Streeteasy observes, depending on the size of the unit, and so on. Applying for co-op ownership can be a painful process. Renting them out (if you can do that at all) will be hard, since the renter will have to go through the co-op board.

Selling is similarly tough, as the prospective buyer needs to be approved by the board. A board can require that a buyer put a lot of money up front, as Curbed explains. Ultimately, you may end up with less equity over time as experts say co-ops don’t typically appreciate at the same pace as condominium units or single-family houses or town houses. 

Co-ops are also very “secretive,” as the Guardian put it, with little transparency into how boards make their decisions about potential buyers and renters. According to data from the New York City Department of Housing Preservation and Development, there were 3.6 million housing units as of 2021, out of which 832,000 were in a condominium or a co-op. 

That being said, co-ops aren’t all that bad. 

The important thing to remember is if you’re just looking for an affordable place to live with your family, the numbers may very well make sense. 

Co-op apartments are priced lower than units in condominiums, as already mentioned, so you’re still able to find good options with easy access to the subway and other urban amenities. You can stop dealing with rent hikes from your landlord and have a property to call your own. And, ultimately, you also live in a building with many long-term tenants versus living among neighbors who change every year. There can also be a greater sense of community in a co-op vs. a condominium as co-op residents may tend to change less frequently.

So you have to weigh the pros and cons. If you’re looking for a more affordable entry into New York City real estate, and have the stomach to navigate the co-op process, then, by all means, apply for that apartment your wife liked.

Bottom line: Just be sure you won’t want to move in a couple of years from now because you likely won’t be able to rent it out for long, if at all.

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