Apartment vs Co-op: What To Buy
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There is a real difference between buying an apartment (or even a house) and buying a co-op. While the details may escape most inattentive readers, the truth is that your choice of real estate will have a great impact on your economic future and the rights and obligations you are buying into.
The most important difference between apartments and co-ops is that with an apartment, you are buying not only the actual walls where you live, but also the right to the land in which the building is standing. On a co-op, however, you are buying shares of stock to the property itself. You’re not buying a place to live, you’re making an investment into a specific property.
Attached to this comes a series of details. For example, buying an apartment means you get your credit history checked. Buying a co-op means you need to pass a rigorous interview (if the committee doesn’t like you, they don’t have to sell you anything) and more than likely have a background check done.
You are also limited in other areas when it comes to a co-op. For example, you are probably not allowed to sublet or use the place as a weekend stop. Instead, you are expected to live there full time. The same goes when the time comes for you to sell the place. Before you can do that, the Board of Managers would have to approve the potential new owners.
So why do people buy co-ops in the first place? They’re usually cheaper than apartments of the same size. There are also substantial tax breaks associated with owning a co-op. For example, you are not required to pay real estate taxes, since you are technically considered a stock owner, rather than a property owner. There is also an issue of privacy involved, as you are not listed as a property owner in any public record.
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