Condos vs. Co-ops vs. Condops: Understanding the Differences

The Residential Real Estate Market in New York City is a dynamic and complex market, offering more variety of housing options than a buyer would find anywhere else. Now unless your one of the lucky few in the market for a townhouse, you’ve got three options: Condos, Co-ops, and Condops. Understanding the differences between the three is crucial for anyone navigating the NYC real estate landscape. Today, we’ll delve into the unique characteristics of Condos, Co-ops, and Condops, helping you make an informed decision when it comes to buying your next apartment.

Condos: Independence and Ownership

Condominiums, or condos, represent a form of individual ownership. When you purchase a condo, you essentially own the interior space of the unit along with a share of the common areas, such as the lobby, hallways, and amenities. One key advantage of condos is the flexibility they offer; owners have more autonomy over their properties, including the ability to rent them out without stringent board approval or sublet restrictions. However, there will still be a [typically more lax] board application with a high likelihood of application fees that you should definitely be aware of before purchasing if you plan on renting out your condo at any point during your ownership. Your agent should make you aware of these fees, but if they don’t, you can always shoot me an email.

Co-ops: Community Living with Board Approval

Co-ops, short for cooperative, differ significantly from condos. In a co-op, buyers purchase shares in a corporation that owns the entire building. The buyer then receives what is called a proprietary lease, granting them the right to occupy a specific unit for an indefinite period of time. Co-op boards play a much bigger role in the approval process for potential buyers by scrutinizing their financial stability and personal background more stringently than a Condo would. While co-ops may be more restrictive, they often come with a stronger sense of community, shared responsibility, and lower prices when compared to Condos. Now slow down investors. Before calculating your cap rate on these favorably priced co-ops, you should know that nine times out of ten, a unit in a co-op will not make a good investment because if they haven’t banned the leasing of units entirely, they will certainly restrict your ability to do so and profit.

Condops: A Blend of Condo and Co-op Features

The third and final option you have in NYC is a Condop. Condops, while commonly referred to as a “co-op with condo rules”, are a bit more nuanced than that description portrays. In some cases that description can be flat out wrong. Legally, they are defined as: “A building that has been split up to provide both commercial units and residential units.” Vague, I know. A better description is “a co-op nested within a condo building which serves as a tax loophole.” Essentially if more than 20% of a co-op’s revenue is brought in by the building’s non-residential / commercial units then the shareholders of the co-op become ineligible for certain homeowner’s tax deductions. So, developers and co-op shareholders came together to create a new category of buildings where the building was split into two condo “units”. The commercial section was designated as one condo “unit” and the entirety of the residential section (which encompasses all the individual apartments) was designated as another condo “unit”. The residential section then gets divvied up into cooperative shares and there you have it folks, Condops!

But what does that mean for you as a home buyer? It means that no Condop is the same and you should have a great broker and attorney looking out for your best interests so you know what you’re getting yourself into. Some may still be as stringent as a co-op board, requiring a board interview and imposing restrictions on subletting, while others will in fact operate with condo-like rules.

Financial Considerations: Assessing Costs and Fees

Each type of property comes with its own set of financial considerations. These considerations for the most part fall under two categories: monthly carrying costs and upfront closing costs.

When it comes to monthly costs, Condo owners typically pay common charges and real estate taxes directly, providing more transparency in cost management. (note: property taxes are paid on a quarterly basis, but listings will advertise the averaged monthly price) Co-op owners, on the other hand, pay what is known as a maintenance fee every month. This maintenance fee is essentially your common charges & taxes bundled into one fee which contributes to the building’s mortgage, property taxes, & various building expenses. Condop financial structures may vary, making it essential for buyers to carefully review the financial implications before making a decision. (Read my exhaustive post on closing costs in NYC)

Resale Market and Appreciation

Understanding the resale market and potential appreciation of your property is vital for long-term investment. Condos generally have a more straightforward resale process, as buyers can be individuals or investors. Co-ops often have more restrictions on resale, and potential buyers must go through a rigorous board approval. Condops may fall somewhere in between, depending on the specific rules of the building.

Conclusion

In the diverse landscape of New York City real estate, choosing between condos, co-ops, and condops requires careful consideration of your lifestyle, financial goals, and preferences. Whether you value independence, community living, or a hybrid approach, each option has its own merits and drawbacks.

As you embark on your real estate journey, take the time to assess your priorities and consult with a knowledgeable realtor, like myself, to guide you through the intricacies of the NYC market. Your dream home awaits, and understanding the nuances of condos, co-ops, and condops is the first step toward making a well-informed decision.

Feel free to share your thoughts and questions in the comments below. Are you leaning towards the independence of a condo, the community spirit of a co-op, or the hybrid appeal of a condop? I’d love to hear about your experiences and help you navigate the exciting world of NYC real estate.

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