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Co-ops vs. Condos


Housing co-operatives and condominiums seem similar, but there are reasons for weighing a co op vs condos. You can rent them or use them as single-family homes. As a result, co-ops and condos are most popular in older, larger cities. Here are some important differences between the two.

Co op vs Condos: Ownership

So what’s a condominium? Well, a condo is a specific unit in a multi-unit structure. A buyer typically owns such a unit as a private residence. A condo owner also has undivided ownership rights to common elements.

A co-op unit also typically occupies a multi-unit building. However, the co-op owner doesn’t actually own the unit that is occupied. Instead, all the residents own shares in a corporation that holds title to the entire property, including the individual units. The corporation grants leases or contracts to occupy the units to shareholders, who also get to use the common areas.

Co-ops and condos have more in common with each other than they do with other housing options. For instance, they are both usually part of multi-unit buildings. However, they feature divergent costs of ownership, management, and tax benefits. Most importantly, they differ in ownership.

From those basic differences spin a number of other distinctions.

Co op vs Condos:  Governance

There’s a vast divide between condo and co-op management. Co-ops are governed by their members, who are democratically elected to boards of directors. They also receive input from various committees.

These boards and committees decide all policy matters. For example, the decide when to perform major repairs and which service providers to contract with. Their power also includes controls on individual co-op members. Most notably, they can dictate who a co-op owner can sell to.

Owners of condos similarly elect a board of directors. The condo board has a lot of say in business matters such as contracts with service providers like landscaping companies and when to perform major repairs such as roof replacements. However, condo boards are generally less intrusive in resident’s affairs than co-op boards.

Co op vs Condo: Costs

a multi-unit housing complex can be comprised of co ops or condominiumsCo-ops tend to be less costly to purchase per square foot than similar condo units. Closing costs may be lower as well.

Condos are likely to be somewhat more costly per square foot. Plus, at closing a condo buyer will pay for title insurance and other closing costs that a co-op buyer does not.

Both types generally require a monthly fee. A co-op member’s fee includes their share of the building’s mortgage and taxes as well as operating costs such as utilities, security, maintenance and amenities.

With a condo, the monthly fees are often lower than for a comparable co-op. Owners typically make mortgage payments to a lender rather than the association. Condo real estate taxes may be paid into an escrow account or directly to the tax collecting authority.

Co op vs Condo: Control

Joining a co-op is similar to joining a club. The co-op can control who lives there. Buyers will likely face personal interviews before being approved to join the co-op.

Once in, a co-op buyer can’t just sell to anyone. Buyers have to be approved by the co-op. Many co-ops also restrict renting of units. Condos on the other hand, can generally be sold to anyone without approval of the board.

Co op vs Condo: Financing and Taxes

The co op vs condo discussion may come down to how you’ll pay for it. For instance, co-ops may require that buyers have a loan-to-value ratio of 75% or less – or even require paying cash. Condos are less finicky. If you can qualify for the required loan, you can probably buy a condo. Condos generally allow sublets as well.

Tax benefits are different depending on whether you’re getting a condo or co-op. The condo buyer can deduct mortgage interest and real estate taxes on his or her personal tax return, just like a single-family home buyer. Co-op residents, however, can only deduct a share of the mortgage interest and real estate taxes paid by the co-op.

The Bottom Line

a multi-unit housing complex can be comprised of co ops or condominiumsAlthough co-ops and condos have distinct differences, it’s tough to say that one is better than the other. Co-ops tend to cost less while allowing residents more control over who moves into the building. However, they give up some control themselves. Condos allow more individual freedom, but can be more costly than co-ops.

Housing Tips

  • If the co op vs condos debate proves too much for you, a financial advisor may help you figure out which is right for you. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • It’s worth noting that co-op values can be more resistant to financial downturns including the last major housing market collapse. That’s likely because they tend to place more stringent financial requirements on members.

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