How to Buy an Apartment in New York City:
- DECIDE ON WHETHER TO GO FOR A CO-OP, CONDO OR A COND-OP.
Most of the New York buildings (approx. 80%) and especially the ones, built before 1980 are co-ops and the newly built ones are mostly condominiums. The condos are considered to be a real property and when buying a co-op, you basically purchase shares of a corporation. There is also a third category of apartments, the so-called cond-ops or co-ops with condo rules.
Co-ops are less expensive than condos, but in order to qualify for purchasing, you need to be approved by the co-op Board of Directors.
CO-OPS: These ownership structure is known in New York only, and that’s why buyers, coming from other parts of the country are not familiar with them. A corporation owns the building and residents own shares (stock certificates) of that corporation and a proprietary lease, which allows them to occupy their unit. So they are in fact shareholders or tenants instead of owners.
CONDOS: New York Condos are like any other condo in the country or like single family houses – you get a deed at the closing and you own real property. You need to get approved by the Condo Board (unless you are purchasing in a New Development), but the process is way less painful that the co-op approval. You can’t really get rejected when purchasing a condo (though such cases do exist). If a condo Board rejects you, they have to purchase the apartment themselves.
- MONTHLY MAINTENANCE AND ASSESSMENTS
Condominium owners pay Common charges (which go toward the maintenance of the building and paying salaries of the staff) and Real Estate Taxes separately each month. The Common Charges are collected by the Management and the Real Estate Taxes are paid directly to the State.
Co-ops pay a Maintenance fee, which is collected by the building Management and includes Real Estate taxes as well. Common charges and maintenance are usually raised each year on the average of 5%.
Both Condos and co-ops collect assessments whenever a major renovation of the building is necessary like repair of the roof, renovation of the lobby and the hallways, change of the elevators, etc.
- MINIMUM DOWN PAYMENT REQUIREMENTS
Condominiums usually require 10% down, but one can’t get mortgage today with less than 20% down. You might also have to put some money in escrow if your financial statement is not good enough as per the Condo Board.
Co-ops require a minimum of 20% down, but very often as much as 25% down. Some Park Avenue co-ops even require 40 or 50% down payment.
You also have to have a sufficient amount of money left over in liquid assets once you close on the apartment, which should be equal to a 2 years worth of maintenance payments on the average. You als have to meet a debt-to-income ratio around 25-29%, meaning your total monthly payments – the maintenance plus the mortgage can’t exceed a certain percentage of your income. You also need to have a very good credit.
- THE BOARDS AND APPROVAL PROCESS
You need a Board approval, unless you are buying an apartment in a new development or you are buying in an old building from the Sponsor/Developer.
Co-op Boards can turn down a Buyer for any lawful reason.
- WHICH TYPE OF APARTMENTS ARE BETTER FOR INVESTMENT PURPOSES
Only Condos are good for investment. There are too many restrictions when it comes to renting a co-op apartment. Typically, the Buyer is required to live for 2 years in the apartment before being able to rent it out. Then they are allowed to rent it for a couple of years and have to get back and live in it again before being able to rent it out again.
For more info, call 212-706-8883