Buyer's Guide

Cooperatives, also known as co-ops, are owned by an apartment corporation made up of tenants. Tenant-owners of co-op apartments own shares in the corporation, and this entitles them to a long-term proprietary lease. The corporation pays the total amount of the building's mortgage, real estate taxes, employee salaries, and other expenses for the upkeep of the building. The tenant-owner, in turn, pays a portion of these expenses as determined by the number of shares the tenant owns in the corporation. Some of these maintenance fees are tax-deductible. Share amounts are dictated by apartment size and floor level. Approximately 80% of available apartments for purchase in New York City are in co-op buildings.

Purchasing in a co-op requires approval by the building’s Board of Directors. The board is elected by tenant-owners of the co-op and interviews all prospective owners. Co-op boards look for people who are financially qualified and will have no issue paying both the monthly maintenance fees and the mortgage to the bank. While each board has different criteria, having a debt-to-income ratio of around 25%, 1.5 to 2 years in liquid assets to cover monthly maintenance and mortgage liquidity post-closing, and steady employment and income all help make you a favorable candidate. Your personal background in also important. Boards want to know who will be living in their building to make sure that they are a good fit.

A condominium apartment in Manhattan is real property. Buyers get a deed just as if they were buying a house. Since they are real property, there is a separate tax lot for each apartment. This means buyers pays their own real estate taxes for the property. Owners will also pay common charges on a monthly basis. Common charges are similar to maintenance fees in a cooperative. However, they will not include real estate taxes since these are paid separately, nor will they include the building's mortgage and interest given that a condominium, by law, cannot have an underlying mortgage. Financing and approval for purchasing a condominium are much more lenient and flexible than purchasing a co-op. There is also greater opportunity when it comes to sub-leasing. However, since there are fewer condominiums than cooperatives, they are generally more expensive.