By Deborah Miller, Licensed Real Estate Salesperson
To buy a co-op property in NYC is to embark on a unique endeavor.
Purchasing in a co-op is more so applying for membership to a financial collective, where the buyer owns shares in the cooperative, rather than purchasing a piece of “real property.”
While traditional condos typically afford more flexibility regarding whether the property can be used as a primary residence or an investment property to rent out, co-ops are typically more restrictive on that front.
But while co-ops have more restrictions, the prices are often more competitive, in part due to supply—co-ops make up the majority of inventory available for purchase in NYC.
Additionally, real estate taxes are included in co-op monthly maintenance fees, a portion of which are tax deductible.
Here are three numbers to keep in mind as you prepare to purchase a co-op in the Big Apple.
1. 20-25%
Buyers will typically need a minimum of 20-25% of the purchase price for a down payment in a co-op.
However, exceptions exist, so speak to your real estate agent if you want to find opportunities that only require a 10-15% down payment.
2. 28%
Co-op building members, called shareholders, are beholden to each other in certain aspects. For instance, if a shareholder ceases to pay monthly maintenance dues, the burden falls to the other shareholders to pick up the slack. This is why applicants are screened by the co-op board for financial well-being and spending vs. saving behavior, including proof that the buyer’s ratio of debt to income (called DTI) is less than 28%.
3. 12-24 months
Co-op boards like to see that in the event a buyer applicant hits a financial hardship, the buyer has an emergency cushion of 12-24 months of monthly maintenance and monthly mortgage in addition to the initial down payment, all in liquid reserves.
Remember that chance favors the prepared mind, so find an experienced real estate agent with expertise on the NYC buying process. Also, each co-op building has its own expectations, so select an agent with experience detailing and managing expectations.
Deb Miller writes from Harlem. Learn more about her and her Senior Broker, Ariela Heilman, here.