Condo Vs. Co-op

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    The Westchester on Cathedral Avenue. The sprawling Broadmoor on Connecticut. And the most famous of all Washington DC addresses (other than 1600 Pennsylvania Ave.), the Watergate. What do all of these gorgeous landmark residential complexes have in common? They are all co-ops.

    We get so many questions about the differences between co-ops and condos. It is truly one of the most misunderstood areas of real estate. And in Washington DC, there are many buildings that you might assume are condos but which are actually co-ops. Here then is a basic breakdown of the differences, advantages, and disadvantages of each.

    Condos

    Owning a condo is like owning a house except for the maintenance. When you purchase a condo, you own the space that you live in, as well as a share of all of the common areas. You have an actual deed to the property, you receive a separate tax bill from the city or municipal area, etc. You will pay a monthly charge or condo fee, which goes toward the upkeep of the grounds and any major repairs.

    In addition, because you fully own your condo, if you move you may choose to sub-let your condo just as you could do as a single-family homeowner. Alternatively, if you are looking for an investment property, a condo is often a good option because it is usually less expensive to purchase than a single-family home, requires less upkeep and maintenance, and is easy to rent out when you are not using it.

    One of the drawbacks of condo living is, well, other people. Since all of your neighbors also own their condos in full, they are, for the most part, welcome to behave as they wish within their condominium unit. There may be very little sense of community in a condo development, because each unit is independently owned. In addition, many condominiums end up having a high percentage of absentee owners and investors who are acting as landlords. This means that many of your neighbors may be renting and may not be as invested in acting for the good of the community.

    Co-ops

    Owning a co-op is a very different proposition. In fact, it is almost a misnomer to talk about “owning” a co-op, since what you own is a share in the entire building, and a lease enabling you to occupy your particular unit. You co-own the entire complex with each of the other co-op owners, just like owning a share in a corporation. And it is this absence of real property ownership that sometimes scares people away from co-op ownership. However, a co-op can have many advantages.

    Co-op residents get much the same tax advantages as more traditional real estate owners. In fact, because they are able to deduct the interest on their personal loan as well as the interest on the mortgage on the entire building, if one exists, they may end up with even more tax savings.

    One of the most important distinctions between a co-op and a condo is that most co-ops require a membership committee to approve of a new co-op owner. There are only two ways that a membership board is allowed to reject an applicant: financial insolvency or refusal to live by the association’s rules. If your financial records do not indicate that you can adequately keep up your ownership share, you may be rejected on financial grounds. If it appears that you would be unwilling to live under the rules of the association, you can be rejected. This has been the basis for rejection of some celebrities in co-ops, if their party-oriented lifestyle did not seem to lend itself to the co-op’s rules.

    This is yet another reason that people are often concerned about co-op living. They imagine that they will be subject to the tyranny of a membership committee run amok. But this type of arrangement can have many advantages. If you are looking for a quiet home where people generally behave appropriately and with consideration for their neighbors, you have more of a guarantee of that in a co-op than in a condominium. If you want a building that is primarily owner-occupied rather than renter-occupied, a co-op would be a better fit. In addition, the co-op boards’ emphasis on financial solvency helped many co-ops weather financial downturns like the 2008 mortgage meltdown much better than the foreclosure-plagued condominium complexes which lost a great deal of value.

    Whether you are interested in a co-op or condo building, we can help you navigate the differences and find the right building for your real estate needs. Our agents have all of the expertise to ensure that you make the right decision. Contact us today and let us get started. We can’t wait to help you find the condo, or co-op, of your dreams!

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