Before you answer “Yes” or “No,” let’s make sure you fully understand what it means to live in a co-op, or cooperative housing. There is a misconception that co-op living is for lower-income individuals or for those seeking a “hippie” lifestyle. However, on the contrary, co-ops are a very popular living structure, especially in New York City, where 50% of apartment living consists of co-ops.
What Is A Co-Op?
When you buy a co-op home, you are buying a share of a corporation – and this cooperation owns the housing unit. Unlike buying a condo, where you own the specific property that you are living in, being part of a co-op means that you are buying into the entire building. No matter how many shares you own, however, you are never in a position to monopolize the decision making within the building. A co-op brings together a community, creating equality between its members. This means that even those with the fewest shares have an opportunity to speak up.
The Benefits vs. The Downsides
You are likely to ask, Why would I move into a co-op, and how would it benefit my lifestyle? Well, this is an excellent question that all individuals and families should consider before taking the big leap.
- Less Maintenance. If you live in a co-op, you will be responsible for the interior of your home. The rest of the building, however, is maintained as a community. Therefore, there may be less work for you at the end of the day. This option is great for those in retirement – in southern California, you can actually find that many of the retirement communities consist of co-ops.
- Owning a home can be expensive, whether you are just getting into homeownership or are struggling with maintenance. Buying shares in a co-op is drastically cheaper than buying your own home or condo.
- Sense of Community and Security. A co-op is about community – living together and watching out for one another. When you move into this type of housing community, you may discover a new mindset. In many communities today, people do not even know their neighbors. However, when living in a co-op, you will have the opportunity to meet everyone. With this togetherness comes a more secure living situation. A neighbor you actually know will report odd behaviors or unknown individuals more often compared to a stranger living in a condominium.
- Improved Environment. Due to the shared sense of ownership that comes with living in a co-op, residents can often expect to enjoy an improved environment, which includes better facilities. There is generally a sense of responsibility by each individual, which means the building is better cared for.
- No Investors. Co-ops are strict on who can move in – and part of the restrictions includes limiting or not allowing investors. The board of a co-op is looking for a community, not investors seeking a profit. Because of this, co-op membership is usually limited to those living on the premises.
- Restrictions. There is no set of rules that applies to all co-ops; however, it is worth recognizing that living in a co-op will bring regulations that living in your own home will not bring. You may even run into issues when trying to sell your shares when you realize that some buyers may be ineligible. When owning your own home, you have complete control over who can buy.
- Less Equity. Due to the nature of a co-op, your investment tends to stay stable rather than to grow, meaning that your home value will not increase (in comparison to home ownership).
- Fees. Living in a co-op incurs monthly maintenance fees, which cover the cost of that extra load of work you are not responsible for. These fees can be daunting to those looking to avoid debt completely. However, they are similar to the fees one takes on when living in a homeowner’s association (or HOA).
- Higher Down Payment when Purchasing. Although the price is usually lower, the down payment may be higher. Co-ops generally require a down payment of anywhere from 20% – 50% when moving in, while when moving into your first home you can get by with only 3.5% down when using an FHA loan.
If You Own A Home, Should You Consider Moving?
As you can see, there are both advantages and disadvantages to living in a cooperative community; therefore, the only person that can answer this question is you. Assess the above pros and cons and determine if moving into a co-op can bring a positive change to your lifestyle.
If you want to consider the move, try talking to current residents. By discussing the opportunities of moving into a co-op with the current residents, you can gain a better understanding of how the community works and identify whether or not you feel the population would suit you well. Or contact us! We can help you assess whether moving out of your current home will best suit your future needs.