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04-30-2009 05:29 PM
I'm seeing most co-ops have a montly maintenace deduction listed. What is this deduction?
Also i'm not familiar with the co-op model. Is there a risk associated with owning only stock in the corportation that owns the property, should that corporation have financial problems, eg. poor investments and they can't pay the bills.
05-01-2009 11:21 AM
OK maintenance in a co-op includes both common charges and real estate tax therefore the deduction comes from the real estate tax portion of the maintenance that you would write off on your taxes.
05-01-2009 11:24 AM
05-07-2009 03:31 PM
The building may also have assesments above and beyond the maintenance - make sure to ask.
To determin the health of the co-op your lender may ask that the co-op fill-out a Project Questionnaire which goes into great detail about how the co-op is run and financed.
Regarding the risks & benefits of a co-op. One benefit is very low closing costs, at least in NYC they are 2-3% of the sale price and there are no additional city taxes that 'property' owners have to pay at closing. Another benefit is repairs and upkeep are shared by everybody. This means you pay the maintenance check and don't have to worry about the light bulbs in the hall, the pain in the lobby or the garage door etc.
Some of the major risks of a co-op are that you need the board approval to rent your unit out (if you can at all), remodel, refinance and most importantly you need them to approve a buyer if you want to sell. This effectively gives somebody else vito power over your sale. If you make enimies on the board you might have a devil of a time selling - it's a worst case scenario but it happens.
Another thing to know about co-ops is that they can have all sorts of rules to keep perspective buyers out. The bank may ask for 10% down but the co-op may ask for 20, 30 or even 50% down plus proof of cash reserves euqaling months of maintenance fees. It's basically a form of descrimination and it's legal. The board doesn't have to approve a buyer even if you meet the guidlines and they don't have to say why you were turned down. It's like a country club in that way.
All that being said NYC is filled with co-ops and they are often the most affordable apartments to buy.
For more info check out: http://www.cnyc.com/