Is a co-op technically an investment or not?

Question

Hi BiggerPockets Family,

I’m trying to start my real estate investment journey through the purchase of my primary residence, with the intention of selling it in less than 5 years. I was open to condos and co-ops but after more research am stuck.
Are co-ops even technically an investment (considering you don’t own the actual space)? Should only look at condos if I really want a taste for the investment world? (Late this year/ early next I want to start building a portfolio of out of state, long term rental properties). Can anyone share their thoughts?

(Where I live/ work, I can only afford an apartment so don’t have the opportunity to house hack with a multi family)

Thanks in advance! Jackie

Jared W Smith · Answer

Completely different type of investment. Yes, you can sell it when you want. But it's far less control than a condo. For one, typically the board has to approve who ever buys it and even the tenant of sublet.

James Carlson · Answer

@Jackie Mcmorrow

Account Closed

This is interesting. No real such thing as co-ops out west here in Colorado. How do they operate differently than condos? I would have thought if you can buy a co-op, and you can later sell it, that it would be basically the same type of investment as a condo. But no?

Jared W Smith · Answer

You wouldn't believe. I had to sell the one I had due to the MANY issues. Not worth it in my opinion.

James Carlson · Answer

Huh, that sounds like a real headache.

Michael Haynes · Answer

Hello Jackie Mcmorrow in NY. The only thing you said that made any sense is that you want to "purchase your Primary Residence." You need to read the IRS Publication 523 that deals with the Sale of a Residence. It says that if you live in your Home for 2 out of 5 years that you can Sell it for up to $250,000 Tax-free. During that time you find another place that you would live in. Fix it up to Rent until you Sell you Home and move into your Rental. That's all you need to do for your Tax-free Real Estate Money Machine. Learn how to Daytrade Futures on your laptop for your "Gig work." Or drive for UBER.

Mohammed Rahman · Answer

Hey @Jackie Mcmorrow - I'm a broker and investor based in NYC, I've done deals in Westchester and can talk about whether or not co-ops make sense for you.

Traditionally, co-ops are more anti-landlord when compared to condos - that's why they're generally cheaper than condos.

However - each co-op building is different. There are some that have a very relaxed management board who may allow unlimited subletting.

Whether or not you own the units vs. owning the shares that give you a lease on the unit is just a matter of perspective because at the end of the day the numbers breakdown the same.

Simon Ashbaugh · Answer

Hey Jackie, Condos may be a better fit considering your initial investment goals and future plans for building a long-term rental portfolio. They often offer greater flexibility, control and potential for appreciation compared to co-ops.

Is a co-op technically an investment or not?

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