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Jackie Mcmorrow
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Is a co-op technically an investment or not?

Jackie Mcmorrow
Posted Feb 28 2024, 08:24

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 

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Account Closed
Replied Feb 28 2024, 09:07
Quote from @Jackie Mcmorrow:

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 

In general, condos are often seen as a better investment option compared to co-ops because with a condo, you own your specific unit and can have more control over its value and potential for appreciation. Co-ops, on the other hand, involve owning shares in a corporation that owns the building and can come with more restrictions and limitations on how you can use or rent out your unit.

If your goal is to dip your toes into real estate investing as a primary residence before building a portfolio of out-of-state rental properties, it may be a better idea to consider a condo over a co-op. This way, you can potentially build equity over time and have more flexibility in renting out your unit in the future.

Ultimately, it's important to do thorough research and consider your long-term investment goals before making a decision on whether to choose a condo or a co-op for your primary residence.

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James Carlson
  • Real Estate Agent
  • Denver CO | Colorado Springs, CO
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James Carlson
  • Real Estate Agent
  • Denver CO | Colorado Springs, CO
Replied Feb 28 2024, 10:11

@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?

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Simon Ashbaugh
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Simon Ashbaugh
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  • Columbus Ohio, Cleveland Ohio
Replied Feb 28 2024, 11:25

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.

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Mohammed Rahman
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  • New York, NY
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Mohammed Rahman
  • Real Estate Broker
  • New York, NY
Replied Mar 5 2024, 14:16

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. 

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Michael Haynes
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Michael Haynes
  • Investor
  • Tampa, FL
Replied Mar 6 2024, 18:19

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. 

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Jared W Smith
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Jared W Smith
  • Architect
  • Westchester County, NY
Replied Mar 7 2024, 08:48
Quote from @Account Closed:
Quote from @Jackie Mcmorrow:

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 

In general, condos are often seen as a better investment option compared to co-ops because with a condo, you own your specific unit and can have more control over its value and potential for appreciation. Co-ops, on the other hand, involve owning shares in a corporation that owns the building and can come with more restrictions and limitations on how you can use or rent out your unit.

If your goal is to dip your toes into real estate investing as a primary residence before building a portfolio of out-of-state rental properties, it may be a better idea to consider a condo over a co-op. This way, you can potentially build equity over time and have more flexibility in renting out your unit in the future.

Ultimately, it's important to do thorough research and consider your long-term investment goals before making a decision on whether to choose a condo or a co-op for your primary residence.
AGREE 100%. 
I owned a Co-op and rented it out for 3 years. It was a mess with rules, Board problems and Building issues. Sold it off after Covid. Took a bath on it unfortunately. 

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Jared W Smith
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Jared W Smith
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Replied Mar 7 2024, 08:50
Quote from @James Carlson:

@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?


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.   

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James Carlson
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James Carlson
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Replied Mar 7 2024, 09:04
Quote from @Jared W Smith:
Quote from @James Carlson:

....No real such thing as co-ops out west here in Colorado. How do they operate differently than condos? ...

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.   


 Huh, that sounds like a real headache. 

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Jared W Smith
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Jared W Smith
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Replied Mar 7 2024, 09:10
Quote from @James Carlson:
Quote from @Jared W Smith:
Quote from @James Carlson:

....No real such thing as co-ops out west here in Colorado. How do they operate differently than condos? ...

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.   


 Huh, that sounds like a real headache. 


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