Are co-ops worth investing in NYC?

Question

Hi. I am interested in purchasing an apartment in NYC (Brooklyn) and rent it out. I came across many apartments, but all of them are mostly co-ops. Are co-ops worth investing? did anyone in this community invested in RE in NYC or JC area and can you please share your experience, if you do not min? Looking forward to hear from you all.

Basit Siddiqi · Answer

@J UsmonovIn my opinion Co-ops in NYC are not a good investment.1) You have to deal with the Co-ops rulesThey may not allow you to sublease, they may allow you to sublease after 2 years, they may allow you to sublease immediately. Make sure to read the by-laws2) The pool of candidates that you can sell to is limited. The board has to approve the buyer if/when you decide to sell the property.The Co-op board normally will veto any sales that occur in a down market. They don't want a property with a low comp to affect the home value of the other home owners.They are selective of who they bring in. They want to make sure that individual can afford the monthly maintenance payments3) Mortgage payments + monthly maintenance makes it a very costly investment and hard(not impossible) to cash-flow.

Jason Lee · Answer

There are co-ops in NYC that can be rented out from day one as investment properties. Some are called "condops" though they are not technically condops. They are co-ops that are run using condo rules, so no board interview, they allow investors and non-US persons to purchase, etc. These trade at a slightly higher price than regular co-ops because the potential buyer pool is larger. There are also co-op sponsor units which can be sold with holder of unsold share rights which allows the purchaser to rent out the unit indefinitely as long as they don't occupy the unit. Then there are regular co-ops that allow investors to purchase. Many of these are non-warrantable buildings because the concentration of investors is too high or a single shareholder owns too many units in the co-op. Financing can be tough in these buildings, particularly now. Then there are co-ops that have an unlimited sublet policy after a year or two of ownership. There aren't that many of these around but they can make nice investment properties if you plan to owner occupy initially. Not necessarily advocating for co-op investments but you asked. Yes, ideally you'd get a condo, but the prices for condos are significantly higher.

Scott Wolf · Answer

@J Usmonov, while @Calvin Thomas is not wrong in any way shape or form, let me elaborate for him.  Most co-ops do not allow any significant subletting arrangement.  Those that do, are price accordingly, and profits can be slim, with no upside like condos may have with appreciation in New York.

You'll need to 1) find out if they can be rented out, and then 2) run the numbers and see if they make sense. Your best bet is probably finding another avenue to get into investment real estate, or if you can find an apartment where you can rent a room or two to tenants, then it may make more sense if you need to be there for a 9-5 job, but probably will not cash-flow.

Brandon Cohen · Answer

@J Usmonov To add on to the great advice already given here, a coop can change their rules should they see fit.  I wouldn't advise a client to purchase in a coop if the sole reason was to rent it out.

Jason Lee · Answer

@J Usmonov this info is not typically advertised publicly. I don't know that a lot of agents would know either as there are not that many of them. I know several buildings in Manhattan and a handful in Brooklyn.

J Usmonov · Answer

@Jason Lee thank so much for your input. Definitely didn’t know about the various types of apartments. And for the types that you have enlisted above, can they be found in zillow and other apps? Or they can be found only via agents?

Scott Wolf · Answer

Yes, but you'll pay a premium for that.  @jason lee makes great points about the differences.

J Usmonov · Answer

@Scott Wolf thanks a lot for your input. So basically condos do make sense more than co-ops?

J Usmonov · Answer

would you mind to elaborate why it is not worth investing? and what type of house or apartments I should be focused on?

Calvin Thomas · Answer

No.

Are co-ops worth investing in NYC?

Most Popular Reply