why are co-op such tough investments.

Question

I understand the restriction on owning a co-op. But can flipping be used in a co-op deal ?

David London · Answer

Coops can be painful...I live in one...love the place...and would love to leave it at the same time...will think twice before buying another one...that said in NYC and around they are hard to avoid.

Like any property if you find value it can probably be done, but there are some serious pitfalls you have to watch:

1. Some coops have flip or sale tax which if you ignore or miss can cut deep into your profit.

2. Most NYC coops have restrictions on renting/subletting units so in case your flip take too much time or market conditions change you might not have an option B of renting it out and will get stuck with high holding cost for a vacant place.

3. You typically need approval from the board for everything such as getting finance...renovating...selling...furthermore your buyer will need to be approved...so expect everything to move slow...definitely not a quick flip...when we bought our place it took us about 5 month to close...(seller losing coop stock...management being unresponsive...coop board interview...etc..).

4. Most coop (and that particularly true for non Manhattan coops) are practically companies ran by unpaid volunteer amateurs...a coop is a company which own a building and then lease it's unit back to shareholders...in many case you'll have a school teacher board president with an art director as a treasurer...great people with very little experience in running a company...

5. And last...avoid small coops as things can get very emotional...

p.s - There are few coops which allow subletting from day 1 but they really hard to find...Came across some a while back in the UES and Inwood.

Hope that help.

Trevor Ewen · Answer

@Davere Currie

The incentives are not in the right place to make a co-op an investment. Co-op owners strategically use the board to discourage speculative or absentee choices of almost any kind. In this sense, they are accomplishing a goal of making a relatively affordable (in comparison) unit available to the owner-occupant only.

I can't imagine making any more than a small percentage, and very hard earned with completely unnecessary risk. @Justin Kane has the right idea, I would stay out of NYC for investment.

Our state government is about to fire a missile right into whatever is left of landlord rights in the city: https://www.nytimes.com/2019/04/17/nyregion/ny-rent-laws-regulation.html

Most of those bills, if passed, will make NYC and more punishing investment environment than it already is. I do not see an upside here at the moment.

Justin Kane · Answer

invest outside of your area, you dont need to invest in NY

Jason Lee · Answer

Are you trying to flip a contract, or renovate and then sell?

why are co-op such tough investments.

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