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Based on the general rule that condos are more expensive than co-ops.
Hypothetically, let's say you have the same exact apartment in both a co-op and a condo building (I realize this is unrealistic but just bear with me for the sake of the question), how much less would the co-op be priced than the condo?
$50 to $150 per sq ft......generally.
Of course condos "generally" cost less per month in maint/taxes. Except of course for year eleven in a ten year tax abatement
"Of course condos "generally" cost less per month in maint/taxes. Except of course for year eleven in a ten year tax abatement"
Or, in a new development, once the sponsor sells most of its units and the owners realize the true cost of maintaining amenities (like all-night room service, three-tiered Moroccan-style roof-top club, consierge services) will be a billion $$$/month.
Coops typically have an underlying mortgage on the building (in addition to your mortgage). The size and terms of that mortgage will have a significant impact upon how much higher the monthly carrying charges are versus a similar condo. If I'm interested in buying a coop I always ask how big the underlying mortgage is on the building as I will effectively be owning my share of that underlying mortgage if I buy the coop.
The snark is funny here, but it's a pretty tough question to answer. I would guess you'll find some people would actually prefer owning a co-op versus a condo, and vice versa. But since (I think) most buyers would probably go for a condo in your scenario, it comes down to how much are those differences worth to you. And a condo's differences versus a co-op are not set in stone. Some co-ops are much more lenient on frequently important issues (renting/subletting, pets, parents buying) than others, and that might be all you're looking for anyway. Condo boards can impose restrictions as well, though they're obviously more limited at the outset. Personally, I prefer a no-frills condo for the flexibility it gives me if I needed to move and rent the place long-term, but I don't see myself paying more than a 5% premium for that. Unless you throw in that three-tiered Moroccan-style roof-top...
Well, for that Moroccan rooftop, buy here: http://streeteasy.com/nyc/building/jade-nyc. Spectacular night views. Equally spectacular eye-popping monthly condo expenses for relatively small spaces. How did everyone think all those silly amenities were going to get paid for?
But then again, you do get one of those bizarre lacquered kitchen/closet/see-thru-bathroom cubes in the middle of the apartments which shouldn't be too chipped up yet.
why would you ever purchase in a coop and sbject yourself to the possiblity of being evicted for objectionable behavior?
Bjw and Kyle, I suggest the Chupster for multi-tiered rooftops. It's my when-I-win-the-lottery fantasy.
I agree with Bjw on the no-frills condo. Not every condo has the out-of-control amenities.
Why would you ever purchase in a condo and subject yourself to the possibility of being unable to evict objectionable neighbors?
Of course, the chance of more ... interesting partners in a condo is priceless.
NJ hair-restoration doctors looking for an investment
Any schmuck who can rustle up a loan
There's an interesting paper from NYU that tries to quantify this: http://www.millersamuel.com/pdf-tank/1051930559WFulr.pdf
"Why would you ever purchase in a condo and subject yourself to the possibility of being unable to evict objectionable neighbors?"
"Why would you ever purchase in a coop and sbject yourself to the possiblity of being evicted for objectionable behavior?"
The ESSENCE of the two forms of ownership. These two questions answer all your condo/coop concerns - even re; pricing and economics....this is all you need.
NWT and I WIN this thread. The rest of you have nothing useful to say.
For more fun, go to ACRIS and search by Document Type = Lien of Common Charges. There're 20 for Manhattan in the last seven days and nearly 100 for the last 30 days.
For each one of those, the condo's other owners are carrying their CC freight, and the lien will be public record forever.
In a co-op, should you fall a bit behind in your maintenance, nobody knows but the board and agent.
Often other owners will not pick up the bag, just remind the other owner to pay up. And lien will extinguish if not foreclosed upon. Affected party may have to go to court to make sure it's no longer listed, tho.
BUT, and a big but, a condo building certainly can't be foreclosed on due an owner's deliquent cc's. That'very nice to know that the BUILDING can't be taken away from me.
As somebody or another on this board once pointed out, condos in NY generally claim more highly inflated square footage than do coops, which makes the ppsf sound better for condos than it really is. Be sure to base your comparisons on actual measured interior space.
like is said alan...that statement is completely useless. spare everybody any similar thoughts. thanks.
Condos are like divorce, they cost more because they are worth it. If it's hard to get into a co-op, try getting rid of one for whatever YOU feel is a fair price when the board has to approve your "undesirable" purchaser.BTW - the co-op board answers to no one, condo boards are typically more benign.
Condo sq footage is always inflated because portions of common areas are ascribed to each apartment in the offering plan or whatever it is called.
I've lived in coops for over 20 years and the only person ever persuaded to leave was a porno magazine owner who got into a fight with a hooker and his girlfriend one night and ended up stabbing the hooker as I recall. Not sure how it would have been better to be in a condo at that point, but the coop was able to see to it that he was gone within the year...Or maybe it was the District Attorney. Memories fade. Whatever. No one is forced to live in a coop or condo. To each his or her own. That's what makes the RE world go around.
but why are co ops mostly a NY thing?
They're a big-city thing. NY, Boston, Chicago, DC. Apartment-focused places with enough of a market for co-ops in the 1920s-1980s.
Until the 1960s, condos were illegal throughout the US ... to own a house mandatorily meant that you owned the land it was on, and not as in a share of the land -- the whole thing.
NY, for the most part, was the only place where someone would want to own an apartment, rather than a house or 2-, 3-, 4-family house ... and coop was the only option. You'll find small numbers of long-standing coops in various cities, even western ones like Seattle, but mostly just older, dense cities.
I think the earliest coops in NY were organized by and for wealthy artists, probably bachelors or "bachelors", and were live-work things -- like those ones around 67th & CPW with the double-height living rooms (studios) with good northern light for painting.
There were also coops built in the 1950s or 1960s as some sort of semi-utopian working class movement type of thing. They were sprawly, low-rise bleak apartment communities.
Alan... Here's another topic to add to my "Alan's Expertise List".
I'm the poster who made the original inflated square footage point. (I think both forms of organization are valid; I own one of each). To answer the OP's question, I'd say around 20-25%.
Are property taxes generally higher for condos? I ask only because the CCs taxes on the "no-frills" condos we saw were generally higher than the maintenance on comparable co-ops, which have an underlying mortgage on top of the basic services and pro rata real estate taxes.
Living in a small (< 10 unit) building, I think co-op is the way to go. When the fate of the building rests in so few hands, I think we have to be in each other's business whether we want to or not. In a larger building, I'd be fine with condo.
Square footage is always inflated regardless of co-op or condo.
Of course, the chance of more interesting partners in a condo is priceless.
Litigious crackpots , Deposed dictators Reality-TV stars, Famous fraudsters ... (etc)
Any schmuck who can rustle up a loan..."
The sponsor in my building rents to those types all the time and he still owns 30% of the building. A chain is only as strong as it's weakest link.
Coop Myth # 1:
Coops are safer because of the strict admission rules.
The argument that Coops are safer because of the draconian admissions policies is just a falsehood.
After the "conversion" the sponsor usually retains a significant number of apartments known as "unsold shares". The sponsor can do whatever he wants to with these apartments which includes ignoring all of the rules imposed on purchasing shareholders. The sponsor can rent these apartments to whom ever he chooses and the purchasing shareholders have no say in the matter what so ever.
Also, what most people don't realize is that there is a huge population of Coop shareholders who purchased as "insiders" during the Coop Gold-rush of the 1980's. Many of these people were not necessarily financially sound and most were individuals who were protected by rent regulation laws. These people usually purchased their apartments with little or no deposit at an extremely reduced price - most of them thinking they were making a Real Estate investment.
There are plenty of people living in Sponsor controlled Coops that would not pass the board - don't kid yourself.
"... In a co-op, should you fall a bit behind in your maintenance, nobody knows but the board and agent..."
And if the Coop tries to interfere with the sale of your apartment nobody knows but the board and the agent.
...I've lived in coops for over 20 years and the only person ever persuaded to leave was a porno magazine owner who got into a fight with a hooker and his girlfriend one night and ended up stabbing the hooker as I recall .."
That was probably before the Pullman ruling.
Now, to "Pullmanize" someone is part of the Coop vernacular.
"...but why are co ops mostly a NY thing?.."
Because most reasonably minded communities would not tolerate an institution like this.
The origin of Coop ownership was honorable. It allowed a group of people to Cooperatively purchase a building prior to the invention of the condominium.
The birth of the condominium was a reformed version of collective ownership which favors the actual owners rather than a corporate entity which can act with unprecedented impunity.
The problem is the way the Business Corporation Law was corrupted by NY Landlords.
Unfortunately there is enough idiot rich and transient money in this town to float this for decades to come. There needs to be legislation which protects Coop shareholders. But for that to happen there needs to be politicians who are not installed by New York's Real Estate Robber Barons.
People are beginning to pay attention though.
Coop Myth # 1:
Coops are safer because of the strict admission rules.
andwin: You can write whatever you want, but I don't believe the facts support your argument.
Let's start with this indisputable fact: Coops make up a much bigger % of the overall market than condos. For Q3-10 recorded sales:
New Dev 19%
That's already majority Coops -- by only one metric -- recent recorded sales. For actual inventory, coops make up a significantly larger proportion. I'm sure someone has this data handy.
Now -- run a Manhattan search including the term "Short Sale" for Condos and then for Coops. Admittedly this is a small sample size, but the results are the other way around:
Condos 71% (32)
Coops 29% (13)
There's bound to be a better way to measure this, but this took me about 5 minutes and I think the story it tells is more right than it is wrong. It's not true in every case, but in the aggregate, overlevered marginal buyers are more likely to buy Condos than get into Coops.
Bottom line: if you want to say that Condos are safer - and that owners are less likely to find themselves supporting delinquents -- then you need to support your argument with some facts.
. Should be 54%, 28%, 19% above...
and what about a condop?
During the bubble, condos were a better vehicle for flipping and therefore for bubble investors, so naturally they were priced higher. As the bubble slowly ends, this premium is likely to diminish.
At that point, the key difference between coops and condos will be financing, and, in particular, the appearance of financing.
A coop can be sold with a lower price and a higher maintenance because some of the cost is included in the underlying mortgage. For downpayment-constrained buyers, that can be very attractive, and less sophisticated buyers may not realize how much they are actually paying. So in non-bubble years, builders aiming for middle-class buyers generally prefer coops. This factor is even more important if commercial mortgages have lower interest rates than individual ones, as they usually would absent bubbles.
In contrast, during the bubble, when individual mortgages were easier to get and cheaper than commercial ones, and many buyers were using bubble cash in any event, condos were more profitable to builders.
If markets are driven by investors and foreigners, condos are likely to sell at a premium. If most buyers have more income than downpayment, coops will sell for a premium, not a discount, as they did in the '80s in markets directed as homeowners rather than investors. The cyclical back-and-forth of financing and its effect on builder choices means that for many buyers the condo/coop choice is about housing stock, not legal form.
Still, enough NYers are more concerned with the building than the legal form, however, that price differences are unlikely to be large or stable: in new construction, builders will be happy to provide whichever is easier to finance in any given decade, and in the secondary market, many buyers will be willing to switch to the cheaper form.
Bottom line, to the OP: It makes no sense to pay a premium for a condo because you think you are going to get a premium when you sell. You may or may not. It depends on financing availability when you sell, how long particular building fashions last before the builders move on, and other unpredictable things. Better to assume that at an indeterminate time in the future, the prices will be about the same (after adjusting for the underlying coop mortgage) for apartments that are about the same.
Holy f...i leave this thread for one day and a bunch of ignorance and misinformation spews forth.
i'd like to tackle the condop question: often misunderstood. some people, (like a MORON broker for well-established brokerage told me once) think a condop is a "coop (in ownership form) with condo (less strict) rules." WRONG. Condop is refers to the ownership structure ONLY - not the rules. A Condop is a CONDO - usually TWO of them. Unit 1, usually made up of the commercial aspect of the building, is typically deeded to the Sponsor or other purchasing entity. Unit 2, usually comprised of the residential aspect of the building, is deeded to the Coop Corporation....now insert your understanding of a coop. THAT is a Condop. Reason for creating - purely financial. First, sponsor sees opportunity in the commercial aspect. Best way to sell? Make it a condo and deed it - in fee simple - to buyer or to hisself. Also a condoop helps a coop to not have to deal witht eh 80/20 rule per IRC 216. The coop owners will never have to worry whether 20% of the coop's income is derived from non-shareholders. done. that's it. if you find yourslef thinking something else...back track cuz you are wrong.
Also would like to tackle the coop history question: coop is a very CLUNKY form of owning real propoerty whereby city dwellers, in an effort to 'piece' ownership pieces of a building out to purchasers, thoguht the best way to accomplish this was NOT to simply divide the building up as if each piece fo the building were an individual pieces of land, but rather to create some corporation that would be deeded the building and who would issue shares of ownership in said corporation. these shares would, in effect be the apartments, and some master propietary lease would govern the use and occupancy (as if when you own something you need somethign telling you how to use or occupy it). A lot of people say the coop form was derived as a way to piece realty out, but too also handle issues of control and privacy in these buildings or that a better form was illegal ?!?! (anybody found creating a condo shall be fined and imprisoned?!?!) BULLSHIT. This form was created because people were too stupid to think of a better way. In pure legal terms and in advancing the free trasnferability of propeorty rights - an AGE-OLD interest that is universally agreed-upon, advocated for, and upon which MANY MANY MANY MANY laws affecting real propeorty are based - condo is a MUCH MUCB better form of ownership. And interestingly, NY was simply behind the ball. While a lot of states were legalizing, I mean getting with it in the 60's, NY didn't pass their condo act until the 70's. To this day, NYC still holds onto the coop as a viable form of ownership - but that is fast changing. Just take a look at how many condo plans are filed with the AG vs. Coop plans and the writing on the wall becomes apparent.
I also want to also tackle the square footage inflation comment: MORONIC. to attribute square footage inflation as an almost inherent quality of a condo, but not a coop - or to attribute this practice to anything other than the whims of whoever is measuring, is stuff of pure MORON.
to sum up - i remind you of the most valuable two questions one should ask in assessing a condo vs. a coop...and again, the answers to which explain a lot about the differences in pricing, carrying costs, and desirability of both....
A question: Since common charges in condos do not include RE taxes which are paid directly by the individual condo owners, they tend to lower than in similarly "amenitificated" coops. Therefore, if an owner fails to pay the cc, it is not as costly to the condo as it is when a coop owner (shareholder) doesn't pay maintenance. This seems obvious to me, but am I missing something?
geez...financeguy...you write all that extensive purported "analysis" of condo vs. coop as if the market is dancing back and forth betw condo and coop based on various factors..when, in reality, isn't there a trend toward condos because it is a better form of ownership as the condopres points out?. ..
at the risk of making a MORONIC comment,
you know they changed the 80/20 rule back in late 2007, right?
DG Neary Realty
> While a lot of states were legalizing, I mean getting with it in the 60's, NY didn't pass their condo act until the 70's.
NY was in the '60s as well. 1963, I think. First in Manhattan was the St. Tropez.
Wait a sec, didn't someone somewhere say that a condo unit's taxes were INDIVIDUALLY assessed? Hmm.
CondoPres is simply wrong in his description of the history (and function) of coops.
A coop, legally, is a rental in which the tenants own the landlord and give themselves protected leases that look much like rent stabilized leases, but are more transferable. There is nothing clunky about it and it works quite well.
Condos are not a traditional common law form of ownership, so absent legislation, they were impossible. States began enacting legislation in the 1960s, I think, largely to make it easier for apartment dwellers to get some of the Federal tax subsidies given to homeowners, and to make it easier for non-NYC banks to understand how to lend money and foreclose. (The tax subsidies were later extended to coops, so there is no significant tax difference between the two forms today).
In NYC, coops usually have more restrictions and mutual control than condos (with plenty of restrictions). However, Condopres is correct that nothing in the legal form requires this. Elsewhere, gated communities use the condo form to be as restrictive and intrusive as the snootiest Park Ave coop. And Florida condos have learned, just like NYC coops did in the Depression, just how important it is to know something about the finances of your neighbors.
Buyerbuyer, I'm not sure I'd call a two decade long trend in one direction followed by a decade long trend in the other "dancing around", but the issue is, I suppose, whether there is some reason to think that the popularity of condos stems from something fundamental that will stop convergence. Since the legal differences aren't major, that seems unlikely.
During the bubble, builders had strong economic incentives to build condos. First, because condos are real property and foreclosure follows real property rules, individual condo mortgages were easier to bundle into CDOs and sell in the secondary market than either coop underlying mortgages (which are large and don't fit packages made up of small stuff) or coop loans, which are not mortgages but secured liens on personal property under the UCC that confuse dumb investors used to using the UCC for credit card and auto debt instead of apartments. Also, in NYC condos historically came with fewer restrictions on investing, flipping and renting; as a result, calling your building a condo was a quick and easy way to signal that it was speculator friendly. As speculators came to dominate the market, builders sought to cater to them rather than to people who feared them. Most importantly, for the last decade or so, individual mortgage interest rates were lower than commercial ones, and, simultaneously, the bubble made it less of a marketing advantage to be able to advertise a low price, so there was no reason to have an underlying mortgage.
When these market conditions change, the trend will change. Even if they don't, they don't seem important enough, absent a bubble, to preserve a significant price premium for condos. It's too easy for a coop board to loosen its rules, or for banks to figure out how to bundle coop loans into CDOs: if those changes make the unit worth more, sooner or later enough people will do it to eliminate the premium.
Long run, I'd expect that condos would sell for LESS than coops (if you include the proportional part of the underlying mortgage in the price of the unit, as you must to make a fair comparison): coops can duplicate all the advantages of condos, but the reverse is not true.
There is nothing inherently "better" about condos than coops. On the contrary, given that most American buyers have more ability to make monthly payments than to put down a downpayment, the underlying mortgage, which is possible (so far) only in coops, is a serious advantage to coops.
Also: In NYC for reasons that I don't pretend to understand and that have nothing to do with the underlying values, condos seem to be assessed at higher prices than coops, which often are able to use rent stabilized buildings as comps. If the law isn't changed, as the new construction abatements wind down condos will have significantly higher taxes.
financeguy, excellent analysis, as always.
nyc10023, that would be CondoPresident, who thinks/thought the city assesses individually, as if somebody's tarted-up kitchen would result in a higher assessment than the same-PCE unit upstairs. (Anyone who's had an assessor visit, let us know.)
NWT/Zip code person - What in your right minds tell you that a condo is taxed as a whole? Unbelievable. And nice typo catch, NWT - now go track down those "liens that last forever."
And finance guy - You are off your rocker if you think anybody with any decent legal and historical knowegde of real propeorty thinks the coop is a more efficient and functional form to own real property. Just wrong. And common law is clearly beside the point...the condo is as much a creature of common law as the coop is. But for the corporation and its legislative mandate, coop's wouldn't exist either. They both owe their ass to the legislature. Again, all typos aside, my point is that the coop was the first swing and a miss. The condo, by contrast, got it right. This is universally regarded in the legal world. Now if you want to address this point, I am all ears. Otherwise, I'm not going to respond to anymore of your intereference. Don't have time.
Ali g....you should risk reading more carefully. Again, one of the reasons why the condop was created was to deal with the 80/20 conundrum. Of course it was recently gutted, but that's not what I was talking about. I was talking about what condop's really are and WHY they WERE - WERE, got it? - created......
I didn't say _taxed_, I said _assessed_. Two words, two meanings.
The city assesses the whole building, then calculates each unit's tax using the unit's PCE. Got it? If not, go look up your building's assessment and your own unit's taxes.
CondoPres: bcs I've spent a heckuva lot of time staring at individual condo units' tax bills & condo declarations. Condos are not assessed individually. The building as a whole is assessed, and the tax bill is presented to each unit based on the % ownership. If I am wrong, please point me to something in B & W that says so.
Pay particular attention to (b)
While (a) states that each condo unit is a "parcel" and shall be subject to "separate" assessment and taxation
(b) states that the aggregate of the assessments of the units & their common interest should not exceed the total valuation of the property should the property be assessed as a parcel
Hmm, hmm, I wonder what the practical implications of (a) and (b) are. Over to you, Mr. Condo.
look you morons....the building is assessed as a building and the units as rent rolls - individually. And its not PCE. If it is then explain to me how to identical sqft's can be assessed differently than the other. Also look at your tc109 for language allowing unit owner or building owner to file an appeal. Also that the assessment can be taxed based on particularities of the apartment, NWT - GO IT?
I'm dense, I don't get it.
Units with the same square footage but on different floors, different exposures, own different percentages of the common elements, etc. I have NOT seen an instance where, in the condo declaration, two units own the same % of the common interests, and have different annual tax bills.
In addition, I am not sure, that, when an individual unit files an appeal - is he/she filing an appeal against the BUILDING assessment or the individual assessment (which, you know I don't think exists).
Any particularity of the apartment is reflected in ownership % - again, see my point above.
Please, prove me wrong.
CondoPres, appreciate your efforts to "educate" here, but you could do it with more tact, to say the least - the ad hominem stuff can go. I'm fairly certain nyc10023 is correct, as that's exactly how my taxes are assessed, and I have paid pretty close attention ever since I tried to figure out what unabated taxes would be. To be fair, I've found it's something very few people have a good grasp on, even (somewhat surprisingly) real estate lawyers.
If CondoPresident is an example of the supposedly more reasonable, pleasant people I would get to live with and deal with in terms of management were I to be in a condo, thank you, but I'll pass. The word "rabid" comes to mind. It's too bad because while content-wise the posts raise some points at least worth discussing, the prospect of a back-and-forth with this individual reading posts laced with this kind of gratuitous vitrole kills any desire to engage the poster. The needlessly aggressive, insulting tone of CondoPresident is exactly what most of us here have been making a concerted effort to move away from recently.
It sounds as if condo tax assessments do not correlate to real economic value of units within the building (higher floor, view, etc. not assessed differently). I wonder if anyone has ever made a legal challenge based on this? ..I suspect there could be some grounds for it on arbitrariness or some legal principle (my thinking being that there has to be some coherent logical basis for assessing say building 1 vs building 2, and by the same logic there ought to be a distinction of separate condo units within a building...but i have no idea what the tax code says).
[For coops it would seem to be a different issue altogether due to the legal structure]
(i know that the validity of assessments is a frequent subject of litigation out in the USA, particularly on large parcels of land/building where the values justify the litigation cost).
CondoPres calls condos more "efficient" than coops, but that makes little sense. In each case a group of occupants pay the same management company to run the building. So economically, they are pretty similar -- in both cases, the owner/occupants replicate a landlord-tenant relationship while eliminating some of the more predatory and free riding incentives of for-profit landlords, ending up with something a lot like Rent-Stabilization-with-tenant-rights-to-transfer.
However, if what he means is that the "free transferability" rule that most NYC condos adopt is more "efficient" than the restrictions that most NYC coops choose, the world seems to disagree.
Coops are free to adopt complete free transferability and write leases with no other restrictions. For that matter, condos can adopt rules almost as restrictive as the most restrictive coops. Since rule changes are relatively easy, the fact that both exist strongly implies that neither is intrinsically better than the other.
Bottom line: The main reason that condos dominated new construction during the bubble was signaling: adopting condo form was a quick and easy way to signal investor/speculator friendliness and therefore to jump into the bubble more fully. There is no legal reason why coops can't be investor friendly or condos speculator hostile, but the custom is sufficiently well known that it tends to overpower the otherwise small differences between the two legal forms.
To the extent that this custom remains strong as the bubble winds down, condos should fall further than coops. If this happens, some condos may seek to limit the decline by adopting coop-like restrictions.
Buyerbuyer: NYC tax assessments are arcane and complicated and have no logical connection with real economic value or legal form -- it's all a function of the power of various interest groups at particular moments in the legislative history. Coops are assessed by comparison with "comparable" rentals, where comparable seems to mean "built in the same era" and so often means "rent stabilized and/or poorly maintained," with the result that the most expensive coops often pay absurdly low taxes. Most new built condos have one of several forms of tax abatements. 1-3 family homes are assessed at a reduced rate and have limits on how fast taxes can go up, so many pay taxes based on '80s values. And so on.
Someone more up on the details can explain more.
Financeguy you makes some valid points, and apparently some people on this site think you're a financial genius, but I find much of what you write to be blizzard of verbiage using seemingly seat-of-the-pants "analysis" .
You write so much that no one could possibly take it all on, but this is just too much:
"CondoPres calls condos more "efficient" than coops, but that makes little sense. In each case a group of occupants pay the same management company to run the building. So economically, they are pretty similar -- in both cases, the owner/occupants replicate a landlord-tenant relationship while eliminating some of the more predatory and free riding incentives of for-profit landlords, ending up with something a lot like Rent-Stabilization-with-tenant-rights-to-transfer. "
You can't be serious in equating ownership (through condo or coop) with a landlord tenant situation. Come on. If the building burns down, what is a tenant out? If you say the tenant was still obligated to pay rent forever, then it wasn't what one would normally call a lease, so what's the point of writing this?. And, for the record, I wouldn't bother to dispute your voluminous output on the subject, but I do not accept, and I doubt if I am alone on this, your mantra that rent controls are efficient, and I also dispute that there is an economic concensus that they are efficient.
And I don't mean to be rude or have a personal dispute, but you seem to be laying forth economic principles and prognostications with what borders on irrational dead certainty.
re assessments: I understand the system is screwy. My inquiry is whether there have been legal challenges because there is a limit, legally, I believe, to the arbitrariness of what a government can do, but I don't know how the nuances play out in ny or whether/how far this has been litigated.
"... Bottom line: if you want to say that Condos are safer - and that owners are less likely to find themselves supporting delinquents -- then you need to support your argument with some facts....
You're words, not mine. I'm not saying that Condos are safer. I'm specifically disputing NWT's Coop Myth #1 "Coops insure more desirable neighbors." which is false.
But you're right, by design Coop owners don't usually find themselves supporting delinquents they find themselves supporting the sponsor.
Unfortunately the same real estate parasites that molded the modern Coop scheme are now behind most of New York's Condo developments. But, at least for the time being, Condo owners have protective legislation and are not dangerously subordinated to an institution which literally makes it's own laws.
I'm not sure what your point was with respect to the percentages of coop sales vs. condo sales. But since you brought it up - the new developments...? what are they? I'm betting Condo.
And the size of a corrupt institution does not make it more credible. Just a bigger problem.
Regarding short sales and the like. Of course you're not going to easily find that information about coops. They don't have to report it. Which is part of the problem.
But heck, up until 2006 they didn't even have to report the sale price of apartments to the city either.
So things are getting better. Just really slowly.
"...and what about a condop?.."
Case in point. As it's been pointed out, At one time a Coop could only claim up 20% of it's revenue from a commercial source (Federal tax code). And many landlords simply wanted to retain absolute ownership of the commercial portion of a building.
So what did they do? In order to get around federal tax laws they invented a NEW class of ownership which suites the landlord ... and the Condop was born.
Hilarious, right? They write their own laws. The lawyers call it "crafting" language.
"... A coop, legally, is a rental in which the tenants own the landlord and give themselves protected leases that look much like rent stabilized leases, but are more transferable. There is nothing clunky about it and it works quite well..."
That's a glorified definition and It has nothing to do with reality. But I'm glad to finally hear someone acknowledging that Coops are just rentals.
Let me bottom line this:
Coops need to be reformed so they are legislated and governed for what they are: "HOUSING"! A persons most personal and valuable asset.
Coop shareholders are the most disenfranchised apartment dwellers in the world. They have all of he responsibilities of property owners yet NONE of the rights. All of the risks of homeownership with almost none of the benefits.
There needs to be be more legislation proposed that protects the rights of shareholders and their investments. Until Coop apartments are given the same protection as other forms of home ownership (or corporate investment) you will see more and more crisis situations arise as the Coop boom of the 80s matures and conflicts between shareholder and Coop end in disaster for the shareholder.
The frightening thing for many Coop shareholders is that many injustices will probably go unnoticed for years before our legislators cure the problem.
Your managing agent - Are they an affiliate of the sponsor?
Buyerbuyer: if the building burns down,the loss will be borne by the same insurance company.
Financeguy..there may or may not be adequate insurance, so I don't think that is a good answer.
But then answer this: the market value of the building drops by 75%. The tenant can walk away. The owner can't. Your statement equating ownership and landlord/tenant made no sense.
"If CondoPresident is an example of the supposedly more reasonable, pleasant people I would get to live with and deal with in terms of management were I to be in a condo, thank you, but I'll pass. The word "rabid" comes to mind. It's too bad because while content-wise the posts raise some points at least worth discussing, the prospect of a back-and-forth with this individual reading posts laced with this kind of gratuitous vitrole kills any desire to engage the poster. The needlessly aggressive, insulting tone of CondoPresident is exactly what most of us here have been making a concerted effort to move away from recently."
Hear hear, it's like reading a lecture from the Del Boca Vista annual, and Kramer's about to slide through any minute.
condopresident, did i beat you up in grammar school? my bad, but those glasses were just begging to be hit, and your face just got in the way....
allright...I agree. I'll tone down on the assholeness.
But serious, Zip code and NWT...here's some language.
7. Condominium hearings. Hearings on condominium unit applications by individuals representing themselves will be scheduled in September. Hearings will be conducted in May on applications covering condominium units where there is just one representative within the condominium. Hearings on condominiums with applications by two or more representatives will be conducted in September. Hearings for representatives of the board of managers and unit owners will be scheduled on the same day.
8. Class two and four condominium valuation proof. Condominiums in classes two and four are appraised according to the income approach to value, one of the three recognized appraisal methods. The whole building is valued as if it were one rental building. Sale prices of condominium units are not used to find the value for assessment purposes of class two and four units. Evidence of rental income and expenses for comparable rental buildings and/or units is necessary to establish value. Also, class two unit owners who rent their unit must provide documentary proof of rent income. See TC109 Supplemental Instructions on proving the value of a unit in a class two condominium. Because the proof of comparable rental value is not readily available to most individuals, unit owners are advised to join in a single application by their board of managers."
"Who should use Application Form TC109? Condominium owners, or a condominium board of managers acting as the agent of the condominium owners, claiming a reduction of the 2010/11 tentative assessed value of condominium property classified on the assessment roll in tax class two or four (including two-unit condominiums and condominiums owned by cooperative apartment corporations). A single form may include reduction claims for one unit, multiple units or all units of a condominium, provided all units are on one tax map block.
To prove your claim, it is important to understand the income method of valuation that applies to your property. Under the law, condominium units in class two and four are regarded as rental property which must be valued primarily by the income method, one of three recognized appraisal methods. The income method of valuation assumes that the real estate market looks to the stream of income the property generates or could reasonably generate on the open market.
Therefore, we do not rely on prices at which condominium units are purchased for owner-occupancy to establish their value for assessment purposes. To calculate value for assessment purposes, net income of the whole building is divided by the appropriate rate of return demanded by the market, according to the formula of “Income divided by Rate = Value”. When the Tax Commission reviews your application, your unit’s assessment will be offered a reduction if: (a) we determine the entire building’s value is less than the value indicated by the total assessed value of the building, or , AND PAY ATTENTION, (b) you show that your unit has specific factors affecting its value, such as differences in size, location or amenities."
Not my words, but the Tax Commission's.
And financeguy - "CondoPres calls condos more "efficient" than coops, but that makes little sense. In each case a group of occupants pay the same management company to run the building. So economically, they are pretty similar -- in both cases, the owner/occupants replicate a landlord-tenant relationship while eliminating some of the more predatory and free riding incentives of for-profit landlords, ending up with something a lot like Rent-Stabilization-with-tenant-rights-to-transfer."
First, this explanation above is a great way to explain coops. Now let me explain condo ownership. I own my unit and % of the common elements and NOBODY is my landlord, there's certainly no lease and I can, with out a doubt, more quickly and more freely transfer my ownership to somebody else. Period. I am not sure how else to explain it to you.
"Bottom line: The main reason that condos dominated new construction during the bubble was signaling: adopting condo form was a quick and easy way to signal investor/speculator friendliness and therefore to jump into the bubble more fully. There is no legal reason why coops can't be investor friendly or condos speculator hostile, but the custom is sufficiently well known that it tends to overpower the otherwise small differences between the two legal forms."
You are really grasping at straws with this statement. The primary reason why condo's dominate (no past tense about it), is because the New York RE consumer now desires the more efficient and transparent form of ownership - the condo. Pretty simple stuff. Devlopers know this. They know the owner wants to own their propoerty outright - in other words, NO BARRIERS between the owner and its right to their unit/%land.
And having rights to the land (condo) as opposed to not (coop) as well as there being even the possibility of being evicted (coop) vs. not (condo) are HUGE differences between the two legal forms.
"Hear hear, it's like reading a lecture from the Del Boca Vista annual, and Kramer's about to slide through any minute."
This is great, btw!
Talk of sponsors and their evil powers in coops is a red herring (e.g. smokescreen/distraction) for many if not most coops in NYC. I don't understand the obsession with sponsors in discussions of coops. Most coops in NYC are well-established and have existed for a long time. Sponsor roles diminish over time to near insignificance. My coop, for example, has one board seat occupied by the successor-entitity to the original sponsor and the entitity's historical knowledge and experience in building management actually adds to the knowledge base of the board. Beyond that, the board is controlled by shareholders and the sponsor has essentially no say in operations.
This was true, also of the Chelsea coop I lived in for 18 years. In the lower Fifth Ave coop where I lived for a time, the sponsor had long ago sold its last unit in the building and thus no longer existed.
And CondoPresident: thank you for dialing down the rhetoric.
There is nothing mystical about "ownership". It's a bundle of rights, and "owners" whether they own a right to a 3d space and an interest in the common space, or a percentage of the shares of the corporate fee simple owner, have basically the same rights: to possession so long as they pay the bills.
And basically the same risk: that bubble prices will drop, and, worst case, that neighbors in the building won't pay their bills leading to deterioration, higher expenses, and/or seizure by a bank/city for non-payment of loans/taxes.
The main legal difference, again, is that coops may, but need not, take on a joint mortgage, which makes maintenance of the common areas easier and reduces the risk of neighbors refusing/being unable to maintain the common space, but also adds to the immediate financial burden if neighbors default. This probably means that coops have higher potential variance in gains or losses from a competent or incompetent board/association, although in practice both rely on the same group of professionals and are likely to be getting the same advice.
Also, if the economy tanks: Coops will have a marginally easier time evicting non-paying coop owners than condos will have foreclosing on non-paying condo owners. Coops owe their taxes collectively, so if enough people have trouble, the city could seize the whole building. Condos, in contrast, owe their taxes unit by unit, so if disaster strikes, the seizures and foreclosures will be unit by unit. Maybe these distinctions matter to you; to me, they look like disasters either way.
And it isn't true that condos have "NO BARRIERS between the owner and its right to their land". The condo association, which has to ensure that the building stays up, has quite broad powers.
financeguy - Question - Can you lease a coop without first obtaining approval from the corp.?
I just went through a refi for my coop and the process was pretty painless. apparently since a coop is considered personal property vs. a condo which is considered real property, the transaction is much easier in terms of documentation as well as much less costly. I thing this aspect is a strong arguement in favor of coops, assuming you have a reasonable board.
Legally, condo associations have a great deal of power to set detailed and binding association rules; in NYC they usually don't exercise it (but in many suburban gated communities they do). Coop corporations have marginally more power to do the same thing, and in NYC they usually do create detailed rules. The rules for the two forms are not identical, but the legal differences rarely matter much.
Big picture, unit holders have virtually identical rights in the two forms: if you pay your common charges and obey the rules, you can live there and transfer. If you don't, you lose your rights. If you don't like the rules, you can vote for a different board/association, but have virtually no right to ignore them.
The details differ -- it is probably somewhat cheaper and faster (more efficient) to enforce the rules in a coop; judges are probably marginally less likely to review a coop board decision for, e.g., violations of the anti-discrimination laws; and eviction for non-payment (coop) is almost certainly faster than foreclosure (condo). Still, these are details. Legally, the two forms are quite similar.
The practical difference in NYC, however, is quite large. People who want to live in relatively orderly environments with collective control over behavior that affects others can signal that and find like-minded others by buying coop shares and a coop lease. People who want the right to act as they please without regard for their neighbors can signal their desires and find like-minded people by buying a condo.
So, most NYC coops choose to sharply restrict the ability of leaseholders to sublet their units, while most NYC condos choose to freely allow unit-holders to rent their units.
Outside of a bubble, this should not affect prices much. Some people want one; others want the other -- they'll sort. If there is an imbalance between people and available apartments, the type that is in shortage will cost more. But the imbalance is unlikely to last indefinitely: some people are indifferent and will move to the cheaper form, freeing up supply in the more expensive one; and developers will develop the more profitable form, again increasing supply. Over time, shifts in supply will balance prices, unless commercial mortgages are cheaper or more available than individual ones (in which case, coops will dominate, as they did before Federal loan guarantees opened up the individual mortgage market in the 40's and in periods like the 60's - '80s when banks were happier lending to the association than individuals). Or consumers have trouble seeing the underlying coop mortgage and think coops are cheaper than they are, as seems to have been the case in the '80s.
In the bubble, NYC condos were more expensive because the custom of more permissive rules makes them easier to flip and thus more susceptible to bubble pricing. This was especially true because loose credit made irrelevant the advantage coops have of being able to choose between joint mortgage or individual ones. As the bubble ends over the next several years, the price gap between coops and condos (adjusting for the underlying coop mortgage) is highly likely to disappear.
Coops have marginally lower costs for the reason Marco-M points out: UCC financing is slightly more efficient and lower cost than RE financing, especially in the post-MERS age. But this difference is too small to have much impact on prices.
I think condo's are generally more expensive because they are usally a lot more modern than coops. If anything you would think the higehre transaction costs for condo's would decrease thier price.
In terms of neighbors, I would feel uncomfortable knowing that my neighbor could move in anyone without any or very little notice to others in the building.
Condominiums are frequently more expensive because the financing structure is between a buyer and their bank. Co-op boards limit or prohibit financing, therefore the pool of available and qualified buyers is smaller, which drives the prices down somewhat.
A buyer can purchase a condo with a higher value than his or her net worth. In a co-op with a fiscally responsible board that would not be possible.
target>>>> "Co-op boards limit or prohibit financing, therefore the pool of available and qualified buyers is smaller, which drives the prices down somewhat."
Is this true? Surely maybe so for high-end co-ops but otherwise are those who buy co-ops any different from those who buy condos? At end of the day is it not the same people buying the co-ops and condons in any given segment of the market?
Many co-ops evolved in the '80's because it was a way that a landlord of rent regulated apartments could "sell" the building to his tenants and pass along the underlying mortgage. In fact many sponsors added to the underlying mortgage and cashed out. Much more profitable then trying to sell the occupied building
Matsui - there are differences between co-op and condo buyers, usually based on both finances and preferences. If one wants an established, prewar building in a prime, established neighborhood then by default one will most likely be looking at co-ops. If one wants to live above the 20th floor in a glass walled building, or in a newer "hot" neighborhood, then one will find themself looking at condos. The locations, construction techniques and architecture are usually quite different between co-ops and condos - based mainly on their dates of construction as condos are later to the game in New York. For many purchasers their taste leads them to one type of ownership vs the other.
If a buyer has a high salary but no savings or investments, he will be guided to look at condos as they are more receptive to that type of purchaser. If a buyer does not wish to share his financial information with the people he will be in business with (which is the case with neighbors in a co-op) then he should look at condos. If a buyer wants to be able to sublet, house swap, etc. then he should look at condos. If a buyer is drawn to solid, traditional architecture with high ceilings, windowed kitchens and bathrooms, doormen and service entrances and elevators he should be prepared for a co-op board.
Depending on the apartment a purchaser likes the choice between co-op and condo will be made for them.
The price of a coop *should* theoretically be lower than a comparable condo due to subleasing and other restrictions in the coop. A condo is a much more liquid investment. Younger buyers with active careers may naturally gravitate to condos for that reason.
At their worst, coops operate as country clubs designed to protect the lifestyle of the established population (which bought-in at much much cheaper rates). The famous Morningside Gardens are a great example of COOP with many amenities (day-care, senior care, a theater troupe!) This may be great for your grandma, who bought her apartment for pennies on the dollar in the seventies. She may not mind the $1.20/sq.ft. in common charges per month, because she has no monthly mortgage bills.
For my family, it makes no sense to buy into such a community. Our monthly costs would simply go to subsidize the convenience of others. Besides, we cannot and should not stretch our monthly finances for non-optional gym, pool, daycare, and knitting circle memberships. That money is best spent on extra mortgage payments. And the services could be bought piece-meal in the immediate neighborhood, cheaper and on pay-as-you use basis.
I believe many buyers and investors are doing some of the same math as us. A condo (or a coop) with minimal ameneties, without sublet, renovation, or sale restrictions will remain the better investment in any type of market.
>>Surely maybe so for high-end co-ops but otherwise are those who buy co-ops any different from those who buy condos? At end of the day is it not the same people buying the co-ops and condons in any given segment of the market?
Most coops in Manhattan specifically discourage non-primary occupants or subletting. Because of this, the market for coops is limited (for the most part) to primary-residence buyers, whereas condos are interesting for primary-residence, pied-a-porter, and the investment buyers. We also know that there are far fewer condos on the market than coops.
Higher demand, lower supply equals basic economics.
Oh I do understand what drives choices of one vs another. I was just disputing the suggestion that most who buy condo's do not have sufficient finances to buy co-ops.
Apart from the ease of purchasing/renting out condos versus coops, the other way of attempting to equivalize (or make more apples to apples) is to take the coop apartments share of the underlying mortgage and add that to the purchase price (basically the coop has gotten the mortgage for that piece of the purchase price).
Agreed, "most" in that case is an overstatement. It would make sense for some of the buyers. Like me for example! Moving from graduate school to a well-paying job means poor earnings on paper for the last few years. The condo has no problem with that as long as the lender doesn't.
The coops will also often restrict gift payments and down-payments, again shrinking the market somewhat. But shrinking the market is the whole point, I guess. There were some funny threads on here by coopers grumbling about trust-fund babies, rich foreign students, and similarly bohemian riffraff. As someone who is both politically progressive and libertarian, I just don't like the idea of the coop board meddling with the color of my curtains. (This was literally suggested by the agent on my recent visit to 88 Morningside, in Harlem. And she thought it was a selling point!)
Matsui - I am not suggesting that MOST who buy condos could not buy a co-op, but that for many that is the case. A buyer with the same resources can purchase a more expensive condo than a co-op, which is why many make that choice.
Others buy condos because they prefer the architecture or location of a condo building. Others, despite having the finances, may have not be able to pass a board due to personality or planned use issues (not discrimination, mind you, but valid reasons why people would not want them as neighbors).
Finally, as noted above, some people simply chafe at the idea of a co-op, in which case they should look to other forms of ownership, regardless of their finances.
We bought a condo simply because it was the apartment that we fell in love with. Majority of what we liked was co-op so thought we'd end up in a co-op, but just happened to end up with a Condo instead. We were thrilled in the end because the closing was easy, renovation process was a breeze (didn't do a lot but no approvals needed for the basic work) and we have much more flexibility to rent/easier approval of a new buyer down the road.
If Co-Ops are so much cheaper than similar sized condos, wouldn't there be a big pay-off for co-ops to convert to condos? Wouldn't society become better off with this "release" of money that is tied up in an organizational form despite the assets being the same?
Very difficult for a coop to become condo, mostly because it would require that all the owners be willing and able to pay off their share of the underlying mortgage of the building.
A co-op can always amend its by-laws to become more condo-like, as some have.
So, as previously noted, I have come full circle. When I said that a few days ago, my meaning was that I am firmly back to being a multicity resident (though we still pay NYC/NYS income taxes). Also, having rented, purchased and renovated in NYC, I do not think it fair to continue to call myself a novice anymore. But the real "full circle" feeling is hitting me as I sit here on a beautiful late-August Saturday chained to my computer because I have a time-sensitive real world project, and instead of working on that project, I am drawn to the water cooler. Sadly, 3 years later, the water cooler has fewer regulars, but it is the quality rather than the quantity, so I am okay with whoever is still here. Because I would do anything rather than focus on my real world project, an earlier post led me to research coop vs condo price differentials. When we were looking, what I found to be the most surprising thing to me about NY real estate is that so many desirable buildings/areas require purchasers to have liquid reserves that are multiples of the purchase price of a contemplated unit as a simple rule-of-thumb guideline, but that is only the beginning of the analysis. The conventional wisdom in the rest of the country is that people tend to buy properties that are multiplies of their net worth, but in parts of NYC, you can only purchase properties that are a fraction of your net worth. Mercifully there are large swaths of NYC where this is not the case such that anyone choosing to buy in an area where leverage is not generally allowed are making a concerted choice to accept depressed liquidity for stablility, etc. and there are lots of other options for anyone who prefers greater liquidity, freedom, what have you. Seriously, nobody had explained that to me before, and I think it is one of the most important things for people to know when they are looking. So many young couples attracted to the low listing prices and low maintenance of buildings on Sutton Place and wasting time looking at listings whose boards they may have no chance of passing. Convoluted way of saying that one of the odd things about NY real estate is that the more financially secure one is, the less one has to pay for housing. I really feel for the dual income young professionals because I feel like they are the ones who really get squeezed in the market. If you can break above a certain price point, you get a lot more for your money. Not sure what that price point is today, but I am sure landlords and sellers are acutely aware of whatever it is.
Maybe New2me and foolishrenter will return to the water cooler.
Target does a much better job of making the point I was trying to make. In reading this thread, it seems like financeguy was saying those with high salaries and relatively low savings for downpayment need to go for coop (" If most buyers have more income than downpayment, coops will sell for a premium, not a discount, as they did in the '80s in markets directed as homeowners rather than investors. ") whereas Target was saying the opposite ("Condominiums are frequently more expensive because the financing structure is between a buyer and their bank. Co-op boards limit or prohibit financing, therefore the pool of available and qualified buyers is smaller, which drives the prices down somewhat. A buyer can purchase a condo with a higher value than his or her net worth. In a co-op with a fiscally responsible board that would not be possible."). I suspect Matsui explained the apparent disconnect when she said that Target's point might only be the case for high-end coops. Either way, you could not pay me to buy into a new condo building where only the banks are charged with determining whether the buyer can afford the shiny $4 million price tag. I would also be wary of buying into a coop with low downpayment/liberal financing rules. Are there any industry statistics on what percentage of coops in prime Manhattan require minimum 50% down payment these days? And what is the dual income professional couple buying these days - let's say they have savings of $500,000 and have annual income of $350,000 - are they buying condo or coop?
I don't really expect anyone to answer me and realize I am kind of talking to myself now, but I find this subject interesting. So much so, that I am now going to procrastinate further by reading the paper that NWT has linked above if the link is still live.
>I don't really expect anyone to answer me and realize I am kind of talking to myself now, but I find this subject interesting. So much so, that I am now going to procrastinate further by reading the paper that NWT has linked above if the link is still live.
Maybe you will get a response from New2me or NYCNovice.
So, I have spent way too much time procrastinating here, and found various threads on the issue (more good material for Streeteasy Dialogues cocktail table book). My thinking is "why would you buy a condo if you can afford an established coop?" but I realize there are many who feel just the opposite.
You should ask BBurg on this one, as she didn't buy in the East 50's (though she says she likes the neighborhood, and it was very convenient for her husband's office and her child's school) and went to a condo in Williamsburg.
Many people simply don't like the prospect of being interviewed by a coop board, and being told whether they can or cannot buy. That is much of the allure of condo's as well of sponsor sales in established coops (just look at the premium that coop sponsor sales, which do not require board approval, command).
And of course there is the other perception that condos can be rented out easily, without restrictions.
But, of course, the better condos do put a lot of obstacles in the way of renting - lots paperwork, high fees, etc. etc..
@ph41 - Interesting. Talk about apples and oranges. I am guessing Bburg (who I hope will answer directly!) must have been looking for potential appreciation in whatever she chose to purchase. If someone is approaching the decision from investment perspective, I cannot imagine east 50's would get much consideration, although I have to admit that I have no idea about this.
HBbburg was likely concerned about passing the co-op in part because of the source of some of the money she would have used for the downpayment .
The whole PCV lawsuit thing and diversion of state resources away from those the rent regulations were designed to support.
There could also have been the issue of educational credentials.
And if I remember correctly,BBurg wanted to buy, and did buy, with only 10% down, something no coop would have allowed.
@multi - don't you think that all purchasers, whether condo or coop, hope and think that their purchase will appreciate ? Potential appreciation is investment potential, especially when leveraged.
Oh yes I remember now, thanks Penthouselady. Bburgh was flagged as a sub prime borrower by her bank. She then tried to say her husband owned the entire law firm and that didn't work with the first bank. Eventually they found a bank. But remarkably irresponsible because the whole financial crisis was based on too low down payments by sub prime borrowers often in marginal neighborhoods like Hburgh.
And the building she bought into, didn't she find out right away about other owners who were already in default? Crazy. Not for Manhattan co-ops.
@ph41 - Sure, everybody "hopes," but if that is a real focus of your hunt or even in your decision to buy at all vs rent as Bburg had been doing, I suspect there are areas that will see more appreciation than the east 50's, particularly when you factor in that the most desirable buildings in the east 50's require 50% down, which gets to your point about leverage. When you describe Bburg's purchase, it sounds like one that is likely to yield her far more on the capital that she has committed to her purchase than mine ever will. Will my purchase appreciate? I hope so, but I really don't see that happening any time soon, and if/when it does happen, I do not anticipate it will be in any number great enough to make any real difference in my life.
P.S. - If anyone sees a purchase in the east 50's in a 50% down coop as a good investment given all of the other investment vehicles out there, I'd love to the case for it. I can think of lots of reasons to make the purchase, but investment is not one of them.
Let's say all-cash, to keep it simple, as lots of those buyers do. The rent saving on a nice one-bedroom is about $40,000 per year, or a 4% tax-free return on a $1,000,000 all-in investment. It's also inflation-protected, as equivalent rent would probably increase as maintenance does.
You could do better, I guess, but buyers might figure that $1,000,000 as money they'd otherwise have sitting in Treasuries or some other boring low-risk kind of thing.
Buying as AR did might be better, but I'd rather not have graffiti on my building, and not have to look at garbage on the sidewalk all week.
Oops, I meant two-bedroom for those figures.
@NWT - My thinking exactly. It is a great savings account with potentially more upside, plus I get to enjoy every minute of living there.