Coop going Condo .. too good to be true?

Don't all the current shareholders need to pay capital gains taxes, as if there were a sale? For some, the $250/500K exclusion would make that irrelevant, but for others, not so much.

alan, that's point number 3 above,...any other pitfalls?? the borkkker is waiting for my wordd..graziiiiii

How much are all of the fees involved converting to condo, and how does the co-op plan to pay for them? I can't imagine this is an inexpensive process.

Re: #2, the sponsor's tenants don't matter. The sponsor just goes from owning shares to owning units.

I'm wondering why the seller is handing you the condo premium with a bow on it, if the conversion is so likely. Wouldn't they just wait it out and get the extra money for themselves?

I'd check out the 80% threshold. It might be 100%.

1. there are several important differences
2. a coop's lien for maintenance is superior to that of an after-reecoreding lender
3. in condos, the HOA's lien for unpaid charges is inferior
4. that can lead to a loss of common charges in the event a uniut is sold for less than its mortgage amount
5. also, recording taxes on condo mortgages are about 2.4%; coop liens can be recorded for pennies
6. the owners/borrowers oay those fees
7. you also need to file an amendment toy our offering plan with the NYS atty general
8. if you call 212-416-8123 (Real Esatte Finance Bureau" they can help
9. might only require a letter
10. you will laso need an architetd to plot draft plans for each unit that can be filed

ss400k, point #3 is "taxes increase", which is also true on an ongoing basis, for real estate taxes. My point is that there's a one-time hit for capital gains. As if the apartment were sold, even though it's not. So what you mean to reference is something like point #2: current shareholders in the co-op have rights and will fuck up the process ... just as you would if you were in the same situation.

Bear in mind that virtually no coop in Manhattan has successfully navigated such a conversion, even during the greedy years of the mid-00s when coops were seen as nothing but a great big drag compared to condos.

Also you should check with your lender but I assume you will need to get a new home loan because the loan's collateral will change with the conversion.

alanhart
about 1 hour ago
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ss400k, point #3 is "taxes increase", which is also true on an ongoing basis, for real estate taxes. My point is that there's a one-time hit for capital gains. As if the apartment were sold, even though it's not. So what you mean to reference is something like point #2: current shareholders in the co-op have rights and will fuck up the process ... just as you would if you were in the same situation.

http://tinyurl.com/29qcfu7

re: refinancing my personal loan.. what if i pay co-op cash?? what's left to refi (since co-op building mtge is already paid off)? no prob there??

re: capital improvement assessments.. agree they'll probably charge us.. but what's $95k per unit or whatevs when i get $200k extra equity just for goin condo? (using conservative ballpark SE numbers in condo premium for nabe).. you can say the same for closing costs/lawyer fees..HOA condo fees will probably lower, taxes obviously higher

re: capital tax gain.. assume the process will take longer than 2 TAX years, and if i buy and live in it now i can claim the capital gain exemption.. further more, using 33% tax rate PRIOR to any home acquisition/property tax deduction, i still come out on top if i pay cap tax gain sale on price (which i can do with cash) vs what i can get (conservative estimate) with new equity..

re: why this particular shareholder doesn't stick in 'til post-conversion, its an estate sale.. the dude passed away (RIP, spill some henny), and his rich kids with family crap/school/vacations etc want cash now for the unit, not a year or 2 down the line when actual conversion is done.

what else am i missing?? tell me im a fool.

You're a fool.

The building is NOT going condo. You're intensely focused on YOU (re-read your last post) ... but the condo conversion process stinks to high hell for the majority of existing coop shareholders ... especially if the building converted in the 1980s at insider prices, and doubly especially if there are still a lot of shareholders who bought at those prices and would be stuck with capital gains taxes.

The first thing you should do is find out how many Manhattan coops converted to condo in each of the last fifteen years. Report back.

alan, i want to be a fool, but everything you say has been negated per above..

ie building was never converted prior..

re: capital gains tax..use 2/5year exclusion.. if i dont use that, the new equity can pay for the taxes itself (though i can pay cash pre-conversion)..

i've already called this process rare, but i found quite a number of conversions with search prior to posting, and these 3 problems (one of which is yours) seem to be the biggest problem.. which i've all negated per explanations above..

No, you are addressing ("negating") issues with regard to YOUR needs, but not with regards to the OTHER shareholders' needs. Vote fails. No condo.

Add to that the culture of a coop that allows no tenants, and you have a bunch of people who will not want the freewheeling environment of an urban condo. Vote fails. No condo.

And out of curiosity, this was built as a coop ... when?

Also, which successful coop-to-condo conversions did you find?

ok alan, so now that we cleared out the capital gains rate, you jump to voting issue, my last line addressed in OP...

30 west 90th street is one instance where co-ops sat for years unsaleable then sold within months after conversion...

there are examples of others, more recent.. google is your friend..

so far you haven't convinced me, i want you to tell me im a fool, but back it up!! graziii

Cut to the chase, how likely is it that 80% of more current tenants will go for this?

I don't think you can rely on people being willing or able to pay capital gains tax.

I think what Alan is trying to say is that you may end up with a coop when you wanted a condo. That is the risk. But on the other hand you're only paying a coop price, so you're not really losing anything. It's just that the gains of a condo conversion have a good chance of not materializing for you, because the other shareholders will probably vote no.

Yeah, you really need a strong sense of how far along the co-op is in the process and what has been communicated to the shareholders.

This is one of those things that sounds great. We'll become a condo and everyone's property values will go up by $200k! But are the shareholders aware that they will need to pay capital gains tax, that they will need to take out a new loan if they have debt secured to their shares, that they will likely be assessed a large amount of money to cover the conversion costs, that renters will be allowed in the building after years of no subletting allowed, etc., etc.?

You need an insider to tell you how far along this idea is and how much support it really has. It's very easy for one person with an agenda to use propaganda like "property values will increase $200k" to get residents all excited. Have the 80% in favor truly made an informed decision, though, or are they likely to change their minds when they get all the facts? When they hear the pleas from the 20% who can't afford the conversion costs tell them this process will mean forced sale of their homes, etc., etc.?

Just some things to think through. And, remember, potential is potential (says the person who bought an apartment hoping to annex common space with the realization that I may not ever be able to do it). Don't buy an apartment, especially a co-op, if you would be unhappy with the status quo.

Expect any windfall prospect to be priced in already, and more so as/if it moves closer to happening, because everyone else (and their kid brokers) will salivate over the free money, and be willing to pay a premium over a comparable coop.