Coop Liquidity Question

Your real estate holdings are not liquid, no matter how much equity you have in them, or however easy you think they would be to sell. They will not be counted towards post-closing liquid assets, which are generally a combination of cash in banks and marketable securities not held in retirement accounts.

ali r.
DG Neary Realty

Why don't you put a small / conservative mortgage on the house and pull out some cash to help with your RE purchase? Also make sure you're reporting your rental income as income on your package (assuming it is on the up and up, reported on your taxes, etc.)

Thanks to you both. Freebird, that's an interesting suggestion, but seems totally counterintuitive to me. I understand the desire for "liquidity" on the part of the board, but in my view the modification you suggest would seem to diminish the quality of the application, since I would have the same net worth, but more debt, albeit slightly more liquidity. In any event, I suppose this is the only viable work around if I came across something that I wanted to hop on rather than wait a bit longer. Thanks again.

The RE holding you describe might actually be cause for some concern. It is a holding that requires upkeep and while it generates rental income it also can eat up your disposible income if something goes wrong. At best it is a neutral asset--not at all a liquid asset. At worst it is cause for some moderate concern if you are not otherwise sufficiently liquid.

Hopkins, Do not confuse liquidity and net worth. Liquidity means cash, near term guaranteed cash, or assets which can be converted to cash in say less than a month. Let us you lose your job and your asset is your investment apt. You are not liquid but not poor either.

Greetings. How do coop boards look at retirement accounts from the standpoint of liquidity? I'm in contract on a 1BR/1BA on the UWS. I'm putting down the building's requirement of 25%. I gave them 10% earnest money. After handing over the remaining 15%, I will be left with accounts containing 300K (slightly less than half of the apartment purchase price), but only 30K of that will be in a brokerage account. My broker's answer is sort of all over the map, although in general I think she's good. She says that they look at retirement accounts as 50% liquid (in which case, I would have 150K liquidity), but she also says I should try to get my parents to stick money in my brokerage account or do whatever it takes to get that brokerage account up to 100K. Please advse. Thanks!

This is why I HATE FUCKING COOPS !!!

^ Can't help but laugh at how different people are. This thread describes exactly why I *love* co-ops! I agree that they err on the side of conservatism, but it severely dampens the chances of neighbors stiffing other neighbors in terms of upkeep.

Not trying to hijack your thread, OP. Good luck with your decision, and I hope you find a great apartment that appropriately suits your needs. :-)

I love coops. They are even more illiquid than condos. Perfect!!! Put a guy like NYCMATT on the "can I sell my coop" lever!

@ gcondom ... BULLSHIT ! I know coop ownwers that have paid tens of thousands in maintenence meanwhile they have willing buyers waiting because of boards redtape bullshit.

Interesting thoughts. I always believed that 401K assets did not receive any credit from the BOD as far as inclusion in post-closing liquid assets. I would assume that this has to be the case if a real estate investment cannnot be included in the liquid asset calculation (even with some kind of haircut).

Anyway, I understand the principle behind this board requirement, but it's application seems pretty goofy. For instance, while my real estate investment is not without risk, in many ways it is a safer investment than a lot of "liquid" investments that could be wiped out the day after closing. Moreover, what's to stop someone from going out the day after closing and spending the "liquid" assets on new furniture and renovations that would immediatly reduce a large part of the value? One might consider a real estate investment much more stable and certain -- which in some ways would seem to be more desirable to a board than cash that can be spent instaneously. Regardless, those are just the rules of the game I suppose.

Agreed, Hopkins. I'm amazed that in this era of sophisticated computer modeling of everything from derivatives to baseball fielding ratings, we can't accurately estimate a rational "markdown" of non-liquid, but non-zero-value, assets, and so instead we have buyers doing things as ridiculous as obtaining a *mortgage* just so that they can have more cash in the bank (but thus the same amount of additional debt).

The silver lining for you is that the income you receive from owning that asset, or a portion of it. presumably counts in your favor.

rc10000, the agent is waffling because the agent doesn't know. Which is a pity because this is easy enough to find out.

It depends on how fussy the co-op is, but the usual standard is 1 to 2 years' worth of housing payments (maintenance+mortgage if any) in liquid assets at closing.

It doesn't sound to me that you meet that standard. Perhaps the co-op will accept 6 months' worth? Or perhaps I am guessing wrong about your expenses.

Ask the agent (broker) to look up on OLR or RLS or whatever they use, and get the name of the building's managing agent. Then have the agent call the managing agent (it will be a name like Century Management or AKAM, a company not a person), and ask to speak to whoever is the point person for that specific building.

And that person will know the answer to your question.