Cash Purchase

it all depends on your post down payment liquidity and your earnings. if the 2 coops remain empty for a period of time, they should not have a significant effect on your finances.

Thanks ab_11218. So is it better to buy my primary residence lst? I will still have sufficient savings after the purchase of the investment properties as I'm selling my current residence.

Just trying to make the best decision possible.

if you're getting a mortgage, it is always best to show no liabilities. for a bank, a rented coop is looked at as liability. you will not have it long enough to show yrs of rental income that bring in a profit.

I'm in the process of applying for a mortgage loan and it's unbelievable the amount of documentation they're requesting to verify my income, liabilities, and the mere fact that I won't default on the loan. I highly recommend that you buy your residential property first, then buy your investment property with cash. Cash buyers are much less scrutinized and more or less you need to show that you have enough cash to purchase your property without having to go through a bank.

When you have your board interview for the co-ops, please do not forget to mention that you are buying for investment purposes and planning to rent out. They will look very favorably upon that and will help you in getting approved from the board.

Are you sure you can rent out these co-ops indefinitely & from day one? What happens if they change the bylaws of the corporation in the future?

apt_boy, are you serious??? Coops typically do not allow subleasing, as far as I'm aware.

coop as an investment property... interesting. I hope you like a future board dictating what you can and cannot do with your investment, which is not an investment in real property.

@sdeniseed

the main two (and probably only two) advantages of a coop over a condo are that it can fulfill the same function (be your home) at a cheaper price and gives you some sort of control on your neighbors before they move in.
After that, it is much less flexible for resale or renting and is certainly not the best way to invest for renting in RE.
If the coop amends the laws, if you can even find a coop that will let you buy it to rent it "forever" (members of the boards live in a coop for a reason) in the first place, you might not be able to rent it, you will also have to find a tenant who is willing to go through an interview, a tenant that is accepted by the board, it will be lots of time where the property is not rented. RE as investment, there is appreciation and either rental rate or utility of home, renting a coop you give up part of the second one, it s just not meant for that.

Buy your residence first, coop or condo depending on your preferences and what you can find, and then buy condos as investments. Either you are joking or unaware of some facts or are in a very special situation to be already decided to buy coops as investment, in the latter case please explain more.

Go with a condo for your investment property. You tenant must still go through a board review, but it is based on financials and a background check. If they deny your tenant, the board has to rent it at the same rate given to your tenant.

However, you would want to review their application, etc. before it is submitted to verify that they will not be a problem to you as the landlord. Boards mostly want a 1 year rental minimum.

Beyond why anyone would purchase a co-op as an "investment property," note that whether or not you pay for them in cash, the bank will consider maintenance as an expense against your qualifying cash flow. The bank will NOT consider any rental income until at least one year's income is on your tax forms, whether or not you have a lease and a check. It MUST be on your tax statements.

Fannie Mae will allow a loan with rental income on one year's tax statements and a lease and a check for the second year. HOWEVER, most banks will not - they will require TWO FULL YEARS' rental income from the properties to be shown on your tax forms. That means that no income will be counted against those expenses for nearly 3 years.

Then, they will only allow 75% of the income-tax stated rent to qualify against 100% of the expenses. You will also need to have a 6 to 9 month reserve for all maintenance expenses, regardless of whether the unit is rented.

In addition, note that because of new underwriting rules, not only co-ops, but also condos are now limiting the number of units rented within a complex because people can't get mortgages if there is too much subletting. Don't take it for granted that even if today they allow you to rent your units out, that you will be allowed to rent them out in the future.

Proceed with caution - you might not be able to buy for 3 years if you proceed as stated.

Thanks everyone. Very good information!!!

sdeniseed - as long as you can carry all the liabilities, you should not have a problem. Also, the primary residence purchase must be obvious that it will be your primary residence. sunny.hong@decapitalmortgage.com
NMLS 483661