How much $$$ do you need to be approved?

I think that is a little tight for a $2k per month maintenance coop. But a coop with lower maintenance say $1500 closer to 1st/2nd ave may work.

I’m with 300 here and contemplated a reply earlier but he said it better.

Consider that at 90k you may not want to be approved for a building with 2k monthlies for your own good.

UES is high cost of living and you will find it challenging above and beyond your apartment monthlies at 90k.

I would add that unless the building's underlying mortgage has been paid off, you are looking at a significant increase in maintenance once the coop goes to refinance its mortgage.

Most commercial mortgages are structured as 10/15-yr interest only, with the "balloon" principal payment at the end of this term. This means that a building is forced to refinance the mortgage every 6-10 years and will eventually have to pay a higher interest rate, which could easily double the amount of mortgage interest within maintenance.

Also consider whether the mortgage is paid off or not, in a staffed building the monthlies will increase at a rate greater than inflation, up to on average 2x inflation.

You are also liable for assessments which can come up every 5-10 years and be equal to 3-24 months of monthlies in one shot. In old coops this type of thing comes up due to regular facade work, elevator refurbishment, boiler failures, etc.

And then of course actual maintenance/repair within the 4 walls of your unit as appliances age, various water fixtures fails, HVAC needs upkeep, general kitchen/bath wear&tear, etc. All of which is 2x as expensive in NYC.

Also remember Manhattan coops are generally agreed to be undertaxed relative to most other city RE, and as the city faces budget conflicts they may eventually rectify this.

NYC DOF is vengeful, for example my building fought for years to get the primary resident abatement properly recognized for residents, and when they finally capitulated they also raised taxes building wide by 25% .. wiping out the 18% savings and then some.

Thanks for all the comments. The current income isn’t the issue as we have savings to draw from in addition to the income. Since we’re paying cash we wouldn’t have a mortgage. I’m just curious, what amount of assets a board would consider to be “acceptable”?

Typically a co-op board wants to see 1 to 2 years worth of carrying charges liquid post close with a debt to income ratio below 30% ideally around 25%.

They will also be looking at the source of your income, and how things such as interest rate risk and stock market performance could affect it In the future. You may find some boards that are okay with your finances, but may want one year's worth of maintenance payments put into escrow.

Also, above they're talking about the co-ops underlying mortgage.

Keith Burkhardt
TBG

@ theburkhardtgroup Keith, Thank you for that detailed response. That helps. It sounds like they are not looking for a huge level of liquidity if it’s 2 years worth of carrying charges, say around 50K for an apartment with a 2k monthly nut, if I’m reading your answer correctly.

Prefacing this comment with the disclaimer that I believe coop boards are financially incompetent. With that said, as an incompetent board member, for applicants of your age who are retired, I would want a net worth of $3,000,000 with a credit score above 800.

To all the financially literate, please discuss. I recall throwing this question out to this forum when our board was actually considering a retiree whose net worth was significantly lower than that of others in the building, and I believe the consensus of the financially more adept was that our board was being ridiculously conservative. Your analysis swayed my vote, which, in turn, swayed the vote of other board members. Please refer to my opening statement: Coop boards are financially incompetent.

Just to turn this around a little bit, and speak from what I would call a practical point of view. What do you think the probability would be of GeorgeP defaulting on the maintenance payments and losing his $600,000 of equity in the co-op, with $90,000 of income? However, in GeorgeP's case we need to understand the source of the income outside of social security. I'm also assuming he has no other debt. And certainly what we do know about his finances would not work for Sutton place Co-Ops or Park avenue corridor co-ops.

Also something to consider, only a little over 1% of the US population has a net worth of $3 million dollars.

Keith Burkhardt
TBG

@Keith - fair points, but I'd also ask who else lives in UES co-ops other than the 0.1 to 1% ?
Unclear on what the size/composition of GeorgePs net worth is and that's going to matter to the board. Just to put some hypotheticals ..

> However, in GeorgeP's case we need to understand the source of the income outside of social security.

Agreed!
Composition of assets is just as important as quantity. Assume $40K of the $90K income is SS.

Is the $50k income coming off a $1M portfolio of treasuries?

Is it coming from $4M of Mag7 stocks + $1M in treasuries?

Is it coming from $5M of RE that has $3M of debt against it?

Many scenarios in between, and I'd also point out boards are probably going to put a liquidity/risk discount on RE & stock portfolios.

To clarify, the point I was trying to make was how many people buying $600,000 apartments have $3 million in the bank.

@steve123 - exactly. There are so many variables; each applicant is unique.

Hi Keith - I had not fully internalized your earlier posts. Not looking for $3M in the bank; just ball-parking $3M in net worth, and you and Steve both hit on the composition of the assets as being important. And as everyone noted, it is not the applicant's portfolio that is unique, but each building is unique. I would require deeper pockets for my building than I would for one that was appreciating or even staying flat. We do have some smaller apartments, not as low as $600K, but below $1M where $3M net worth is the norm.

I really love Sutton place, but darn those boards can be very unreasonable. Recently submitted an offer from very well qualified buyers, one worked at one of the most preeminent hedge funds in the world. Seven figure income, seven figure savings after closing all cash. We sent in a financial package for a board member to review, they said thanks but no thanks. Oh well, what's 365 days on the market...

There are 150 one-bedroom co-ops available on the upper East side with asking prices under $700,000. I'm sure one of them will take you. George ; )

> Also something to consider, only a little over 1% of the US population has a net worth of $3 million dollars.

It's interesting that even the 1%-ers still have difficult time to buy a tiny one bedroom apartment in UES, LOL

While in the working class borough of Queens, the coop board is much more friendly. Most buildings only require 20% down payment and debt to income ratio between 25 and 30%, basically the similar requirements used by the banks for the traditional mortgage.

@keith - I have significantly lower net worth threshold for those who are working/up-and-coming than for a retired applicant or one that has never been gainfully employed.

For young professionals, net worth is not a factor for me but rather potential and ability to carry the apartment for a few years while trying to sell and potentially sustain a loss were the income to evaporate.

*it is not ONLY the applicant's portfolio that is unique, but ALSO each building is unique.

I can only speak for myself and what I know of the actual thinking of others who sat on my building's board with me over the past year, but the bottom line for all of us/our sole focus was "Can this prospective purchaser comfortably afford the building with a cushion for unforeseen personal expenses as well as the regular assessments on top of maintenance that are inherent in a pre-war building." Tons of variables, and all I can says is that we did the best we could.

I will also add that during the 10+ years I have been in the building, there has only been one board turn-down, and I wasn't on the board at that time so I don't know what the reason was. I think the buyers (or more likely the brokers) do a good job of self-selecting such that the board has rarely been faced with difficult choices.

Thanks for all the input. I’m getting the impression that even though we'd have no problem paying $600k cash for a unit, we’re still not “rich" enough for the UES. My wife isn’t keen on coops anyway, due to potential problems selling down the road and the flatness of the market, so perhaps it’s just as well for marital bliss.

What alternatives are you considering?

We’ve been traveling globally full time for some years. Might hold off on settling down to continue that and look for a long term visa overseas. Yeah, I know it sounds like a crazy alternative.

Sounds like a great plan!

Nice! And you can rent an apartment in NY now and then if you find yourselves wanting to spend time in the city. We rented for three years before we ultimately made a long-term commitment to NY via purchase.

https://streeteasy.com/building/425-east-51-street-new_york/1e

@GeorgeP - This one is not UES per se, but the building has a reputation as being the closest to a coop with condo rules as one can get in neighborhood with a board that is all business. I believe the numbers would work for you and that you have enough $$$ to be approved were it to interest you. If you have never checked out the neighborhood, you should. I had never heard of it before walking the streets and finding it by following the dog walkers. It is not for everyone, but if it appeals to you, I believe the apartment above would be an option.

keith, the hedge-fund world is a sharp-elbowed world; it might not have been the financials...

Multicityresident, Thanks for the tip. Looks like a neat building.