co-op or condo

rent

Hahaha. I'm trying to figure out whether you are a realtor trying to sound coherent with a plan for RE investment in NYC real estate with the goal of selling in 2 YES TWO years, or a space creature who has just landed here and instead of the trite "Greetings, earthlings!" has decided to pose this question for comedy's sake. I guess realtor, trying to take advantage of misinformed people by making them believe there are still "investors" buying RE in this market. Even the heads of some of NYC's biggest real estate firms are accepting that NYC is going to go down (slightly, they say) or stay flat (hahaha) for the next few years. Buy as investment?? LMAO

There was a recent thread on this topic. You might want to check it out.

Rent.

FWIW, the condo probably has more downside risk. I doubt either property has any significant upside if your time horizon is really two years.

Regardless of the market, you should rent if your time horizing is anywhere below 5 years (at least).

That said, when deciding to purchase a coop you should consider the bi-laws and house rules - do they allow sublets? procedures for rennovations? etc.

Maintenance fees do seem high, but without further info it's hard to understand why (is there a terrace? high floor? what are charges for comparable places considering these factors?). Also consideer that maintenance fees include the interest on the building, which is tax deductable.

thanks for the comments.

I am thinking to purchase something for now and move into a bigger place in another two yrs, not necessarily for investment purpose but for primary living. But on the other hand, i would hope it doesn't lose too much value.

Hi uptowngal,

The coop allow sublets after two yrs owned. Each sublet must be for a term of 1 year (may be renewed) and is subject to board approval. The fee for subletting is $500 one time fee yearly.
no terrace, high floor might be the reason for higher maintenance.
76% tax deductable.

I am not a renter and if the market really not coming up in another 2 yrs, i would consider renting it out i/o selling.

Rent for two years, save, and buy the bigger place at that point. Two years is way too short of a timeframe for what you are looking to do.

nyccondo, I can't tell if you're joking, but if not:
1. Are you comfortable with the possibility of the value of your apartment falling 40-50% ?
2. Are you comfortable with the possibility of it taking 10 years to rise back to the value it is today?
3. Are you comfortable with the possibility of the price you can rent it out for dropping sharply in the next few years?

Uptowngal, what exactly are "bi-laws"? Or are you trying to say "by-laws"?

Your closing costs alone would kill you after only 2 years. What's the downside of renting with a 2 year horizon? My problem with renting is the possibility of having to move every 2 years... but if you're doing that anyway, so what?

Let me answer the ACTUAL QUESTION: The coop is better. It's larger, yet cheaper, and it's in a more residential area (I think you will get sick of being on busy 42nd St.)

Also make sure the condo's tax abatement isn't about to end. Common charges and tax can be deceptive at the beginning of a condo's life. The taxes are often abated for a few years, and then wham.

Also, in a coop, and especially in a downturn, your neighbors will be better vetted, more financially secure to support the building's needs, and you won't be subject to as many random renters. I think it's a better value proposition and more likely to hold its value than the new condos that are cheaply made.

PS I think you will find that trying to go out to eat dinner in the viscinity of 42nd street is very frustrating, unless your idea of a neighborhood joint is Chevy's TexMex. You'll be much happier with the restaurants in Murray Hill. Just walk around the two areas and picture yourself there. Have dinner there one night, etc.

Thanks Yog, great advise. I do like the location more for the coop. the only thing is the co-op aboard might not be as easy and the CC is extremely high for a 850 sq ft.
the condo is 10 yrs tax abatement and it is on it's third yr now, so seven more to go.

The co-op is by far a better choice, location-wise at least. Hell's Kitch is an armpit. I cannot imagine anyone wanting to live on 42nd St.

Also, while prewar buildings have their quirks, they are generally far better built than new construction, which is flimsy by comparison. It is true, though, that the co-op you are describing does have a rather high maintenance - I'd want to know whether the building's finances are sound.

You should really consider waiting, though. It is clear the RE market has not yet hit bottom and if you're not even certain you'll want to live in the place for more than two years, what's the point of risking a buy low, sell lower scenario if you can avoid it?

**Uptowngal, what exactly are bi-laws"?**

Bi-laws are by-laws for bi's.

I'll reiterate the strong "rent" recommendation, but I also would like to point out that while 42nd is crowded with tourists near Times Square, it's desolate (and not in a good way) all the way west, which is almost certainly where the building in question is. If you drive everywhere you go, maybe that's not so bad. Otherwise you might as well not even live in Manhattan.

yes, squid, I meant by-laws. snoop, thanks for clarifying (lol!)

nyccondo, the coop fees still sound rather high - I suspect that, given the 76% deductability, the building has a high underlying mortgage, which might be a driver. You should look at the latest financials (have an atty do the same) to get a better feel for how well the coop is managed financially. Also find out how often they've raised fees, have there been any recent costly rennovations or upcoming (can raise fees) how much is in the cash reserve, assessments, etc.

;-)

That's $1.76 per square foot on the coop maintenance fees. Definately high. You should make sure to look at financials and have a thorough attorney review. Also, it might be a good time to look for comparable apartments in the same area that have lower maintenance. Keep in mind that the high maintenance is one reason you are getting a lower sales price on the apartment.