New Mortgage on our Co-op building itself?

shameless attempt to keep this active and hoopefully get some info. ....

i am far from expert but here is what i know.

decision to take out mortgage depends on various owners circumstances and desires, i.e. some people would rather pay an assessment (or series of assessments) and be done with it and keep maintainance low and others would rather not reach into their pockets for a large sum. interest portion of any central mortgage become tax deductible.

bank will loan money based on financials of the corporation not individuals. if the co-op defaults, the bank will take over the building and resident owners could lose up to their investment in the building but like any other corporation, liability is limited to the corporation and does not extend to the shareholders beyond their equity in the building.

no idea of what kind of terms (if any) are available to co-ops in this current market...needless to say, up until a short while ago, banks were throwing money at buildings.

my caution is that we all have a tendency to spend borrowed money (no kidding!) much more easily than money for which we reached into our pockets. if you are interested in controlling expenditures, I would vote to severely limit any borrowings and make people pay in current dollars.

I would try to convince fellow cooperators that upping the maintenance for/by tax-deductibility of interest (from underlying mortgage) is a fool's game at any tax rate.

qwerty,

If the building is an established coop with good financials most lenders wont ask for personal guarantees from the residents. The rates are very competitive, 4's to 6's depending on the loan size. You may also want to look into a revolving line of credit, it will be less expensive for the coop to close on.

Most lenders require the corporation to maintain an interest bearing account in which the funds can be used to pay the mortgage if the corp misses a payment. If for some reason the loan falls into default, the lender could technically take over the building but not the individual units .

Thanks all.
My thinking is along the lines of: if we're making improvements to a building that will last 30+ years, shouldn't they be paid over 30 years (with a mortgage) rather than all at once with an assesment. I guess low maintenance is a good selling point if an owner wants to sell but it likely won't be enough to re-coup a huge assesment paid by the current owner. Am I missing something?

?

yes...this is how the entire county got into the mess we are in....if you think anything lasts for 30 yrs, guess again.

"if we're making improvements to a building that will last 30+ years, shouldn't they be paid over 30 years (with a mortgage) rather than all at once with an assesment."

Are you going to find a contractor who will wait 30 yrs to be paid in full?

"Am I missing something?"
Realize that just because an improvement is expensive, doesn't mean it will last it's entire 'useful life', like a roof or boiler.

Suggest you speak to the bd's accountant.

i can't help myself...we all want something for nothing, or for less than it costs. it used to be, if you needed a roof, you saved and bought it. not, always borrowing on the come and then wondering what happened.

pay for what you want (need) when you buy it...

why pay mortgage interest? Are you getting 4 - 6 percent on your money elsewhere?

Columbiacounty: thanks for your thoughts. Did you save-up and pay 100% cash for your apt./house?

Sometimes it does not make economic sense to pay cash (ex. when you're paying a large share of a $250K new facade to a small brownstone co-op that you might not be living-in 2 years hence). In other words, a mortgage would allow one to pay the contractor when the work is done (despite "dwell's" confusion) but the true cost would be spread over say 30 years (and shared by future owners i.e. not me).

Manhattanfox: I'd only be paying interest for a limited # of years...plus I'd save the opportunity cost of the outlay I'd otherwise have to make if I paid for with an assesment.

hell no...but when i remodeled i paid cash...big difference...don't put on the new facade if you're not going to there in two years unless you have a sure sale lined up. lets be damn careful about getting future owners to pay for today's spending.

you mean like bush making us gen x'ers pay for his adventures?
yeah, i brought politics into the mix, because i was bored.

And i tend to agree with C.County qwerty....paying 100% cash for a home is far different then paying 100% cash to make it look better.

Its not up to me on the timing of the new facade, the coop decides, its a safety/ maintenance issue. All I can do is influence the method of funding (that's the whole point)>

A new facade is not a cosmetic expense it is necessary.

I think it would depend how many units are in your co-op. If there are many, and you can spread the burden around it might make sense to get it out of the way now. Keeping maint low is very important, whether you want to sell or not. THere are often many people in co-ops on fixed incomes and low maint is key for them. If you consider the time-value of money, and that we are probably due to inflation (once this recession ends) as well as tax increases, you are going to want to have your future costs as low as possible. Also, the less debt you have now, the better position you will be in to obtain credit if you absolutely need it in the future. If it's a very large co-op just do an assessment and grin and bear it. Are these "renovations" truly necessary? Aesthetic? Can thye be scaled back? Or are they major capital improvements, like repointing or the roof?

Not confusion, sarcasm.

"but the true cost would be spread over say 30 years (and shared by future owners i.e. not me)." IMO, you're not thinking about it correctly; you're intellectualizing re: amortization & future owners. So what if future owners pay? If the roof/boiler, whatever, must be replaced now, then it must be replaced now. This is a qu for the bd's accountant. But, if ya gotta do the work, ya gotta do it, the qu is how to do it most economically sensible.