Co-Op or Condo: What's What?

Co-op and condo are two types of collective home ownership that are popular in the United States. While the two have some similarities, they are very different. In a co-op, you buy a share in the company that owns the building where you want to live. In a condominium, you buy a portion of the building. Both co-ops and condos have their advantages and disadvantages,

Understanding Co-Ops

The term "co-op" is short for "cooperative." In real estate, a housing cooperative is an apartment building or a group of apartment buildings that's collectively owned by all of it's residents. Each resident buys a share in a cooperative. In exchange, they get the right to occupy an apartment within the building. The more shares the resident owns, the bigger the apartment will be. Each resident also has to pay monthly fees to cover heat, water, electricity, insurance, real estate taxes and salaries. Some of those maintenance fees are tax-deductible.

Shareholders of the co-op are able to contribute in all the major decisions regarding maintenance, improvements, changes related to any aspect of their co-op. In smaller co-ops, all residents make the decisions directly. In larger co-op, they elect some of the residents to the Board of Directiors to make the decisions on their behalf. Either way, those resident associations make rules all residents must live by and ensure that the rules are enforced.

In order to join the co-op, potential residents must receive approval from the Board of Directors. The Boards tend to conduct rigorous background checks before they grant approval. In cities like New York, where co-ops are common, the process can get very time-consuming. In fact, the process can take so long that some potential residents wind up waiting months for an answer.

Understanding Condos

Like co-ops, condominiums are established in apartment buildings owned by residents. However, unlike co-cops, where residents own the building in general, rather than their apartment specifically, condo residents directly own whatever apartment they reside in. In some cases, the condo owners share the building with renters or retailers. This is known as mixed-use housing. Condo residents have to pay their own property taxes and they have to pay monthly fees to cover heat, electricity and general maintenance.

Like co-ops, condominiums usually have Boards of Directors or some other form of association of residents. They make the decisions regarding to maintenance, general improvements and other issues related to the building in general. Unlike co-op Boards of Directors, condominium boards don't screen prospective residents, though they may have the power to expel residents if they violate any of the building rules.

Condo Costs vs Co-Op Costs

Generally speaking, buying shares on co-ops tend to cost less money than buying individual condos. Condo buyers can use mortgage loans and other forms of outside financing. While co-ops may allow some form of outside financing, they usually require hire down payments. Maintenance fees tend to be more expensive in condos than they are in co-ops. Co-op shareholders can get tax deduction for some of their fees,


Sub-leasing occurs when property owners rent out their unit to someone else. Because condominium residents own their units, they are allowed to lease their units to anyone they want, whenever they want. However, condominium Boards of Directors may impose limits on what kind of rents the residents can charge. While co-op shareholders may be able to sublet their units, it tends to be a more complicated process with more restrictions.

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