If the question “What is a co-op” has been playing through your mind lately, that means you’re probably heavily considering buying a place in NYC, where co-ops are a big part of the home-buying landscape. Congratulations: You’re about to embark on one of the most exciting, challenging, and ultimately fulfilling rides of your life. Buying a co-op in NYC is a process quite unlike buying a home anywhere else, so familiarizing yourself with the ins and outs of it will help you figure out if it’s right for you.

What Is a Co-Op?

Buying a co-op in NYC doesn’t mean that you’re buying the apartment itself. A corporation owns the building the apartment is in, and you’re buying shares in that corporation. Once you’ve bought the shares, you’ll have a proprietary lease, which will entitle you to live in the building. The amount of shares you have in the corporation will most likely depend on what how large and expensive your apartment is; the larger and more expensive your apartment, the more shares you’ll own. Here are some key points to keep in mind.

1. Your lender will need to approve the co-op before it approves your loan.

Before approving you for a loan for your co-op, your lender will check out your co-op to make sure its finances are in good condition. Work with a real estate agent and a real estate attorney in order to make sure that the co-op you’re interested in has good financials before you move ahead.

2. In addition to paying for your own co-op loan, you’re going to have to pay monthly maintenance fees.

Once you work out how much you’re going to have to pay each month in order to pay for your co-op loan, you’re going to have to make room for the monthly maintenance fees as well. Those maintenance fees will be used to pay for everything necessary to keep the building running and in good order, including things like salaries for the workers, real estate taxes, the building’s water bill, and repairs. You’ll also be contributing to the payment for the underlying mortgage of the entire building.

3. You’ll need to come to the table with all your financial information wrapped up tightly and ready to go.

If you’re the type of person who’s generally uncomfortable sharing personal information, get ready to be ripped out of your comfort zone. You’re going to have to come to the table with your financial fingerprint, including several years’ worth of tax returns, pay stubs, and bank statements.

4. If you’re planning on renting out the place, check out the co-op’s rules before signing on the dotted line.

Many people intend to increase their bottom line by purchasing and then renting out co-op apartments. If you intend to do this, check out the co-op’s rules regarding rentals before signing your contract. Some co-ops have very lax rules regarding rentals, while others refuse it outright or have extremely tough restrictions. You’ll need to find out if the co-op’s rental rules are worth your financial time.

Image Source: Flickr/John Weiss

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