What is a co-op?

Co-op is short for cooperative housing. It’s a membership based legal entity that is a form of residential housing. I have heard the term apartment cooperative. These types of units range from prestigious units to practical and affordable units. Consider it as another form of residential housing, to go along with condominiums and single unit dwellings.  

Are co-ops Real Property?

Unlike condos or single-family homes, co-ops are not considered real property. Co-op residents own shares in a specific building and have use of a specific unit. Prospective share owners are well vetted since they collectively pay for the management, maintenance, and upkeep of the building.

Co-ops offer tax benefits

One of the primary reasons for co-ops are lower expenses and the fact the building is not managed for-profit.  Additionally, owners get the tax benefits of homeownership, including real estate taxes. In other words, they can deduct their share of the mortgage interest rates and property taxes.

Co-operatives are tightly managed. This can limit how units can be used (eg, Airbnb units). Since shareholders are vetted, the likelihood of defaults on loans is less likely to occur.  

Here are 5 Benefits of purchasing a co-op when compared to a condo.

  1. Purchasing a co-op is less expensive than buying a condo
  2. Co-ops offer more financial stability
  3. Co-op foreclosures are not likely to happen
  4. You can expect higher occupancy rates with co-ops
  5. You get a better deal on square footage.

What is the downside of owning a co-op?

  • There are more restrictions on renting your co-op
  • Co-ops require a 10-20% down payment
  • The number of lenders for co-op properties is small.
  • The approval process takes a longer time
  • Monthly fees may be higher than a condo.
  • It’s more for living than investing

Summary:

The co-op offers a more affordable option in housing. Consider what is best for your family. If you are likely to move in 3-5 years, it may not be an ideal option. If you are thinking of settling down and want to live in a specific city, then it’s worth considering.  Loan interest rates are usually competitive. If you are considering the co-op, then check with Sela Homes. They can be a valuable resource.


Haugh, Robert. “Santa Clara to Help Local Businesses Create Worker Cooperatives.” Santa Clara News Online, 4 Mar. 2021, santaclaranews.org/2021/03/04/santa-clara-to-help-local-businesses-create-worker-cooperatives/. 

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