Housing Co-Ops Are Different

Co-operatives cost considerably less than a condo but you'll have to save much more for a down payment. Some buyers find co-ops too restrictive. Yet it's a good choice if you seek an affordable, long-term housing and living in a close-knit community.

How Housing Co-Ops Work

Co-ops are more than just another form of property ownership. They make housing communities whose residents work together to run them.

Members of such a community own shares in a co-op corporation. They've the right to occupy individual units in a property, which belongs to the corporation.

Most co-ops forbid subrenting to preserve their resident owner character, and they have strict admission criteria. Either you or your buyer will have to be approved by other members.

Co-operatives are self-governed and they strive to be cost-efficient. Usually, they hire other companies for specialized services, such as property maintenance or management.

However, all members are expected to participate in the community and do some work themselves. They serve on a board of directors and various commities, attend meetings or even do some manual labour.

In retun, they have a better sense of belonging to the collective and more control over decision making.

Although co-ops cost much less than condos the majority of buyers don't qualify for financing. Collaterized shares carry more risk, so lenders ask for a 30% down payment and they charge a higher interest.

These entry barriers induced a niche sector which offers the best value for the money. If you can surpass them and don't mind co-op arrangements, you may find a high-end property at an amazing price.

On the other hand, you may consider co-ops less appealing than condos. There're more limitations on what you can do with a unit, and you may not have enough time to be an active contributor.

Condominiums are so popular because they don't require a large down payment. It's much easier to buy and sell them, and they appreciate better.

Co-Ownership Is A Hybrid

A tiny portion of the market is made up by property co-ownerships. They're a trade-off between condos and co-ops.

There's no title for a single unit. All co-owners are registered on the title of a building. Each individual owner has a share in the whole property and can occupy a specific unit.

Co-ownerships are priced like co-ops, while being less restrictive. For instance, like with a condo you won't need the permission of others to sell and rent, or mortgage your suite.

What Are Co-Op Types

In general, cooperatives can be divided into two distinct tenure categories - non-profit and market co-ops. The difference between them is often misunderstood.

  1. Members of a non-profit co-op are prohibited to make any gains from the project. These co-ops are publicly funded and they function rather like rental apartments.

    Shares have a very low purchase price, roughly equal up to three monthly fees. They can't be sold and members get the money back when they leave the co-op.

  2. What we have focused on is a market co-op, which is often called for-profit. Share prices are dictated by the market. You're free to sell own share if other members approve your buyer.

    For-profit does't mean the co-op makes money running the property. This name only refers to the profit you could make upon the sale.

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