What goes into buying a co-op???

My FI might be buying one (pending me getting a job). We are looking in Queens.


What do you look for??? What kinds of things do you have to do to buy one???

TIA

Kathleen,

I know with a co-op you have to be approved by the board?( which is not hard form what i heard)Where in queens? there are a ton in bayside and whitestone neart my mom but let me tell you they are $$$ for a bit more money you an get a HUGE house in Suffolk.I also heard they sometimes when you get rid of it you have to pay some sort of fee i am not sure. FM if you wnat more info.


Noel

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Posted by beautyq115

My FI might be buying one (pending me getting a job). We are looking in Queens.


What do you look for??? What kinds of things do you have to do to buy one???

TIA

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1br co-ops in Queens run between 130-190k. 2brs run from 160k-300k.

There is no penalty or fee if you ever sell a co-op... outside maybe a small move-out fee which in my co-op is $300 buks. No biggie.

I almost bought a house in Suffolk... and i still may consider it. But the commute to NYC from Suffolk is so not practical next to my tiny commute I have now coming from Bayside.

I think its a good investment...we aren't ready to buy a house just yet so it would be good...and we need some place to live after we get married in JUly

Thanks for the advice everyone

A co-op is a great investment!
It was perfect for us for the same reasons - not enough money to buy a house, but we needed a place to live together, and wanted to build equity!
Good Luck!!

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Posted by palebride

A co-op is a great investment!
It was perfect for us for the same reasons - not enough money to buy a house, but we needed a place to live together, and wanted to build equity!
Good Luck!!

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Hopefully it works out

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Posted by DjPiLL

There is no penalty or fee if you ever sell a co-op... outside maybe a small move-out fee which in my co-op is $300 buks. No biggie.

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Not always true. Co-ops often have flip taxes because it is one of the few ways a co-op can make money. We have one in our building. It is 2% of the profit of the sale of the co-op. Not too bad, but still it does add up. Some buildings do a % of the total sale.

Buying a co-op is very similar to buying a house as far as paperwork. Things to look for our the financals of the building (is it stable?)? Have there been any lawsuits? Our building was involved in a lawsuit that we were unaware of until after closing. They sued and spent $35,000 to recoupe $12,000. Not good, now our maintanece has gone up to try and pay the inept lawyer the building hired. What is the owner occupancy ratio? The higher the better because you want people living there who have a vested interest in the building. I also think that buying in an up and coming neighborhood is the best. We bought for $165,000 2 yrs ago. Our place without any improvments is not appraised at $230,000. Just a few things to keep in mind. If you have any questions feel free to FM me.

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Posted by heidla

Not always true. Co-ops often have flip taxes because it is one of the few ways a co-op can make money. We have one in our building. It is 2% of the profit of the sale of the co-op. Not too bad, but still it does add up. Some buildings do a % of the total sale.

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2% Flip Tax? LOL Thats INSANE!

I have yet to find a co-op (at least in Queens)... that has a flip tax.

If a co-op needs to charge a flip tax to make their money... their entire board needs to be FIRED!

My co-op at the end of the year will have a three million cash surplus... co-op sales prices have gone up 40% in the last year... while capital improvements continue to happen. They do this by operating a GOOD STRONG BUDGET.


I know a lot of co-op fees are total BS. But if a co-op needs to charge a flip tax to sell.... that screams 'financial problems' to me and I would never buy there.

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Posted by DjPiLL

2% Flip Tax? LOL Thats INSANE!

I have yet to find a co-op (at least in Queens)... that has a flip tax.

If a co-op needs to charge a flip tax to make their money... their entire board needs to be FIRED!

My co-op at the end of the year will have a three million cash surplus... co-op sales prices have gone up 40% in the last year... while capital improvements continue to happen. They do this by operating a GOOD STRONG BUDGET.


I know a lot of co-op fees are total BS. But if a co-op needs to charge a flip tax to sell.... that screams 'financial problems' to me and I would never buy there.

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In Manhattan flip taxes are the norm in areas that we working folk can afford. 2% of the profit is actually not bad. One of my friends building just passed 1% of the total sale!!!!! If your co-op is operating at that much a profit that is awsome because from what I discovered most do not.

Facts about a Coop:

In a Cooperative you don't actually own your apartment, you own shares of the corporation and you have a lease (that usually expires in the far future) to live in the apartment with the Cooperative as your Landlord. This is called a proprietary lease. If and when you close, your bank will get a stock certificate that is proof that you are the owner of those shares.

A unique thing about a Coop is the fact that you can be rejected by the Board for any reason whatsoever as long as it's not discriminatory. Board's like to see that you will have a lot of money left over after you make all your debt payments (monthly mortgage, maintenance charges, car payments, etc.) They will ask to see your bank statement, they'll ask for references and they will file a credit report on you. Many Board's will reject someone if they feel that the financial constraints of that applicant is too severe to pay off all of these debts. Nothing you can do about it. Oftentimes, Coops run very close in terms of the money coming in and the money going out that they don't want to let someone enter the building who might jeopardize this balance by paying late or not at all. If someone does not pay, the Coop has the power to put a lien on the apartment, meaning that the apartment can not be sold until such time that the late charges, legal charges and all the back maintenance is fully paid off. It is also costly for the Coop to go through the legal hassel, so they would rather approve a resident in strong financial standing. This is one of the drawbacks of the Cooperative.

In regards to any problems that are ongoing in a cooperative that you are considering buying, before you go to closing, you MUST have your lawyer look over the Board of Director's minutes (a written record of all major issues and rules set forth at the monthly Board meetings) so that you won't be shell-shocked to learn that there is an ongoing lawsuit or ongoing structural damage that you will either be assessed on a periodic basis or your maintenance will be raised. There are a lot of red flags in minutes, but no one takes the time to actually look at them. You have every right to be aware of everything that goes on in the building before you buy so that you can make an informed decision. I would recommend looking at the last 4 years of minutes because lawsuits often take years to make it to court.

A benefit of Cooperative living as opposed to buying a house is that not only are certain common area issues taken care of by the Cooperative (gardening, plumbing, certain electrical work) but the maintenance that you pay to keep up the building (a proportion of the total building's charges based on the number of shares that you own) is to a certain degree tax-deductible. Often your maintenance will include the maintenance for the Cooperative plus any Real Estate taxes. The reason that maintenance is sometimes so high is that there may be an underlying mortgage on the property that you as a shareholder would be paying off, but this is also included in the tax deductible issue.

One benefit to Condominium or Cooperative living is that there is a certain responsibility by the Landlord (in this case the Cooperative) to maintain the habitability of the unit. If there is a leak or electrical problem in your building (to some degree) the building will maintain anything inside your walls (pipes, etc) and the walls. For instance, if there was a major flood from the upstairs apartment and your walls and ceilings were ruined, the Cooperative would be responsible for returning them to their original condition. Your personal items will not be covered by the Cooperative so get your own form of Homeowners insurance so that you are safe with your possessions. You would not have this level of responsibility if you owned your own home as you would have to do everything yourself, so this is a plus for a Cooperative.

Another thing to look at when looking to buy a Cooperative is to get an engineers report of not only your apartment, but the building as a whole. In addition to the minutes that your lawyer is reading, you MUST get a report that will let you know from a structural standpoint the condition of the building (the windows, the roof, the brickwork on the outside of the building, the boiler and electrical systems.) If any of these parts of the building are compromised, that will lead to $$ down the road for all of the shareholders. The Coop will have to get money somehow and even if it is through a bank, the shareholders will be funding the repayment of that loan.

I know that someone wrote on the post about a flip-tax that goes to the Cooperative in the sale. While the posters saw that as a negative thing, it truly isn't. Different Coops have different rules and percentages, some have none. Having a flip tax is actually a good thing because this constant influx of cash for the Coop leads to less chance that the current Shareholders will be assessed or their maintenance raised because there is always money in the reserve account. (Make sure when you look at the financials you look at the Reserve account and the financials as a whole so you know that your investment is safe and one capital improvement for the Cooperative won't lead the Coop down the tubes financially.) Some of the most successful and strong Cooperatives out there use this tactic to make it easier for those who sustain themselves in the building for a long period of time and do not move on quickly. Simply a cost of doing business.

As someone stated in an earlier post, some buildings are not fully owner-occupied. There are Shareholders known as Sponsors (holders of the unsold shares.) Oftentimes these are reminents of when the building was converted and for one reason or another the particular units that they own were not sold off and they are not held by the Bylaws of the Cooperative. The Sponsor is usually the developer of the Cooperative or the company that converted it. They can usually bypass the subleasing requirements of the Cooperative and have a different take on the expenditures of the building because it is purely a business to them. Oftentimes Sponsors have at least one position on the Board of Directors, and depending on the amount of apartments that they own and the time that has passed since the building has been converted to a Coop (according to the bylaws of the Cooperative), they might have a controlling interest of the Board. If this is the case, they probably won't be willing to improve the building with financial expenditures because if John Doe who owns 1 apartment in the building has to pay, the Sponsor gets hit with the cost for as many units as they own. Try to look for a building that at the very least is not controlled by the Sponsor and if there is no Sponsor that is even better.

In terms of what you have to do in the initial stages of considering buying a Coop once your offer has been accepted by the present Shareholder, you have to submit a detailed package to the Managing Agent of the building that might require some fees for the Agent to process your application (usually anywhere from $150-$400), a fee for your credit check and if you end up closing, you might end up paying a certain fee to the Reserve Fund (another way of the Coop remaining in good standing.) Every facet of your financial life will be examined and they will look at the past and the present in how you paid bills and if you have any debt that you are paying off. After you submit your package, you will be told whether or not the Board would like to meet with you and if all goes well, you do and you start the process of going to contract and then to closing!

Hope this helps.....sorry for the lengthy entry. If you need any more answers, let me know.

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Posted by DjPiLL

I have yet to find a co-op (at least in Queens)... that has a flip tax.

If a co-op needs to charge a flip tax to make their money... their entire board needs to be FIRED!

My co-op at the end of the year will have a three million cash surplus... co-op sales prices have gone up 40% in the last year... while capital improvements continue to happen. They do this by operating a GOOD STRONG BUDGET.

I know a lot of co-op fees are total BS. But if a co-op needs to charge a flip tax to sell.... that screams 'financial problems' to me and I would never buy there.

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Actually I live right down the block from you in Hollis Court and we had a very small 'flip tax.' My co-op is is well managed.

There are co-ops which charge a flip tax on the transfer of shares; there are some that have residents pay a certain percentage of the GAIN on the sale of their co-op (The percentages may vary between 1 - 15%; some try not to collect any additional fees on the sale of the co-op but may charge a high maintenance fee per month and may have residents pay assessments for every additional charge that the complex may incur. There are many other key aspects to consider when reviewing the Co-op's financial statements and considering to purchase one as fashion mentioned above.

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Different Coops have different rules and percentages, some have none. Having a flip tax is actually a good thing because this constant influx of cash for the Coop leads to less chance that the current Shareholders will be assessed or their maintenance raised because there is always money in the reserve account.

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I really don't see this as a good thing, no matter how much the co-op likes to preach 'it brings in revenue so it must be good'. Sorry... don't buy it.

There are many ways a co-op can generate income. And fact is... the BETTER co-ops find ways to generate income WITHOUT affecting shareholders.

Hell... my co-op has gotten very creative lately in doing this. We now have a $1500 parking transfer program.... completely vouluntary. Since parking is a premium in my area... a seller can pay $1500 to the co-op to have his spot 'tranferred' to the new buyer. New buyer still has to pay the $50 a month for the parking.... but he doesn't have to go on a waiting list. The seller picks up this tab... but we all know thats very easily addable to the sales price of the unit.

Maybe thats why sales for my particular co-op are so high (compared to other co-ops in the area)... cause of the financial stability of the cooperative.

But I guess in the end 2% of the profit of the sale isn't so bad. If I sold tomorrow at 262k which is what my units are pretty much going for... I would have to pay $1600 in flip tax.

Blah!

Glad I don't have to deal with that.


Again.... this is news to me. I didn't look in Holis Court when I bought.

As a professional in the business, I'm just sharing the professional opinion..just take the most important part of that opinion that a flip tax doesn't mean weakness on the part of a co-op, it's merely a revenue stream..

Of course there are other ways to induce revenue from various soft resources such as a parking charge, a voluntary charge system that you mentioned, renting out space to companies in the building (laundry, cell phone antannaes)

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Posted by Ang&Rich

There are co-ops which charge a flip tax on the transfer of shares

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Who knows... maybe my co-op does indeed do this. I have to look at my handbook again.

I sold two years ago... and I didn't notice it. But then again I paid so many small BS fees at closing... maybe they pulled a fast one on me.

I do know for a fact that I didn't pay anything based on what profit I made.

I might have paid a very small 'share tax stamp' fee to transfer the shares to the buyer. But that fee was so small (I think it was like $80 buks)... i don't see it as an issue.

Maybe i'll read my handbook tomorrow... cause if I do sell... i am definitely going to see a profit.

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Posted by fashionbride

As a professional in the business, I'm just sharing the professional opinion..just take the most important part of that opinion that a flip tax doesn't mean weakness on the part of a co-op, it's merely a revenue stream..

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I respect your position on this.


But with that said... if it were up to me... I would look for a co-op that doesn't charge a flip tax.

Why? Because if a co-op already has a flip tax of say 2% of the profit on the sale... who's to say by the time you sell it may be up to 5%.

Yeah I know there is no guarantee if you buy into a co-op with no flip-tax they can add one down the road.


But I think increasing a flip tax thats already in place has a MUCH HIGHER probability of happening over a co-op deciding to piss off shareholders by introducing a flip tax for the first time.

The 'flip tax' that we paid was nothing more than the transfer of shares and we split it with the seller. So when I sell it will be a 50/50. It's a small amount in comparison to what I hear others have to pay - 15% was the highest I heard and I believe that was based on the profit...now I agree with you there on not being a huge fan of that method.

On the other hand, my maintenance fees are considerable lower compared to the other coops in the neighborhood. So the one time small flip tax that we paid was no big deal to us. Each board has a different way to balance the budget. I think it's important to keep these things in mind, and as you said, review the financials before jumping in. If I were to have been scared off by the first mention of a flip tax I would have missed out.

Oh one more thing...I believe there are laws which govern the flip tax and coops cannot just continuously increase the amount or calculation. They have the calculation written into their bylaws.

I hear that. I am actually in Windsor Park.

I find that Windsor Oaks has some high maintenance compared to Windsor Park. They also have smaller apartments... and a HORRIBLE parking program. Granted some sellers do have some NICE looking apartments... but there is a lot of sacrifice IMO with living there.

The maintenance for my 2br co-op is $560 which is very low (especially since I am on the 5th floor - I think 1st floor same apartment is under $500).

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Posted by DjPiLL

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Posted by fashionbride

As a professional in the business, I'm just sharing the professional opinion..just take the most important part of that opinion that a flip tax doesn't mean weakness on the part of a co-op, it's merely a revenue stream..

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I respect your position on this.


But with that said... if it were up to me... I would look for a co-op that doesn't charge a flip tax.

Why? Because if a co-op already has a flip tax of say 2% of the profit on the sale... who's to say by the time you sell it may be up to 5%.

Yeah I know there is no guarantee if you buy into a co-op with no flip-tax they can add one down the road.


But I think increasing a flip tax thats already in place has a MUCH HIGHER probability of happening over a co-op deciding to piss off shareholders by introducing a flip tax for the first time.

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A flip tax can't just be passed by the management. It or any increase in it has to be voted on and approved by the shareholders.

The parking space revenue generator is nice, but we live in Manhattan where most co-ops don't have parking spaces.