A few words about Coops - Posted by Frank Chin
Posted by Frank Chin on January 14, 2004 at 04:18:30:
You have to be extremely careful about coops. You’re not buying Real Estate, but instead, shares of a Corporation, where you have to live by its rules, often more rigid than Condos, and affected greatly by the finances of the Coop more than you think.
I found Coops hard to value, because Coop carrying charges vary widely due to the wide variation of the underlying mortgage of the building. That mortgage may range from none for some older buildings, in which case the coop value will be closer than that of a condo, to much lower in value to condos because the Coop itself borrowed heavily to finance improvements. So sometimes, a bargain may not be so after a review of the building’s finances.
So the question is, how does the carrying charges for this building compare to others?
What’s the procedure for the Coop board approving new buyers?
As to flipping it, some coop’s impose a “flip tax”, not only to help with financing its carrying charges, but encourage long term occupancy rather then speculation. So, is there a “flip tax” at this coop??
Answers to these questions will determine if the price is a bargain or not.
And then there are the rare cases where the coop itself is financially struggling because many of the other owners are behind in paying carrying charges. This has resulted in the bank foreclosing on the underlying mortgage. At that point, the coop shares are worth nothing.
I in fact lived in a condo once, where the finances were stressed because many owners refused to pay higher maintenance fees, and we were on the verge of having the electric, water shut off because those bills were months behind.