[Fredslist] Real Estate 101: Co-ops

[JADLER115 at aol.com]

As I told you all before, co-ops make up approximately 85% of the marketable 
buildings in Manhattan.  So exactly what is a co-op?  When you buy an 
apartment in a co-op building you are buying shares in the building.  You do not 
actually buy your apartment.  When you close you receive a proprietary lease on the 
apartment.  This lease is actually a stock certificate giving you the rights 
to “X” number of shares in the building.  These shares are designated at the 
time of the Offering Plan.  The numbers of shares that are designated to the 
apartment take many features into consideration:  what floor the apartment is 
on, what the views from the apartment are, what the square footage is etc.  In 
the “old days” before the last real estate tax increase, we could figure that 
$1.00 or $1.25 a square foot was reasonable.  Now, if you find that, it is 
the exception.  Taxes and insurance premiums went up and so did maintenance. 
The monthly expense of a co-op is called maintenance.  Maintenance includes 
the cost of running the building, e.g., paying the expenses of the building 
staff, supplies, mortgage etc.  A portion of the maintenance is your share of the 
real estate taxes the building pays for the land the building is built on.  
Once a year your management company will send you a letter telling you what 
portion of your maintenance is TD or tax deductible.  Sometimes, if you buy an 
apartment in a “land leased” building, you do not get this deduction.  This 
means that the building does not own the land it is built on.  However you will 
still get a TD on the interest the building pays on the underlying mortgage.  
When you go to see an apartment these are two figures you will find on the 
brochure for the apartment....TD & Maint. 
Co-ops are governed by a Board of Directors.  It is their directive to follow 
the offering plan guidelines.  You may sell or rent your apartment according 
to the offering plan guidelines.  Co-op apartments are measured differently 
than condos and tend to be larger apartments.  At this time they also have fewer 
amenities and cost anywhere from 15% to 25% less.  Because a co-op can have a 
mortgage and they also keep a reserve fund for major improvements, there is 
less chance of an assessment or an increase of maintenance because the Board 
has the option of refinancing the mortgage or taking out a second mortgage...or 
both.. 
The minimum amount the building allows you to finance is written in the 
offering plan and it is written in stone.  A 25% building indicates that you MUST 
put down 25%.  You may finance the rest. 
My objective in these weekly notes is to inform and keep it really simple.  
At this time I wish to thank the Gotham attorneys who wrote and added their 
thoughts to my Real Estate 101 short course.   
Janet Adler 
Janet Adler Realty, Ltd

1 212 427 3809
1 917 834 2246
 
_www.janetadlerrealty.com_ (http://www.janetadlerrealty.com) 
 
 
 
 
 




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