I recently got this question this weekend and prompted a blog post on co-op condominiums, renting, investments and buying.
It's important to understand that if you are looking to buy a condominium you need to know what's available out there. A condominium and a cooperative, also known as a co-op, are different. Condos are multi-dwelling units that are privately owned and have shared common areas. A co-op is not considered real property. For those that by into a cooperative, they become a shareholder in a corporation that owns the entire property. As a shareholder, you are entitled to an exclusive use of a housing unit within the property. You don't actually only individual property, just a portion of the entire property.
So, what's better?
It depends on the type of lifestyle to living arrangements you want. Because cooperatives are owned by a corporation, they usually have tenant owner board of directors. This board is responsible for meeting with and approve or disapprove new owners. However, in a co-op, a large portion of the monthly maintenance fee is tax-deductible. Depending on where you are, you may or may not be able to invest in a co-op and then rented out. That's usually not the ideal use of a co-op apartment. Usually, FHA loans are not approved for co-op properties and you usually need at least a 40% down payment.Most co-op buildings will not allow new shareholders to buy a property as an investment. They may have a rental policy but may only apply to those who have already live there for a certain amount of time.
Also, buying a condominium may actually be cheaper than becoming a shareholder in a cooperative. You don't need a 40% down payment, most Miami condo buildings are FHA approved, and you will need to jump through the hoops that co-ops require. The cardboard normally has to approve any new tenants, which can cause a snag for trying to get into a building that you really like.
Co-ops are definitely their own beast, that's for sure. They may work out for certain situations and may be ideal for some, but not everyone can benefit from owning a part in a cooperative. Most people prefer to own their own unit out right and pay an association fee for use of certain common areas.
If you're interested in learning more about cooperatives in downtown Miami or Brickell where you'd like a list of current condos for sale in Miami, browse the website or contact me at any time.