New York has several types of properties that may leave you scratching your head. What is the best one for you?
The good news is that it is fairly easy to narrow down your search. There are 5 main properties in NYC: 1) co-ops, 2) condos, 3) condops, 4) multi-families, and 5) single family homes.
Comprising about 75% of the Manhattan property inventory, co-ops are the most complicated. When you buy a co-op unit, you are buying shares in a corporation. The corporation owns the co-op building. This means that you are not buying real property. However, you will have a proprietary lease on the unit you purchase.
Co-ops are also not as flexible as the other property types. Most likely there are restrictions on subletting, which is not great for investors. Other rules with a co-op purchase may or may not include: pied-a-tiers are, gifting, co-purchasing, and guarantors.
Lastly, co-ops have more strict financial requirements. A typical down payment requirement is 20-25%. Furthermore, the buyer must show post-closing liquidity to cover both maintenance and mortgage payments for 2 years.
Condos are great for investors since you can rent from day one. Ownership is real property, not shares in a corporation. You can typically purchase a condo with 10% down payment. They tend to be significantly more expensive than co-ops though.
There is a very small % of condops in the city. They are a combination of a co-op and a condo. While they are technically a co-op, they have condo rules. This makes them great as investment properties. Another characteristic of condops is that they typically have some commercial space on the ground floor.
These properties are mainly located outside of Manhattan. Most brownstones are multi-families. As the name implies, more than one family can live in this property since it spans more than one floor. Multi-families are owned by the purchaser(s), who can either owner-occupy the space and/or rent it out with no restrictions. A multi-family can be converted into a single family home.
Single Family Home
This is the most common type of home in the US. The single family home is pictured as the American dream – white picket fence around the house. These are essentially non-existent in Manhattan.
They do exist outside of the city where there is more space. Just like condos and multi-families, single family homes are real property and are great for investments.