If you're looking for a new place to own and don't want to dish out your life savings, you may want to look into a co-op. Co-op, short for "cooperative," is a unique way to obtain property. For an apartment in a co-op building, you are buying shares instead of buying the property itself. A co-op is owned and controlled by a group of individuals who have equal shares and occupancy rights to the housing. Buying a share gives you access into the shareholder group and the rights of the co-op corporation.
Co-ops can come in all shapes and sizes:
single family homes
mid and high-rise apartment complexes
One of the biggest advantages of living in a co-op is the price. Co-ops tend to be cheaper than a condo. Instead of taking out a mortgage, each buyer takes out a "share loan" when purchasing shares in a co-op. A share loan is like a mortgage. It provides you with funds to buy shares from the seller. You then make monthly payments to the lender to eventually pay off your loan. Residents are responsible for paying a share of the costs for running and maintaining the building. In larger co-ops a dedicated crew handles all maintenance and repairs. This means that tenants are not responsible for tasks like lawn upkeep and building repairs. This can make co-op living attractive to those are very busy or elderly.
Although co-op living may be the more affordable housing option, there are also some downsides. One is that co-op living can require a lot of work upfront to qualify. First, the co-op board has to approve an applicant, which includes interviews and years of tax records. If you're keen on renovating, you're not allowed to make changes without the approval of the board. Monthly maintenance fees can also be steep depending on the state of the building, which creates higher costs, but varies every month.
Is It Right For You?
If you're on the market to find someplace new to live, co-op living may be an attractive option. Make sure you do your research, because although co-ops are generally affordable, they do have shortcomings that may cause you to reconsider. Like most ventures there's a slight gamble, but co-op living could have a major pay-off.