Buying a Co-op Condo, Investing in One or Renting?
I recently got this question and it 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 buy into a cooperative, they become a shareholder in a corporation that owns the entire property. As a shareholder, you are entitled to exclusive use of a housing unit within the property. You don't actually own an individual property, just a portion of the entire property.
So, what's better?
It depends on the type of lifestyle and living arrangements you want. Because cooperatives are owned by a corporation, they usually have a tenant/owner board of directors. This board is responsible for meeting with, and approving or disapproving, new owners.
In a co-op, a large portion of the monthly maintenance fees are tax-deductible. Depending on where you buy into, you may or may not be able to invest in a co-op and then rent it out. That's usually not the ideal use of a co-op apartment. Many co-op buildings will not allow new shareholders to buy a property as a rental investment. They may have a rental policy but it may only apply to those who have already lived there for a certain amount of time.
On the other hand, buying a condominium may actually be cheaper than becoming a shareholder in a cooperative. If you are buying a long term rental, you don't typically need a 40% down payment. With the right loan, most Canmore area condo buildings may be purchased with less down and you will not need to jump through the hoops that co-ops require. The board 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 outright and pay an association fee for use of certain common areas.
There are advantages and disadvantages to either so it's important to do your research, ask, questions and do your homework on the association before jumping in.
If you're interested in learning more about cooperatives in Canmore, Banff or other areas perfect for vacation homes and investments, browse the website or contact me at any time.