Questions & Answers for Buyers

Q: As a foreigner, can I buy an apartment in the US?

A: Of course you can! Many foreigners invest in the United States and especially in New York City. Condominium buildings are investor-friendly and make things easier for foreigners.

For investing: A condo will provide a more liquid asset. You can also rent it while you wait to resell (you may not be able to do that in a co-op).

To live in: Some buyers meeting co-op requirements would prefer to live in an "owner occupied" building and will then prefer to buy a co-op. Who else can take better care of the apartment and building than the owners?

Q: What are the differences between Condominiums and Co-ops?

A: Condominiums are becoming more popular in New York City as new residential buildings are constructed. Unlike co-ops, condo apartments are "real" properties. Buying a condo is much like buying a house. Each individual unit has its own deed and its own tax bill. Condos offer greater flexibility, but are often priced higher than comparable co-op apartments.

Advantages of Buying a Condo

  • In most cases, buyers can finance a larger portion of the purchase price (up to 90%) and therefore put less money down.
  • With a condominium, you do not need board approval to purchase or sell.
  • Condo apartments can be freely sublet, giving you more flexibility.
  • Monthly maintenance fees for condos are much lower than for co-ops (because condominiums do not have an underlying mortgage, whereas almost all co-ops do).

Disadvantages of Buying a Condo

  • Condos are generally more expensive than comparable co-op apartments to purchase.
  • Monthly maintenance payments are not tax-deductible.
  • In New York City, 85% of all apartments available for purchase (and almost 100% of pre-war apartments) are in co-operative buildings.
  • When you buy a co-op, you don’t actually own your apartment. Instead, you own shares of a co-op corporation that owns the building. The larger your apartment, the more shares within the corporation you own. Other features, such as terraces and being on a higher floor can impact the number of shares allocated to an individual apartment. Monthly maintenance fees cover building expenses including heat, hot water, insurance, staff salaries, and real estate taxes.

Advantages of Buying a Co-op

  • Co-ops are generally less expensive than comparable condominium apartments.
  • Some of your monthly maintenance fees are tax deductible.

Disadvantages of Buying a Co-op

  • All prospective purchasers must be approved by the Board of Directors. The Board approval process is often time-consuming and rigorous: it requires extensive information regarding finances, employment, and personal background. Even celebrities have been turned down by some selective New York co-op boards. Not only does every board have their own set of rules, those rules can be changed over time.
  • Monthly maintenance fees for co-ops are much higher than for condos. This is because the monthly fee includes part of the underlying mortgage for the building.
  • Many co-op boards limit the amount of the purchase price that can be financed and require higher down payments than are usually required for condominiums.
  • It is harder to sub-lease a co-op. Each co-op building has its own rules, but many limit or forbid subletting.

Q: What will a Co-op board require to approve a purchase?

A: The Co-op board will review these items:

  • Financial history
  • Job history
  • US/International credit history
  • References (professional and personal)
  • Details of how you will use the apartment. Pied-A-Terres are not always allowed.
  • Lifestyle
  • Evidence of a home business - this is often not allowed
  • Your purchase price - a low purchase price might go against your acceptance
  • Pets - Pets are not always allowed
  • An in-person interview may be required
  • Possible additional requirements may come up unique to each board

Q: What parts of the purchase and ownership costs are deductible?

A: Deductible costs include:

  • Mortgage interest: under current U.S. law, all interest that is paid on a mortgage of less than one million dollars is tax-deductible.
  • Points: buying a home involves a number of different fees and other expenses. One of these, called points, represents a small percentage (usually one percent) of the loan and is paid up front at the closing. Normally, no more than three points are charged on a typical mortgage loan. Points are fully deductible at tax time. Points charged on refinancing loans are also deductible.
  • Property taxes.
  • Part of the Maintenance can be deductible in a Co-op
  • Moving costs
  • Home office deduction
  • Assessments
  • As an investment, whatever you spend to furnish the apartment or to improve it is deductible
  • For more information see a Certified Public Accountant