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April 27, 2007
Questions about buying a co-op
We have the opportunity to buy a co-op in Crown Heights, in a building that is 20% owner occupied..with no immediate plans to put more units up for sale. The broker tells us the deal needs to be all cash given the current status of the building (I suppose mostly renters..). We are considering purchasing the property..is there anything specifically that we should be aware of?
Comments
It's not a good idea to buy if they only have 20% ownership. You'll have no say and they probably have very little money in reserves. 80% of the tenants do not care at all about the building because they do not own. Ideally, you want at least 80% ownership. They want your cash to add to their reserve fund (pay for a new boiler or a roof or something).
Posted by: Archie at April 27, 2007 11:41 PM
I second that. Needs to be cash 'cause mortgage companies won't lend in a building that's not 80% owner occupied.
Aside from abundance of renters, other problem is there's effectively no co-op board. The management company is the board (or 80%) of it. They want to maximize their profit, you want a nice place to live. Inherant conflict of interest and potential for less-than-public financial dealings.
Me, I wouldn't do it . . . unless the price made it worth the risk?
Posted by: John at April 28, 2007 8:33 AM
hmm..original poster here...its 150 k for a three bedroom, and a nice space. how does the building become 80% owener occupied then...i guess another 60% of the units would need to be sold to people who could afford to buy without mortgages??
Posted by: Anonymous at April 28, 2007 8:44 AM
is this for an investment, or to live in? As an investment, it might not be a bad idea...if you could sit on it for a while, and just collect rental income...
Posted by: Anonymous at April 28, 2007 8:55 AM
We bought intoa Prospect Heights co-op 7 years ago - it was 40% owner occupied at that time. We almost couldn't get a mortgage! So similar sounding story - if you like the space, and like the neighborhood, and the price certainly is right, go for it!
Don't listen to the broker - investigate mortgage options (Chase, mortgage brokers, etc.). The reality is, most lender WON"T lend to a building like that, but give it a try - the seller doesn't care where the money is coming from.
The owner occupied ratio will change - if the sponsor/seller is aggressive about turning over his units (from renter to owner). Aggressive does not have to mean evil!
Posted by: anon at April 28, 2007 9:48 AM
as there are "no immediate plans to sell any more units"..it appears the sponsor is not being aggresive (kudos for their honesty)..so what then?
I agree with John re the inherent conflict of interest..
Posted by: Anonymous at April 28, 2007 11:57 PM
What a fantastic price. How did you find a 3 bedroom co-op for 150K? Are these deals even advertised?
Posted by: Kensington at April 29, 2007 10:55 PM
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