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June 9, 2008
First Time Buyer - Condo or Co-op?
My husband and I are relocating from Europe for a fixed 2 year work assignment. I am American and would like to benefit from the mortgage tax deductions for owning real estate versus renting. We both work, double income.
We would like to purchase a 2 BR property in Boerum Hill or Park Slope. After the 2 year assignment is up, we intend to return to Europe and either sell or rent out the property.
Questions: Is a condo a better fit than a co-op? Is it difficult to rent out a co-op? Is board approval required for the tenant?
Any tips or insight is much appreciated!
Thank you,
shiny
Comments
shiny,
Although it really depends on the individual building, but many co-ops place strict rules around subletting, especially as you get into the nicer buildings in Park Slope. Some may require you to live in the building for several years before subletting, and some may not allow it at all. A condo is typically yours, and you may do with it as you wish, however they are more expensive for a comparable apartment, and the closing fees are much higher.
One thing to note is that the prices are not in line with rents in the areas that you mentioned. If you are really interested in subletting, I would expect to put down a fairly large down payment to keep your expenses lower or to take a loss when you rent it out. Good luck!
Posted by: seahag21 at June 9, 2008 7:05 AM
Buying a coop when you plan to move out in two years is nuts. You will unlikely be allowed to rent it. Selling it depends on maket conditions, which no one can predict.
If you want to hold onto it for a longer-term investment, a condo is a better bet. But you'd do best to factor how long you'd have to hold it rented out to profit, given the higher closing costs to buy.
Which, in any event, don't really matter, because as the above poster noted, renting a nice place is cheaper now, even without taking any closing costs into account, even when you do figure in the savings from the mortgage deduction, you will be spending more to own than to rent. Stupid decision, unless you want to hold it long term for possible (and I stress possible, as no one can predict the market) gains in equity.
Posted by: guest at June 9, 2008 8:06 AM
I would absolutely rent for a two year time horizon. The stress of closing alone isn't worth it, especially in this uncertain environment.
Posted by: guest at June 9, 2008 9:16 AM
I agree with the other posters, and would add a couple of points. Getting a mortgage might be tricky, depending on how much info you're required to provide. If you sell before two full years are up, you'll be paying capital gains on your entire profit (assuming there is one). No co-op board will approve a buyer whom they know up front will only live in the building for two years. Finally, do you really want to be a Brooklyn landlord from Europe?
Find a really nice rental and enjoy NY.
Posted by: guest at June 9, 2008 9:51 AM
I'll add my ditto to that. Renting in your situation, especially these days, will prove to have fewer headaches and will ultimately be cheaper than owning.
Posted by: Steve at June 9, 2008 10:09 AM
Buying now for two years is a terrible idea. Price some rentals and see how you get the same apartment for about half the price. You'll take a huge loss every month when you rent it out.
Posted by: Brooklynnative at June 9, 2008 10:12 AM
Ditto to all the unsolicited advice. Unless you intend to put a LOT of money down, you will never cover your monthly costs with the income from rent.
As for the question you asked, except in very rare circumstances, a condo is a much better choice if you intend to rent.
Posted by: curiositykilledthecat at June 9, 2008 11:03 AM
Another difference between the condo and coop is that there is more likely to be a flip tax that will take a bit out of any profit you make on selling a coop in 2 years.
As a financial adviser, I'd tell any client in your position to rent. Unless you are willing to buy in a "lesser" neighborhood, you will not see any reasonable growth in your investent over this period of time. Your money can earn you more elsewhere.
Posted by: guest at June 9, 2008 11:13 AM
Everyone here is forgetting that the
Euro is higher than the dollar right now. If the poster bought a condo now they might be able to benefit from that. However, plan to hold onto it, and rent it out, until the dollar strengthens.
Posted by: guest at June 9, 2008 11:51 AM
It doesn't matter that the euro is stronger than the dollar. They have as many dollars or Euro's as they have. They should put them where they will earn the most in their investment horizon. Park Slope apartment real estate is not the place to do that.
Posted by: guest at June 9, 2008 12:26 PM
Definitely rent, especially in this market.
For 2 years, it is a no brainer, even with the deduction.
Even if you find what you think is a good deal, you may be under water when you want to leave, which is a bad place to be, regardless of whether you can rent it out or not.
Btw, I try to avoid trashing other posters but 11:51 is making a truly ludicrous point.
If you have euros, it reduces the price of BOTH renting or buying equally.
It doesn't make one more attractive than the other.
Posted by: guest at June 9, 2008 12:58 PM
definitly rent.
Posted by: guest at June 9, 2008 3:32 PM
A decent co-op would not even let you in if you told them you were buying the place for the tax deduction and subletting it in two years. People want good neighbors who live in the building because they want to not because they need a tax deduction. You need one of those "stewardesses condos" in Manhattan. so called because they rent out by the month.
Posted by: sam at June 9, 2008 4:00 PM
As people wrote above, do not go for a coop.
If you can find an affordable condo, you might buy it and then hope the dollar rises against the euro.
Otherwise, just rent. If the dollar looks like it'll jump against the euro and you want to play the currency markets, shift euros to dollars for a year or so and then back again.
It used to be that the French franc fluctuated enough with the dollar that a year could make a decent difference. I worked in exchange in Paris in the 80's. I would not play that angle these days b/c it seems the dollar could remain low against the euro for a couple more years...but then again, a nickel's fluctuation can result in big gains (or losses) depending on the amount at play. Unless you have 1) a crystal ball or 2) high level information, playing the currency market can be hair-raising. It’s a gamble unless you’re a big outfit doing millions of business daily. Small players can get burned.
This may all sound off topic, but if the main bulk of your money is in euro right now and you might loose if you bought a, for example, $800K apartment with the dollar dropping further, you may find yourself on the short end of the stick.
If, though, you are currently paid in euro, don’t have much in dollars here and want to diversify, and if you've plenty so you do not have to worry, go ahead, buy dollars while they’re cheap for you. [of course, past performance is not a guarantee of future performance!!!]
If you can afford a place and can keep it so you have a Brooklyn pied-à-terre, enjoy. You’ll have a place to stay when you come to the US to see friends and family and/or can let people stay in your condo when you’re not there.
Heck, you might, just might, do okay, getting a condo, probably furnish it a l’IKEA (since you’ll be here for only two years) unless you’ve things in storage in the States, and then leave it in two years as a furnished sort-term rental. If you’ve a couple of sleeper couches and a couple of bedrooms, a family of 5 or 6 or two couples or whatever can rent for a week or two for a lot less than the cost of a NYC hotel...and parts of Brooklyn are featured in lots of guide books so many Europeans are coming to BAM, Park Slope, the Botanic Garden, the Promenade.
If you have someone who can manage it, you may end up making decent money on short term and vacation rentals. There are some small outfits/people specializing in this in NYC. Check the web.
You can also go through one of these companies to rent out as a mini-corporate apartment as well and stay out of the vacationer realm. Film productions hire NY-based people to scare up enough housing for their crews (apartment owner does well!), universities often will take a long term sublet so they can house visiting faculty; likewise with cultural institutions.
I personally prefer the idea of non-institutional rentals since it'll give you your place back sporadically or when you want to block out time so you can use it as needed.
I, for one, would not like to have anyone staying in my place but have a friend who has gone away for a year or three months many times and has done well doing these short term rentals. His West Village one-bedroom is comfortable but utilitarian and he doesn’t care too much about “stuff”. He simply puts clothes and personal papers into a Manhattan Minstorage closet when he leaves for a year. Has a full sized sleeper in the living room.
If you HAVE to get a "regular" large US-based mortgage in order to buy an apartment, do NOT. If you work for a financial firm with in-house preferential mortgage and can benefit from the interest payments, maybe think about it. I take it from what you’ve written, you may be paid in USD, are worried about your income in euro above and beyond the limit for expats and are taxed on it, have some other income in USD that needs to be offset or some combination of these three.
Talk to a financial planner.
To the forum here:
Real estate is falling/precarious in Europe (the run up there is collapsing in places) so “Shiny” may not do so badly investing in NYC.
Posted by: guest at June 9, 2008 6:15 PM
My advise is to stay away from my co-op. we don't need eurotrash.
Posted by: guest at June 9, 2008 7:28 PM
i live in a condo where my neighbors from the UK are renting. they quickly figured out that they were losing money and just bought a condo in wiliamsburg. guess it depends if you have the money or not. they are very relieved to be buying now.
Posted by: guest at June 9, 2008 7:39 PM
7:28, moron, learn how to spell "advice" you ugly American.
Posted by: guest at June 9, 2008 8:00 PM
8:00 Stop using the word moron in every one of your postings you america-hater. Why don't you move to Europe where the beautiful people will embrace you, I'm sure (not).
Posted by: guest at June 9, 2008 8:08 PM
Thank you everyone for the comments, extremely helpful!
As to USD/CHF:
The Swiss Franc has appreciated about 20% against the dollar since June 2006 (similar to the Euro story, but not as extreme). But, I would rather not play the currency exchange too much. I have no idea whether USD will continue to weaken but my gut feeling is that over the long term, it will. This takes away some of the upside on returns, but also means maint fees paid in the US are relatively cheaper.
Anyways, I really appreciate your help and will reconsider the idea to purchase something instead of renting.
Cheers,
shiny
Posted by: shiny at June 10, 2008 5:50 AM
Ah...CHF...sorry, I assumed Euros were in play. That will be a big change: Switzerland to Brooklyn...even if you're in Zurich or Geneve...if you in Bale or Sion! Fuggedabouddit! Brooklyn'll be a huge shock!
At least the food will be A LOT cheaper!
AND...you can join the Park Slope Food Coop when you get here!: foodcoop.com
See you there!
Posted by: guest at June 10, 2008 5:19 PM
Hey Shiny, my wife and I are selling a 2 BR, 2 Bath condo in Boerum Hill. There are NO rules/restrictions re renting out the apartment. If interested, please email me at statestreet464 @ yahoo.com
Posted by: guest at June 10, 2008 10:26 PM
I'd sooner become a renter again than buy another co-op.
The board is full of nice folks who are totally ineffective and don't know anything they need to know. Plus a few of the inevitable power-trippers, who are ineffective except in their ability to be stubborn for no good reason. More of a pain in the neck that I could ever describe. Takes FOREVER to get anything done or answered...
Go condo, condo, condo, IMHO.
Posted by: tanner at June 14, 2008 1:48 PM
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