Whats the best way to buy a 2 family building?

Weather you buy as a tenancy in common or LLC, the vehicle for separating the ownership into a condominium or coop regime is called a “no action letter” and is administered by the Attorney Generals office. It is a very simple process and will allow the two owners to subdivide their spaces to facilitate a sale or individual refinance. You can always institute a right of first refusal should one of the units sell. The reason you want a condo or coop is that the declaration and bylaws clearly outline the responsibilities and rights of present and future owners. You also have a saleable item: an individually deeded apartment. Nobody wants to buy 50% of an LLC or the other half of a tenancy in common. The value is not the same and more importantly the purchase of 50% of an LLC or tenancy in common is not financable for the incoming buyer.

yte

in Real Estate - General 13 years and 3 months ago

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coopking | 13 years and 3 months ago

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A friend of mine and I are seriously considering buying a modest 2 family building in the near future. Most likely somewhere in crown heights or bed stuy. We would both plan to live in the building so there would be no renters ” I would live in one of the apartments he and his girlfriend in the other. Could the two of us just take out a mortgage in both our names? Is it worth it to try and form a coop? I have owned a coop for several years so know a bit about the whole buying process. Any insights would be appreciated.

Bklnite | 13 years and 3 months ago

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Yes the 2 of you could take out a mortage in both your names. Google “tenancy in common”. You can have difficulties if one wants to sell because it probably requires refinancing for the seller to pay off his part of the mortgage and for the buyer to get a loan. I doubt that forming a coop would make sense – see recent posts about difficulties financing when a single owner owns more than 10%. Forming a condo might make more sense.

jockdeboeraia | 13 years and 3 months ago

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I am no lawyer, but a know a number of people who form LLC’s when purchasing property.

needmtg | 13 years and 3 months ago

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For a 2-unit building, tenancy-in-comon is the way to go if 1) you’re planning to stay a while, 2) have a good relationship with other owner(s) and 3) have a cleary defined exit strategy. You’ll hear from nay-sayers on how not to do business with friends and not to buy property with friends, but it’s done commonly on the West coast (and in fact real-estate ads mention this method of ownership often.) You do not need a LLC either. An attorney specializing in this is Zerline Goodman, who I talked with for a while when I was considering selling 1/2 my house as a TIC. I suspect actually forming a co-op would be very exepsive and time-consuming, but then of course ‘selling’ is no longer difficult.

brokelin | 13 years and 3 months ago

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actually, selling is still difficult with a coop, not only because there may be difficulties finding financing, but also because people are wary of two unit coops.  Buyers are essentially substituting themselves for you, owning a building with your friend, who they do not know.  Many buyers would rather buy a duplex and rent out the other half, where they maintain control.  condo is definitely the way to go, though the maintaining the building  together part is still like living in a coop.  if there is a falling out, with a condo, one owner cannot block the other from selling their unit.  also, you say if one moved, you would just rent out, but what if the rent does not cover their expenses…and what if their desire to repair what is now an investment property is now less than that of the other who remains a resident owner.

brokelin | 13 years and 3 months ago

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and I caution against the thought you will just sell the building.  what if one owner has a life change and needs too move out in a few years, rent will not cover their expenses, and the building value has not eppreciated enough yet, so that it will not sell for enough to cover your investment and closing costs…

brokelin | 13 years and 3 months ago

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Meant…appreciated…