Zack childress,a co-operative housing unit is generally termed as co-op owned by shareholders. These shareholders are members of a co-operation who own shares. These shareholders are offered an apartment with a lease period. Often these co-ops are compared with a condo, but the type of ownership, renting regulations differs. The owners have all the rights to renovate which should not violate the law. Once you violate the law, the board of members has all the rights to tell you to vacate. The vacant portion can be occupied by the next shareholder whoever request for. Occupancy rate is higher than a condo.
Zack Childress reviews on co-operative housing lifestyle, its pros and cons. To know more about how co-ops works in real estate, check out REI quick cash system where Zack has explained in detail.
How these co-op communities are formed?
These housing units are usually formed by non-profit organizations for the purpose of meeting the socioeconomic and cultural needs usually managed by a jointly owned business venture. The shareholders form a separate team for managing business.
Types of Co-ps
- Consumer co-op – managed by the members of the service organization
- Worker co-op – run by a particular company for the welfare of their employees
- Housing co-op – managed by the residents of the community itself
- Hybrid – a combination of all the 3 above communities
- Condop: a co-op is built inside a condo building for commercial and retail purpose or if it’s for residential purpose inside a large condo unit, a co-op is formed and each unit is shared among owners.
The financing methodology also differs; you should seek for a lender who has recognition agreement with the co-op. The owners have to provide their income and asset information to the co-operation board. Following which a meeting is scheduled with the respective shareholder and decision is taken whether to approve the lease. You need to make 10 to 20 percent down payment initially. The other way to avail loan is to take a share loan in lieu of a mortgage which becomes collateral. Credit unions are also good way to approach for funds. Beware of mortgage scam and approach a lender who has experience in co-operative housing.
Why these homes are preferred?
- Much affordable than a condo unit.
- As there are strict guidelines for applying mortgage, only qualified and financially sound buyers are approved. So foreclosures are very rare.
- For the money you pay, you get a better home with all amenities.
- The monthly maintenance fee paid by the shareholders is tax-deductible.
- Co-ops are never flipped or sold.
- Builds team work and co-ordination skills
- Improves democratic power
- Provides economic benefits to members of the community.
- Less taxes are collected
- Suitable for investors who aren’t bothered about capital gains
- Not suited for investors aiming for a high capital incentive
Zack Childress complaints about the lenders, there are very few of them who deal with co-operative housing; hence it is very difficult for the buyers to avail mortgage. Co-ops are not ideal to buy as an investment property owing to strict guidelines for renters. Consult your fiscal adviser before making your co-op investment.