Co-Ops vs. condos: Learn the difference and how to choose between these housing types

A condo (short for condominium) is one of many individually-owned units in a building with shared common areas. Owners are responsible for their own units, and pay monthly fees to a Homeowners’ Association (HOA) which handles maintenance of the shared spaces. 

Condo buildings may look like high-rise apartments, or be arrayed in a more spread out complex. Condos have been gaining popularity since their advent in the 1960s and are now found in urban and suburban areas throughout the country.

A co-op building is a cooperatively-owned building. When you buy into a co-op, you’re buying shares in the corporation that owns the building, not your actual unit. Your shares give you a proprietary lease on the apartment. Co-ops come in all shapes and sizes, from imposing pre-war apartment blocks to modest buildings with only a few units.

Co-op shares are considered “personal property,” rather than “real property,” like a condo. This means that co-op members own the right to live in their unit, rather than owning the unit itself. A co-op board of directors made up of tenants decides on every topic facing the co-op, including pet regulations, renovations, and who can move in.

Cooperatives (or co-ops) are far less common than condos in most places, except in New York City, where they make up 65% of non-rental units.

Condos and co-ops have a lot of similarities. Both are functionally owner-occupied apartment buildings where common charges cover the maintenance of shared infrastructure. Consider these questions before you decide which type of housing will suit you best.

On average, condos can cost up to 50% more per square foot than co-ops. Aside from the selling price, there are additional costs you will encounter.

• Closing costs. Required mortgage recording tax and title insurance makes closing costs for condos twice as expensive (approximately 3-5% of the selling price, versus 1-2% for co-ops). 

• Down Payment. A down payment of 20% is standard for condos. Co-ops require a down payment of at least 20%, and some may ask for even more, up to 50%. 

• Monthly fees. HOA fees for condos are usually lower than maintenance fees for co-ops. Be sure to check exactly what the monthly fees cover for each housing type.

• Property taxes are paid individually by condo owners and collectively by co-op owners, but the costs are no different.

Condos tend to be new construction and have luxury amenities, like pools or tennis courts. Co-ops are often older buildings, which may have charming details like fireplaces or parquet floors.

A condo’s HOA imposes some rules on owners regarding the outside of their unit and common spaces, but condo owners have relative freedom within their homes compared to co-op members. The co-op board has a say in everything from your pets to your renovation plans, and can even force problematic owners out. The co-op interview process is stringent and personal: if you’re approved, your new neighbors will know a lot about you, including your job, credit score, income, and savings.

Condos and many co-ops are run by a management company, but if you live in a self-managed co-op, expect to do more maintenance work yourself.  If you want to be involved with your condo or co-op board, you can volunteer or be elected for the job. Serving on the board gives you more power over decisions affecting the building, but can be a lot of work. This is especially true in co-ops, where more oversight is required by the board.

Buying and selling a condo can be a quick process. When you apply to buy a co-op, the approval process is lengthy, and must be repeated when selling to a new buyer. This is one reason co-op owners tend to stay in their homes longer than condo owners.

Condo owners have few restrictions in this regard, whereas most co-ops do not allow subletting. If it is allowed, the subtenant must be approved by the board. 

Despite their steeper upfront costs, condos may be a better choice if you’re looking for a real estate investment. They’re easier to buy and sell, and are more flexible about renting. They also appreciate in value faster than co-ops. 

If you’ve fallen in love with a co-op apartment and can imagine making your life there, or co-op living simply fits your budget better, educating yourself will help you take the oddities in stride. 

Both condos and co-ops can be quite expensive—especially in cities. Saving to buy one takes diligent personal budgeting. If saving for a condo or co-op is one of your goals, opting for an affordable rental while you save can help you get there. Bungalow offers private rooms in shared homes that are less expensive than living alone. Find a Bungalow near you.