// WHAT IS A COOPERATIVE?
Many customers ask us this question. A cooperative is a company with shareholders and a board of directors. In fact, you are not buying an apartment, but buying shares of a cooperative. Prices for apartments in cooperatives are lower than in condominiums due to the fact that a) most of the buildings in New York are cooperatives and b) cooperatives often have many rules about who can purchase housing in them and about the purposes of its use. Foreign buyers considering buying a home in a cooperative should consider the following factors:
Most cooperatives prohibit ownership of an apartment through a legal entity. In this regard, you can not buy an apartment in the cooperative on behalf of the company. As a result, the owner is subject to a higher capital gains tax (30%) when the apartment is sold in the future, as well as inheritance tax (46%) in the event of the owner’s death. It is for these reasons that we advise our clients to open an LLC, which means that there is no question of purchasing housing in a cooperative.
// THE TRANSFER OF REAL ESTATE ON THE RIGHTS OF SUBLEASE
In co-ops there are strict rules on the transfer of real estate on the rights of sublease. In some cooperatives, such a transfer is completely prohibited, while other cooperatives allow it to take up to 2 out of 5 years. In addition, the prospective tenant must be approved by the board of directors. Due to the fact that the apartment will be issued in your name, you also need to ensure the correct liability insurance.
// MORTGAGE LENDING
In cooperatives there are strict rules on mortgage lending. In some cooperatives, mortgage lending is completely prohibited, while other cooperatives allow up to 75% of the loan funds when buying an apartment. Please note that foreign buyers are unlikely to get a mortgage loan of over 60% in any case.
// COOPERATIVES: YES OR NO?
Based on the above arguments about buying a flat in a cooperative, this purchase will only make sense for taxpayers in the United States or in cases where the property is planned to be used as a temporary place of residence.
INVESTMENT REAL ESTATE >> NO
TEMPORARY RESIDENCE POSSIBLE >> POSSIBLE
MAIN LOCATION >> YES