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Co-operative housing -- advice needed

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Co-operative housing -- advice needed

Old 08-14-06, 03:51 PM
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Co-operative housing -- advice needed

I realize that housing co-operatives aren't that common outside of NYC; however, there is a development in the Kansas City area that a friend of mine lives in, and I'm thinking of looking at some of their vacancies.

There are about 350 units in the development -- townhouses and multiplexes. All of them were built in the early 1940s as housing for defense plant workers in a nearby industrial area. After WWII, they were used as veterans' housing for a number of years, and became a co-operative in 1952.

The pros:

Price. The most expensive one, which has three bedrooms and is mostly redone, is $25,000. Many can be had for less than $10,000.

Financing is done through a credit union established by the co-operative board. The longest you can finance for is seven years, borrowing up to 90% of the unit's value.

Close-knit community. I know from my friend that the people living there are pretty neighborly.

The cons:

Location. Since this development borders an industrial area, it's not desirable. Also, within a mile or so are strolling hookers and drug houses. The development itself is set back from the road and pretty well isolated. As far as crime, I do know there was a murder a few doors down from my friend a couple of Christmases ago, but that's the only standout crime I can think of. I have a call in to the local police department, but nobody has returned my call yet.

Age. Obviously, these aren't brand-new dwellings, although they have been kept up well and refurbished.

Resale Value Potential. I ordinarily wouldn't let this bother me since I look at this as a way to have a home -- not to make money. A co-op isn't really an investment in the traditional sense, I guess.

----------

If I didn't buy into this co-operative, I might consider buying a mobile home. However, there are several drawbacks to that. I would want a home in a good park that regulated things pretty tightly so it didn't look slummy, and at least in Kansas City, those parks exist -- but only in far-flung suburbs. With $3 for a gallon of gas, I'm not interested in a long commute.

My dad lives in a mobile home, but it's on several acres of land. I realize that's really the best way to have one, but I'm not a country mouse!

Also, mobile home maintenance is highly specialized and can get expensive. At least with a co-op, part of the maintenance is covered by my co-op membership.

----------

I'm not going to do anything just yet. At this point I'm just tossing the idea around in my head. I just wanted input from some homeowners and possibly from co-op or condo residents.

Last edited by Vibiana; 08-14-06 at 03:55 PM.
Old 08-14-06, 03:52 PM
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Just for reference, what's your current living situation?
Old 08-14-06, 03:54 PM
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Originally Posted by criptik28
Just for reference, what's your current living situation?
I live in a two-bedroom apartment. I have lived here for nine years. The rent is the cheapest in the metro area as far as I know unless I want to live in the 'hood. Shabby but reasonable amenities.
Old 08-14-06, 03:55 PM
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as a NYC co-op owner, I would never, ever, ever buy one outside of NYC or a 20 mile radius of NYC.

Other than value, there is liquidity. if you have to sell for some reason it's a lot harder than a home. i would buy a mobile home before a co-op. there is a reason why they are so cheap outside NYC. No one wants them.
Old 08-14-06, 03:56 PM
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You're not looking to move to Independence are you?
Old 08-14-06, 03:56 PM
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Originally Posted by Minor Threat
You're not looking to move to Independence are you?
You can't go home again.
Old 08-14-06, 03:58 PM
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Lenexa has some co-ops.....
Old 08-14-06, 03:59 PM
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Originally Posted by Minor Threat
Lenexa has some co-ops.....
Isn't this great, everybody! My first stalker ...
Old 08-14-06, 04:01 PM
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Now you're just dilusional.....








Old 08-14-06, 04:02 PM
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On the surface, it doesn't sound like a bad idea. Certainly, living in a 3-bedroom there for $415/m for 7 years (I'm guessing a 10% rate on the entire amount) isn't bad. You'll probably pay a few hundred/thousand for moving in (taxes, etc.).

Certainly, in 7 years (or less) you won't have any rent to pay. But that still leaves any co-op costs / condo fees (could be $50/m or $500/m), homeowner's insurance (for your property inside this place, at most $100 per year), and real estate taxes (minimal, my guess is less than $50/m).

(I'm completely pulling these numbers out of the air so make sure to look into it).

The caveat is that if your building you're renting needs $10MM in repairs, your rent is unlikely to go up $300 in one year. But that may or may not happen with the co-op. If the building is old but has been well-maintained over the past ~60 years, then you should be OK. If it hasn't been maintained, the current owners are passing off the costs of doing this maintenance to future owners (you). That's not fair and it's a red flag that you shouldn't get into the building.

I'm sure dave and al will have some advice as well, but mine would be: take the sharpest look into the state of the homeowner's association / condo / co-op board (or whatever they call them). Not only their rules, guidelines, budgets, etc. but also who runs the board and how likely they are to continue doing this. Are they likely to keep it running tip-top for the next 10 years, or are they on the way out and going to be replaced by Sally Half-Ass and Johnny Know-Nothing?

The goal (for you), should be to own something that down the line you won't have to pay for. With rent that will never happen, but with owning property (be it a suburban cookie cutter home, a co-op, or a mobile home), you can live with reduced costs in the future.

Edited to add: If you know anyone that needs housing, you can always rent out the third room. Obviously there's pros and cons about this, and your co-op board may not allow it, but it gives you some financial flexibility that you may not have had before.
Old 08-14-06, 04:12 PM
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What other costs are associated with this?
Old 08-14-06, 04:14 PM
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Originally Posted by kvrdave
What other costs are associated with this?
Sorry, I forgot to mention the maintenance costs. For a three-bedroom they'll amount to about $150 per month.

The property taxes are paid by the co-op association and then at the end of the year each shareholder is given a statement to use if they itemize deductions.
Old 08-14-06, 04:16 PM
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In that case, it sounds like a great option as long as resale is not something you care about. And so long as you aren't going to move soon.
Old 08-14-06, 04:16 PM
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Originally Posted by Minor Threat
Now you're just dilusional.....


and hopeful.
Old 08-14-06, 04:31 PM
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Just make sure the co-op board is well funded. If something happens and they need $250,000 for repairs, do they have that money? If they don't, guess who gets to pay it.
Old 08-14-06, 04:31 PM
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in NYC when you get a co-op mortgage there are a few steps

first you read the offering plan, which is similar to a condo plan
second the lender gets the audited financials and look at them along with other info like investor ratio. underwriters don't allow loans in buildings with too much debt, too little cash or too many investors

third, if the building goes bankrupt then the creditors take over and you lose everything except the mortgage you will have to continue to pay in addition to the rent you will now have to pay. there is a building near me where the sponsor (original developer) didn't sell enough units, didn't maintain it properly, blah blah blah and the building almost went bankrupt. there was a big court fight because the sponsor wanted the building to go bankrupt, finally they found an investor to lend them money to make repairs and everyone's maintenance jumped to crazy levels. something close to $1000 per month for a 1 bedroom.

my building is swimming in cash and is very well maintained. NYC RE is crazy because a co-op's value varies on a building to building basis because of things like financial condition and things like that. there are a few buildings in the area with no mortgage and a low risk of default. most have a mortgage from when the developer sold it to the shareholders

it's like a condo except for the ownership part and there are the same problems. downside is in NYC the board of directors must approve all sales and it's not uncommon for politics to come in and sales to be denied or prolonged. there is alsot he risk of assesments if something breaks or a big job needs to be done. Most good co-ops here will charge a higher maintenance than needed to pay the bills and put the money into a rainy day fund like my building's $1.5 million chest.

and in NYC you have to have all renovations approved by the board or you can get fined or they can make you put everything back to the original condition. and in a lot of buildings they make you change the structural parts as part of the renovation to help fix up the building.

NYC they are 75% of the RE market here so it's not a big deal. If or when I move away from this place i will never buy a co-op or condo unless it's in some trendy part of the city. co-op's aren't well known outside NYC, they are a tiny part of the RE markets there and not worth the hassle unless you are in NYC. I think they are good for NYC, but not in the rest of the USA where you can find a home for a lot less money than here.

Last edited by al_bundy; 08-14-06 at 04:36 PM.
Old 08-14-06, 04:32 PM
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It still sounds too old. Do you know what problems it already has - loud/bad pipes, poor insulation, bad ventilation, old wiring, etc.
Old 08-14-06, 04:56 PM
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Originally Posted by Ranger
It still sounds too old. Do you know what problems it already has - loud/bad pipes, poor insulation, bad ventilation, old wiring, etc.
It's not a single building we're talking about -- it's attached homes and townhomes. According to the information I have, the roofs and guttering have been replaced recently. I don't see anything about the insulation or wiring, etc. I would need to look at an individual unit before I felt comfortable asking questions like that, and I'm nowhere near financially ready to buy into this thing. It would take me at least a year to save enough for the down payment and to purchase appliances and the other things I currently don't have to own.

But thanks for the warning.
Old 08-14-06, 05:19 PM
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do you know if the units have central air or window air conditioners?

how are the units kept warm in winter? if it's using a radiator or a boiler for heating, that's usually when you can expect a lot of loud pipes.
Old 08-14-06, 05:32 PM
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Originally Posted by The Bus
Just make sure the co-op board is well funded. If something happens and they need $250,000 for repairs, do they have that money? If they don't, guess who gets to pay it.
Find out when the last Reserve Study was done. Then look at it. Look at previous ones. Make sure they have proper reserves.

$150 for your area sounds high for what is essentially an assessment and for a large complex. What else is included in that? Water/sewage/refuse pickup, snow plowing, pool, tennis court, clubhouse, landscaping?
Old 08-14-06, 05:36 PM
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THANK YOU for all the advice, guys and gals! I'm headed home for the day with the information I got from the development's website. I will report more later!
Old 08-14-06, 06:14 PM
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Originally Posted by PrincessT
Find out when the last Reserve Study was done. Then look at it. Look at previous ones. Make sure they have proper reserves.

$150 for your area sounds high for what is essentially an assessment and for a large complex. What else is included in that? Water/sewage/refuse pickup, snow plowing, pool, tennis court, clubhouse, landscaping?
$150 doesn't sound high. This is maintenance of old buildings after all.

This is sort of the case where you want to make sure corners aren't being cut. If the costs go up at a steady/measurable pace, then that's not necessarily a bad sign.
Old 08-14-06, 07:16 PM
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I'd also drive around during the day (and night) to see exactly what the neighborhood is like. Hookers and drug dealers? Sounds kinda shady.
Old 08-14-06, 07:22 PM
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and convenient!
Old 08-15-06, 08:11 AM
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Originally Posted by Vibiana
It would take me at least a year to save enough for the down payment and to purchase appliances and the other things I currently don't have to own.
Do you have room in your current place to store stuff? The 2nd bedroom maybe?

If so, sign up for freecycle in your area. People are giving older (working) appliances away all the time by me. Find it and store it until you move.

*edit - here's the KC freecycle site:

http://www.kcfreecycle.org/

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