What is a cooperative?
A cooperative a.k.a co-op is a business, organization, or a farm owned and run by its members who then share its profits. In real estate, a cooperative offers its members (shareholders) a chance to live in its units and other properties in exchange for buying shares of the cooperative.
Not everyone can afford to buy a house or a condo. However, there are ways that almost everyone can afford to live in one of them. This is where the cooperatives come in. These organizations are different from conventional real estate investments. Instead of buying the condominium, for example, people will buy shares in a cooperative and own the rights to live in one of the condo’s unit.
It is important to know that the number of shares you buy will determine the size of the unit you live in and the location of the condominium. For example, a person who wants to live in a 2,000 sq.ft downtown condo will buy more shares than a person who is living in a 1,000 sq.ft unit in the same location.
Other factors that can influence the price of shares can include but not limited to the level of the floor, good view, etc.
The ownership of the property is what differentiates co-ops and condominiums. Condominiums are privately owned whereas co-ops units are owned by the cooperatives.
Benefits and the disadvantages of cooperatives
Cooperatives have a lot of benefits to both investors and clients who live in them. At the same time, they come with some setbacks on both sides. The following are some of the benefits and disadvantages of these properties.
- Co-ops are much cheaper than regular condos
- The cooperatives can raise enough money to cover all expenses without having to get loans
- Co-ops are generally owned by shareholders which makes then bad investments
- It is hard to sell co-ops due to restrictions
- Shareholders are responsible for paying the maintenance fee for the unit they live in
- Co-ops are less taxed
