OWNING A CO-OP APARTMENT

Owning a Co-op is basically the same as owning a Condominium with a few fundamental differences. In a Co-op, you own shares in a corporation that owns the structure which has an underlying mortgage. (The number of shares assigned to a specific apartment is listed in the offering plan.) As a Co-op owner, you receive the shares of stock that represent your proportionate interest in the housing corporation. When you own a Condo on the other hand, you receive an individual deed to an apartment.

In a Co-op, the corporation is assessed real estate taxes and you pay your portion of those taxes monthly as part of your monthly maintenance. When you own a Condo, you are assessed individually for real estate taxes, and pay them in addition to your monthly carrying charges.

As a Co-op owner, you also receive a proprietary lease which gives you the right to permanently occupy your apartment and to dispose of it at any time and in any manner that conforms to the By-Laws of the Cooperative. This means you can sell your apartment at any price subject to Board approval, give it as a gift or will it to your heirs.

THE ADVANTAGES OF MAINTENANCE

Your Co-op Board of Directors provides services on a regular basis necessary to take care of the interior and exterior upkeep of the building. Your monthly maintenance fees cover the costs of these services.

Therefore, all the expenses incurred in the smooth running of your Co-op community, including salaries of staff, utilities, lawn care, heat and hot water, snow removal, water charges, insurance, legal and accounting fees, real estate taxes, mortgage payments and a reserve fund for any contingencies and/or building wide major capital improvements, come out of the monthly maintenance fees.

The Board, Accountant and Managing Agent carefully review and evaluate these operating costs to be sure that they are within appropriate guidelines. Maintenance charges are distributed fairly and equitably among the apartments in direct relationship to the total amount of shares allocated to each apartment.

FINANCIAL AND TAX ADVANTAGES

Owning a Co-op offers you several financial options. In fact, it is like owning any type of property because it is a tangible asset that has a definite value.

You may also sell your Co-op at any time you wish and probably get back more than the price you originally paid for it.

There are also certain tax advantages you are entitled to as a property owner. For example, you can deduct all payments for real estate taxes and mortgage interest. These payments are included in the monthly maintenance you pay to the Co-op corporation.

Maintenance Deductibility for the purpose of Annual Income Tax filings, (tax return write-off ) is arrived at as follows: Multiply the number of shares for the subject unit by the assigned proportionate dollar amount of Real Estate Taxes and Mortgage interest to determine the total actual dollar figure deduction.

You can also deduct the interest costs on a Cooperative mortgage should you choose to finance part of the purchase price with this type of loan.

The tax savings you will ultimately receive depend on your income tax bracket and it is advisable to consult with your accountant and lawyer.

This means you can use it as collateral for most of your personal needs such as securing a loan for a new car, boat, or even a trip around the world. It can even help pay for your childrenÕs education

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