Condo vs. Co-Op: What’s the Difference?

what is a co-op

If the responsibilities of being a homeowner have become humdrum, it might be time to make a move. Or maybe you’re looking at buying a house but think the regular maintenance is more than you, or your schedule, can handle.

Does this sound like you? Then a condominium or co-op might be the right fit. Both offer the benefit of not having to handle routine upkeep—but, like anything, there are some cons to go with the pros. Plus, co-ops are somewhat unique when it comes to ownership.

What is a Co-op?

Co-ops are different from condominiums and other residential arrangements because they aren’t considered real property. When you buy into a co-op you are buying shares in a corporation, which entitles you to a unit on the property.

That’s not the only difference between a co-op and condo. Here are some of the basics you need to know to help you make an informed decision between the two.

Condo vs. Co-op

Condo Co-op
Ownership Buying a condo means you own the real estate, including an interest in common areas like lawns. When you buy into a co-op apartment, you’re buying shares that entitle you to a portion of the building. A co-op board will often have to vote you in as a new owner—and approve whomever you sell to, which can be time-consuming.
Fees Condos charge maintenance fees, usually on a monthly or quarterly basis. This covers costs like lawn mowing, snow removal and certain routine maintenance. Co-ops will also charge fees, but they are often higher in a co-op and sometimes include items like utilities. However, co-ops are less likely than condos to charge special assessments for things like capital improvement projects. Either way, maintenance fees should be factored into your monthly expenses. Keep in mind that they may increase over time.
Cost Condos usually cost more to buy than a co-op, but you have more flexibility with your investment. It’s usually easier to sell or lease out a condo. While co-ops will have higher fees, the initial cost of buying into a co-op is usually cheaper than a condo. However, it is usually harder to sub-lease in a co-op, so it’s best to plan on living there.
Property Taxes Condos are individually owned, so owners are taxed separately just as they would be in a single-family home. Co-ops are considered a single property, with a single property tax assessment that is split among the owners and usually included in the maintenance fee. Property taxes are typically lower on co-ops than on condos.
Tax Deductions If you own a condo, you can deduct the full amount of mortgage interest and property tax payments just as you would in a single-family home. Co-op owners can only deduct their share of property taxes and interest on the underlying mortgage on the entire property that’s rolled into their maintenance fee.

Thinking about buying a condo? Be sure to look into condominium insurance. Renting is also an option in many condo communities, so don’t forget about renters insurance.