Tag Archives: first time home buyer

Why Purchasing a Co-op Isn’t For Everyone

23 Sep

I have been looking at real estate for the past year. I know my neighborhood, considering I have been living here my entire life, and I know what I like. I know more than anything I would like a house. But, my husband and I cannot afford that. We live in one of the most expensive cities in the world and purchasing a home right now is not an option. In fact, where we live, it may never be an option. This is something I have reluctantly come to terms with at this point in my life.

I have always read pieces, blogs, message boards—you name it, I’ve probably read it—written by people who tell you to never purchase a co-op. It kind of makes me chuckle, because they make it sound like you always have an option. My own father tells me I should buy a house when it’s obvious we cannot afford one. Theoretically, it may be better for you, since you can do what you want to your own home but it’s not always the most practical choice.

Right now my husband and I are in contract to purchase a co-op. And without reservation, I can honestly say I will never purchase a co-op again. I have now become a naysayer!

Why Did I Look At Co-ops In the First Place?

In certain parts of the States, I am sure you will find people who have never even heard of a co-op. The idea that you are not actually owning something and in fact, just own shares of a corporation, would probably completely bewilder people. The fact that you must abide by and answer to a group of people who decide how you should live (also known as the cooperative board) may seem outrageous to people.

For us, it’s just a fact of life. Co-ops are ubiquitous where we live. The buildings in my neighborhood (that look like apartment buildings, yes) are almost entirely co-ops—not condos. There is a certain precedent for this. And they will continue to exist primarily because this is a launching pad or a way of life for some people. Co-ops are the only thing that my husband and I could reasonably afford. In fact, the mortgage and the maintenance will be lower than our rent.

What Has Changed My Mind

I knew that I would be charged fees for everything—but I had to start keeping a log.

Sure, you have to pay the bank. Closing costs. Fees for this. Fees for that. My eyes glaze over just thinking about it.

And yes, you have to pay the lawyer. Good times.

And then, lest you forget, the management company. We have to pay them for the application ($400), we have to pay them for one other thing that I already forgot about ($250) and we have to pay them separately to fill out one page—ONE PAGE—$150. They give you a list (yes, a list) of things they want from you—as intrusive as a physical examination from a doctor—that paint your financial history. Tax returns. Pay stubs. W-2s. You need a million references. Not enough, you say? Well it’s a good thing you have to make seven copies of every document so the board can have enough copies to go around and know your entire life story.

Everything takes so long and everything is such a huge hurdle. After we submit everything, we need to also have an interview with a board, where they will decide whether or not we are worthy.

And really, this is more than a month away. After all is said and done, the board can reject us. That’s right—after paying the fees, after paying the lawyer, after putting 10% of the purchase price into escrow, the board can simply say no for whatever reason they feel like.

Only the Strong Survive

Purchasing a co-op is a very long, drawn-out process that is definitely not for everyone. I say that I would never do it again but I guess I would if I had no other option. But if I did have an option, I would never do it again. Sometimes I look at my husband and tell him I regret doing this. I’m not sure if I really regret it or if I am just complaining because things are getting so tough with the co-op. But I think I will be happy once all is said and done and we finally move into our new home.

Have you ever though twice about purchasing a property? Do co-ops exist in your area?

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Thankful—Because We Didn’t Purchase Something

29 Jul

My husband and I have been looking for our “dream home” for a few months now. To be honest, I have been scouting homes for over a year but we have been seriously looking at homes for the past two months.

I put dream home in quotes because my dream home is not here. Nope. I cannot afford a house here so our “dream home” has really been limited to co-ops and, if we were lucky, a cheap condo. We were pre-approved and one of the first co-ops we saw—well, we loved it. It was a two-bedroom co-op that needed some work here or there but overall, it was nice. It had a terrace, which I was practically dying for and the only catch was that there was no washer/dryer unit on-site. It was at the top of our price range and we both really liked it. But after consulting with a plumber, we decided it was not worth it at all and we sadly let go of our “dream home.”

I would say that a few weeks after that, my perception completely changed. And I am glad we did not pursue that co-op!

Our current rent is probably right on average for what we would pay in our neighborhood. I started thinking to myself, “If I don’t plan on living here forever and these are not places that I absolutely love, why do I intend on paying more every month to live there?” Our rent is somewhere between 26-27% of our net income, which is actually a pretty good number considering a recent article I read talked about how much rent eats up the budget of those who live in my city.

So I thought up a new plan which is as follows:

  1. We began looking at one bedroom places instead of more expensive, two-bedroom places. We also stopped looking at expensive one-bedroom units. This not only saves us money on the down payment and mortgage but it also saves us money on the maintenance.
  2. I decided that our cut-off was now going to be $220,000 instead of the $350,000 we had started at and had been pre-approved for, since we can, in actuality, make those payments every month. I also decided to focus on places where the maintenance was on the lower-end of the scale, which for us is $600 or less.

I am incredibly interested in a place we looked at the other day. It’s listed for $199,000 and the maintenance is $473.55. I am hoping to get that price down by at least $10,000, though I’m not sure yet how negotiable the seller is since he is also willing to rent it out at the same price that I pay for rent now, which is $1,300/month. Doing a little big of math, I figured:

  • Purchasing the property for $190,000 would allow me to put down 25% or $47,500. The mortgage would be $670.09 at a rate of 3.875% (co-ops do not get rates as good as houses.) With the maintenance at $473.55, my total payment every month would be $1143.64, saving me more than $200 every month in rent. At least 50% of the maintenance every month is tax deductible, as well as the mortgage interest.
  • Purchasing the property for $190,000 would allow me to put down 30% or $57,000. The mortgage would be $625.42 at a rate of 3.875%. With the maintenance at $473.55, my total payment every month would be $1098.97, and everything else mentioned above also applies here obviously.

My thinking, for now, is that inevitably, I will get the money back that I used as a down payment when I sell the property in the future. In the meanwhile, I can pay for a mortgage and maintenance that is not only less than my rent but that will provide me with $2500-$3000 per year in tax deductions. In the meanwhile, I can save more money toward something else. Most housing did not experience any depreciation in my neighborhood so that is not of any concern to me.

So overall, this house hunting experience, which has left me largely frustrated, has also allowed me to reevaluate what I really want and what I am willing to settle for at this time. I think that going with a smarter decision, even if we don’t like it as much, will work out better for us in the end.

And really, I should thank the realtor from the first property—she was so obnoxious that she completely turned us off from the property all together!

The Emotional Cost of Purchasing a Home – Part One

21 Jun

For many years, purchasing a home has been a dream of mine. Of course, my city is so expensive that I can’t afford to buy a house, but I can still purchase some entity nonetheless.

Aside from the financial drain, purchasing a home can take a huge emotional toll on someone as well. Being that this has been a huge dream of mine, I should have realized that no matter how logical I am, there will still be some emotions involved.

How Purchasing a Home Can Be Emotionally Draining

1. The Savings Hit – We have worked very hard to save our money over the years in order to have enough money to put down on something. We withstood the jokes about us being cheap and we annoyingly answered questions from people who couldn’t fathom the idea of getting rid of their cable like we did. The savings account we have almost feels like a blanket to me — we have all of this money just in case. At the same time, we were saving for a down payment in the first place. When you work so hard to save a large sum of money, it feels incredibly scary to all of a sudden have that money disappear. We are going to be putting down 20% so for us, that is a ton of money!

2. Never Quite Right – We have been looking at places for over a month now. We had a short list of things we were interested in finding in a place such as:

  • Two bedrooms, though if the space was large enough or a junior four, we would consider one bedroom
  • Private outdoor space such as a terrace
  • Lower maintenance costs, considering I’ve seen maintenance costs at over $1,000/month
  • Washer and dryer must be available on-site; does not have to be within the unit itself
  • Must cost $350,000 or less
  • Prefer that there is at least one thing that can be remodeled; do not want something that is completely new
  • Must allow cats

There are so many co-ops in my area and the fact that this is so hard to find has been driving me crazy. I don’t think we even have a large list of demands so I don’t know why this has been so difficult.

  1. We have looked at numerous two bedrooms and one or two junior fours. (A junior four is usually a larger one-bedroom apartment that may or may not have a second room.) Many of the two bedroom units that we can afford are small and because of the second bedroom, the price exceptionally higher. There are a couple we have been interested in but things seem to not be working out for us. One of the junior four units that needed work had a no pets policy and exceedingly high maintenance.
  2. The outdoor space is something that is actually at the top of my list in terms of purchasing a co-op. I would really, really like to have a terrace and would take a one-bedroom co-op in order to have one. Unfortunately, terrace units are much harder to come by and usually more expensive.
  3. Maintenance costs are additional costs on top of our mortgage. Some of them make purchasing a co-op for us prohibitively expensive, even if there is a tax deduction at the end of the year.
  4. We actually really like one particular co-op and this is the only reason we haven’t made an offer—it has no washing machine on-site. I can’t imagine owning my own place and having to drag my laundry out every weekend.
  5. Given that maintenance costs for the places we have been looking at run upwards of over $700/month, we must be able to keep our budget on the lower end.
  6. We consider this a starter home and would possibly like to make money off of it down the line. If I buy something that has been completely remodeled before I get there, what can I personally add?
  7. Many co-ops around here do not allow dogs but most of them will allow cats—however, we have come across some places we liked that have strict policies against pets.

I think the most emotionally draining part of the points above is that we have found places that we really liked that are just not working out for us. We have been talking about this two bedroom co-op since we saw it almost a month ago and it’s the one we keep coming back to—but without a washer and dryer on-site, there is no point for us. The realtor for the seller has been pretty annoying about it and we seem to not be able to get our minds off of this place.

Until next time…

Ignoring “Advice” When Buying a Home

16 Jun

My husband and I have been looking at homes. We have had our eye on one particular contender. It’s a two bedroom, one bath co-op in a small unit of cooperative units that look like a row of townhouses—highly unusual in my area since most co-ops look like large apartment buildings. Aside from the stress involved in looking for a home, I have found that people tend to be less than supportive in our attempt to purchase a home. Instead, we end up hearing a stream of opinions from people who know absolutely nothing about our situation and who seem to know little about the housing market today.

Opinion #1: Don’t Buy a Co-Op! Ever!

People fear co-ops for a number of reasons. They do not like that you technically do not own a piece of property. They don’t like the idea of boards and people who can raise your maintenance whenever they want for whatever reason. I am perfectly able to understand where they are coming from and why they feel that way.

What I do not appreciate is when people wholeheartedly try to talk us out of purchasing a co-op. They do not know our situation well enough, financial or otherwise, to make that decision for us.  So many people are ready to talk us out of purchasing a co-op without talking to us first and that is something I do not understand.

Why purchase a co-op? Simply put, that is all we can really afford. Occasionally there is a condo that comes on the market that we can afford but that is very rare. Unlike the neighborhoods many of these people live in, co-ops are actually quite commonplace and regularly bought and sold where we reside.

Opinion #2: Try to Get…

My husband and I have what I consider to be a short list of things we want in a home.

  • Two bedrooms, one bathroom
  • Preferably some type of outdoor space
  • Washer and dryer on-site, not even necessarily in our unit
  • Dishwasher in the co-operative unit
  • Storage or a lot of closet space
  • Some type of parking even if there is a waiting period or lottery

Now some of these things are somewhat flexible. For example, the unit we are interested in doesn’t have a washer, dryer, dishwasher or parking on-site. However, we feel as though we must have the option to add some of these things in the future. Not having a parking space is not the end of the world either—it’s a preference but not necessarily a need.

The naysayers, of course, have to insert their own opinions as to what we should be looking for—why not try to get something with a backyard? Why don’t you get something with a big kitchen? Why don’t you get something that has been renovated? Why are you buying a co-op again?

Opinion #3: Why Don’t You Just Buy a House?

I really hate this question because it assumes that I wouldn’t want to buy a house if I could buy one. Do you think I would be purchasing co-operative units if I could afford a house? What makes you think we can easily afford a house? Do you guys mistakenly think my husband and I are rich? My husband and I would gladly purchase a home if we could afford it. Affordability is key and most of the people telling us this bought houses twenty or thirty years ago when houses were still easily affordable in our city.

What to Take Away

It’s always smart to listen to people in terms of housing, especially when you have never purchased a home before. However, you need to remember that this home is for you and that there is a difference between good advice and opinions from your friends and families. When you begin your search, keep these things in mind:

  • Always ask for advice but make sure your advice is from the right people
  • Before you ask for feedback, make sure whoever you are discussing your situation with has the entire picture
  • Don’t allow other people to push their opinions on you and push you into something you don’t want

How have your home buying endeavors been? How have people responded to what you are looking for when you tell them about it?