Facts about True Foreigners invest in Manhattan New York Real Estate
We work with many Foreign National buyers and investors from different parts of the world, we often have to explain to the buyers about the Manhattan New York Housing Product (Condo or Co-Op). Often, we encounter the question….
“Can a Foreign National Buyers and Investors buy a Manhattan New York co-op?”
Co-ops are 90% or more of New York Real Estate. Co-op buildings are governed by Co-op Boards, the co-op board makes essential decision about the building and set building house rules and policies. Among those decisions, Co-Op board of directors approve and interview every potential purchaser.
Foreign National Buyers or Investors to buy an apartment in a co-op building are not easy for several reasons:
Co-op purchaser approval takes weeks — if not months — and is a rigorous and notoriously difficult process. The majority of co-ops only approve buyers with New York employment, US income tax and excellent credit history in the US. The law doesn’t require a co-op to even provide an explanation for a potential buyer’s rejection.
There are often restrictions on how much financing a buyer can use (for example, no more than a certain percentage of the unit price).
Almost all co-ops restrict the right to sublet your apartment, which makes it unattractive to investors. Usually, co-op apartments cannot be rented out at all or can be rented out for 1 or 2 years after a certain number of years of owner occupancy.
Co-ops regulate your use of the apartment in many other ways… including having guests or performing renovations.
When selling (or renting it out when allowed) a co-op, your buyer will be subject to co-op approval as well, which reduces the number of qualified buyers and therefore reduces the price of your investment.
There are often additional “flip taxes” on the resale of a co-op to discourage speculators.
All these measures are intended to protect interests of other co-op shareholders and make sure that a new buyer is financially stable, and will always be able to pay for monthly maintenance, improvements and expenses of the building. In addition, often residents of co-op buildings often view their building as exclusive clubs and want to make sure that the building attracts only a certain type of people who use it in a certain way that makes all the residents comfortable.
The purchase price of most co-ops is 10-20% lower than that of condos. Monthly expenses (maintenance), on the contrary, are usually slightly higher and include utilities, maintenance expenses, real estate taxes, and the corresponding share in the mortgage indebtedness of the building… if the building has a mortgage loan. In addition to the mortgage interest on their own loan, co-op shareholders can deduct their portion of the corporation’s real estate tax from their taxable income.
Still, co-ops can be attractive for those who would like to use the apartment as a primary residence or as a pied-a-terre in Manhattan . For the most part, co-ops are older (prewar) buildings with beautiful authentic features, fireplaces, high ceilings, moldings… and sometimes even their own gardens.
