FAQs

What are some benefits and drawbacks of homeownership?

Becoming a homeowner is one of the biggest financial investments many people will make in their lifetime. Homeownership is wedged into the minds of many as a pillar of the American dream. While owning a home signals a certain level of financial success, it is important to consider the benefits and disadvantages before embarking on the journey to homeownership.

Some benefits of homeownership include:

Good long-term investment: in a strong economy, the value of homes generally increases. But even if the home itself deteriorates, the value of the land can increase. You are investing in an asset for yourself when you purchase a home.
Building equity: every single mortgage payment is an opportunity to build equity, which equity belongs to you. This is a big benefit over renting. You can then leverage your equity to help with other future financial goals. Mortgage payments are often referred to as “forced savings.”
Federal tax benefits: homeownership can also bring about tax breaks. Mortgage interest, interest on home equity loans, property taxes and some closing costs when buying the home can all be deductible. While the deduction is particularly useful for off-setting the initial financial blow that comes with purchasing your property, changes in tax law raising the standard deduction and capping deductions that can be taken on state and local taxes, make it less likely for first time home buyers and younger people to enjoy those breaks.
Greater privacy & stability: unlike renters, homeowners enjoy the liberty of renovating to their liking, and there is less risk of being forced out by a landlord due to increase in rent or sale of the rental by the landlord.
Control of day-to-day housing costs: homeowners have control over the day-to-day housing related costs and can make better short and long-term financial decisions.

What about the disadvantages of owning a home?

Commitment: Homeownership is a long-term financial commitment that is difficult to just walk away from. Transitioning out of a home requires more effort than moving out of a rental. Renters are generally not responsible for finding a new renter, while homeowners must find a new buyer and make a favorable sale.
Maintenance costs: homeowners are responsible for all maintenance and repairs, which can quickly add up expenses.
High upfront costs: buying requires sizable down payment, closing costs and moving expenses.
Property value can fall: there is no guarantee that the home value will increase.

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Condo v Co-op - the advantages and disadvantages.

In New York, buyers looking to purchase apartment units have one of two choices to choose from: condominium unit or cooperative apartment. Although both condos and co-ops look similar from the outside, they cannot be more different. There are a myriad of differences between the two and the choice between purchasing either a condo or a co-op ultimately comes down to personal decision.

Below are some attributes to take into consideration when deciding between purchasing a condo or a coop:

Condos:

1. Condos are considered true real estate. A deed is transferred to the new owner at closing.

2. Owners own their apartments and jointly own the common areas with other owners in the building.

3. Condos are generally more expensive than coops and are generally newer constructions.

4. Condos are generally less strict in terms of allowing owners to rent out their apartments.

5. Condos generally have more extensive amenities.

6. Condo associations only have a right of first refusal when an application to purchase is submitted.

7. Condos do not generally require a substantial down payment.

8. Condos generally have higher closing costs due to title costs and mortgage taxes.

Co-ops:

1. Co-ops are not real estate in the traditional sense. The “co-op” owns the building; the purchasers simply purchase shares of a corporation.

2. A stock certificate is issued to the new owner at closing, not a deed.

3. The bigger the co-op unit, the more shares the owner owns.

4. Co-ops are generally less expensive than condos.

5. Co-op owners give up some of their rights to the co-op board.

6. Some co-ops do not allow subletting, and the ones that do, most have a minimum of time in which the owner must live in the apartment before renting it out, and the coops usually have limits on how long an owner can rent out their apartment within a five-year period.

7. Co-ops impose greater restrictions on transactions and co-op board approval processes are known to be notoriously difficult. The co-op board can reject a potential buyer for a host of reasons without any obligation to disclose why.

8. Co-op approval process can be long and tedious.

9. Co-ops generally require a down payment of at least 20% and expect potential buyers to have significant amounts of money left thereafter. Many co-ops are also concerned about the potential purchaser’s debt-to-income ratio.

10. Though coops do not have the mortgage tax or hefty title bill, a lot of co-ops charge flip taxes, a transfer fee, which is paid by a seller or buyer to the co-op at closing.

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*Disclaimer: Please be advised that these answers are for informational purposes only and should NOT be considered legal advice. Neither Akinola Law Group, P.C. nor Oluwatoyin Akinola are your legal counsel unless we formally enter into an attorney/client relationship by signing a formal engagement letter/service agreement. This also means that any and all information shared is NOT covered under attorney-client privilege. We advise that you have your specific situation evaluated by an attorney.