I mentioned in an earlier post that my wife and I were looking for a co-op. Houses are just too expensive for us. When you purchase a co-op, you do not technically own the apartment, you own shares of a co-op corporation that owns the building. There is a monthly maintenance fees that covers expenses such as heat, hot water, property taxes and staff salaries. Well after about 10 months of looking at places, we finally signed a contract on a co-op. We weren’t in a rush since our lease contains a 2-month early termination clause allowing us to move out with 2-months notice without penalty. A small one bedroom apartment with a baby is a little tight, but it’s doable. But Baby LRC is crawling a lot now and will no doubt start walking soon, so we’d like to move to a slightly bigger place.
For most people who purchase a house, after signing the contract, getting the mortgage and having the place inspected are the other big steps in closing on the house. With co-ops, unfortunately, there’s another big obstacle: the co-op board application and interview. Co-ops are similar to home owner’s associations which make silly rules as to what you can or cannot do to your home. But another thing that co-op boards can do is to deny your application to buy shares in the building. And no, they do not have to give you a reason. There have been situations where buyers have received the okay from the bank, they go to the co-op board with a mortgage in hand, only to be rejected. I’m hoping this does not happen to us. I have already reviewed the application which I’ll probably share in more detail about this process in a future post. But the application is 38 pages and asks a whole bunch of questions about your finances.
We almost didn’t put a bid on this property. When we looked at a few places, we fell in love with the fancy updated kitchen and bathrooms. The granite counter tops, the stainless steel appliances, recessed lighting and other fancy upgrades that are trendy nowadays. And even though we know that the seller will be taking their furniture with them when they move, the modern sofa with recliner, big flat screen televisions and the creatively decorated child’s room really entices my wife and I. When we went to the apartment which we eventually signed a contract for, we didn’t have any of those feelings of excitement. Let me explain. The seller is an older lady who has lived there for 20 years, and is planning on moving to be closer to her family. She keeps everything in the apartment very nice, but she hasn’t updated anything. No granite counter tops or stainless steel appliances…heck, she doesn’t even have a dishwasher. She also only has an old 25 inch tube T.V (gasp!)
Most people who buy houses usually don’t mind buying a “fixer-upper” at a discount and make the changes that they want. However, with co-ops, once again it becomes more complicated because you have to fill out an application AND pay a fee to the co-op board whenever you want to make changes to the co-op. This includes upgrading the kitchen and bathroom. They have to approve your project before you start, so many people do not want to go through this hassle. In any case, the older lady kept things very nice and it looked pretty nice. Sure, it might not have the trendy updates and decor that many places have, but when have I been a slave to the new trends? Plus, I’ve never used a dishwasher in my life, so I’m not missing out. The price was more affordable because she didn’t make fancy upgrades to it, so we will be spending a lot less than we intended. Good thing the week we saw the place, I read Are You a Prisoner of this Money Mistake? by Laurie who blogs at the Frugal Farmer. It knocked some sense into me…especially when Laurie wrote, “Don’t make the money mistake of settling for basing your life decisions and your spending decisions based on what the opinions of others are.” I can’t explain why I think granite counter tops and stainless steel appliances are better. Is it because everyone else says that it’s better and I want to impress others when they come over? Once we put a fresh coat of paint on the walls with our color of choice, make some minor updates to it and put our own touch on the place, I know the place will look great. No, there will not be any granite counter tops or stainless steel appliances, but I couldn’t care less.
Other Thoughts:
I want to give a shout out to a useful new site – MagnifyMoney. Its mission is to educate consumers so they’re able to get the right product for their specific financial situation. I think the “Compare Products” feature is very helpful to consumers. It drives me nuts when people aren’t maximizing their cash back rewards when using their credit cards, or if they’re paying various bank related fees, and if they’re not getting the highest interest rate possible in their savings account. The recommendations will save and earn you money. Erin from Broke Millenial is a part of the team so you know it’s a quality site. Hey Erin, will the site be recommending which banks have the most transparent and low cost mortgages in the future?
I’d also like to thank Joshua from CNA Finance for mentioning some of my previous posts. I recommend checking out his series “Why Bloggers Fail.” I’ve been at it for a little over a year, but still feel like a newbie so his tips are always helpful.
Good for you guys! We are doing small apartment living with kids and it can be hard sometimes. We are saving for a house, but I love how you guys went outside the box with the co op. Hope the review goes well!
femmefrugality recently posted…Making the Switch: How I’m Saving $100+ Every Month on My Cell Phone Bill
Thanks! How small is the apartment and how many kids? We were originally saving for a house, but if we wanted to stay in the neighborhood which we really like…it would cost too much for a house.
It’s interesting how you are almost “expected” to either buy a house with all the new trendy upgrades or plan on making them asap. My wife and I are in a similar situation as we bought a house that an older woman lived in. It’s VERY outdated and while we do plan on making some upgrades, we plan on doing it slowly. It may not ‘wow’ our guests right now, but with our student loan debt and other saving goals it works for us for now.
DC @ Young Adult Money recently posted…5 Gifts That Will Tick Off Your Frugal Wife
I don’t know what got into me…I don’t care about trendy upgrades but when every place you see has them, it makes you think you need it! You guys are young and own a house (plus you’re landlords)…that already gives you the “wow” factor!
I’m so excited for yall. I admit, I was okay with whatever apartment we got but it was a real bonus that it was updated with nice countertops. It feels nice, ya know?
Cat@BudgetBlonde recently posted…Saving For A Rainy Day or Paying Off Every Penny?
Thanks! Are the nice countertops granite or marble though? When we moved into our apartment, it was updated but wasn’t with expensive and trendy material. It can look nice without being expensive =)
That is so exciting!
When we first started looking, all we liked were renovated properties and new constructions. But after a few months, I realized that we can get a much better deal on a fixer upper. Plus, we can customize it the way we want. We haven’t found a place yet but we’ve definitely broadened our horizons.
Connie @ Savvy With Saving recently posted…Extra Income Update: $6K In Freelance Writing Income
Thanks Connie! There are a lot of new construction condos. I was thinking that too…you can make the changes that you like. Though hopefully we won’t have to make any major changes because it’s much more complicated when it comes to co-ops. Good luck on your search.
Fingers crossed that everything will work out with this one. I know it’s hard to not get carried away with the bells and whistles, but you made the right decision. A lick of paint, and it’s new to you. Good luck!!!
Kemkem recently posted…Barcelona: Our awesome visit
Thanks Kemkem! It is definitely hard not to get carried away, especially with a place you’ll be calling “home”
Best of luck in getting the new place, Andrew! That’s exciting news. FWIW, we have paid off our house and still don’t want to spend any money to get shiny steel appliances or granite countertops. I wouldn’t mind the look, and if a home already had those things, then great. But I wouldn’t shell out money for something like that, which is purely aesthetic. The counters we have hold up a cutting board just fine. 🙂
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Thanks! No need for stainless steel appliances or granite countertops…save your money! You’re right, I like the look but some sellers wanted to charge a high premium because they spent money to make those changes. So true about your counters holding up a cutting board just fine…some people argue that granite is stronger, but it’s not like you’re actually cutting on to the countertop right?
Congrats Andrew!!
Where did you end up buying? Significantly more square footage?
Brad @ RichmondSavers.com recently posted…The What, Why, and How of Saving for a Down Payment on a Home
Thanks Brad…it’s in Forest Hills. It’s about 900 square feet compared to about 600 now.
Congrats Andrew! I’m a simple guy with simple tastes, but a dishwasher I need. It feels good to have a little space with a little one. Our little guy has more stuff in his room than we do. Haha We’re first time parents, what can I say 🙂
-Bryan
Income Surfer recently posted…The HOW and WHY of our Desired Portfolio
Haha, maybe once I’ve experienced a dishwasher I won’t be able to live without one! Plus, it won’t be to hard to get one and have it installed I think. As for the baby, just wait until your little guy starts becoming more mobile!
Congrats, I hope everything goes well from here! I love the point of the post, too. As usual, I saw a show the other day on HGTV where a couple went over their budget by $15k to get their dream *second* (vacation) home. Ridiculous!! Good for you for sticking with your budget and not caring about upgrades. Like Cat, I kind of lucked out with our apartment, but I was okay with getting something more “comfy and cozy.”
E.M. recently posted…Being Grateful: Twenty-Ninth Edition
Thanks, I hope it goes well too! I really think shows like HGTV really brainwash people into thinking that these lavish renovations are necessary! The place is “comfy and cozy”…I think that’s a good description. It wasn’t in bad condition at all nor was it out of date…it just didn’t have fancy upgrades that a lot of other places have.
Congrats! That’s a big move and it sounds like a sweet place. Love the fact that you haven’t operated a dishwasher. You always did dishes by hand?
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Thanks! Yep, I’ve always done dishes by hand. My parents don’t have a dishwasher. The apartment my wife and I live in has one but the kitchen is so small, we need to use it as storage. Plus, it’s not like 2 adults and a baby have that many dishes to wash.
How exciting, Andrew!!! I think you guys made a wise choice in choosing the simpler co-op, and I think as you get into payments and getting it paid off, you’ll still be glad you did. We moved from a huge, newer house to an old, outdated house. It was a trade off for the land and the farm, and yes, I do at times miss the new and shiny, but mostly not. Can’t wait to hear the final details. And thank you so much for mentioning my post – I’m so glad it inspired you 🙂
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I do think our future selves will thank us for having lower monthly payments! I’m glad you posted on that topic when you did…it was very timely for me. Even though I usually don’t care about trendy upgrades and appearances…we were a little brainwashed by other places with the fancy renovations.
Good luck on getting approved with the Co-op board!! I’m sure you all will be fine. It was interesting to read about co-ops- I don’t think it is something we have here in Miami, but I will have to look into in further.
Thanks for sharing!
Julie @ Millennial Cents recently posted…Traveling the World on a Budget
Thanks! It doesn’t seem like co-ops are that prevalent in most of the country. You’re probably better off not having to deal with a co-op board!
The granite counter tops might be a little better than the old formica ones but stainless steel appliances are no better than white or black ones. The fridge does not keep the food any colder and the stove doesn’t cook the food any better. The stainless appliances are popular simply because they are popular. Having them for most people is simply to impress others that they can afford those appliances. I actually heard on one of those house hunter HGTV shows one of the buyers say “what would our friends think when they came over if we didn’t have granite and stainless?” How shallow and vapid could they get?
Better in appearance or will it last longer? The seller has lived there for 20 years and her formica/laminate countertops still look like they’re in very good condition. Granite does look nice though, but I’m fine without it. And yea, I really don’t think stainless steel appliances add much functionality…it’s just the for appearances. Those HGTV shows probably perpetuate the shallowness and vapidity (is that a word?)!
Congrats Andrew and best of luck with finishing the process! I hear ya on all the niceties. I know those things may be coveted by many, but at the end of the day it’s just not worth it. They break down, become a lot less shiny and just aren’t worth it. My in-laws have granite and stone everything and it just doesn’t feel like a home. We visit and see exactly why we make the choices we do.
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Thanks John! You’re right…it might be nice and shiny in the beginning, but the luster usually goes away quickly. I like the look of it actually (maybe it’s because everyone is using that look)…but when it comes down to it…those niceties aren’t all that important.
I don’t even pretend to understand how co-ops work, but that sounds like a great deal. I agree that you don’t have to have all the latest things to make a great home. I’m curious, though, is the co-op price based on the average of the building or would you make more if you do upgrade and decided to sell down the road? Can a co-op board make you upgrade if they feel your apartment is not up to the value of the building? That is a fascinating way to buy property. I’m kind of glad I probably won’t ever have to deal with a co-op board. Our HOA is bad enough!
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Kind of like an HOA…except much worse! =) The co-op price is based on the market value of similar co-ops in the neighborhood…much like home values. If you upgrade it, you will be able to sell at a higher price. Upgrading is a bit of a hassle because you have to get approval from the co-op board and pay a fee. I don’t think that a co-op board can force you to upgrade your apartment. I have heard some co-op boards rejecting the price which has been agreed to by the buyer and seller because they think it’s too low and will bring down the value of other units.
Very exciting Andrew!!! I have a good friend who lives in a co-op in the UES and it is challenging for her to have to go through the board whenever she wants to do anything and sometimes the board’s decisions seem arbitrary, but for the most part, she is happy. And I hear you on the countertops! We purchased our home two years ago and at first I thought the kitchen HAD to be renovated because of the 25 year old laminate countertops. Now I have gotten used to our “old school” countertops because I know the longer they sit on my countertop, the longer cash will sit in my bank account. 🙂
Shannon @ Financially Blonde recently posted…Dad Advice for a “Regular Person”
I’m in Queens and I think the co-op board is strict…I can’t imagine how they are in the UES! Nothing wrong with laminate countertops right? And you’re right…I like my cash sitting in my bank account! We’ll probably make some changes but nothing major.
Congrats and good luck! I think adding your own small updates will truly make it feel like your own. Also, we don’t have a dishwasher, either. Somehow, we still manage to survive 🙂
Kristin Wong recently posted…Where to Find Ridiculous Deals on Cheap Prescription Glasses
Thanks! What…no dishwasher?! I thought I was the only one =) Not that many dishes when it’s just a couple or a couple with a little baby.
Congrats on the new purchase, I dont know if I missed it but Im assuming you got a 2 bedroom co-op? I can afford a co-op right now, but for resale purposes I would rather rent and save up enough to get what we really want.(SFH or Duplex) Best of luck getting the new digs. Let me know if you need your floors refinished, I know a guy who knows a guy. LOL.
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It’s actually a junior 4…can convert it to a small 2nd bedroom. I wanted to rent and save up too, but we rented for 5 years and really like the neighborhood. It’s near impossible to buy a SFH…let alone a Multi-family house here! The co-op requires 80% carpeting…but if we need the floors refinished, I’ll let you know! haha
Congrats to you guys! I must admit I get kitchen envy when I go into nicer homes/apts. I think my biggest envy of all is a washer dryer. I’d settle for one being on the property, as going to the laundromat is a pain in the ass. I hate it when people complain about having to do laundry and it’s in their house. I wish! 🙂 But I try to flip my sadness by thinking, “oh yeah I live 1/2 mile to the beach.” It all comes out in the “wash.” LOL pun intended!
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Thanks Tonya! You’re right, I couldn’t imagine trekking to a Laundromat! We have one on the property and it’s still a hassle, especially when you have to wait your turn. I’d much rather have one in my unit. And yes, the 1/2 mile to the beach is a positive. Plus, I’m sure you don’t have to trek to the Laundromat in the snow which I’m sure some New Yorkers have to do =)
Thanks for the shout out, Andrew! I’m actually down in Chattanooga, TN with the MagnifyMoney team (minus Goofski) right now and we’re doing focus groups, seminars and one-on-one financial meetings with folks to help them out and hear about what would be best for us to add to the site in the future. Mortgages are certainly a subject of interest, but we don’t have a timeline for when we’ll be expanding yet.
Broke Millennial recently posted…When Working for Free Makes Sense
No problem, thanks for getting back to me! I’m sure Goofski would have been a hit at the seminar!
Very exciting news, though the process sounds nerve-wracking (and expensive). If they don’t have to give a reason, then how does one know it’s not based on discrimination or something along those lines? Personally I like the granite look since it’s way easier to clean (or hide dirt!) than tile which we currently have, but is it the ONLY solution? Probably not. Best wishes on getting the co-op!!
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Thanks Anna! Yes, it is a bit nerve-wracking and very expensive! I think that’s exactly why they don’t give a reason…they don’t want to any potential lawsuits. It really seems unfair.
Congrats on the big step! It must be really exciting to move into a new place, even if it’s an old one. Indeed getting a “fixer upper” sounds good in most occasions because you have the chance to make the place your own and it’s worth doing it despite the extra trouble and the extra time you have to spend with the board. I’m sure that they won’t have anything against one person updating the kitchen or bathroom 🙂 Again, congrats and good luck!
C. the Romanian recently posted…Niche “Empire” Case Study: 5 at a time!
Thanks C. Congrats to you guys as well!