Condo vs. Co-op in Chicago

Condo vs. Co-op in Chicago: A Comprehensive Comparison

If you’ve ever thought of buying a Chicago co-op but wanted to know more, this article is for you – here we explore the difference between condo vs. co-op ownership and the pros and cons of co-op ownership and condo ownership.

When considering homeownership options in Chicago, the most common choice is condominium (condo) ownership. However, there are also cooperative apartments (co-ops), which aren’t as common and often misunderstood in our local market.

What’s the difference between Condo and Co-op ownership?

The primary difference is how you own the property. With a condo, you own the exact unit in the building, whereas with a co-op, you own shares of the corporation that owns the entire building.

Co-op ownership is much more common in cities like New York. Each type of ownership has its unique advantages and disadvantages, and understanding these differences can help you make an informed decision. Especially if you’re considering buying a Chicago co-op, lets explore both options in detail.

What is a Condo?

A condominium is a type of real estate where individuals own their units outright while sharing ownership of common areas such as hallways, gyms, and pools. Located throughout the city of Chicago, condos are prevalent in high-rise buildings, converted warehouse lofts, and even smaller buildings like 3-4 flats.

Pros of Condo Ownership:

• Ownership Rights: Condo owners hold a deed to their unit, providing them with more control over their property.
• Financing Flexibility: Mortgages for condos typically follow conventional loan guidelines, making financing easier. Condos can also qualify for FHA and VA loans.
• Investment Potential: Many condos appreciate in value, offering good investment opportunities. Buyers in Chicago are familiar with condo ownership and there is a stable market for resale.
• Amenities: Condos often come with shared amenities like fitness centers, party rooms, rooftop decks, and pools.

Cons of Condo Ownership:

• HOA Fees: Owners must pay homeowners association (HOA) fees, which can increase over time and cover maintenance and amenities. Unit owners could also be subject to Special Assessments when there aren’t enough funds in reserve to cover large capital projects for building maintenance or improvements.
• Rules and Restrictions: Condo associations often impose rules that can limit rentals, pets, renovations or the use of shared spaces.
• Market Vulnerability: The value of condos can be more volatile compared to single-family homes, influenced by market demand as well as the performance of the entire building.

What is a Co-op?

A cooperative apartment, or co-op, is a form of housing where residents don’t own their units outright. Instead, they own shares in a corporation that owns the entire building, granting them the right to occupy a specific unit.

In Chicago, you will find co-op buildings mostly near the Lake in South Shore, Hyde Park, Streeterville, Gold Coast, Lincoln Park and up through Rogers Park.

They are mostly in those big beautiful pre-war buildings like 1448 N Lake Shore Drive or 3750 N Lake Shore Dr, but you will also find Mid-Century Modern style co-ops like the Mies van der Rohe designed building at 860 N Lake Shore Drive or even Andrew Rebori’s mirror image buildings with a beautiful garden courtyard connecting them at 40-50 W Schiller. Here are the pros and cons of co-op ownership:

Pros of Co-op Ownership:

• Lower Purchase Prices: Co-ops often have lower entry costs compared to condos, making them more accessible price-wise.
• Fees: The monthly co-op fees appear incredibly high with compared to condo HOA fees. The reason is that the property taxes are also built into the co-op fee. The co-op building is taxes as a whole and each shareholder in the building is responsible for their portion. In a condo building, each unit is taxed individually and the property tax is paid independently of the monthly HOA fee.
• Community Atmosphere: Co-op living can foster a stronger sense of community, as residents often share responsibilities for the building.
• Financial Stability: Co-ops may require a lower debt-to-income ratio, as the board can vet potential buyers more rigorously.

Cons of Co-op Ownership:

• Approval Process: Buyers must go through a board approval process, including a credit/ background check and interview with the board, which can be stringent and time-consuming.
• Less Control: Owners have limited control over their units and must adhere to the co-op’s rules, which can affect renovations and leasing.
• Financing Challenges: Co-op financing can be more complicated, and some lenders may have restrictions on financing for co-ops. There are only a couple of lenders that will finance co-ops in Chicago. Co-ops also do not meet qualifications for FHA and VA Loans.
• Resale: Time on market is usually much longer for co-ops due to the smaller amount of buyers considering co-op buildings and the perception of high monthly fees without understanding that property taxes are part of the fee.

So which is best – Condo vs. Co-op in Chicago?

Choosing between condo and co-op ownership in Chicago ultimately depends on your lifestyle preferences, financial situation, and long-term goals.

• If you prioritize ownership and investment potential, a condo may be the better choice.
• Conversely, if you value community and lower initial costs, a co-op could be a great fit.

Before making a decision, it’s advisable to research specific buildings, consult with real estate professionals, and carefully consider your personal needs. Whether you choose a condo or a co-op, Chicago offers vibrant communities and diverse living options to suit any lifestyle.

Conclusion

Here we’ve looked at condos vs. co-ops in Chicago and now you should know everything about buying a Chicago co-op and the pros and cons of co-op ownership. For more information or help buying, selling or leasing, contact Chuck Gullett. Thanks for reading!