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Millennials Catch On: Co-ops, Best Way To Own Property W/O Lifetime Debt!

When you add green energy to the mix it becomes a no brainer!

Many Black-owned consumer cooperatives were established at the end of the 19th Century and the first half of the 20th: grocery stores, gas stations, credit unions, insurance co-ops, and some housing co-ops. In 1907 W. E. B. Du Bois held a conference on cooperatives and listed 154 current African American co-ops.

"So you really want to buy a multi family house, live in one unit and rent out the others to cover the mortgage? Unfortunately, you can't afford to buy a multi fam house on your own. The real estate agent you talked to said most investors are buying them in cash. Ugh! So you're thinking about how to co buy a sustainable multi-fam w friends... Then maybe turn each of your units into condos which you could sell for more money, and individually, down the road."

Well here are your options! First off, Yes. It's super smart to pool resources, but save yourself (And your family members/friends) from future conflict by using a lawyer to set up a corporation, Trust or LLC, with a stockholder agreement addressing ownership percentages, income, expenses, taxes, and how/when/if the property will be sold. There must be an ironclad exit strategy with specific language because life changes quickly (marriage, divorce, birth, relocation, sickness, death).Cooperatives have always endeavored to enable people to have access to goods and services without exploitation – to realize their needs and aspirations. This has led them to pursue a convergence between economic, social, and environmental interests – going green energy through solar, wind or geothermal is building triple bottom line sustainability.

You can buy with friends but you need to be on the same page for potential repairs that impact the overall unit. You can convert the house into condos to allow you both an exit plan. The agent was correct in that many sales are all cash and certainly a large portion are investors. Having a mortgage is just another contingency that is going to make your offer a little bit less strong. There are ways to make up for this of course, but if you’re going up against an all cash offer with no other contingencies then you’re going to have to really come through on the base amount that you’re offering. There are other factors at play of course (percent down, timeline), but ultimately you’ll need to put in a pretty strong offer if there are other all cash offers on the table. Sellers will often go with lower offers that are all cash.

Don’t get discouraged, these are just the facts of where the market is in many urban areas. It’s a process and it may take a while, just be prepared for that. Most first time buyers end up putting in multiple offers before they feel comfortable with being as aggressive as you need to be in places like Atlanta, Houston, Chicago, or Boston. I think buying a multi and planning to rent out other floors is a great idea, or going in with friends/family. You’ll have an attorney representing you throughout the process between accepted offer and closing, and they can work out the details of ownership and what procedures are in place for extenuating circumstances within the arrangement.

It is good to remember, that there are programs out there to help those who have lesser means to purchase in order to scale up into a multifamily. There are levers you can pull, in an offer to make it more attractive, even with a mortgage. If the summation of their conclusion is that there is absolutely no way to purchase a multi-family then the agent you spoke too very likely did not go over all of the programs available, provided by both the state and the municipality you may live in.

Cooperatives can give you affordable upscale city living but there are realities you must remember which is why you need a good attorney at the beginning. Co-ops don't gain value in the same way as condos and homes do - You can renovate a home or condo as you please in many cases because you OWN it. (Condos might still have restrictions but not the same as co-ops). Also, the mortgage payments will end eventually and you WILL own your property. You will pay upkeep fees forever and likely NEVER fully own the co-op without established exit terms. but if you want a great apartment for 3000% below the market a Co-op is the way to go. One the main benefits to co-ops is they dissuade pure investors and prefer each unit to be owner occupied. This in general means common areas, maintenance and improvements are decided by the people that live there rather than a company that doesn't.

with a co-op your housing is guaranteed, the mortgage should be fixed, and any HOA fees are pretty predictable in that they only should be going up 1%-3% annually if that. HOA fees include taxes which you would need to pay with a condo or single family home. A $1000 HOA fee in Westchester 60% of that easily could be going to taxes, so to pay $400 for heat, water, electricity (sometimes), parking, maintenance, and possible other perks is not bad. This is all to say with renting you never can recoup any of the money you spent, but with a co-op you are paying off a mortgage thus creating equity, buying an asset, and in some cases your unit will appreciate. Your stock example is true, but like renting co-ops are supposed to offer alternative cheaper forms of housing that in theory allow you to afford to live in nicer areas while being able to save. Why spend $3500 on a 1 bedroom in NYC when you can have a 3 bedroom co-op after fees for $3000? $500 put into that index fund, plus the equity you are building is better than renting.


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