A Guide to Investing in Coops

 

A Guide to Investing in Coops

Real estate continues to get more expensive in many cities and urban areas. For many people residing in these areas, it can be a difficult task to find affordable housing. As the cost of living continues to rise, many people are looking at cooperatives as an alternative option. However, you should be aware that purchasing a cooperative is very different from owning or purchasing other types of housing.

Purchasing A Coop:

In order to determine if purchasing a coop is the right decision over purchasing a house or condo, you must do some research on your finances, as well as different coop policies. You have to be sure that you are making a safe investment. If your finances are not in order, you may lose your property.

Differences:

Owning a coop allows you to purchase shares in a company. You are not actually owning real estate like you would if you were buying a house or a condo. The company owns the property and you would have the right to stay in the property based on the total number of shares that you have in the company. The company has the majority of the power and they would be able to set the terms that you must abide by while you are staying at the property.

Important Information To Know:

The company should give you some financial statements to look over, so that you can tell if the financials are consistent on a yearly basis. Pay close attention to the company’s balance sheet and statement of equity. Poor financial records could be a strong indicator that the company is draining funds to avoid increasing the costs that shareholders would have to pay to continue staying in the coop. Make sure that the financial statements have been audited by a Certified Public Accountant. Without the numbers being audited, there is no real way to determine if the numbers are valid or not.

Check to see if the coop has an emergency fund. There should be money set aside to deal with issues such as a basement leak or problems with the HVAC system. Make sure that the principal on the mortgage is being paid. In some cases, the company may prefer not to own the property. You may be required to refinance the mortgage. Be sure to check any small additional notes that are listed on the financial records. The notes should go into detail about certain aspects of the financial statements.

 

Yorkville Advisors, LLC is a privately owned hedge fund sponsor.

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