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Kim Porter
Kim Porter
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Kim is a freelance contributor to Newsweek’s personal finance team. She began her career on the Bankrate copy desk in 2010, worked as a managing editor at Macmillan and went full-time freelance in 2018. Since then, she’s written for dozens of publications including U.S. News & World Report, USA Today, Credit Karma, AARP The Magazine and more. She loves spending her free time reading, running, baking and hanging out with her family.
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Robert Thorpe
Robert Thorpe
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Robert is a senior editor at Newsweek, specializing in a range of personal finance topics, including credit cards, loans and banking. Prior to Newsweek, he worked at Bankrate as the lead editor for small business loans and as a credit cards writer and editor. He has also written and edited for CreditCards.com, The Points Guy and The Motley Fool Ascent.
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A single-family house is just one option when you’re looking to buy a home. In some cases, a co-op or a condo could be a better fit. Both types of homes offer fewer responsibilities and more affordability compared to houses. The main difference between a co-op and condo is the ownership structure. Here’s what to know when you’re deciding between a co-op vs. condo.
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Vault’s Viewpoint on Co-Ops and Condos
- Co-op units are collectively owned by residents who form a corporation, while condos are privately owned by individual residents.
- It’s easier to find financing, build equity and make changes to a condo unit compared to a co-op.
- If you can ride out the interview process, co-ops may be a cheaper option and could help you build strong relationships with your neighbors.
What is a Co-Op?
A co-op is a multifamily housing unit that’s jointly owned by all the people who live in the building. The owners form a housing cooperative (the “co-op”) and usually structure it as a nonprofit corporation. Instead of buying a unit, you’ll buy shares in the corporation based on the value of your unit. You’ll then receive a document that entitles you to your living space.
The corporation owns the building, including the interior of all units, the exterior and all common areas of the building. Shareholders elect board members, who then manage the co-op, enforce rules, screen prospective owners and handle the bills. Shareholders pay monthly maintenance fees and generally have a say in how things are run.
What is a Condo?
A condominium, or condo, is a private housing unit within a larger building or complex. You own the interior of your unit, and a condo association manages the buildings within the community and the shared common areas. The HOA also enforces the covenants, conditions and restrictions that apply to the property as a whole.
The process of buying a condo is similar to buying a house. Though you can pay with cash, it’s also possible to apply for a mortgage loan. Lenders will include your monthly condo fee in your debt-to-income ratio.
What Are the Pros and Cons of a Co-Op?
Housing cooperatives, or co-ops, tend to be cheaper than condos and may help foster a sense of community since residents tend to stick around. But depending on the type of co-op you buy into, you might not build equity and you’ll need to complete an extensive interview process. Take a look at some of the pros and cons of co-ops:
Pros
- Tax deductions. As with other home types, your share of the property taxes and mortgage interest payments are typically deductible on your personal tax return.
- Affordability. Co-ops tend to be cheaper than condos and may require fewer closing costs and lower down payments.
- Less responsibility. You won’t be responsible for any landscaping and maintenance beyond your unit. This means you’ll have fewer responsibilities and potentially more free time.
- Build equity. If you buy shares in a market-rate co-op, the unit can be bought and sold at full market value. This feature allows you to build equity much like a single-family home.
- Fewer monthly bills. Each shareholder pays a carrying charge, which is a monthly fee that covers their portion of the building’s expenses. Your utilities, taxes, maintenance and other costs may be conveniently wrapped into one payment.
- Sense of community. Co-ops usually prohibit sublets and have an extensive interview process, so they tend to have less turnover compared to condos. Residents tend to stay in their units for the long term and build strong relationships with each other.
Cons
- Maintenance fees. Much like a condo fee, your carrying charge increases your monthly costs. This means you could wind up paying more each month compared to a single-family house.
- Limited financing options. Some traditional mortgage lenders won’t offer mortgages for co-op purchases, so you may need to explore other financing options. For instance, your co-op might offer a share loan to cover a portion of your shares.
- Selective application process. Co-ops usually require you to go through an in-depth application process, an interview and formal board approval before you can buy shares. The intensive process could be a turnoff for many buyers.
- Collectively owned. The corporation owns the interior of your unit, so any major renovations you want to make need the co-op board’s approval.
- Equity restrictions. Unlike market-rate co-ops, a limited-equity co-op restricts a unit’s sale price. This limits your ability to build equity and earn a profit when you sell your shares.
- Less availability. Most co-ops are located in densely populated cities and metropolitan areas, making them harder to find in some areas compared to condos and houses.
What Are the Pros and Cons of a Condo?
Condominiums provide some of the benefits that are lacking in co-ops. You can readily finance the condo with a mortgage, build equity and renovate your unit with fewer restrictions. But they come with some overall drawbacks, including smaller sizes and less privacy.
Pros
- Ownership. Because you own your condo, you have more freedom to renovate or sublet your unit.
- Build equity. Condos allow you to build equity over time and potentially make a profit when you sell.
- Easier to finance. Compared to buying shares in a co-op, it’s easier to find and take out a home loan on a condo.
- Amenities. You get access to any shared condo amenities, such as pools, fitness centers, clubhouses and playgrounds. Your condo association may even host events for its residents.
- Less maintenance. Your monthly dues help pay for the maintenance costs associated with the condo building, landscaping and shared areas. The condo association also takes care of the logistics of hiring professionals and paying taxes and insurance.
- More affordable. Condos are typically less expensive than single-family houses. In May 2024, condos had a median price tag of $371,300, versus $424,500 for a house, according to the National Association of Realtors.
Cons
- Size limitations. Condos are usually smaller than single-family houses and might not come with dedicated outdoor spaces or large yards.
- Less privacy. Because you’re sharing a building with your neighbors, there’s less privacy with condos compared to stand-alone houses.
Which Should You Choose?
If you value privacy and want to make unlimited upgrades to your property, you might go with a single-family house. But co-ops and condos are popular alternatives to this housing type because they come with fewer responsibilities, less upkeep and better affordability.
Deciding between co-ops vs. condos depends on where you want to live and what plans you have for your home.
A condo could be the right choice if you want to build equity, sublet or make extensive changes to the unit. But if you live in a big city or you’re looking for short-term housing, then a co-op is an affordable option that could be right for you.
Frequently Asked Questions
Which Is Better: Co-op or Condo?
The answer depends on your priorities. If you want to own your property and build equity, then a condo might be the best fit. But if you live in a big city and you want to build strong ties with your neighbors, then a co-op is the way to go.
What Is the Difference Between Co-op and Condo Prices?
Condos are generally more expensive compared to co-ops. For instance, a one-bedroom New York City condo had a median price of $1.08 million in late 2023, according to UrbanDigs data analyzed by Apartment Therapy. Compare that to $708,000 for a co-op of the same size.
What Is a Major Difference Between a Cooperative and a Condominium?
The key difference between co-ops vs. condos is the ownership structure. With a co-op, a group of residents form a corporation and own the building collectively. Instead of buying a unit, you buy shares in the corporation and live in the unit. And with a condo, you purchase and own the unit, and you can build equity over time.
Editorial Disclosure: We may receive a commission from affiliate partner links included on our site. However, this does not impact our staffs’ opinions or assessments.
Kim Porter
Contributor
Kim is a freelance contributor to Newsweek’s personal finance team. She began her career on the Bankrate copy desk in 2010, worked as a managing editor at Macmillan and went full-time freelance in 2018. Since then, she’s written for dozens of publications including U.S. News & World Report, USA Today, Credit Karma, AARP The Magazine and more. She loves spending her free time reading, running, baking and hanging out with her family.
Read more articles by Kim Porter