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What is the Difference between a Co-op and a Condo?

We have both types of homes in Laguna Woods Village, but very interestingly, they are many times the same floor plan! So you can buy a “Casa Linda” home as either a “Condo” or a “Co-op” but what are the differences in ownership? Good Question!

In Laguna Woods Village, a Co-op is not any easier or harder to sell than a Condo, it appreciates at the same rate as a Condo. You get the same benefits tax wise from ownership of either a Condo or a Co-op (i.e. – you can write off your mortgage interest and property taxes). You can even rent out a co-op year around, just like a condo. Now they are trying to encourage “home ownership” of the coops in Laguna Woods, so they do have a grace period before you can rent out your home full time, but rest assured, if you “break your hip” and have to go into assisted living, you can rent your home out year-around! So there really is no difference! Obviously, if you are an investor, you would want to purchase a condo since you can rent these properties out “year around” right from the get go! By the way, you can “will” a condo or a coop to your children after you pass away, you do not need to be 55+ in order to own a home in Laguna Woods Village, you just need to be 55+ TO LIVE in Laguna Woods Village. So that is not an issue either.

What exactly is a Co-op? The full term is ”Stock Cooperative” and they are a lot more popular back east where they have the brown stone buildings, in New York as an example. See the Diagram Below:


The problem came up in the early to mid 19th century, how can we sell the units in a building? Also, who owns the land underneath the building? So what they did, was come up with an idea where a Corporation buys the building and then each apartment in the building gets stock in the Corporation based on his/ her ownership share.

To make it simple, see the diagram above, if you have 4 apartments in the building, each apartment/ home would get 25% stock in the Corporation (4 x 25% = 100%) What you actually get when you purchase a Co-op is a Stock Certificate instead of a Deed of Trust. Rest assured, it is just as valuable as a Deed of Trust and you can even get a loan on them! Just like a Deed of Trust – getting financing is no problem! Now the interest rate on your coop loan will be 1/4% higher verses a condo loan, but for a $30 difference per month, does that really matter? In general, coops in Laguna Woods tend to be cheaper than condos, so this difference may make this interest rate issue a “wash.”

One final point, the HOA dues on a coop are only $566 per month and HOA dues on condos are $627 per month, so you do save $61 per month in HOA dues with a coop! Also, the association maintains the appliances with a coop which they do not do with a condo.

Feel free to contact me for further information about this! I will clue you in…

14 March
What is the Difference between a Co-op and a Condo?
Howard B says: October 20, 2008 at 6:45 am

Thanks for the very informative article. I’ve wondered about the difference, and now I know.

Steve Carlson says: March 11, 2011 at 1:54 am

Why would a coop be restricted to rent for 6 mos. out of a year. The reason for this question is that I am looking to take advantage of the market downturn now, as I am 64, retireing in 2 yrs. and would like to secure myself a place to retire with my wife. I am looking at Laguna Woods.

patrick says: March 14, 2011 at 1:02 pm

Hello Steve, I do not know what the United Mutual home owner’s association has this rule has this rule for Co-ops (6 month rental restriction), but if it is a problem, we can get you a Condo which is allowed to be rented out year around. Please email me if this works for you and I would love to show you some properties.

Joy says: October 1, 2011 at 5:42 pm

when you state – Conversely, if you have a high amount of assets but do not meet the yearly income requirement, some of your assets may be counted as income??

so – what is a “high amount of assets”? let’s say the condo or co-op is around $120,000 or maybe less. i know you need an extra $125,000 but what would qualify as a high amount of assets that would qualify me if my yearly income is less than the numbers you stated in your article- i need exact figures on this.

patrick says: October 5, 2011 at 9:34 am

They count excess assets as “income” at the rate of around $7,000 yearly income per excess $100 k of assets. So if you have an “extra” $200 k in assets above and beyond the regular asset requirement, that would equal $14 k per year in “income.”

Dianne says: November 25, 2011 at 6:43 pm

As a resident of LW, I’ve been asked to help find a long-term rental for a friend, which has not been easy. The 6-mos lease term is a problem for a number of Co-op owners who would like to rent their units longer 1) because they inherited the unit from a parent and are not old enough to live in the village 2) don’t want to or can’t sell the unit in a down turn market for the amount paid, 3) would like to retain the unit for their own use when their ready to retire. The coops were the original units built and the loan was with HUD, which required the 6-mos lease max until the loan was paid off. The loan has been paid now and many residents want this restriction lifted. But, it’s up to the Board of Directors of United Mutual to give the “OK” for longer leases. Currently, they don’t believe it’s a good idea, regardless that a number of residents feel otherwise.

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