New York City has roughly 1 million residential units in co-op buildings. That's about 75% of the city's multi-family housing stock. Condos account for most of the rest. The two look identical from the outside. Inside, they operate under completely different legal and financial structures. For international buyers, this distinction determines what you can actually purchase.
What You're Actually Buying
A condo is real property. You receive a deed. You own the physical unit and a percentage share of the building's common areas. You can sell it, rent it, or leave it empty. The building's condo association can set rules, but they can't prevent a sale.
A co-op is not real property. You're buying shares in a corporation that owns the building. Those shares come with a proprietary lease that gives you the right to occupy a specific unit. You don't own the apartment. You own stock. The co-op board controls who can buy, who can sell, and under what conditions.
This isn't a technicality. It fundamentally changes how the transaction works, what financing is available, and how much control you have over your investment.
The Board Approval Problem
Co-op boards have enormous power. They can reject a buyer for almost any reason (except legally protected categories like race, religion, or national origin). They don't have to explain why. In practice, boards reject buyers for insufficient financial reserves, unstable income sources, plans to sublet, or simply because they don't like the buyer's application.
Most co-op boards require 1-2 years of post-closing liquidity (cash and liquid investments sufficient to cover maintenance and living expenses for 12-24 months). Some prestige buildings on the Upper East Side or Central Park West demand 3-5 years of liquidity. Many require a debt-to-income ratio below 25-28%.
For international buyers, the hurdles multiply. Boards want to see US-based income, US credit history, and US tax returns. Foreign income documentation is viewed sceptically. Buyers who live overseas and plan to use the apartment part-time face additional scrutiny. All-cash purchases don't bypass the board. They just remove the financing objection. The personal interview still happens.
Rejection rates aren't published, but brokers estimate that 10-15% of co-op applications are rejected. For foreign buyers without US financial ties, the rate is significantly higher.
Financial Comparison: Maintenance vs Common Charges
Co-op owners pay monthly maintenance. Condo owners pay monthly common charges. They sound similar but the numbers differ substantially.
Co-op maintenance includes your share of the building's mortgage (most co-op buildings carry underlying mortgages on the property) plus property taxes, staff salaries, insurance, and upkeep. Monthly maintenance on a two-bedroom co-op in a Manhattan doorman building runs $2,000-4,000/month. In some pre-war buildings, it's higher.
Condo common charges cover only building operations: no underlying mortgage, no property taxes (you pay those directly). A comparable two-bedroom condo: $1,200-2,500/month in common charges, plus $800-1,800/month in property tax. Total monthly carrying cost is often similar, but the tax deductibility differs.
The key financial advantage of co-ops: they're 20-40% cheaper per square foot than equivalent condos. A two-bed on the Upper West Side might be $1.2M as a co-op and $1.8M as a condo. The savings are real, but they come with restrictions.
Subletting and Investment Use
Most co-ops restrict subletting. Typical rules allow subletting for 1-2 years out of every 5, with board approval required for each tenant. Some buildings ban subletting entirely. The sublet fee (paid by the shareholder to the co-op) is usually 10-15% of the subletter's annual rent.
Condos generally allow unrestricted rental. Some newer buildings impose a minimum lease term (1 year) or cap the percentage of units that can be rented simultaneously (often 20-30%), but board approval for tenants isn't typical. For investors who want rental income, condos are the only realistic option.
Short-term rentals under 30 days are illegal in NYC for apartments in buildings with three or more units (Local Law 18, effective September 2023). This applies to both co-ops and condos. Airbnb-style investments are effectively dead in Manhattan.
Closing Costs: A Significant Difference
Condo closing costs for buyers run 2-5% of the purchase price. This includes title insurance, recording fees, mansion tax (1% above $1M, scaling to 3.9% above $25M), and mortgage recording tax (1.8-1.925% of the loan amount).
Co-op closing costs are lower, 1-3%, because there's no title insurance (you're buying shares, not real property) and no mortgage recording tax on co-op loans. However, co-ops often impose a flip tax on sellers: typically 1-3% of the sale price or 10-20% of the profit. This effectively shifts closing costs to the exit.
Why Most Foreign Buyers Choose Condos
The math is straightforward. Co-ops are cheaper to buy but harder to qualify for, harder to rent out, and harder to sell (because the next buyer faces the same board approval). Condos cost more upfront but offer full ownership, rental flexibility, and a global buyer pool at resale.
International money flows almost entirely into condos. New development condos in Hudson Yards, Midtown, and Lower Manhattan specifically court overseas buyers. The marketing, the sales process, and the building structures are designed to accommodate non-US purchasers. Sponsor units (unsold units from the developer) don't require board approval even in condo buildings.
If you're buying NYC property from abroad, want to rent it out, and want a clean exit in 5-10 years, buy a condo. If you're relocating to NYC, plan to live in the unit full-time, and want to save 30% on purchase price, a co-op is worth the board process.