Co-op Investing As a Live-In Rental

Some time back my wife was given an inheritance from her great aunt and we decided to invest it all into an co-op apartment in NYC in an area near where we both work. Was this a good investment? I’ll tell you when I sell it, but so far the on-paper math is working out well for us.

We bought a co-op in Manhattan. This is probably throwing some major warning signs up for anyone reading this article – I know, not cheap by any means, notoriously low cash-flowing or negatively cash-flowing market, and we didn’t negotiate an optimal price.

However, when speaking with landlords across the country, there are a few things that make co-ops a dream type of property to invest in long-term.

Details on Co-ops

  • There is a board with policies
  • There are usually occupancy limitations in board policies limiting when and how you can rent your property
  • Maintenance fees can in some cases include heating, water, and other utilities as well as fees that may be associated with having a Super.

Rental Price Inflation Hedge

The first reason we love our investment is that it’s shielded us from rental price increases. While we’ve lived here, rental prices in Manhattan and surrounding boroughs have gone up by roughly 12% according to data from StreetEasy. Meanwhile our co-op maintenance has not increased whatsoever.

Based on this math, we estimate we’ve saved roughly the equivalent to our closing costs through the rental price inflation hedge so far and we’re only 4 years into our ownership.

Relatively fixed operating expenses

Our experience and the experience of many other co-op owners have been that there are great buildings out there to become a shareholder in that will maintain low maintenance fees for a significant amount of time.

Our co-op has two years-worth of capital, doesn’t have an elevator or doorman or other expensive features, and has a live-in super who is an owner in one of the units. This means some fantastic things. The super is readily available to resolve issues you’d otherwise need to call a plumber or handyman.

All of this has meant as mentioned above, our maintenance costs have remained low and fixed for a significant amount of time while the building has maintained its financials.

Will this change over time? Of course. There will be increases over time, but the financials were available to us at the time of the deal and we found a well-run co-op business and we invested into it.

Some details on operating expenses covered in maintenance:

  • Sewage
  • Water
  • Heat
  • Super repairs
  • “External” (not in unit) basic repairs
  • “External” upkeep of the property

Less Capital Expense Intensive with spread risk

The risk of us having to shell out $30,000 for a new roof are basically zero in a co-op. There are only two things we need to worry about:

  • Fixing appliances and repainting between tenants
  • Fees for abatements from the co-op

Things we have to worry about are potential abatement payments for the maintenance of the stairs, etc. which are larger fees that can be charged by the board itself in case something catastrophic occurs to the property that must be fixed. For instance, there is a staircase that needs structural repairs for at least $200,000. That fee will come out of the co-op cash reserves and possible abatements from our shareholders.

The difference here between a co-op and a condo ownership HOA fees is largely in how abatement fees are charges. Because the co-op is run by shareholders who live in the building itself, they tend to maintain better financial situations than condo boards and therefore have generally lower abatement fees if something major does go wrong with the building.

Board Policy Considerations

The board wants to ensure shareholders are getting the most out of their properties in terms of value. That includes management of sub-letting and renting to non-owner occupants.

For our board, the policy is that after 3 years an owner can rent out their unit and additionally tenants are re-assessed for lease renewals every year.

The board also vets tenants on-top of the vetting process that owners do for their occupants as well. That’s right – someone is checking your tenants verification for you to make sure they’re financially and fiscally sound tenants. The co-op doesn’t want to get stuck in a terrible tenant that needs to be evicted because that’s just terrible math.

The Math

  • We’ve covered our closing costs with the rental inflation hedge
  • The property has appreciated by ~10% since we purchased it 4 years ago
  • Monthly rent is roughly $2,900/mo
  • Monthly costs are roughly $2,269/mo (PITI + OpEx)
  • Cash-flow is $631/mo


While many buyers are freaked out by the capital costs, board policies, and legal landlord considerations in NYC – a lot of these issues can be mitigated depending on the deal you get.

You have to shop around for Co-op investments just as much as you shop around for other types of properties.

The investment is not just an investment in a property, but ultimately an investment in the business of a co-op as well, which you’ll be a shareholder in.