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What's exactly is cooperative housing?

These days, everyone is looking for ways to make life more affordable. Finding ways to reduce your housing costs is one way to do that -- so that has some people looking harder into cooperative housing as an alternative to owning a home, renting an apartment or buying a condo.

But what, exactly, is a cooperative?

Cooperatives are similar to apartments or condos in that they usually have multiple people dwelling in one building with a shared common area. That's really where the similarity ends, however.

Unlike an apartment (on which you pay rent but have no invested ownership rights) or a condo (which you own, but still pay fees for maintenance and shared amenities), a cooperative requires you to buy shares. Essentially, you and the other tenants pool your resources in order to purchase a property. Your shares entitle you to live there -- although you typically also have to pay an additional fee each month in order to pay for the utilities, maintenance, repairs and taxes.

Unlike a condo, which is usually controlled by a board, cooperatives tend to be more egalitarian in nature. Everyone has a fairly equal voice in the way that the cooperative is run and what changes can be made.

Cooperatives also have the advantage of being more affordable than either a condominium or a house. No one individual has to come up with the money to put a down payment on the property. You also have the ability to sell your shares in the future, should you decide to move on -- which tends to make cooperatives more attractive than merely paying rent to a landlord without building equity.

Cooperatives tend to be most readily available in large metropolitan areas, such as Chicago, Seattle and New York City. If you're interested in forming a cooperative, consider getting some experienced legal advice before you start. That's often the best way to get off on a sure footing and avoid mistakes that could cost you in the future.

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