Hello friends,

I’ve recently learned of a housing option that makes “early retirement” sound a lot more feasible for me as a young single dude. One of the biggest variables an early retiree will face without a robust portfolio is the inflationary rise in rent. One solution is to purchase real estate or take on a fixed rate mortgage, but then that potentially eats into a portion of your portfolio. Some are willing to just move somewhere cheaper when the inevitable rise in rent happens, but what if, like me, one of your goals of early retirement is to immerse yourself more in your community? It’s hard to do that if you have to start over every couple years.

I first learned about Co-Op’s a couple years ago, but tossed the idea aside. The more I read about them, the more I love the idea. A lot of co-ops do not allow financing. This means your neighbors have some level of fiscal responsibility since they were able to save enough money to buy into the co-op in the first place. They have what I consider to be the perks of renting (convenient on-sight maintenance/office staff)  without all the negatives of renting  (high turnover in neighbors, potential to turn the place into a slum, rising rent costs). I also love that there are additional rules and restrictions that are democratically decided. Don’t want to live above a neglected barking dog? Buy into a Co-Op that does not allow pets. Don’t want to live above a chainsmoker? Buy into a Co-Op that does not allow smoking.

A great resource on American Co-Op’s is the National Association of Housing Co-Operatives. An interesting thing on Co-Op’s is that they are definitely limited to certain geographical parts of this country. There is absolutely nothing in the South except for Atlanta and South Florida. The NAHC suggests the only reason the latter has them is because a plethora of New Yorkers moved down there and created them. For my Canadian readers, here is a similar resource about co-op’s in your country.

The downsides of the co-op? Your community could democratically elect a board of directors that changes the rules that were in place when you bought in.  You moved into a non-smoking community because you don’t want to live above a chainsmoker. The newly elected board changes the rules.  You might have to wait a bit longer to move because you are limited to cash buyers. But the “carrying charge”, similar to an HOA fee, is so small, that in my case, if I just had to move, I’d pay “double rent” for a bit and not worry about it.

I wouldn’t necessarily intend to live in a co-op forever, but if I am a single bachelor for the rest of my life….why not? I’m not one of those people who needs a giant yard to maintain. I’d actually prefer NOT to have a yard. That sounds like additional stress to me.

Costs vs. Renting

Below is an example of an available co-op unit in the Phoenix, Arizona metropolitan area. This is a metro with four professional sports teams, a major college sports program, a symphony orchestra, a plethora of restaurants, and millions of people happily going about living their lives every day. It’s hot AF in the summer, but if you’re early retired (or don’t have a consistent job commitment in the area), you can escape the heat like all the snowbirds do.



There are apparently several co-ops in the Phoenix area. I would personally not buy a 2 bedroom apartment co-op for just myself. That’s an extra room that I don’t need and can’t rent out. I did however, also check 2 bedroom apartment rentals in downtown Phoenix. You’re looking at spending $2400/month for the luxury of being downtown. Phoenix is not exactly a hopping downtown.

Let’s say you want to live in Phoenix for three years with your spouse and you want the extra bedroom f0r guests. Let’s ignore any potential increases in cost of rent or the co-op’s monthly fee. In the downtown luxury apartment, you are paying $2400 per month for 36 months. That’s $86,400. In the more modest co-op apartment, you pay $57,000 upfront, and $261.00 per month for 36 months. That’s a much smaller $66,996. Just another example of saving $$ by being asset rich rather than income rich.

That’s a savings of almost $20,000. Plus, you’ll be able to sell your membership in the co-op for SOMETHING when you leave. It just might take a while to liquidate it. You might not recoup everything that you invested into it. If you itemize your deductions, you would also be entitled to tax savings for your share of the co-op’s property taxes and mortgage interest. Many of the co-ops were built a long time ago, so they probably don’t have mortgages anymore. But that’s okay, that’s why you have a dirt cheap monthly cost.

Forget the appreciation, just do the math vs. renting. If I did choose to live in Phoenix, I probably would go the co-op route. I have a whole road trip to decide where to live though. 😀

You’re competing with a vast smaller number of people for your intended living unit. The vastly larger population of renters who are looking typical apartments in the greater Phoenix area, which drives up the price of rent. And for purchases, the property investors driving up prices for your typical rentals-allowed condo. This is yet another way that an early retiree can arbitrage their money management skills. This all assumes that you don’t mind living among neighbors and that you can find a co-op that shares your own lifestyle values. Why aren’t more people creating co-ops with like-minded people?

Readers- do you have any positive or negative experiences living in a co-op?