10 minutes

Where co-ownership fits into what we know about real estate

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Here’s what we currently know about real estate:

  • The mortgage model is broken, biased, one-sided and, for too many, unattainable.
  • Those who are stuck renting keep falling further behind, and are increasingly giving up on the dream of homeownership.
  • The industry has remained mostly unchanged for decades, and no longer meets the evolving demands of consumers.

Co-ownership is a new alternative homeownership model that seeks to change how we think about real estate and homeownership. With its innovative approach, co-ownership aligns the equity benefits of traditional ownership, with the flexibility of renting, to create a solution that truly meets the needs of modern consumers.Let’s take a deeper look at what we know about real estate, to see how Key’s co-ownership model fits into this understanding.

What we know about traditional ownership

Homeownership has been the backbone of personal financial freedom and prosperity for generations. However, in major cities like Toronto, it takes an average of 28 years for the typical first-time home buyer just to save up for the recommended 20% down payment. And for those who are able to qualify for a mortgage and buy a home, they often become “house poor”, with monthly payments consuming a large portion of their income.We also know that ownership does not meet the growing demand of residents who want to have increased mobility and flexibility. Because of the expensive fees associated with selling real estate, roughly 6% of a home’s value and sometimes more depending on mortgage break fees, buyers do not have the ability to easily move around wherever life may take them. This rigidity often deters renters from making the transition to ownership, locking them out of the associated equity benefits.

What we know about renting

Unlike ownership, renting does not offer equity benefits to residents. Instead, the money that could be going towards equity and financial freedom is paying for someone else’s mortgage. As real estate prices rapidly climb and the amount of savings required to secure a down payment increases, renters often get stuck on the “rental treadmill”. This lack of mobility from renting to ownership can create a feeling of missing out for renters.Renting also means there is an inability to make significant changes or upgrades to meet the needs and desires of tenants. They must work with the landlord or property manager to make these changes, increasing friction and headaches.One benefit of renting, that comes at the expense of building equity, is the flexibility to move around as life demands. Many people are choosing not to stay in one place for more than a couple of years, so having the ability to frictionlessly move with relatively short notice can be a benefit.

How Key’s co-ownership model fits into this understanding

Key’s co-ownership model merges the benefits of traditional ownership and renting to maximize prosperity and wellbeing of Owner-Residents. Rather than needing to save for a large down payment and qualifying for a mortgage, Key Owner-Residents can build home equity starting at just 2.5% (around $10-15k for most of our suites). We make this happen by partnering with property owners and investors to secure suites in premiere buildings. Then we give Owner-Residents the opportunity to own with us as the exclusive resident of their suite. Owner-Residents can then build additional equity at their own pace; equity that moves with the market. Furthermore, as Owner-Residents increase their share of ownership, their monthly residency payment decreases.In addition to the equity benefits of co-ownership, residents have a much higher degree of flexibility when it comes to mobility. After the one year mark passes, Owner-Residents can move out and sell their equity at the new market value penalty free with just 75 days notice. Instead of paying the average 6% costs associated with moving, there is only a 1% fee associated with an Owner-Resident’s portion of equity, dramatically reducing the closing costs of moving. Lastly, as Owner-Residents build equity in their Key suite, they have the option to qualify for a mortgage and buy the suite after three years. While it is a great opportunity, buying the suite outright is certainly not required; it all ties back into the incredible flexibility that Key’s model enables..Navigating today’s real estate market can often feel overwhelming. It’s important to know what your options are and understand the benefits and drawbacks of each. If you’re an aspiring homeowner learn more about alternative homeownership models to consider and if co-owning makes sense for you.

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