|RE: community financing||<– Date –> <– Thread –>|
|From: Eileen McCourt (emccourtmindspring.com)|
|Date: Sat, 28 Jul 2001 13:43:01 -0600 (MDT)|
When I purchased my condominium, I was having difficulty pulling together the down payment. A friend of mine who wanted to help became an equity partner with me. He invested what amounted to 2.5% of the purchase cost. This was not filed as a subordinate loan or second on my home. The bank was not involved. It was a simple arrangement between friends. We were not partners in any way other than this business arrangement. We had a one page legal agreement drawn up by an attorney that was basically this: He owned 2.5% of the property. After 3 years, either person was entitled to retire the investment, with an appraisal of the home at that time to determine the value of the 2.5%. If he needed the money sooner, and I was unable to pay the full amount, I could pay back half of the investment up front, and we would enter into good faith negotiations for repayment of the balance of the value of his investment. As it turned out, we were both ready to retire the investment after 3 years. My home had increased significantly in value, and he made about 44% in his original capital investment. Of course I live in the Bay Area, and real estate was going wild at that time, but I think similar arrangements can work in cohousing. I have suggested a plan in our community to either develop a fund or have individuals enter into individual arrangements to invest a small capital sum in another cohousing member's home in our community, as an equity investor, with a 5 year term, expecting that homebuyer will be able to refinance in 5 years to pay back the investment. These would be "silent seconds" and the investor will not be on the title, so it requires trust that this recipient will follow through, and the ultimate willingness to lose that amount of capital, and/or accept a small return. The underlying assumption is that the home will increase in value over 5 years, and that the homebuyer will continue to have earnings increases to cover the cost of the refinanced mortgage or home equity loan needed to pay off the investor at the 5 year term. The Cohousing Conference session on Affordable Housing also had much information on institutional resources for moderate and low income buyers, as well as non-profit developers. I suggest getting the tape of that session from the conference. --eileen Eileen McCourt Oak Creek Commons Cohousing in Paso Robles, CA emccourt [at] mindspring.com http://oakcreekcommons.org/ -----Original Message----- From: cohousing-l-admin [at] cohousing.org [mailto:cohousing-l-admin [at] cohousing.org] On Behalf Of Rob Sandelin Sent: Saturday, July 28, 2001 8:24 AM To: cohousing-l [at] cohousing.org Subject: RE: [C-L]_community financing I have not heard of a cohousing group using co-investing before. I think its an interesting idea but might not be realistic because it assumes that their are community members investors with enough capital to not only secure their own mortgage but to invest in another. Also how would this investment pay dividends? Current conservative investment portfolios are drawing 5-8 percent a year. What financial return would an investor get from such a scheme? Real estate appreciation only is collectable upon the sale of the unit, not a very secure or steady income potential. I am assuming such an idea would put all the investors on the title? Or would they draw up some sort of other legal arrangement? I would be sure to consult with the bank giving the mortgage before doing this to be sure they will fund such a mortgage situation. Rob Sandelin -----Original Message----- From: cohousing-l-admin [at] cohousing.org [mailto:cohousing-l-admin [at] cohousing.org]On Behalf Of Debbi Schaubman Sent: Thursday, July 26, 2001 11:42 AM To: cohousing-l [at] cohousing.org Subject: [C-L]_community financing Greetings! Great Oak Cohousing (Ann Arbor, MI), currently in the programming phase, has been exploring ways to address affordability issues. Our Affordability Committee has gone through the cohousing-l archives, read the materials on the TCN www site (and other related sites), and haven't been able to find very much information on the specific topic we've begun to consider: co-investment. (Sorry if we simply missed the information!) We're interested in learning about other communities' experiences with this model (or ones similar to it): a group of community members invest money and buy 10% to 30% of a few units. Those units would then need a smaller mortgage, have a smaller monthly mortgage payment, and require a smaller down payment. Our sense is that, assuming some appreciation in the real estate, the investor, the household and the community would all benefit from this approach. Thanks for any information, suggestions, horror stories, etc. you can share. Debbi Schaubman (who is eagerly awaiting a Spring/Fall 2003 move-in!) _______________________________________________ Cohousing-L mailing list Cohousing-L [at] cohousing.org Unsubscribe and other info: http://www.communityforum.net/mailman/listinfo/cohousing-l _______________________________________________ Cohousing-L mailing list Cohousing-L [at] cohousing.org Unsubscribe and other info: http://www.communityforum.net/mailman/listinfo/cohousing-l _______________________________________________ Cohousing-L mailing list Cohousing-L [at] cohousing.org Unsubscribe and other info: http://www.communityforum.net/mailman/listinfo/cohousing-l
- community financing Debbi Schaubman, July 26 2001
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