RE: community financing
From: Eileen McCourt (
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 McCourt
Oak Creek Commons
Cohousing in Paso Robles, CA
emccourt [at]

 -----Original Message-----
From:   cohousing-l-admin [at]
[mailto:cohousing-l-admin [at]]  On Behalf Of Rob Sandelin
Sent:   Saturday, July 28, 2001 8:24 AM
To:     cohousing-l [at]
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]
[mailto:cohousing-l-admin [at]]On Behalf Of Debbi Schaubman
Sent: Thursday, July 26, 2001 11:42 AM
To: cohousing-l [at]
Subject: [C-L]_community financing


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!)

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