RE: community financing
From: MinnMal (minnmalqwest.net)
Date: Tue, 31 Jul 2001 19:11:01 -0600 (MDT)
At Monterey Cohousing in Minneapolis, we were able to use inter-group
finanacing to get affordable units. We bought a large "mansion"-type
building with nearly 3 acres of land in 1992, converted the mansion
(actually a very gracious 1924 home for the elderly) into 8
apartment-style units and then built 7 new townhouses which we moved
into in 1996. Our original organizational structure was as a
cooperative, and the cooperative was both a housing cooperative and the
developer of our project.  Many of the members who intended to move into
the townhouses helped with the initial down payment on the building and
land. This was done as loans to the co-op at 8% interest.  We got a
blanket mortgage on the building and grounds, which allowed the folks
who purchased units in the mansion to have different levels
(percentages) of down payment for their share purchase price.  Many of
the units in the mansion are very small, so we could keep the purchase
price low.  The total of all "mansion" unit prices added up to the sum
we paid for the building and grounds. All the owners of units in the
mansion had to sign loan guarantees for the blanket mortgage. Other than
that, the bank had no concern about individual members' ability to
qualify for a mortgage; the cooperative is the entity that individuals
repay on a monthly basis, so it was the cooperative rather than the bank
that looked at individuals' ability to pay their share of the mortgage.
When the new townhouses were built, we priced them at a level that
represented our building costs (soft costs plus construction costs) plus
a fee for each "lot" (the land under the footprint of each unit) that
was roughly equivalent to the total dollars needed to do the renovation
of the common space in the mansion. For those of us that had loaned
money to the cooperative to purchase the building, we converted the
loans into down payments on our townhouses.  (I'm simplifying a lot
here, but that was the basic idea.) The townhouses are owned as
condominiums so we each have individual mortgages. The proceeds from the
mortgages gave the cooperative the funds needed to pay off the
construction loan plus loans we took out to do the rehab work. Sorry
this response is so long -- hope it is helpful to see how the co-op
model of financing can be an advantage.  (It also helped that we got a
real deal on the original property. In effect, we got the building and
grounds for what the land alone was worth, as there were few alternative
uses for the building and any other developer would have had the expense
of tearing down the building before they could have built something else
on the property.)

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