Re: Early Stage Financing for Cohousing
From: Sharon Villines (sharonsharonvillines.com)
Date: Thu, 16 Mar 2006 05:50:12 -0800 (PST)

On Mar 16, 2006, at 6:36 AM, Hyghroad [at] aol.com wrote:

I would not hesitate to tap into conventional funding sources (banks, etc.) to fund your project. A land purchase is easy for a bank to understand since the collateral (the land) can be so easily appraised. [snip] At this point, it seems like most Co-Ho communities that want to form need the advantage of a partner with deep pockets and I'm not sure there is an umlimited supply of those that want to move into co-housing. The alternative is as Zev suggested, use a real estate developer, who of course will want to make
money on the deal.

A wonderful cohousing person, Gilda Iriarti, who used to work for the Cohousing Company once gave a group I was working with several pieces of information about real estate financing and development. The most important was that unless you have great wealth, your banker is your best friend.

Start developing a relationship with a banker very early on. Bankers are not all alike -- as a group they may be more conservative than burning-soul cohousers, but there is a reason for that -- they are lending you some one else's money and if they make a bad deal, they not only loose that money, they lose their jobs. Are you willing to risk your job and your family's security on your project?

If you know the statistics for failed cohousing groups and how much money has been lost or poorly invested in them, you would be cautious as well. As we collectively learn from experience, the risks are greatly reduced but the veterans on this list can tell you how many communities have failed, each member having lost thousands of dollars, and how many others were built at much higher costs in time and money because the communities did not have the support of a bank and a developer.

Home ownership is something that even 75 years ago would have been impossible for the many people now developing cohousing communities. Government programs and _banks_ have made home ownership possible and cohousing, from the financial view, is a form of homeownership.

A good banker knows a lot about real estate development in your area. He/she is probably the number one best source of information on trustworthy developers, competent lawyers, and the direction of urban planning which can deeply affect your project. Bankers know which developers, for example, always bring jobs in under cost and on time. They know who is about to bankrupt and who has about to default on a loan. One community's development has been seriously road-blocked because the town board went negative on all development when they only had stage one built and they can't build a commonhouse until they get stage-two built. A good banker might have been able to leverage an exception for them and might also have seen this sea-change coming and warned them against a staged development.

There are ignorant and short-sighted bankers, as well as ignorant and short-sighted developers, but if you use your wits and shop around, you can probably find a banker who can and will help you. Bankers don't like risky deals but they also have careers to build so if they make a good decision that brings attention to their bank, its a step up. You want to partner up with a smart pony, and if you can find 2 or 4, you'll get where you are going faster.

Sharon
---
Sharon Villines
Building Community: A Guide to Creating New Neighborhoods
http://www.buildingcommunity.info


Results generated by Tiger Technologies Web hosting using MHonArc.