Cohousing-L Mailing List: Re: co-housing and real-estate investments

[Jim Snyder-Grant (Jim_Snyder-Grant.LOTUS]

Bill asked about how different cohousers have approached the value of 
preserving resale value for the house. 

Although New View did not explicitly have this as a goal, we quickly backed 
into it by the following route:

1) 'Affordability' was a primary goal (i.e., that the members could afford to 
buy their houses, not that we expected to meet any formal affordable housing 
guidelines)

2) An important part of affordability was how much money people had to put down.

3) If we designed houses that cost more than they appraised for, banks would 
require that we put down the difference in addition to whatever the normal loan 
terms were.

4) A bank appraisal is specifically designed to make an educated and 
conservative guess at market value.

So, our planning proces had to make sure that we kept the total construction 
cost at or near the total of each house's appraised value. After we got our 
first preliminary & rough construction budget & appraisal, we agreed on a 
target of a maximum of 5% overage.

So, assuming we hit that target (or better: there is still hope), and assuming 
the bank's appraisals do predict the market, people who buy & then have to sell 
soon are facing a rough maximum of a 5% exposure, plus dual closing costs.   As 
far as I know, we are all planning to stay here much longer then that of 
course, but it's good to have a sense of the possible downside. Some of us have 
the optimistic sense that since the bank has no way to know yet the market 
value of cohousing in our area, that the actual short-term downside risk is 
less - a suggestion of an existence proof is that there are all these buyers 
(and a waiting list) apparently ready to pay a premium beyond appraisal to live 
in cohousing.

You also asked about resale restrictions. I can't say as much about that. We 
are organized as a condo so we can't have many restrictions of that type.

You also talked about your house as a major piece of your assets. This is a 
concern for me, as well, because unlike owning a conventional single-family 
house, I REALLY don't want want to plan on selling this house & moving 
somewhere cheaper in order to retire. I want to retire right here. My wife and 
I are already planning to live in the smallest type of unit on the site. So my 
financial plan has to find a way to cover not using my house to support my 
retirement, except as a place to live in.  On the one hand, that helps relieve 
some of my anxiety about resale. On the other hand, it puts more pressure on my 
other investments & sources of income. One part of my plan is to hope that 
cohousing becomes a good place to learn & practice living on less and enjoying 
it more.

You also noted that this was not just buying a house in a friendly community: 
you are also becoming a joint developer of that community, which has its own 
risks independent of buying a home there. For that, I think there is no 
substitute for trust-building conversations with the other members of the 
group, and then a legally-reviewed written agreement covering contingencies.

Good luck. As far as I can tell, you are thinking through the same issues that 
many of us had to think through about financial planning & cohousing.

-Jim-Snyder-Grant [at] lotus.crd.com