Cohousing-L Mailing List: Retrofit TIC cohousing, legal/banking issues

[Patri Friedman (patrissimo]

Greetings, all.

I am part of a 15-person group who have been working for 8 months to
form a cohousing community in the SF Bay Area (Mountain View).
Because we don't want to go through the time and expense of building,
we settled on the plan of buying a small apartment complex, and
converting some of the units to common space.

We hired a real estate lawyer to look into the legal issues, and it
looks like a Tenancy In Common is the only workable form of ownership.
In our local cities, the condo/coop conversion ordinances are very
strict, and would require lots of expensive retrofitting to any
property we purchased, approval from the DRE, and even then might be
blocked.

We have spent a fair amount of time on creating our bylaws, which the
lawyer is looking over, and have also started trying to find a lender.
I was wondering whether any other groups out there are structured as
TICs, and if so, whether we could look at your TIC agreement, and how
you found a lender.  In San Francisco there are many TICs owned by a
few people, and there are lenders that will do share loans, but only
for small TICs.

Besides the fact that it is a TIC, another lending issue is what
happens when someone wants to sell their share.  Lenders don't like
having the pool of creditors change during the life of the loan.
Furthermore, the debt to equity ratio must change, unless the new
buyer puts up a huge down payment.  eg if my TIC share was worth
$100K, $30K down and $70K loaned, and now 10 years later it is worth
$150K, $90K equity and $60K loan, and I sell it to you, you either
need to put up $90K (a 60% down payment), or if you put up $45K (30%
down), you would need a loan for the other 45K.

If anyone has suggestions about the loan situation, or any other
advice, it would be greatly appreciated.

yours in community,
  Patri