Cohousing-L Mailing List: Getting started - developers and cohousing financing

[Joelyn Malone (JKMalone]

Hi Mina. Sending also to Cohousing-L as this may be of general interest.

I believe the usual requirement is 5% down. I'm pretty sure that's what 
Wonderland Development requires. I  know Katie and Chuck also have other 
requirements for their developments - like, the members have to be able 
to raise 15% of construction costs either through loans they make 
themselves (which come back to people as discounts off their purchase 
price, with an additional discount % based on timing of the loan - 
earlier money is rewarded higher since it it more at risk.) So, if 
someone puts down $5000 in the very early phases they may get 100% 
return- $10000 discount; while later it may go down to only 20% or 5% 
depending on level of risk. All the early money is totally at risk - no  
promise of getting it back if the development doesn't go. Loans 
solicited from friends of the group must be a very limited number, in 
order not to run into SEC regulations. These would have a guaranteed 
return rate.

Here on our projects, we are going with a $1000 "reservation fee", with 
3% of expected final unit price due when they sign a purchase agreement. 
This money goes into an escrow fund, and is there to reassure the 
construction loan financers that they have committed buyers. We probably 
will also need loans from members at least for the Rivoli Bluff 
development, and will set it up the way Chuck and Katie have. We  
haven't yet dealt with the % of pre-sales that will be required so 
that's still unknown. At Farmers Market Flats, it may be 8 or 9 of 11. 
(It can be somewhat misleading to use percentages when the total number 
is so small.)
And yes, the whole timing issue of finding all three necessary pieces 
(committed group, site, and developer) that are ready to go at the same 
time can be very daunting. I think that's why the cohousing -dedicated 
developers who have already identified a "likely" property have been the 
most successful. I believe most only pay for an option on the site at 
first - much cheaper than actual site purchase. Anyone else have 
comments on this?
Joelyn

Mina Baisch wrote:

> It makes  sense to me that a developer would want a cohousing group to 
> have some  "skin in the game" so to speak before taking the risk on 
> such a  project. Do you have any idea of what is standard? Sharon 
> Villines  said her group was 70-75% presold with each household 
> putting 5% down.  Is that a fairly common situation?
> Our group is looking in Southeastern PA (Concord Ecovillage). I'm  
> newish to the group, and very new to the whole financing thing, but 
> my  impression is that the properties in the area are very expensive, 
> and  a handful of moderate income families would not be able to make 
> the  initial land purchase. I guess the whole finding a developer, 
> finding  a property, and building a committed group has to kind of 
> evolve  simultaneously for it to work?