Financial survey

Financial questions related to cohousing depend a lot on what model we choose to implement: In a co-op model, everyone buys shares in the entity that actually owns the property and/or holds the mortgage, and in a condo model, everyone owns their own individual unit and contributes to maintenance costs via fees etc.

The financial structure of each of these is different, so the financial burden on individual owners/members is also different. In a co-op, the group entity gets a mortgage, so the demand on an individual is relatively small — but co-op financing can be more expensive, because not as many financial institutions do it. Therefore the up-front financial commitment might be larger than some other models.

In a condo structure, each person or couple would have to come up with their own financing, but banks are more familiar with it so interest fees are likely to be lower. That means the down payment is likely to be smaller and future payments are likely to be smaller as well, which would make it easier for some people to handle.  It is also easier to sell a condo unit, since buyers are also more familiar with condos than co-ops.

The other important consideration is degree of control individuals and the collective have.  In a condo structure, because each unit is independently owned, the Condo Board has authority to spend the pooled maintenance funds and set day-to-day rules, they have no influence over new buyers. In a Co-Op, the Board has broader powers than the Condo Board, including the right to veto potential purchasers.

Although it’s still early in the process, most of us seem to be leaning towards the Co-op model because it suits the kind of community we want to create — i.e., it would make it easier to ensure that people joining were buying into the philosophy behind the community, etc. But more research probably needs to be done on what the concrete financial implications are of each model.

Here are some questions that might be helpful in order to determine which of these structures makes sense for the most people:

1) How big an up-front investment could you make in a cohousing project?

  • Less than $100,000
  • More than $100,000
  • More than $200,000
  • More than $300,000

2) How big an investment could you make over the life of the entire project?

  • Less than $200,000
  • More than $200,000
  • More than $300,000
  • More than $400,000

3) Would it be easier for you to finance a project by putting money down at the beginning, or financing the construction via a mortgage or loan backed by other assets?

  • I’d rather put money down up front, even if it’s a large amount
  • I’d prefer to finance the project over time because the payments might be lower

4) When it comes to ownership, would you rather own a share in a larger entity (to which you would likely have to sell your stake if you chose to leave) or own a property outright, one that you could finance or sell in whatever way you wish?

  • I would rather own a share in a co-operative, even if it meant my ability to sell might be restricted in some way
  • I’d prefer to own my own property and control its financing and sale

5) Assuming you have the ability to finance the initial investment in a Co-op up-front (via cash, leverage on another property or leverage on investments), what is more important – the ability to control more of how the community is run and who gets to join, or to maximize your flexibility and financial return when you sell?  

  • I’d rather have the control over how it is run and who can join
  • I’d rather maximize my financial investment

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