House equity

Want to own a house but don’t have the money? This Toronto-based tech company lets you become an “owner-resident” for 2.5% less


Toronto entrepreneur Jordan Taylor was renting a nice two-bedroom condo for $ 3,000 a month while trying to figure out how to muster enough of his savings to buy in the real estate market.

Next, Taylor, 30, saw an Instagram ad for Toronto-based “real estate technology” company Key, which aims to help people gain a foothold on the local real estate ladder “decades faster” by not having to worry. pay that 2.5% down payment – rather than saving the typical 20 percent that delays building equity.

The company operates what it calls an “innovative condo model” where people can become co-owners of a condo – and live in it – thus having the opportunity to accumulate equity over time.

Key is the latest in a fractional ownership trend, a way for people whose purchasing power has declined given the city’s soaring property prices to enter the market.

But unlike other companies such as Addy Invest, BuyProperly, and RealtyShares, where investors buy shares in buildings and earn profit on rental income, Key requires people to live in the units and become what the company calls it. “owner-residents”. essentially buying a share in a condo owned by another investor.

However, as with all real estate, there are always inherent risks if the market underperforms, notes an expert.

Taylor visited his condo this spring and on April 12 decided he wanted to become a homeowner. He officially moved into his two-bedroom apartment in the West Queen West neighborhood on June 1.

“I was years away from being able to access any kind of property and Key kind of helped me hack this whole timeline for myself,” he says.

Homeowners pay a monthly fee – a fee a little lower than market rent. The more you invest, the less your monthly fees decrease.

These monthly amounts are allocated to expenses such as utilities, building maintenance, property taxes and financing costs. The homeowner also pays a pro rata amount for repairs and maintenance.

The “owner-resident” also pays $ 50 per month for his equity in the condo. They can increase their monthly payments and opt after three years to attempt to take over the mortgage and ultimately be on the title.

For Taylor, this all means he pays roughly the same amount as renting his old condo, including his monthly equity amount.

“I am more than happy that it went so well for me. The timing was perfect. The setup was easy and the stars were really aligned, ”says Taylor.

Daniel Dubois, who co-founded Key with Rob Richards, says the company’s mission “is to create a world where real estate is a source of freedom and prosperity” for all.

“We are addressing the two biggest challenges associated with Canadians being able to own a home: the first is a large down payment and the second is being able to qualify for and service a conventional mortgage. », Dubois continues in an interview.

There is no involvement of the bank in obtaining mortgage approval, but residents must prove, among other things, that they have a stable income and that they can afford their monthly payments.

Richards says that in Toronto there are now 800,000 condominium units owned primarily by investors and leased to “budding owners” – the latter for whom the dream of owning is becoming increasingly out of reach because of the increasing escalation of house prices. faster than wages.

Key works in partnership with the landowners – the people who already own the condos to secure the units. Key says he’s aligning that real estate investor’s capital with owner-resident capital to “top up the cost” of homeownership.

Key says he earns a lot of money by being the suites property manager.

There is a landlord-resident agreement that does not fall under the Residential Tenancies Act. Key allows its residents to give short notice of departure – 75 days – and they can take their accumulated equity with them, only having to pay Key a 1% transaction fee on that invested capital.

The owner of the asset cannot sell the condo for the first three years and after that, he must give six months notice to the owner-resident. They would have the first right of refusal – they can ask to buy the unit at fair market value.

The company plans to expand its scope soon to include single-family homes, semi-trailers and townhouses.

Richards and Dubois declined in an interview to discuss details of Key’s finances, but according to a report from an online real estate magazine, Key has raised hundreds of millions from insurance companies, banks and pension funds. .

The company recently completed a beta test involving 20 people in 14 condominiums in downtown Toronto.

Key predicts that, based on the performance of the real estate market over the past five years, the owner-resident’s equity will increase by 30% over the next five years. But Key cautions that new resident-owners are taking the risk of their real estate depreciating.

Matti Siemiatycki, professor of geography and planning and director of the Infrastructure Institute at the University of Toronto, says Key’s model “still needs a lot of scrutiny.”

“(Key) has some really big venture capital and private equity players involved in this. These people will also want a return on their investment. Is their long term hold on the appreciation of these units (condo)?

“Is it for profit gambling here?” How is the return (on the investment) generated, especially if the units are leased at below market prices or at market rates? I would like to know a little more about how this part works, ”says the professor.


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