In a real estate climate where the gap between renting and owning continues to grow, many who have been locked out of homeownership are looking to alternative solutions. 

Two of the most prominent of these alternatives include co-ownership and rent-to-own; however, it’s important to understand the differences between these two models.

A recent survey of 2000 Canadians revealed that when put up against the rent-to-own program, 70% of respondents chose co-ownership compared with 30% who chose rent-to-own.

Co-ownership is the clear favourite, especially among renters. 93% of renters indicated they found co-ownership compelling. So what makes co-ownership the clear winner? Let’s dive in.

What makes co-ownership stand out

While Key’s  co-ownership may be a very new concept to many, the positive sentiment is growing. In fact, in the same homeownership survey, 90% of respondents agreed that co-ownership would make home ownership accessible to more people.

So how does Key’s model work? Here’s a brief rundown of our co-ownership model:

  • Becoming a co-owner (also known as an Owner-Resident) requires an initial investment starting at only 2,5% of your suites value, depending on the building (around 15k for many of our suites!); while the ownership is shared, the Owner-Resident is the exclusive resident.
  • As an Owner-Resident, your home equity contribution moves with the market, and you can build additional equity at your own pace.
  • Another unique benefit of Key’s model is that you are never required to take on and qualify for a mortgage. As an Owner-Resident you have the option to do so after the third year, but it is never required.
  • Your monthly payment, which covers the portion of your suite that you do not yet own, is reduced by the percentage of equity you own. So as you build more equity, your monthly payment decreases.
  • Key’s model enables flexibility. Any time after one year, you can give 75 days notice to move out and you will receive  your equity plus appreciation back..
  • Key’s model gives you the opportunity to amplify your returns through our co-financing benefit. With this benefit for every $1 of equity you invest we match it with $1 in leverage. The best part? You can benefit from this leverage without needing to take on the actual debt.

The bottom line? Key’s model means you start building equity from day one, at a much more attainable cost to buyers and you’re never required to take on a mortgage. For renters who are locked out of homeownership, this solution means they can actually start owning and building equity in the suite they are living in.

With this understanding of co-ownership, it is now clear why this model stands out. Now that we’ve gone over the main benefits of Key’s model, let’s take a look at how co-ownership compares to rent-to-own. 

Understanding rent-to-own programs

Rent-to-own models are essentially agreements that allow you to rent a property for a specific length of time with the option of buying the property before your lease runs out. You pay rent throughout the lease and typically an additional premium that will go towards your down payment. 

However, there are a few things to keep in mind when considering this option. For one, at the end of your lease period rent-to-own still requires the qualification and payment (5-20% down) for a mortgage. Additionally, you don’t actually build any equity while you’re saving; the additional monthly premiums are more similar to a forced savings plan  rather than equity you can benefit from.

Something else to keep in mind is that for many rent-to-own programs you are typically on the hook for nonrefundable up-front fees, and if you are unable to buy the property after the renting agreement, you may even lose your saved downpayment contributions. You can learn more about how rent-to-own compares to Key’s model here.

If you’re an aspiring homeowner and think that co-ownership might be the right homeownership solution for you, you can learn more about Key’s model and how it works and how it compares to renting.