The novelty and economics of Key’s co-ownership model is what makes our innovative solution unique, but with the emergence of many alternative homeownership models over the recent years, we often get asked how Key compares to other models.  

One of the most well-known forms of real-estate investing is a Real Estate Investment Trust (REIT). First established in 1993 in Canada, they’ve emerged as an important investment class for shareholders and the entire economy. Key’s co-ownership model is distinct from REITs in a number of important ways.

Here is an introduction to the two models and some of the key differences between them.

What is a REIT?

A REIT is a publicly traded company that invests in income producing residential and commercial real estate. Similar to investing in a mutual fund or common stock, it allows retail investors to invest in the real-estate market. It makes it possible for individual investors to earn dividends from real estate investments without buying, managing, or financing any properties themselves. REIT’s include a wide variety of properties – apartment complexes, retail stores, healthcare facilities, office buildings, warehouses, and more.

Business model

The REIT pools investment from several investors, buys land, leases the space, collects rent from its tenants (commercial and residential) and distributes that income as dividends to its shareholders. Some REITs are specific in that they invest either in commercial or residential real estate.

Source: Internal

Types of REIT

There are three main broad kinds of REITs and they can be publicly traded and listed on an exchange, public but non-traded,or private.

1. Equity REITs – An equity REIT is the common form of REIT which owns and manages income producing real estate (primarily through rent) and pays it out to its shareholders.
2. Mortgage REITs – Mortgage REITs lend money to real estate owners through mortgages and loans or indirectly through the purchase of mortgage backed securities. These REITs generate income through a net interest margin – the difference between the interest charged from making these loans and the interest paid for pooling the cash. They’re very prone to interest rate fluctuations in the economy.
3. Hybrid REITs – A mix between the two: they own property and mortgages.

Key’s Co-equity Model

In contrast to REITs, co-ownership, or co-equity, is a unique way to own a home where you co-own your home alongside another entity. At Key, which leverages a co-ownership model, if the value of your condo is $600K, you would make an initial down payment of $15K, which represents 2.5% ownership. You pay monthly payments on the portion of your home that you don’t own. As you increase your ownership stake beyond the initial 2.5%, the monthly payments decrease – the more you own, the less you pay in rent. When you decide to move out you will receive your home equity plus any appreciation back. You can always increase your equity at your own pace, either through a lump sum or monthly payments.

Differences

Publicly Listed REITs / Key’s Co-Equity Model

Ability to reside in the condo - No / Yes

Actual Ownership - No / Yes

Earn Appreciation - Limited / Equal to ownership stake

Market Fluctuations - Higher / Lower

Key’s co-equity model is very different from traditional REITs as co-ownership allows you to become an Owner-Resident. Unlike REIT, as an Owner-Resident you get to reside in your suite and build home equity. REITs are more similar to buying stocks in organization and income is highly dependent on market conditions. Therefore, Key’s model is designed to allow first time home-owners to build equity, earn appreciation, and enjoy the freedom of owning real-estate.

If you’re interested in co-owning real-estate with Key, learn more about how it works and how Key compares to other alternative homeownership models such as rent-to-own and timeshare.