Our world is evolving more rapidly than ever before; it’s time real estate had a modern transformation too

For generations, real estate has continued to be a foundational source of financial freedom and prosperity. However, aspiring buyers are being locked out of ownership at an alarming rate. A generation ago, those who worked hard and were responsible with their savings generally could afford a home; now, the Toronto housing market is only available to the top 20% of income earners in the city. It is clear that the decades-old ownership model that once worked so well for our parents is no longer viable for the majority of Canadians.

Currently, it takes on average 21 years for a typical first time home buyer to save up enough money for a downpayment in Toronto. As a result, more young people are stuck on the “rental treadmill” for most of their adult lives. They end up funneling their rent to investors and landlords, rather than having the ability to put money towards building their own net worth. Where renting once used to be a stepping stone on the path towards home ownership, the two now more closely resemble parallel paths. While most are stuck renting, a lucky few are left to reap the benefits of ownership, and this group is constantly shrinking. Something is needed to bridge the gap between the two realities.

One of the underlying contributors of the growing affordability problem is that there are conflicting interests between residents and investors. When residents and investors compete for property, prices are pushed upwards; investors tend to have the most capital and are consequently the only ones who can end up affording it. As a result, residents keep missing out and are stuck renting.

 

Bridging the gap between investors and residents

By aligning the interests of residents and investors, a massive shift in the industry can be realized. Key’s brand new co-equity model was designed to do just that; it incentivises residents and owners to work harmoniously in a mutually beneficial way.

Here’s how it works:

With Key, aspiring buyers can begin their ownership journey far sooner, and with a much lower up-front investment. With an initial investment of only 2.5% of the value of your chosen suite – fully half the minimum required amount for a CMHC-backed mortgage – the barrier of entry for ownership has never been lower.

Unlike traditional ownership, wherein the purchase is financed by debt in the form of a mortgage, in the Key model, the owner-resident’s capital is supplemented by Key itself. Key in turn raises capital from investors looking for exposure to the multi-residential asset class without the hassle of themselves becoming property managers. Currently, these investors are institutional in nature, but eventually, retail passive investors (such as yourself), will have the ability to participate as well.

Once occupying their selected suite, Key owner-residents pay a single, comprehensive monthly payment in lieu of a typical rental arrangement. This payment consists of two discrete parts; the baseline payment, and the variable payment. The baseline consists of taxes, condo fees (maintenance, etc.) and utilities, and is fixed. The variable portion of the monthly payment accounts for that percentage of the suite not-yet-owned by the owner-resident, and is dynamic to reflect changes in equity over time. In other words, the more equity an owner-resident builds, the lower their monthly payment becomes.

Ultimately, it’s a win-win for both parties.

 

Greater control over your equity

The advantages of Key’s model extends far beyond lower barriers to entry; it truly is the modern transformation of real estate that is so desperately needed. With Key’s co-equity model, there is an unprecedented ability for residents to have control over their personal equity, in a way that traditional mortgages can not offer.

With Key, residents have the flexibility to control the pace at which they build equity, in a way that works best for them. It starts with $50 of their baseline payment which goes towards increasing their equity every month. Beyond that baseline amount, owner-residents may choose to buy up additional increments of equity in their suite at their discretion. Conversely, an owner-resident may redeem any of their equity for its present market value. Note that the owner-resident must maintain their minimum 2.5% ownership stake as long as they wish to maintain their occupancy of a suite. 

The days of long-term mortgage payment plans are history.

 

Beyond the dollar signs and numbers.

Key is truly on a mission to transform the real estate industry. Despite recent trends to the contrary, the choice of real estate ownership is more than a financial decision, it is one that impacts every aspect of our lives; consequently, we need to start thinking about it in the holistic framework that it deserves.

In recent years, ownership has become an overwhelmingly financially-driven decision, to the point that the benefits of social prosperity are often neglected. As a result, the feeling of community between neighbours is on the decline. Despite being surrounded by millions of people every day, 66% of Torontonians report not knowing any, or only a few of their neighbours.

Key is in a unique position to address this phenomenon and help foster community. Since suites are occupied by owner-residents, not short-term renters, neighbours will have a greater ability to invest in building relations with others. Long term, these efforts will be supported by Key’s holistic design philosophy.

In keeping with our core philosophy, Key believes it’s time that real estate is built with the needs of all stakeholders in mind, and not just the financiers responsible for the initial development. Currently, there are a lack of incentives for developers to build high quality inventory since they have no long-term interest in the health of the project once they sell their stake. Typically this is done within 3-4 years for new builds. However, Key is different due to our co-equity model. By holding a long term ownership stake in our suites alongside our owner-residents, Key is incentivized in the development stage to design with an eye for long-term value and functionality. In practical terms this means that Key buildings will have suites designed for livability, not maximum investor appeal; thoughtful implementation of communal spaces, not cookie-cutter ‘party room and a pool’ offerings; and, quality craftsmanship, designed to last decades, not until the end of a warranty cycle.

 

Creating a new way for more people to have their own “home sweet home” inspires us. We’re excited to be launching in the Toronto housing market and then expanding globally. We’d love you to share our journey and we look forward to welcoming our new neighbours.