By Datta Khalsa, Broker
Amidst continuing high prices and interest rates which have driven the monthly cost of loans up by 60% or more, we are seeing multiple approaches to putting ownership within reach using strength in numbers, with objectives ranging from providing essential housing to a fresh take on second home ownership that could be said to resemble a timeshare.
On the essential housing front, a stream of housing bills being passed down by the State and municipalities are mandating higher density development to do whatever is necessary to increase the supply of housing stock both for rent and for sale. In addition to increasing numbers of lot splits and ADU’s, we are starting to see our landscape change to higher buildings with less (or potentially no) parking, and a residential component mandated to allow for mixed use in commercial developments moving forward.
Another approach to keeping costs down is a resurgence of co-ownership agreements as some buyers choose to band together as Tenants in Common on existing properties with multiple accommodations. I’m currently representing a listing for sale that has two independent houses plus multiple outbuildings on a 46-acre parcel, where altogether the property is likely worth in the range of $3 Million. However, due to the logistical and financing challenges of sharing a property, a fractional interest usually has to be sold at a slight discount, so one of the two owner’s equal shares is being offered for sale at $1.35 Million.
More fascinating still, the 4 roommates currently renting the house for the 50% interest being offered have expressed interest in joining forces with each other to be able to split their portions to a more attainable $337,500 each. If they are able to secure fractional financing at 70LTV, this would enable each of them to own an equal share of the property (and with it the benefits of property ownership) with a little over $100K down payment. It will be interesting to see if it works out for them to create a co-ownership arrangement within the existing co-ownership arrangement, and of course a well-structured operating agreement will be key to keeping things not only fair and equitable but also practical between them.
On a different front, a startup called Pacaso offers a novel take on the secondary-home market, dividing luxury abodes in prime locations into co-ownership and sometime cohabitation environments, with each of the co-owners taking turns to enjoy relatively upscale accommodations, albeit for a limited share of the year. At first glance, the prices seem relatively accessible, although when you add up the numbers on their offerings, the total of all the shares comes out to quite a bit more than one party would pay for the whole place, so in this case the forming entity stands to make a profit by dividing the property among multiple owners.
Each of these approaches in its own way represents an emergent factor of the premium market we call our hometown. And it follows that as long as the demand—and the desire—to live here sustains, people will continue to seek out ways to own a piece of the dream.