(Toronto) A new company backed by a former Governor of the Bank of Canada wants to help Canadians become part-owners of real estate through investments valued at just 2.5% of a property’s value.
The goal of Key, a Toronto-based business that launched on Tuesday, is to help people accumulate pledged money on real estate years in advance without being tied to a traditional mortgage that can be difficult. to be obtained without savings.
Stephen Poloz, who served as governor of the Canadian central bank from 2013 to 2020, serves as chairman of Key’s global advisory board.
“Young people, new Canadians and frontline workers are stuck in renting for most of their adult lives and the dream of being able to afford a home has faded people,” said Key’s Managing Director, Rob Richards.
When Mr. Richards, a managing partner at Plaza Ventures, and his co-founder Daniel Dubois, a former manager of Airbnb, began to envision the business in 2018, they calculated that it takes about 21 years for typical first-time buyers to save the recommended deposit of 20% to purchase urban housing in Canada.
The average length of this savings period has now climbed to over 30 years, because national home prices have skyrocketed to an average of $ 716,585 last month and can reach over a million. dollars in places like Toronto, real estate agencies note.
MM. Richards and Dubois believe they can fight these prices with their business model. Key identifies properties she deems attractive, then convinces their owners and institutional investors to add them to her program.
Key then signs contracts with people who want to live in these properties, making them co-owners with investors and owners.
People who move in only contribute 2.5% of the property’s value to live in it, plus additional monthly fees.
For example, a 52m² / 563sq.ft one-bedroom suite that the company advertises at 400 Adelaide Street East in Toronto would involve an initial investment of $ 13,425.
The monthly cost of housing valued at $ 537,000 would rise to $ 1,911.01, with the bulk of it going for maintenance, taxes and residence fees. A smaller part of the amount is however reserved for capital.
Each time resident landlords invest more, they own more of the home, which also reduces their monthly rent equivalent.
For his part, Key earns money through his professional property management and efficiency gains in housing management.
Residents can buy the property they live in and take out a mortgage after the third year.
If the resident decides to vacate the accommodation, he can do so provided he gives 75 days notice. When he leaves, he will receive the equity in his home, in addition to any appreciation.
Within reach of more people
Based on the performance of the Toronto real estate market over the past five years, Key estimates that its residents’ equity will appreciate 30% over the next five years.
“They’re locking in the price, so if it keeps going up, at least they’re not missing out on that potential,” Poloz said.
He finds this aspect important for many people who yearn for flexibility and the ability to own equity in something tangible, even if they are not rich or have little savings.
The desire to help people who will relate to this idea is one of the reasons he accepted to join Key, after leaving the Bank of Canada in June 2020 and landing many positions in large companies. .
“I was setting aside some of my time for things that I am more passionate about and this is one of them. This is something that is really close to my heart, ”he said.
“My main concern is the risk people take every day when deciding they need to enter the housing market. ”
While he believes it will take time and education for people to adopt Key’s model, he believes the need for such a service does exist, and is surprised no one has it. proposed earlier.
Although Key has just launched in Toronto, MM. Richards and Dubois are already cultivating global ambitions since rising housing costs are a problem everywhere.
“We need to give people who make $ 60,000 or $ 70,000 the opportunity to get ahead,” Richards noted.
“It really is a global problem and we are going to be a global solution. ”