Investors as co-owners

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Toronto resident Marcel Padilla has a spring in his step this fall. After living in a 350-square-foot “shoebox” studio rental in a known downtown problem area, he’ll be closing the deal on a larger one-bedroom condo in a more desirable location this month, and he owes it to an online search that led him to a unique home equity sharing model.

“I have a great job that I love and I’ve been in for quite a number of years, but because of expenses and what-not, I’m not able to afford the entire 20 per cent down payment,” said Padilla, an insurance underwriter, referring to the minimum down payment required to avoid loan insurance when purchasing a home.

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“I was looking over the Internet and suddenly the ad for Ourboro came up. I looked at it, went to the website to explore more and sure enough, they’re actually supporting prospective homebuyers,” he said.

Ourboro Inc. is a new real estate investment firm that has been grabbing the interest of prospective homebuyers and investors since launching its marketing campaign in first quarter 2022. Recognizing that housing affordability remains at near record lows, the co-founders aimed to create an equity sharing model that would allow investors to pool their capital and co-home homes with individuals as an alternative to investing in rentals. The company manages a real estate investment fund on behalf of investors, essentially purchasing shares in the future value of homes.

“People find it difficult to believe, but it’s just a different model,” said Ourboro chief product officer Alex Kjorven.  “The money we provide is not a gift. It’s not a loan. It’s an investment from a third party. People have to wrap their heads around it.”

In the Ourboro shared equity model, homebuyers contribute a minimum of five per cent towards a down payment. Ourboro’s contribution can range from five to 15 per cent of the purchase price, up to a maximum of $250,000. The equity split is based on the down payment ratio. For example, if a homeowner pays five per cent of the purchase price — one-quarter of the required 20 per cent down payment — their equity share is also one-quarter (25 per cent) and Ourboro’s is three-quarters (75 per cent).

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Kjorven said most homebuyers to date have opted for a 40-60 split. The company’s model is structured on evidence that most people sell a home within 10 years of the purchase date, but the co-ownership term is 30 years. There are no fees or interest paid. Investors recoup their money only when a home sells or when a co-owner opts to buy them out.

The model is similar to the Government of Canada’s First-Time Home Buyer Incentive but with key differences, most notably that it applies to all buyers, not just first-time buyers, and to resale homes only. The government program sets maximum limits for household income, mortgage amounts and home purchase price, which is around $560,000 across Canada and $722,000 in Toronto, Vancouver or Victoria. Ourboro doesn’t set income or mortgage amount limits and home prices can range from a minimum of $550,000 to a maximum of $2.5 million.

Currently operating in the GTA, Hamilton, Kitchener-Waterloo, Guelph and London, Ourboro has received 1,500 applications from prospective buyers since launching its marketing campaign. Once people realize the model is based on co-ownership and that the company’s investors share the same risk as homeowners when it comes to potential earnings or loss, the interest is there, said Kjorven.

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“We’re trying to create a model that’s a win-win for both. Investors don’t have to be landlords and they’re not pricing a family out of the market by bidding on a home,” she said, adding that the company also offers incentives to help maintain the value of a home, including renovation credits.

Padilla said he was impressed with the investment model’s straightforwardness, which comes with semi-annual home inspections from Caboodl at no cost to him. Working with Ourboro, he was able to spend $600,000 on his new condo and is looking forward to sharing his new home with his life partner, who is joining him in Canada.

“I thought about it for a long time before I contacted them and I really looked at the calculations they presented in case there is a downturn, but ultimately it’s profitability that drives their model,” he said. “I work as a chief underwriter so I’m aware of risks. This one, for me, is a risk I’m willing to accept.”

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