They call it “home-ownership on-demand,” which leaves a lot to be answered.

So how about this: what do you call an opportunity to buy a house or condo if you can’t really afford it?

Um, I guess that’s affordable housing to some extent, but let’s keep this going.

Alright, so what would you call it if the bank wouldn’t approve you for a mortgage, and you didn’t meet the 5% minimum down payment threshold required by law, but you were afforded an opportunity to purchase through somebody else?

Um, maybe you’d call that a “scam.”  Or simply “too good to be true.”

Do you see where this is going?

In order to purchase real estate in Canada, the buyer must have a minimum down payment of 5% for properties up to $500,000, and for any amount between $500,000 and $999,999, they must make a 10% down payment.  So is that it?  Hard and fast, cut and dry?  If you don’t meet that requirement, you can’t purchase?

Traditionally, yes.

But as we saw last week, with new entrants, models, and “market disruptors,” there are other opportunities for home-ownership out there.

In last Wednesday’s blog, we looked at Addy and BuyProperly, two sites that have effectively securitized houses and condos so that people can buy “shares” for as little as $1 through Addy or invest in fractional ownership for a minimum of $2,500 through BuyProperly.

The readers had fun ripping apart both Addy and BuyProperly, arguing not only against the fees but also the “need” for such an app.  One reader suggested that a person interested in investing in real estate should simply buy shares of RioCan REIT, which is likely safer than investing through Addy, but also more traditional and predictable.  Another reader suggested that there’s a shift in mindset among young 20-somethings who want a “different” way of doing things from their predecessors, so perhaps buying a $1,000 stake in 230 King Street East, #2203 is far more interesting than buying $1,000 in RioCan REIT, who’s holdings you don’t know?

I don’t buy that argument, but I’m a 40-year-old.  I’m also logical, and more experienced than a 22-year-old, so there’s that.  But I don’t know how to post anything on Tik Tok and my head would explode if I tried, so if there’s a candidate to reinvent the wheel, it isn’t me.

So if we don’t like Addy and BuyProperly, then what about something else.

What about Key Living?

Have you heard of it?

Believe it or not, the whole reason I wrote last Wednesday’s blog about Addy and BuyProperly was because I’ve had so many people email me about Key Living.  Last week’s blog was more of an introduction to alternative ownership styles, knowing that I wanted to do a feature on Key Living.

This is an entirely different model from Addy or BuyProperly, since Key Living offers a buyer, who can’t qualify under traditional methods, to purchase a much smaller stake in a property and live in it!  That’s the biggest difference between Key Living and Addy or BuyProperly, but as we continue to compare and contrast the models, you’ll see that they’re not really in the same category.

Key Living’s tagline tells you what you need to know from the start:

The 1,000-year-old model of home-ownership needs and update.

Sure.  We’ve heard that before.  People have been saying this about the real estate industry for fifty years, but nothing has changed.

So why should anything change when it comes to home-ownership?

Key Living’s vision:

Whether you’re locked into or locked out of the market, real estate just doesn’t work for far too many of us anymore. At Key, we’re simply not willing to accept it any longer.

That’s why we’re designing a new economic system for homeownership-on-demand that makes urban living possible again. Our patent-pending model enriches the world by enabling more people to own and without debt. We’re also creating better, sustainable communities that foster a sense of belonging. We’re leveraging technology to simplify and enhance our residents’ lives with our innovative “living-as-a-service” offering.

We’re creating a world where real estate can be a source of freedom and prosperity for everyone.

At Key we’re designing a new approach to real estate that is free from the burdens of commuting, cost-prohibitive down payments and the inflexibility that comes with a 25-year mortgage.  We’re making urban living possible again.

Key provides a way for aspiring homeowners to prosper by starting to build home equity many years earlier than traditional homeownership.

Does it sound too good to be true?

Perhaps a little bit, but as with many descriptions on websites for financial services and the like, this sounds like a lot of “fluff.”

So how does it actually work?

Here’s what’s written in their “How It Works” section:

To become a co-owner with Key, the initial home equity investment is only 2.5% of the value of your suite, which will be around $15k for most. For our Beta Program, you have the added benefit of being able to live in your suite now and then pay the initial investment once the Beta finishes (by September, 2021).

As an owner-resident, you get to live in your own beautiful suite at a sought-after central location, where commuting to work is for someone else.

Since it only takes a fraction of the typical down payment, you can start building home equity many years sooner.

Once our Beta is completed, if you’re a first-time buyer, you may access your RRSP for the $15k.

Alright, more fluff, right?

You really have to dig around on their website to find a true example, but this explains the model:

Lauren is an aspiring first-time home owner.  She works in advertising in downtown Toronto and is sick of commuting from Oshawa.

If she contributes $15,000* to live in a Key suite on King West, she’ll pay roughly $2050* as her monthly payment*.  $50 of her monthly payment will go towards growing Lauren’s equity. The rest pays maintenance, taxes and residency costs.

After one year, she receives an unexpected $15,000 gift from her grandmother.  Lauren decides to put the full amount in her suite, increasing her home equity.

Based on how the Toronto real estate market has performed over the last 5 years, Lauren’s real estate equity will appreciate by 30% over the next half decade.  Which means by 2025 her total real estate equity ($15k +$15k + $3k) will be worth over $40,000*.

In addition, because she contributed more, she will have reduced her monthly residency fees.

When she is ready to move out, Lauren will simply give Key 75 days’ notice and she will receive her home equity plus any appreciation (based on the current value of her suite). As with all homeownership, Lauren is taking on the risk of her real estate depreciating.  With Key she’ll also save the 6% costs typically associated with buying and selling real estate.

*Actual numbers based on market value of real estate at the time.

Even at first glance, there’s some merit to this.

Saving the 6% cost to buy and sell, for one thing, although I’m not sure what that means since you don’t pay anything to buy, and you pay more like 5% to sell.  But you don’t play land transfer tax on the purchase here, and that’s a huge savings too.

Now, Lauren is paying $2,050 as her “monthly payment” to live in King West, but what would she pay if she had purchased the same unit?

I spoke to somebody at Key Living last week who said, “More.  Much more.”

How is this possible?

He explained, and then I figured this would make for a fantastic Toronto Realty Blog Q & A.

It also bears mentioning that there are 1,900 on a waiting list for Key Living units, so this isn’t a start-up, folks.  This really, truly seems to be a potential market disruptor.

So let’s do this: I want to use the comments section today as a thread to ask questions for the Vice President of Business Development, Mark McLean.

Mark is the former President of the Toronto Real Estate Board, has been licensed to sell real estate in Toronto for three decades, and was a manager at Bosley Real Estate years ago, which is why I was able to pick up the phone and have a candid chat with Mark about Key Living.

I’ll say this right off the bat: I’m not advertising for Key Living, nor am I necessarily a proponent of the services they provide, but I’ve received multiple emails from readers about Key Living in the past month and I want Toronto Realty Blog to continue to act as a forum to discuss all things real estate.

So I’ll do a Zoom interview with Mark this week and you guys can ask the questions.

Anything goes, about the business model, the platform, the costs, monthly payments, how these properties are purchased and financed, what buildings they’re in, whether they’re going to add freehold to the offering, etc.

Please post your questions below and I’ll be interviewing Mark this week!