How to own an affordable house in Vancouver
The City of Vancouver lead the way in premiering the laneway housing bylaw. It's taken a while for this to really catch on, but the possibilities the bylaw presents are no- brainers. The laneway home can house your parents, it can house your adult kids, it can provide positive cash flow as a rental, or you can move in the newly renovated space and rent the old house. So many incredible options.
At under $300,000 all in, for many one and two bedroom models, it provides way more flexibility than an investment condo. But how does this help someone that doesn't have a property to put it on? How can this help you get noticed in the housing market?
Three words for you.
Tenants in common.
More commonly referred to as “shared equity.”
Investing in shared equity is a great option
When you buy a home with a spouse, you generally hold a title as "joint tenants.” This means the right of survivorship goes from one name on title to the other. So, if a wife is hit by a bus, her husband gets the house etc. But there are other ways to place your name on title.
Take a home on the West side for instance. Assume there is a cute three story house on a decent lot, in an area you like, but it's $1.6 million. You have been preapproved to go shopping for a house for under $700 thousand. You grab some close friends to join you in taking a second look at the house.
Together, you agree the house has a fabulous walkout basement suite but it could use some updating. Your landscaper friend says he loves the space, and the third friend points out that they would rather live in a detached laneway then a suite or a condo.
Now we do the math. You write a contract with your two friends where you agree to divide the home. If one person takes main space of the home, the other takes a suite, the third can take the laneway. The three of you buy this home for $1.6 million (or less if you have a good negotiator). You call a company like Smallworks studio or Laneway Housing Inc., to pick a preapproved design -spend under $300,000 and you will have a home ready for move-in day within 16 weeks. You throw $60,000 into making that basement gorgeous. Add in a little extra for closing costs.
You are now at about $675,000 each. The price could probably be divided by square footage, or by some reasonable three way split that reflected the different units, but I split it equally just to make the point here. You have now created your own co-ownership or shared equity arrangement. Make sure you have a contract/ agreement in writing in place. A co-ownership agreement can be very detailed and typically includes each co-ownerships’ interest in the property, as in percentage 25/25/50; and what each co-owner will pay for the Property Transfer Tax, property taxes, property insurance, water and sewer fees, repairs, improvements, maintenance and legal fees.
Vancity offers a “Mixer Mortgage.” This mortgage lets partners, family members or friends share the cost of home buying, including the deposit, the mortgage and other ownership expenses.
RBC Royal Bank, Scotiabank, TD Canada Trust and other financial institutions offer what are known as “co-borrower mortgages,” which let friends, family and partners own a property together. Applicants must complete a co-ownership agreement and are required to buy home and life insurance. (More information available at REBGV.ORG)
Home ownership as tenants in common
Now own your own place in a neighborhood you would otherwise never be able to get into. You can paint the walls whatever color you want and no one will be giving you notice to vacate.
For most people, this is better than commuting to the suburbs, and it is better for our environment to keep people living where they work and need to be.
Being listed on title as tenants in common means that if anything happened (the death of an owner) then that portion – governed by the contract- would go to his estate, not to the other two on title. Again, you can protect yourself by contract to cover various scenarios - this should all be done before you purchase.
Personal success story
I did this back in 1988, and here's the promised Chinatown story from my previous blog.
I really wanted to own a home. Not a condo.
I wanted land, a garden and a place I could renovate and fix up. I was preapproved for a $60,000 mortgage. Giddyup. It didn't take long to realise I couldn't get anything except a condo, and an old one at that. Lamenting this issue with a colleague I had just met a couple months before, he mentioned he was in the same boat. We soon decided we could pool our money and at the very least ”get in” to our ideal location. He mentioned an area he had toured and loved, so we went to take a look. I fell in love with Strathcona right away. There was a funny little cottage on Pender street, it sat below the street level with a bridge going to it, and a little sign out front that read, “for sale by owner.” When I called and Mr. Wong answered, he said he could meet us the following day and was asking $99,000 for the house.
While my friend headed out on a five day trip to Frankfurt, I went to see Mr. Wong alone with a verbal agreement from my new business partner that I could offer $95,000, but not a penny over $97,000. I was in my early 20's and had very little idea what I was doing. I met him for tea.
Mr. Wong said his sons wouldn't take $95,000 nor the $97,000. I explained that was as far as I could go without the other partner in town. The next thing I know, he said, “I will miss my parking pass, can I have the parking pass to park in front of the house?" So I agreed that at least for five years, he could. My potential new housemate had a scooter anyway.
We drew up a detailed contract explaining what would happen if he or I died, wanted to sell, or got married.
What we didn't know or predict was that we ended up married to each other, and still are today.