I’m actually not sure. I never looked into the details. But the costs of the organization could include a mortgage that paid for it’s construction. A developer could build a building, found the organization, fill the apartments, sell it to the organization who uses a mortgage to pay for it.
The problem is most likely political or legal depending on where you live.
I think a key difference is that you have a bunch of people cooperating to buy more than any of them could on their own. Some costs are fixed or don’t scale linearly, so by buying in together it can be more effective.
Also you don’t always have to start from construction. You could do this by buying an extant building
The organization (the inhabitants) charge rent based on the costs of the building.
The mortgage is just a cost. The organization is recouping its costs, including the mortgage.
A mortgage is secured with the value of the property. A sound business plan and a property worth more than the loan amount will convince some lender or another.
Mortgages secured with the value of the property tend to carry higher interest rates than mortgages secured by looking at revenues. A sound business plan typically does not involve renting at the lowest possible price. Besides, the organization still needs to come up with the down payment.
The members of the organization buy in to the organization. 4 people buying in at 5% of the purchase price, and the organization has a 20% down payment.
This is a simple, straightforward business arrangement. You don’t need to show that the organization is making excess profit. You need to show that the organization is able to pay its bills. A “sound business plan” where the members are all contractually bound to the organization is not unreasonable.
Alright so 4 benefactors need to provide the down payment and pay the mortgage for years while the building is under construction. Once the building is fully rented out, rent payments will need to cover the ongoing mortgage payment + all utilities and fees + repairs + reserves for capital expenditures + some extra to cover initial down payment and mortgage payments during construction (over what time horizon?)
How many people will you find who are willing to take such risks only to break even after a decade or two, rather than invest in government bonds or the stock market?
The “benefactors” you’re talking about are the tenants. The owner of the building is an LLC; the owners of the LLC are also the tenants of the building. In this case, the building is a quadplex. There are no additional renters to bring in.
All of the various payments and fees you mentioned? A traditional landlord has all those as well, plus one more: profit. This LLC doesn’t make a profit. Any “profit” it made would come from the tenants, and would be owed back to those same tenants. There is no profit incentive here.
Wait, if the owners of the building are also the tenants of the building, then this is just home ownership with extra steps, which was my very first comment.
I mean, something has to own the building and contract with the tenants, and that something can’t have a profit motive without simply becoming a landlord. So, yes, pretty much.
I didn’t suggest anything. My comment was about an alternative system they use in Vienna that circumvents the parasite landlord middle-man. Of which I don’t know that much, as I told as well.
I’m actually not sure. I never looked into the details. But the costs of the organization could include a mortgage that paid for it’s construction. A developer could build a building, found the organization, fill the apartments, sell it to the organization who uses a mortgage to pay for it. The problem is most likely political or legal depending on where you live.
Isn’t that just home ownership with extra steps? How will the organization qualify for a loan without having revenues?
I think a key difference is that you have a bunch of people cooperating to buy more than any of them could on their own. Some costs are fixed or don’t scale linearly, so by buying in together it can be more effective.
Also you don’t always have to start from construction. You could do this by buying an extant building
You’re basically describing a condo.
The mortgage is just a cost. The organization is recouping its costs, including the mortgage.
A mortgage is secured with the value of the property. A sound business plan and a property worth more than the loan amount will convince some lender or another.
Mortgages secured with the value of the property tend to carry higher interest rates than mortgages secured by looking at revenues. A sound business plan typically does not involve renting at the lowest possible price. Besides, the organization still needs to come up with the down payment.
The members of the organization buy in to the organization. 4 people buying in at 5% of the purchase price, and the organization has a 20% down payment.
This is a simple, straightforward business arrangement. You don’t need to show that the organization is making excess profit. You need to show that the organization is able to pay its bills. A “sound business plan” where the members are all contractually bound to the organization is not unreasonable.
Alright so 4 benefactors need to provide the down payment and pay the mortgage for years while the building is under construction. Once the building is fully rented out, rent payments will need to cover the ongoing mortgage payment + all utilities and fees + repairs + reserves for capital expenditures + some extra to cover initial down payment and mortgage payments during construction (over what time horizon?) How many people will you find who are willing to take such risks only to break even after a decade or two, rather than invest in government bonds or the stock market?
The “benefactors” you’re talking about are the tenants. The owner of the building is an LLC; the owners of the LLC are also the tenants of the building. In this case, the building is a quadplex. There are no additional renters to bring in.
All of the various payments and fees you mentioned? A traditional landlord has all those as well, plus one more: profit. This LLC doesn’t make a profit. Any “profit” it made would come from the tenants, and would be owed back to those same tenants. There is no profit incentive here.
Wait, if the owners of the building are also the tenants of the building, then this is just home ownership with extra steps, which was my very first comment.
For one, you get the benefit of renting. Which is flexibility.
I mean, something has to own the building and contract with the tenants, and that something can’t have a profit motive without simply becoming a landlord. So, yes, pretty much.
Why are you asking me? If you’re interested to know more, surely there’s plenty of information on-line
Because you suggested the idea?
I didn’t suggest anything. My comment was about an alternative system they use in Vienna that circumvents the parasite landlord middle-man. Of which I don’t know that much, as I told as well.