New Toronto-based business aims to make home ownership more achievable

Rob Richards, right, and Daniel Dubois. Key, a Toronto-based company that launched Tuesday, wants to help Canadians enter the real estate market with investments as low as 2.5 percent.HO / The Canadian Press

A new company backed by a former Bank of Canada governor wants to help Canadians own real estate through investments worth just 2.5 percent of a property’s value.

The goal for Key, a Toronto-based company that launched Tuesday with Stephen Poloz as its global advisory board chairman, is to help people build housing capital years earlier and without getting stuck in traditional mortgages that can be difficult to obtain without savings .

“Young people, new Canadians, frontline workers, they’re stuck renting for most of their adult lives, and the dream of being able to afford to buy a home has moved away from people,” said Keys CEO Rob Richards.

When Richards, a general partner at Plaza Ventures, and co-founder Daniel Dubois, a former manager at Airbnb, began thinking about creating the company in 2018, they found that it took about 21 years for the typical first-time Canadian home buyer in the cities to save up to the recommended payout of 20 per cent.

The average time is now more than 30 years because national house prices have risen to an average of $ 716,585 last month and could stretch to more than $ 1 million in places like Toronto, real estate companies have said.

Richards and Dubois believe they can tackle these prices with a model that starts with Key identifying attractive properties and getting their owners and institutional investors involved.

Then Key signs contracts with people who want to live in the properties, which effectively makes them co-owners with the investors and property owners.

The people who move in contribute as little as 2.5 percent of the value of the property to live there, plus additional monthly fees.

For example, a 52-square-foot (563-square-foot) one-bedroom, one-bedroom suite that the company announces at 400 Adelaide St E will involve an initial investment of $ 13,425.

Monthly suites for the $ 537,000 suite are $ 1,911.01, with the majority going to maintenance, taxes and living expenses and a small portion going to their equity.

Each time owner-occupants invest more, they own more of the suite, which also reduces their monthly rent equivalent.

The company makes money through professional property management and by increasing the efficiency of how suites are managed.

Residents can buy the property they live in and take out a mortgage after the third year.

If the resident decides to move out, they can do so as long as they give 75 days notice and when they travel, they will receive their equity plus any appreciation.

Based on how the Toronto real estate market has performed over the past five years, Key estimates that its residents’ equity will increase by 30 percent over the next half decade.

“They’re tied to the price, so if the price keeps rising, at least they’re not missing out on that potential,” Poloz said.

He believes it is important for many people who long for flexibility and the chance to own shares in something tangible, even if they are not wealthy or do not have lots of money away.

A desire to help people with whom that sentiment will resonate is part of why he chose to join Key after leaving the Bank of Canada in June 2020 and landing several positions at major name companies.

“I saved a little capacity for things, I’m a little more passionate about, and this is one. It’s something I really like,” he said.

“I basically worry about the risk that people take every day when they decide we need to enter the housing market.”

Although he thinks it will take some time and training for people to adopt the Key model, he believes that the need for such a service is there and is surprised that no one came up with it before.

Despite the fact that Key has just been launched in Toronto, Richards and Dubois have worldwide ambitions because rising housing costs are a problem everywhere.

“We need to give people who earn $ 60,000 or $ 70,000 the opportunity to get a leg up,” Richards said.

“It really is a global problem and we want to be a global solution.”

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