Building Your Financial Model: Combine-Leverage-Split

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The great thing about co-ownership in real estate is your group’s ability to COMBINE-LEVERAGE-SPLIT. Rather than shouldering burdens on your own, the group comes together as a collective and community to share the benefits and burdens of home ownership together. 

 

When you buy as a group, this is known as COMBINE-LEVERAGE-SPLIT:

Combine funds to increase the percentage of the down payment

Leverage everyone’s income to increase the property value you group qualifies for. 

Split monthly housing costs to make ownership more affordable

Using this method, you can budget and assess the ongoing costs of home ownership. Try it with the table below!

% Share Total Member Member Member Member
Monthly Mortgage ... ... ... ... ...
Bills ... ... ... ... ...
Maintenance Services ... ... ... ...
Contribution to Reserve Fund ... ... ... ... ...
Insurance ... ... ... ... ...
Property Taxes ... ... ... ... ...
Total ... ... ... ... ...
 

Now that you’re fully budgeted, it’s time to summarise and get ready to move on to Step 3.

 

What are all the Steps to Becoming a Co-owner?

Click on the links below for all the blog articles related to each step.

  1. Familiarize Yourself with Co-Ownership

  2. Finding Your Purchasing Group

  3. Building Your Financial Model

  4. Creating Your Group Agreement

  5. Making Your Legal Agreement

  6. Finding Your Property

“Each member of the group needs to be completely transparent – not only about their assets and income, but also about their liabilities. Personal consumer debt factors into the size of mortgage available.”
— Lesley Tenaglia, Fuse/LT Mortgages

Other posts from Finding Your Purchasing Group

Featured
Finding Your Property: Are You Ready To Buy?
Finding Your Property: Are You Ready To Buy?

Now that you’ve made it this far, let’s talk about what happens when you find a property that you like and that fits your group. Again, the market is competitive so you and your group have to be ready to act fast.

Finding Your Property: Let's Talk About Homes and Renovations
Finding Your Property: Let's Talk About Homes and Renovations

As we said at the beginning of this step, the real estate market is a seller’s market most of the time. In the GTA, that isn’t looking to change any time soon. While there are a lot of different types of properties that your group can look at, you should always keep in mind that supply is limited.

Finding Your Property: Your Home Brief
Finding Your Property: Your Home Brief

Building on your understanding of the needs and wants of each group member, you can begin to create a list of criteria that you are looking for in your co-owned real estate purchase. This Home Brief will help your agent’s guide to finding you a property.

Finding Your Property: Setting Yourself Up For Success
Finding Your Property: Setting Yourself Up For Success

The final step in a co-ownership real estate purchase is to find the perfect property for your group! This step is last because all of the preparation you and your group have done will make this step much easier. So once you are comfortable with your Group Agreement and have worked through your Legal Agreement and budget, you are finally ready to consider properties.

Making Your Legal Agreement: Finding a Lawyer and Frequently Asked Questions
Making Your Legal Agreement: Finding a Lawyer and Frequently Asked Questions

Once you have done the work of determining your legal rights and responsibilities, financial obligations, and future scenarios as a group, we recommend finding a lawyer who has some experience drafting co-ownership agreements. It is essential that your agreement is created with all members of your purchasing group and the contents of any wills or spousal agreements are shared with your lawyer as they prepare your group’s Legal Agreement, so that they align.

Making Your Legal Agreement: Future Scenarios
Making Your Legal Agreement: Future Scenarios

It is impossible to anticipate all future change, and you or members of your group might find yourself in a position of wanting to exit your co-purchasing arrangement. Members of your purchasing group must be in agreement about how and when your property will be divested (disposed of, sold etc.).

Making Your Legal Agreement: Financial Obligations
Making Your Legal Agreement: Financial Obligations

We recommend that you include a schedule for mortgage payments and a clear delineation of other payments, like bills and taxes, in your Legal Agreement.

Making Your Legal Agreement: Rights and Responsibilities
Making Your Legal Agreement: Rights and Responsibilities

Over the next three sections, we will be covering the three important features to include in your legal agreement. Starting now with Rights and Responsibilities!

Making Your Legal Agreement: Types of Legal Arrangements
Making Your Legal Agreement: Types of Legal Arrangements

Generally, there are two types of legal relationships between co-owners: you can buy property as either tenants-in-common or as joint tenants.

Making Your Legal Agreement: Introduction
Making Your Legal Agreement: Introduction

Your legal agreement is an essential part of the co-ownership real estate purchase. It may feel daunting or uncomfortable to discuss certain aspects of your living arrangement through the lens of a legal agreement, but your Legal Agreement is in place to protect you and your group, both individually and collectively.

Lesli Gaynor gaynor.lesli@gmail.com