Financing the Development of the Cohousing Community at Mirador

David Oesper

Though Mirador Astronomy Village will have an RV park, a sharehouse, an apartment building, and a cohousing community, in this note I’d like to focus on how the construction of the cohousing community might be financed.

First, let’s assume that the land for Mirador has been acquired, a community land trust created, and the Mirador cooperative established.

Here’s a hypothetical situation I’d like you to consider.

Linda & Paul want to live in a house at Mirador. They have five floor plans to choose from. They select one of the floor plans for a house that will cost $200,000 to build.

Linda & Paul decide to make a 20% downpayment of $40,000. They pay Mirador the $40,000.

Mirador secures a construction loan through a lending institution and begins construction.

Mirador owns the house that is being constructed. Independent of this contract between Linda & Paul and Mirador, Mirador will be responsible for constructing the common facilities that everyone in the cohousing community will be using.

After the house has been constructed, Linda & Paul move in and begin paying rent to Mirador. Their monthly rent is reduced by $320 because they made a $40,000 down payment on the house. Their rent will be reduced by $320 each month for 125 months (10 years and 5 months) until Mirador pays Linda & Paul back the full amount of their initial $40,000 down payment.

Mirador makes the monthly house payments to the lending institution using the rent payment from Linda & Paul, plus $320 from other income sources at Mirador. (For the sake of simplicity, let’s say that Linda & Paul’s rental payment + $320 = the monthly payment on the mortgage.)

If Mirador is bringing in enough income, an extra amount could be applied towards the principal to shorten the length of the mortgage and the total interest paid.

Linda & Paul will need some legal protection for the $40,000 down payment they initially made. If the house does not get built, then the $40,000 must be returned to them.

Mirador may not be able to secure the construction loan unless Linda & Paul co-sign the loan. If for any reason Mirador defaults on their loan payments (heavens forbid!), Linda & Paul will be responsible for making those payments directly to the lending institution, and ownership will be transferred from Mirador to Linda & Paul. Needless to say, this would only happen if the entire Mirador enterprise goes belly up and the fallback plan is a more-or-less traditional owner-occupied cohousing community in the desert.

Would this work?

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