Stop wasting your- rent - set up housing Co-operative

mohawk

Antrobus you are quite right in saying that repaying a repayment mortgage of £200 000 will cost about £1000 every month for about 25 years. In that illustration the £1000 a month remains for each and every month, unlike the rent any private landlord charges over the same period of time as inflation devalues the buying power of any given amount of money.

So you have ignored the fact I wrote that my proposed original rent level would increase a small amount each year roughly in line with inflation. I can only guess what inflation might be, so I guessed a low average of 3%, seeing as how the average annual inflation has been about 3.6 in the past fifty years. A higher average of 4% for the next fifty years has been estimated by some financial experts.

Using my guesstimates the loan of £200 000 could be paid off in about 20 years, but the co-op would actually have the flexibility to change things annually according to current market conditions.

I have not set out all the rules terms & conditions in their precise exactitude but merely pointed out that instead of landlords profiting from renting to tenants, it is possible for that landlord to be the co-op which is in fact mutually owned by members.

This means tenants are, collectively, their own landlord & profit accordingly.

But no one here seems to understand that !

Equally no one seems to understand that I am only giving an example of a 100% loan to make all this understandable. The co-op may or may not actually borrow 100% as members may or there again, may not cough up their own money.

But it is possible for a co-op to find the full 100% of funding & other co-ops prove the point by having already done that.

And yes, co-ops already have the legal right to issue redeemable shares & have done so for years. Recent legislation is all about making that even better for co-ops than it is at present.

If people here were more genuinely interested in answers to relevant questions instead of being sarcastically carping on at me, I would be quite happy to try and explain.

But at Present I haven’t written out all those anwsers in some kind of rule book which no doubt takes many pages & involve formal legal advice and is part of the long process of actually setting the co-op up.

All I do know at this stage is that the idea of finding money from a zero starting point and setting up a co-op to rent homes to tenants is possible and has already been done.

Also crowdfunding has been demonstrated to work in similar fields & I just want to focus it specifically on providing funding for home purchase to rent to tenants as already explained.

This does not require Financial Conduct Authority registration or control if it is done under certain defined conditions, although it would be my preference to be registered with the FCA.

When other people want to join me in setting up the co-op we we all collectively go through all the details and decide exactly how all those details will work.

Cautious_Optimist

mohawk wrote: »

Antrobus you are quite right in saying that repaying a repayment mortgage of £200 000 will cost about £1000 every month for about 25 years. In that illustration the £1000 a month remains for each and every month, unlike the rent any private landlord charges over the same period of time as inflation devalues the buying power of any given amount of money.

So you have ignored the fact I wrote that my proposed original rent level would increase a small amount each year roughly in line with inflation. I can only guess what inflation might be, so I guessed a low average of 3%, seeing as how the average annual inflation has been about 3.6 in the past fifty years. A higher average of 4% for the next fifty years has been estimated by some financial experts.

Using my guesstimates the loan of £200 000 could be paid off in about 20 years, but the co-op would actually have the flexibility to change things annually according to current market conditions.

I have not set out all the rules terms & conditions in their precise exactitude but merely pointed out that instead of landlords profiting from renting to tenants, it is possible for that landlord to be the co-op which is in fact mutually owned by members.

This means tenants are, collectively, their own landlord & profit accordingly.

But no one here seems to understand that !

Equally no one seems to understand that I am only giving an example of a 100% loan to make all this understandable. The co-op may or may not actually borrow 100% as members may or there again, may not cough up their own money.

But it is possible for a co-op to find the full 100% of funding & other co-ops prove the point by having already done that.

And yes, co-ops already have the legal right to issue redeemable shares & have done so for years. Recent legislation is all about making that even better for co-ops than it is at present.

If people here were more genuinely interested in answers to relevant questions instead of being sarcastically carping on at me, I would be quite happy to try and explain.

But at Present I haven’t written out all those anwsers in some kind of rule book which no doubt takes many pages & involve formal legal advice and is part of the long process of actually setting the co-op up.

All I do know at this stage is that the idea of finding money from a zero starting point and setting up a co-op to rent homes to tenants is possible and has already been done.

Also crowdfunding has been demonstrated to work in similar fields & I just want to focus it specifically on providing funding for home purchase to rent to tenants as already explained.

This does not require Financial Conduct Authority registration or control if it is done under certain defined conditions, although it would be my preference to be registered with the FCA.

When other people want to join me in setting up the co-op we we all collectively go through all the details and decide exactly how all those details will work.

So why would a "tenant" choose your new co-op, rather than an already well established co-op?
Because you will have properties in the location they desire, whilst other co-co-ops don't?

mohawk

Cautious_Optimist

A tenant would choose this co-op for all the usual reasons tenants make any choice: location attractiveness of the property & so on. But then, there would be the unique advantage this co-op would have in that it's would offer a return of some of the rent.

The exact details of how much and when have not been determined exactly at this point and will not be until the work of setting up the co-op begins and other members of the co-op take part in the decision making.

But in a perfect world it would literally be possible to eventually return all of the rent under the right circumstances.

But, off the top of my head it might be appropriate to say something like :

- no return of rent for first six months of tenure.
- after one year tenure 10%
- second year 25%
- third year 40%
- fourth & subsequent years 50%
- after full 20 years of mortgage term if tenure actually that long, a long lease at a price previously agreed at the commencement of the tenancy to be sold to the tenant using the above accrued sums.

This long lease would then have capital value the tenant could sell to anyone they please after offering a first refusal to the co-op.

All I am doing here is saying that borrowing money to rent out property - even if it is as much as 100% of the purchase price - is highly profitable & I have indicated how profitable.

And that as the co-op will be owned by all it's members equally, they will all share in that profit in a way they will decide.

Decisions would normally be taken each year on the basis of the financial circumstances at the time as these will always change from year to year.

What can possibly be difficult to understand about all this ?

antrobus

mohawk wrote: »

....So you have ignored the fact I wrote that my proposed original rent level would increase a small amount each year roughly in line with inflation. I can only guess what inflation might be, so I guessed a low average of 3%, seeing as how the average annual inflation has been about 3.6 in the past fifty years. A higher average of 4% for the next fifty years has been estimated by some financial experts....

If inflation increases so will interest rates. That 3.5% that Landbay pay, and which you have used in your calculations is 3 plus base you know.

mohawk wrote: »

...But it is possible for a co-op to find the full 100% of funding & other co-ops prove the point by having already done that........

The registration of a co-op is simple enough," he says; "The real difficulties lie in property purchase costs. The co-op friendly banks will only lend 70% over 25 years

http://www.theguardian.com/housing-network/2012/jan/13/housing-cooperatives-affordable-alternatives

mohawk wrote: »

....And yes, co-ops already have the legal right to issue redeemable shares & have done so for years. Recent legislation is all about making that even better for co-ops than it is at present.....

I believe that Industrial and Provident societies can issue withdrawable shares, but that is not the same thing as a redeemable preference share.

mohawk wrote: »

....Also crowdfunding has been demonstrated to work in similar fields & I just want to focus it specifically on providing funding for home purchase to rent to tenants as already explained....

If you mean Landbay, then it has not been "demonstrated to work". Landbay has only been running for a few months. It would be too soon to tell whether it will 'work' or not.

mohawk wrote: »

.. This does not require Financial Conduct Authority registration or control if it is done under certain defined conditions, although it would be my preference to be registered with the FCA. ....

Withdrawable shares issued by Industrial and Provident Societies would fall outside the FCA remit. But you earlier said that your "co-op crowdfunding site would be doing everything more or less as landbay" and that you would be offering "a much better, and much higher degree of security". That would be loan-based crowdfunding which would fall within the FCA remit. Capital requirements will apply.

Peer-to-peer lenders will now be required to have a capital "buffer" of at least £20,000 in case they run into financial difficulties. From April 2017, this will increase, so that lenders must have a minimum of £50,000, or more depending on the total amount lent out.

http://www.moneysupermarket.com/c/news/peer-to-peer-fca-confirms-new-rules/0036905/

mohawk

Quote:
Originally Posted by mohawk 
....So you have ignored the fact I wrote that my proposed original rent level would increase a small amount each year roughly in line with inflation. I can only guess what inflation might be, so I guessed a low average of 3%, seeing as how the average annual inflation has been about 3.6 in the past fifty years. A higher average of 4% for the next fifty years has been estimated by some financial experts....
If inflation increases so will interest rates. That 3.5% that Landbay pay, and which you have used in your calculations is 3 plus base you know.

*******************************
I only talk about Landbay to indicate how my idea might work in a similar way. At the moment Landbay thinks 3.5% is a minimum it needs to offer lenders to persuade them to lend. They could have chosen any figure they liked.

And of course, when the Bank of England raises base rates the rate of interest Landbay or any similar organisation will have to offer will also go up in line with increases in BoE interest rate increases.

*******************************


Quote:
Originally Posted by mohawk 
...But it is possible for a co-op to find the full 100% of funding & other co-ops prove the point by having already done that........
The registration of a co-op is simple enough," he says; "The real difficulties lie in property purchase costs. The co-op friendly banks will only lend 70% over 25 years

http://www.theguardian.com/housing-n...e-alternatives


********************************

Yes, I know all about what the Guardian says, & then some.

My original idea did not include crowdfunding but depended on scraping a deposit together from members and issuing redeemable shares which an industrial and provident society (aka co-op) is allowed to do and to shop around for loans from the co-op movement and various charitable trusts who issue tens of millions in grants & loans to things like this.

And then we would get a mortgage (or not) just like anyone else.

But then my mind turned to the idea of crowdfunding & when I had a conversation with the FCA they said of course an industrial & provident society could run a crowdfunding site and they also appeared to inform me that a limited company soliciting loans for it to not lend to anyone else but only to buy it’s own property to rent out would also not require FCA registration.

But as I said, I would still prefer FCA registration & I am still unsure if they were right & I have a lot of legal stuff to wade through to see if they are right & would still have to use a lawyer anyway to deal with it eventually.

The point about crowdfunding is that many crowdfunding sites exist where people successfully raise money for a wide range of activities. It might be business purposes or some personal thing, either way these websites do not allow any financial benefit to be given to members of the public so they can avoid complications of FCA controls/registration. Instead those people wanting to ask the public for loans are told they can only offer non monetary ‘rewards’.

I personally am still mystified as to why people want to lend money for these rewards which are usually trivial and of little value. But, the fact is people do raise money this way and if they do, a crowdfunding site like the one I have in mind offering an interest rate is far more likely to have lenders interested.

https://www.indiegogo.com/

http://crowdfunding.about.com/od/Crowdfunding-definitions/fl/What-is-rewards-based-crowdfunding.htm

http://www.telegraph.co.uk/finance/personalfinance/investing/10435276/Which-are-the-best-crowdfunding-websites.html

**********************************



Quote:
Originally Posted by mohawk 
....And yes, co-ops already have the legal right to issue redeemable shares & have done so for years. Recent legislation is all about making that even better for co-ops than it is at present.....
I believe that Industrial and Provident societies can issue withdrawable shares, but that is not the same thing as a redeemable preference share.


*******************************

I didn’t say anything about redeemable preference shares. I was only referring to industrial & provident society redeemable (withdrawable) shares.

********************************




Quote:
Originally Posted by mohawk 
....Also crowdfunding has been demonstrated to work in similar fields & I just want to focus it specifically on providing funding for home purchase to rent to tenants as already explained....
If you mean Landbay, then it has not been "demonstrated to work". Landbay has only been running for a few months. It would be too soon to tell whether it will 'work' or not.

******************************


But Landbay has attracted enough loans to fund it’s first mortgage loan, apparently. Although I agree it is too soon to know much about it. Yet again I will repeat that I was only quoting it as an example of how some people perceive it is possible to do something similar to what I am suggesting.

********************************




Quote:
Originally Posted by mohawk 
.. This does not require Financial Conduct Authority registration or control if it is done under certain defined conditions, although it would be my preference to be registered with the FCA. ....
Withdrawable shares issued by Industrial and Provident Societies would fall outside the FCA remit. But you earlier said that your "co-op crowdfunding site would be doing everything more or less as landbay" and that you would be offering "a much better, and much higher degree of security". That would be loan-based crowdfunding which would fall within the FCA remit. Capital requirements will apply.

Peer-to-peer lenders will now be required to have a capital "buffer" of at least £20,000 in case they run into financial difficulties. From April 2017, this will increase, so that lenders must have a minimum of £50,000, or more depending on the total amount lent out.

http://www.moneysupermarket.com/c/ne...rules/0036905/

**********************************

What I suggest is not taking in money from the public to lend on to other members of the public which is what you are mentioning here. The FCA is not relevant & a co-op has the legal right to ask for loans.


Last edited by antrobus; Today at 7:26 PM.

antrobus

mohawk wrote: »

......I only talk about Landbay to indicate how my idea might work in a similar way. At the moment Landbay thinks 3.5% is a minimum it needs to offer lenders to persuade them to lend. They could have chosen any figure they liked....

And the 3.5% that Landbay "needs to offer lenders to persuade them to lend" is simply what it's paying lenders. It costs money to raise money, and to administer the money once you've raised it. But you take no account of that .

mohawk wrote: »

....And of course, when the Bank of England raises base rates the rate of interest Landbay or any similar organisation will have to offer will also go up in line with increases in BoE interest rate increases....

As will yours. But your calculations take no account of the fact that the interest rates you might have to pay might increase.

mohawk wrote: »

....My original idea did not include crowdfunding but depended on scraping a deposit together from members and issuing redeemable shares which an industrial and provident society (aka co-op) is allowed to do and to shop around for loans from the co-op movement ...

Industrial and provident societies (or Co-operative and Community Benefit Societies as apparently we are now supposed to call them) can issue withdrawable shares. Buy you would need to address the issue of why anyone would want to buy your withdrawable shares.

mohawk wrote: »

...and various charitable trusts who issue tens of millions in grants & loans to things like this....

Ah, so you're hoping that somebody else is going to simply give you the money. Well, a charitable trust is only going to give you something if your housing co-op also has a charitable purpose. Enriching the members of the housing co-op by allowing them to profit from the venture would not generally be regarded as a 'charitable purpose'.

mohawk wrote: »

....But then my mind turned to the idea of crowdfunding &....

That would be the problem. Your mind seems to turn to a lot of ideas. Without thinking them through properly.

mohawk wrote: »

...I didn’t say anything about redeemable preference shares. I was only referring to industrial & provident society redeemable (withdrawable) shares.......

Then stop saying 'redeemable' when you mean 'withdrawable'.

mohawk wrote: »

..what I suggest is not taking in money from the public to lend on to other members of the public which is what you are mentioning here. The FCA is not relevant & a co-op has the legal right to ask for loans..

You're the one who said that your "co-op crowdfunding site would be doing everything more or less as landbay". I did rather assume that by that you meant having a site that would solicit money from the public and make loans to a variety of different housing co-ops accross the country. If only because the costs of setting up and running a crowdfunding site for just one little 200k loan would likely to be prohibitive.