Some Chicagoans are finding creative ways to becoming homeowners in an effort to make buying a home more affordable.
Whether you’re thinking about purchasing a property with friends or starting a housing cooperative, here are some key things to consider before going all in.
Find people who are a good fit
Do you want to live with families who have children? People who like to entertain? Eco-conscious individuals who are down to start an organic garden?
These are the types of questions a person should ask themselves if they’re thinking about purchasing a home or apartment building with others, said Melissa Stanley of real estate firm Baird & Warner.
“Obviously, a certain amount of compatibility is good,” she said. “You can also form a communal environment. You could say, ‘This is a biker community or an artists’ community.’”
For Humboldt Park resident Ann Panopio, it’s involved a lot of deep conversations. Panopio and her husband, Irvin Hubler, have linked up with Amy Jewel and husband Toby Mitchell to try and purchase an apartment building in Chicago.
“I would say that you need to talk about all the details, even the boring ones, when you’re starting out,” Panopio said. “That way you know what’s going to happen or can better predict what could happen.”
Consider how the building will be managed
Treat your new venture like a baby condo association, Stanley said, and make sure to have contingency plans for every possible scenario.
“You’re going to have shared expenses and have to figure out repairs; so you just have to sit down and have a discussion how you are going to navigate those future responsibilities,” she said.
Panopio said the group wrote out bylaws and operating agreements for how their future property will be managed.
“In the future, if something were to go awry or there is some conflict, there’s always something to turn back to and say, ‘This is what’s governing us,’” she said.
Talk to other people
Getting advice from people who have gone through the process of buying a property with friends or starting a housing cooperative can be extremely valuable, Mitchell said.
“We’re lucky. We live in Chicago and can draw on that,” he said in regards to other cooperative houses nearby. “There are people around to help us, and we’ve learned a lot by kind of availing ourselves of that as much as we can.”
Pencil out the costs
Nailing down the financing for a building can be tricky, Stanley said, but it can be done, either under a limited-equity co-op or other well-outlined legal agreement.
If one resident wants to take on renovations and it increases the value of the building, there needs to be guidelines around if and how they’ll get that equity back, she added.
“Often one party might be willing to put more money into their unit than another party, so that’s also something to really discuss,” Stanley said.
She added that for those who choose to buy property under low-equity cooperative agreements, they might forego any equity in the building in order to ensure affordable housing for others.
“There are a couple of low-equity co-ops where that’s the model: Keep the units affordable,” she said. “People can forego their profits to make sure there’s future affordability for others.”
Overall, though, pooling financial resources can allow people to live in buildings or locations that they might not otherwise be able to afford, Stanley said.
Speak to a lawyer
Creating a housing cooperative or buying property with multiple people often requires legal documentation, so working with an experienced lawyer and real estate agent is a must.
“You are creating a legal entity, and you’re going to need lawyers to help you figure it out,” Stanley said.
Have a clear exit strategy
Before purchasing a property, everyone involved should outline what will happen if one party decides to move out, can’t pay their share of the mortgage or dies, Stanley said.
Those conversations can be difficult, but it ultimately sets everyone up for success.
Be patient
It can be hard to find an attorney, lender or real estate agent who is familiar with cooperative housing or working with a group to purchase a home.
“A lot of people don’t realize this is an option, and a lot of lenders and other Realtors don’t understand how the process works,” Stanley said.
Chicago attorney Sarah Kaplan, who co-founded the HUB Housing Cooperative, said it’s possible if buyers explore their options. In the case of HUB, a loan was secured from the Chicago Community Loan Fund.
Making sure everything is in order and finding the right property can take time. Jewel and Mitchell have spent four years putting together a cooperative house.
“Once we get ours off the ground — which hopefully, it’s not too much longer — we’re willing to help other people,” Jewel said. “Other co-ops have helped us, so this is definitely something that can be done.”
