What is co-housing and could it work for you?

Co-housing is a way of living that offers many benefits, especially for seniors. If the concept is unfamiliar, you may be conjuring up images of a 1970s hippy commune, but rest assured you won’t have to wear tie dye t-shirts or become a vegan to be accepted! 

In this article, we explain what co-housing is, where it originated, and provide an example of a co-housing community in action in Tasmania. Remember, if you’re considering downsizing or making living arrangements for your retirement, we’re here to help you find the right finance for your needs.

What is co-housing?

Co-housing is defined as “an intentional community” of private homes built around shared facilities. These common spaces may include a common house with a shared kitchen and dining area where residents can cook and eat together. There may be community gardens, playgrounds and recreational spaces. Some co-housing developments may even include communal swimming pools and movie rooms for residents to enjoy. 

Each household in the community is independent and fully equipped with its own amenities, including private kitchens and baths. However, the idea behind co-housing is for neighbours to be part of a collaborative community. Co-housing differs from regular retirement villages in that the community is owned and managed by the residents who live there. 

The key benefits of a co-housing community are that residents may have the opportunity to collaborate over how it is set up, what amenities it includes and how much it costs. 

Where did the idea originate?

The idea of co-housing started in Denmark in the 1960s. From Scandinavia, the concept spread to other parts of Europe, on to North America, and over to New Zealand and Australia. 

Co-housing initiatives are now popping up in many parts of Australia, reinvigorating the concept of community. Seniors’ co-housing has been suggested as an alternative to aged care or retirement villages for those wishing to age in place. 

What are the benefits?

Enthusiasts believe co-housing offers the following advantages: 

• More meaningful relationships with neighbours.

• A feeling of belonging, in that you’re part of a community.

• Reduces loneliness and isolation by connecting you with others.

• A collaborative culture of sharing and caring.

• Maintenance tasks are divided among the community.

• Decisions affecting the community are based on the consensus.

• You still have privacy, as well as the support of your neighbours as needed.

• Reduces household bills, as expenses for shared space are divided between residents.

• Depending on your community, it may be less expensive than other housing options.

• Reduces your environmental impact thanks to a “greener” approach to living.

An example of a co-housing community in action

Cascade Cohousing in South Hobart is a great example of a thriving co-housing community. Established in 1991, there are currently 22 adults, ranging in age from young families to retirees, and six children living in 15 privately-owned properties (on strata title). 

There’s a central common house with a shared kitchen, dining area, lounge, laundry, workshop and TV room. Three nights a week, the residents get together for a meal, and once a month they hold body corporate meetings and working bees for maintenance. There are fun activities on offer like film nights, games evenings and gardening. 

You can find examples of other established and emerging co-housing communities on the Cohousing Australia website.

What about finance?

Co-housing projects are usually set up on a strata title – like an apartment building. This allows for individual ownership of an actual lot or unit, whilst sharing ownership of the common grounds on which it is built. Lenders will require a professional valuation on your unit or lot before they will approve finance, just like with any other strata title property purchase.

If you are starting a co-housing community from scratch, organising finance can be tricky – as with any new strata title development – and will depend on many factors. Expert guidance will be required from a qualified solicitor to set up the strata title and body corporate structure correctly, however your mortgage broker can work with your professional team to help organise a finance structure once this is done. 

If you’re entering the next phase of life, co-housing may be the way to go. However, we can help you explore all the finance options, whatever the next step in your property journey may be: 

Family loans

Community or Retirement Living

Reverse Mortgages

Bridging Loans

Shared Mortgages

Securing the right kind of finance to start your exciting new chapter all starts with a chat with your friendly mortgage broker. Please talk to us about your retirement lifestyle plans and goals today!

A Step-by-Step Guide to Investing in Property

When done right, investing in property can help you to build long-term wealth, and who doesn’t like the idea of an additional income stream? (Imagine what you could do with that!) The really great thing about property investing is that just about anyone can understand the principals. If you’re thinking about building wealth for your future this way, here’s a step-by-step guide on how to go about it. We’ve kept it super simple and you’re bound to have questions, so please give us a call to find out how we can help you make it work!

Step 1: Talk to us about your borrowing power

The first step involves a friendly chat with us about the finance set-up. We’ll run through your personal financial circumstances and help you determine your borrowing power – which is the amount a lender may be willing to lend you. Your borrowing power may be very different for an investment property than for a home to live in yourself.

Like all property purchases, you’ll need a deposit. If you already own your home and it has appreciated in value, or you’ve paid down your mortgage somewhat, you may be able to refinance to access equity to fund it. We can explain how this works and the kind of loan that will best suit your situation. We can also organise pre-approval so that you can set a purchasing budget and be confident a lender will come through with the finance when the time comes to start investing. 

Step 2: Formulate an investment strategy

Ask yourself what your ultimate objective is – do you want to build a big investment portfolio of 10 properties or more and make a business out of it? Or are you more interested in concentrating on paying off your own home, perhaps using an investment or two on the side to generate some money to do it? 

We recommend seeking advice from your financial planner or professional tax advisor when formulating your investment strategy. Maximising tax advantages is a big part of property investing and knowing what they might be in your personal situation is key. Ask us for a referral if you don’t already have a professional on board.

Step 3: Set your budget

There are many costs to factor into your budget when buying an investment property. The financial side of a successful property investment is a balance between costs, income, tax deductions and how they affect your overall cash-flow. The costs to factor in may include the following: 

Initial costs

Deposit

Loan establishment fees

Lenders’ mortgage insurance (if you have less than 20% deposit)

Stamp duty (calculators are available here)

Conveyancing and legal fees

Building and pest inspection reports

Quantity Surveying fees – to create your Depreciation Schedule for the fixtures in the property, so you can maximise your tax deductions (after purchase).

Ongoing costs

Rates/government taxes

Insurance

Mortgage repayments

Body corporate fees

Utilities not paid by the tenant

Property management fees

Repairs and maintenance costs.

Step 4: Do your research 

The key to buying the right investment property is to spend plenty of time researching. Property investors usually focus on two key financial returns – capital growth potential (which is the growth in the property’s value) and rental yield (the income the property will generate from the tenants). 

These factors are driven by supply and demand, so try to find a property that will be in high demand by tenants and future potential buyers. Ask us for assistance with the right property market data to inform your property searches. 

Once you’re set on a property, be sure to organise building and pest inspections. You’ll want to know that the property is structurally sound and free of unwanted guests before making an offer or going to auction.

Step 5: Finalise your finance

The final step involves us helping you secure an investment loan that suits your financial circumstances and goals. Ask us to get you pre-approval on a loan for the specific property you want to buy before you make an offer or buy it auction, so you can have a realistic ceiling price to work with during the negotiations. 

This step is the most important one of all if you’re buying at auction – you will be required to put your deposit down on the spot and it is not refundable if the lender does not agree the property is worth the price you paid and won’t lend the amount you need to complete the purchase. If you are buying under offer, we recommend you include a ‘subject to finance’ clause in the sales contract, to cover this contingency.

If you’re thinking about joining the thousands of Australians building wealth for the future through property investment, don’t wait to give us a call. Our mortgage brokers are here to give you expert guidance about investment loans and structuring your finance. Talk to us today!

Can a boarder help you pay your mortgage?

Are you thinking about buying a home and wondering how you’ll cover the mortgage repayments and still have a life? Remember Cousin Jimmy mentioning he was looking for a new pad? Sure, he’s a little ‘unusual’ with his back-scratcher collection and all, but if living with his bizarre hand gadgets means you’ll score some help with the rent, then why not?

Taking on a boarder could be a viable way to help you pay your mortgage, but it won’t all be beer and skittles! If you’re going to take in a boarder, there are some very important implications to consider first, as we explain in this article. 

The pros of having a boarder

Additional income

You can offset your household costs

Potential tax deductions for property expenses

The social factor.

The cons of having a boarder

Loss of privacy

Extra responsibilities as a live-in landlord

The income may push you into a higher tax bracket

You may be subject to Capital Gains Tax (CGT) when you sell

Many lenders don’t take rent from roommates into account when assessing whether you can afford a home loan.

Legalities to consider

The money received from your boarder will generally be considered assessable income by the Australian Taxation Office (ATO), and you must declare it on your tax return. You may be able to claim deductions for expenses associated with renting out part of your home, such as interest on your mortgage. However, if you rent to a relative at a discounted or less than market rate, it can affect what you can claim. In some instances, payments from a family member for board or lodging may be considered a domestic arrangement and not rental income, so you may not be able to claim tax deductions.

You won’t have to pay Goods and Services Tax (GST) on the rent you charge, nor will you be able to claim GST credits. However, when it comes time to sell, you may not be entitled to the full main residence exemption from Capital Gains Tax (CGT) – generally you don’t pay this when you sell the home you live in. You can find more details via the ATO website, however, it’s wise to speak to your accountant about the financial implications before proceeding. 

Precautions

It’s also important to familiarise yourself with your rights and responsibilities, and those of your boarder. Contact your local tenancy authority for advice. You’ll also need to follow the rules about lodging the bond with the residential tenancy authority in your state or territory.

Having a solid contract or tenancy agreement in place will help protect you, should things go wrong. The agreement should stipulate exactly what’s included (e.g. furniture and parking), when and how rent is due, details about notice required and room inspections, and bill arrangements. Also, consider your insurance needs. We partner with some of Australia’s leading insurance providers, so please ask us for help. 

When interviewing candidates, be sure to ask plenty of questions and request references from previous landlords (even if it’s someone you know). Being clear from the start will help you avoid issues down the track. Talk openly about your expectations about things such as:

privacy

paying rent

noise

cleanliness

overnight guests

Lastly, before they move in, fill out a condition report and take photographic evidence.

Becoming a live-in landlord can help you pay off your mortgage and cover living expenses, whilst also allowing you to claim tax deductions in some instances. However, there are important implications to consider, which is why it’s so important to consult your accountant or financial planner first. If you’d like to know more about your finance options for purchasing your home, please speak to us. We can help you find a home loan that suits your specific financial needs and goals – and perhaps make it affordable without Cousin Jimmy’s contributions!