Is this a turnkey solution to ownership?

Daniel Dubois, left, and Rob Richards co-founded Key, which operates what it calls an “innovative co-ownership model” in which people can build equity in the condo over time.

Toronto entrepreneur Jordan Taylor was renting a nice two-bedroom condo for $3,000 a month while trying to figure out how to pull enough of his savings together to buy into the real estate market.

Then Taylor, 30, saw an ad on Instagram for Toronto “real estate tech” company Key, which aims to help people get a foothold onto the local real estate ladder “decades faster” by only having to pay a 2.5 per cent down payment — rather than saving the typical 20 per cent that delays building up equity.

The company operates what it calls an “innovative co-ownership model” where people can become part-owners of a condo — and live there — thus getting the opportunity to build equity over time.

Key is the latest in a trend toward fractional ownership, a way for people whose buying power has diminished given the city’s skyrocketing real estate prices.

But unlike other companies such as Addy Invest, BuyProperly and RealtyShares, where investors purchase shares in buildings and collect profits from the rental income, Key requires people live in the units and become what the company calls “owner-residents,” essentially purchasing a share in a condo owned by another investor.

However, like with any real estate, there are still inherent risks if the market under performs, one expert notes.

Taylor toured his condo this spring and on April 12 decided he wanted to become an owner-resident. He officially moved in to his two-bedroom in the West Queen West area June 1.

“I was years away from being able to move into any kind of ownership and Key kind of helped me hack that whole timeline for myself,” he said.

Owner-residents pay monthly costs — fees that are a bit less than market rent. The more you invest, the less your monthly fees.

Those monthly amounts go toward expenses such as utilities, building maintenance, property taxes and financing costs. The owner-resident also pays a proportionate amount of the repairs and maintenance.

The “owner-resident” also pays $50 a month toward their equity in the condo.

They can increase their monthly payments and opt after three years to try to take over the mortgage and ultimately be on title.

For Taylor, that all means he pays just about the same amount as he did to rent his former condo, including his monthly equity amount.

“I’m beyond thrilled this has gone so well for me. The timing was perfect. The setup was easy and the stars really kind of aligned,” Taylor said.

Daniel Dubois, who with Rob Richards co-founded Key, said the company’s mission “is to create a world where real estate is a source of freedom and prosperity” for everyone.

“We address the two biggest challenges associated with Canadians being able to own a home: the first one is a large down payment and the second is being able to qualify for and service a conventional mortgage,” Dubois said.

There is no bank involvement in terms of securing a mortgage approval, but residents have to show, among other things, that they are receiving a steady income and have the means to make their monthly payments.

In Toronto, Richards said, there are now 800,000 condo units mostly owned by investors and rented to people who are “aspiring owners” — the latter for whom the dream of ownership is getting further and further out of reach due to increasingly escalating housing prices that are rising faster than wages.

Key works by partnering with property owners — people who already own the condos — to secure units. Key says it aligns this real estate investor capital with the owner-resident’s capital to “supplement the cost” of home ownership.

Key says it makes money in large part by being the property manager for the suites, building equity in the real estate and being a digital exchange and marketplace for ownerresidents.

There’s an owner-resident agreement that is outside the Residential Tenancies Act. Key allows its residents to give short notice to leave — 75 days — and they can take their accumulated equity with them, only having to pay a one per cent transaction fee to Key on that invested equity.

The asset owner can’t sell the condo in the first three years and after that they must give six months notice to the owner-resident.

The latter would have the first right of refusal — they can apply to purchase the unit at fair market value.

The company is planning to broaden its scope soon to singlefamily homes, semis and townhouses.

Richards and Dubois declined in an interview to discuss the specifics of Key’s finances.

The company recently completed a beta test involving 20 people in 14 condo suites in downtown Toronto.

Key predicts that, based on how the real estate market has performed in the last five years, the owner-resident’s equity will appreciate by 30 per cent over the next five years.

But Key does caution that new resident-owners are taking on the risk of their real estate depreciating.

Matti Siemiatycki, professor of geography and planning and director of the Infrastructure Institute at the University of Toronto, said Key’s model “still requires a lot of scrutiny.”

“(Key) has some pretty big players in venture capital and private equity involved in this. Those folks are going to want a return on their investment too. Is it that their longterm hold is on the appreciation of these (condo) units?

“Is that the profit-making play here? How is the (investment) return generated, especially if the units are rented at below market or at market rates? I’d want to know a bit more about how that part works,” the professor says.