Toronto-based Key, a co-ownership modeled proptech, announced Tuesday it has raised $11 million CAD ($8.5 million USD) in seed funding led by fintech-focused Luge Capital.
Key claims its co-ownership model makes homeownership more accessible by eliminating the need to qualify for a mortgage or save for the typical 20% down payment. Instead, the startup lets occupants move into homes with a small down payment of 2.5% of the home’s value without having to take out a mortgage.
In doing so, Key aligns real estate investor capital with resident capital to underwrite the cost of homeownership, making it more affordable for residents.
“The lack of accessibility to homeownership is a growing global crisis that needs innovation to solve,” said Daniel Dubois, co-founder and president of Key. “The support given, and the amount of funding raised in our first round further affirms our belief that homeownership should be, and can be, accessible to everyone.”
Launched first in Toronto in November 2021, Key estimates that 2.5% down payment typically will be around $15,000 for the initial home equity investment. The investment can then grow from day one based on how the real estate appreciates.
For every $1 invested, Owner-Residents get another $1 in leverage to build more home equity, faster in what Key calls the “Co-financing Benefit.”
Via its digital platform, Key users can browse available suites Key is offering, apply for co-ownership, make payments, and manage equity in their co-owned space.
Participants in Tuesday’s seed round also included Idea Fund Partners, The Social Entrepreneurs’ Fund, the US National Association of Realtors, Plazacorp, N49P Ventures, Red Jar Capital, TSV Capital, Moderne Ventures, and other undisclosed investors.
“The rising costs of homeownership are being felt across North America,” acknowledges Christopher Langford, partner at IDEA Fund Partners. “Key has created a first-of-its-kind digital real estate platform that provides an accessible and future-forward solution to a massive market need.”
While Key tackles the need for co-ownership in first homes, many proptechs have cleared the runway for the co-ownership model in second homes and vacation rentals as well as the popular rent-to-own model. Divvy Homes, which also allows a renter to contribute 1% to 2% as a preliminary down fee to eventually purchase a property, entered into new debt facilities totaling $735 million in late 2021.
Fresh funding in the bank, Key is set to run pilot projects of its model throughout Canadian and U.S. cities. The proptech also plans to test new home models including single-family, townhomes, high-rise and mid-rise condominiums.
According to Dubois, thousands of people are currently on the Key waitlist – ranging from frontline workers to software engineers. Currently, Key has over 30 occupants in 22 homes that are officially co-owned, although not yet sold.
“Key’s growing waitlist clearly shows it is time for a new way to buy and sell real estate,” said David Nault, general partner of Luge Capital.