Imagine if you will, you have been looking all summer for a condominium to buy and nothing you want seems to fit into your budget. But one night, while browsing the internet you find what looks like an absolute steal! You call your Realtor® to set up an appointment and they tell you, it’s an Own Your Own. What’s an Own Your Own? How is it different from a condo? I’ll explain.
A condo, short for condominium, is in a condominium project and defined as "an estate in real property, consisting of an undivided interest in common in a portion of real property coupled with a separate interest called a unit." (Civ. Code § 4125.) With a condo, you own the airspace within the unit, typically from the paint on the walls in plus undivided ownership interest in the common area.
An OYO short for “Own Your Own” is an individual unit in a Community Apartment Project. With an “Own Your Own”, you own an undivided fractional interest in the property, (also known as a Community Apartment Project) with the right to occupy a particular unit (Civ. Code Sec. 4105).
What does that mean?
An Own Your Own and a condominium are pretty much the same thing, except for a few minor technicalities which really do matter.
Some ways they are alike include…
- Both are recognized legal forms of real estate ownership in multi-unit developments.
- Both have an exclusive right in an individual unit with shared interest in common areas.
- Both have individual tax bills and their own Assessor’s Parcel Numbers or APN.
- Both can be financed and have title insurance available.
- Both have CC&Rs and Board of Directors
So what’s the difference?
An “Own Your Own” is a form of ownership that predates the development of condominiums but came along after the boom of Stock Cooperatives, which we will talk about another time. Once condominiums caught on in the 1960s and 70s they became the dominant form of individual ownership in multi-unit developments.
It’s not that a condominium is inherently a better form of ownership. It just so happens that Section 234 of the Housing Act of 1961 allowed the Federal Housing Administration to insure mortgages for condominiums but it did not include OYOs or Stock Coops.
Once this happened, a there was flood of new financing available to purchase condominiums causing the development of condominium projects to spread across the United States. There was also no longer any reason for a developer to use the Community Apartment Project / Own Your Own form of ownership once the comparably easy to finance condominiums became the norm.
Own Your Owns can still be financed, however, the lender uses what is called a “portfolio loan” where the lender “keeps the paper” instead of bundling and selling it in the secondary market like Fannie Mae and Freddie Mac. Therefore, the rates are higher and terms are less attractive.
These days it is hard to find a lender who even knows what an Own Your Own is, much less are willing to lend on them. However, real estate brokers who work in markets where there are still some OYOs, like Long Beach California, will generally know where to find a lender who makes OYO loans. But these types of lenders are limited. That’s why most Own Your Own buyers pay cash.
Are there still any Own Your Owns left, and what happened to them?
Yes, you can still find some Own Your Owns but there are less and less of them. We still have some in Long Beach California. They were popular in the downtown Long Beach area in the 1940s, 50s and even 60s. Now there are just a few left.
Over the years, Homeowner Associations started converting OYOs and Stock Coops into condominiums. This was very popular in the 1990s. Savvy investors would buy Own Your Owns, often for cash, and then convince the Homeowners Association to covert the Own Your Owns to condos. At the time they would spend around $1,500 or $2,000 in legal fees per unit and see a 20% increase in the value. Not a bad deal.
Should you buy an Own Your Own or stay away?
Well it depends. You should not buy an Own Your Own or anything else for that matter, if you do not understand what it actually is. Hopefully now, you have a better understanding of the concept of a Community Apartment Project and an Own Your Own. Which is the first step in determining if an OYO is right for you.
Why would someone ever buy an Own Your Own?
People generally will be attracted to an Own Your Own because they like the price. OYOs sell at a significant discount to the exact same unit as a condominium. Buyers usually, but not always, pay cash and they rent them out liking the superior monthly returns. Some buyers go for an OYO because the current owner may do some sort of owner financing, making the deal attractive. Part of the appeal may be the potential conversion to a condominium in the future, which is a great “value add”. However, this requires the entire Homeowners Association to take action. There is legal and title work that needs to take place, which cost money. This can be complicated and there is no guarantee it will ever happen.
How do you go about buying or selling an OYO?
If you are considering buying or selling an Own Your Own, I would strongly encourage you to use a real estate professional who has experience with OYOs. There are several good ones out there. Most agents with experience in this area have been in the business a while. Here at the Mike Dunfee Group, we have handled several OYO transactions and would be happy to be your resource.
I am not an attorney or a title officer. If you are seeking a legal opinion, you should consult an attorney with an expertise in the area in which you are seeking advice. I hope you found this useful.
Dunfee Real Estate Services, Inc.