Case study: The story of Radish
A 12-person multigenerational compound in Oakland, California
|Jun 11, 2020|| 3||7|
This is part of an ongoing series of deep dives on coliving spaces. To see others, visit the Supernuclear directory.
Someone called them the “Shoulder Years” — let’s say roughly late 20s until mid 30s.
It’s the years when your friends are all over the map. Some of them are newly single, out of their early 20s relationships, and hitting the dating apps with a vengeance. Some are newly married and thinking about what life together means. Others are popping out their second kid and tending to a whole different set of life issues.
Radish was conceived during the shoulder years. It’s a place designed to house the far-ranging life circumstances of the friends we held dear and wanted to live near.
Design Principles for Radish
The rallying cry for Radish was what we called “The Obvious Truth”
We are happiest surrounded by people we love and admire. These people make us the best possible versions of ourselves.
We call it the Obvious Truth because it’s a “no shit, Socrates” kind of insight... it’s pretty obvious. The hard part is actually designing your life around this truth when our built environment caters almost exclusively to either nuclear families or living alone. Radish was designed to optimize for this Obvious Truth rather than settle for the norm.
Radish was Kristen and my second coliving community after RGB. In designing Radish, we were optimizing for the following:
Flexible co-ownership for residents + non-residents: We wanted people to be able to own pieces of the project at different amounts and allow non-resident supporters to buy in as well.
Accommodating people in different life stages: We want a space that works for single people, couples, and also young families with a toddler or two. We wanted both standalone apartment units that could provide for more privacy (at higher cost) and bedrooms in a house that were less private (at lower cost).
1+1=9: Since we were pooling our resources, we wanted to live in a much nicer space than any of us could afford individually. We wanted a large yard and room for building a dedicated community building.
Walking distance to transit (BART): No one is living off the land here. Everyone needs a way to get to work. Commuting sucks and we were not willing to subject our favorite people to a grinding daily commute. This was an urban project.
Year 0: The search
The search for property took two years. We saw dozens of properties, seriously evaluated about 10, and put in 3 offers.
Every day we looked at our daily listing email alerts from Zillow, Trulia, and LoopNet to see if our dream property had appeared on market yet. We reviewed every listing of >4000sqft of building and >8000sqft of land in our target zip codes for over a year to get a feel for the market. We even coded an algorithm that scraped listing sites for properties being sold next to each other at the same time.
Then the unicorn appeared. A property that was sufficiently unusual that a “normal” developer wouldn’t know what to do with it, but perfect for our coliving purposes.
^A strange tetris piece of a property
It was a single 1/3 acre parcel with two buildings — a 4-plex of apartments and a 5br single family home. It was a short walk from a well-located BART train station in Oakland.
There was space in the middle to construct a third building and an empty overgrown yard that was screaming for a big garden.
It was as close to perfect as we were going to find. So we put in a bid and then immediately got to work pooling resources to buy it (more on that below…).
Year 1: The Great Build
Five “founding residents” moved in — all close friends of Kristen and mine to start. For a project of this complexity, we wanted to start with people we knew well and trusted and then planned to grow from there. Four more people followed over the next few months — some who we knew before and others who just liked the vision.
We inaugurated the space with the Sledgehammer Gala — taking down an unneeded wall in formal attire.
The first year was “The Great Build” — turning a property that wasn’t designed for coliving into one that was built for our needs.
Step 1, obviously, was installing the hot tub in the big empty yard. Priorities, people!
^Big tub, empty yard
Next we renovated some of the apartments, built a fire pit, a couple storage sheds, landscaped the property, and most importantly built our standalone communal space — The Blueberry. The group made hundreds of design decisions … from what color mulch to buy, what type of tile should go in the bathroom, and the dishwasher most likely to withstand daily use by a dozen people.
Design by committee was no one’s idea of fun, so we worked in pairs. Two people worked each piece of the project together. They got input where helpful, but we didn’t sit in long meetings debating the virtues of granite vs quartz countertops. We placed trust in the design team.
^The Blueberry (new standalone communal building) + Vegetable Garden
2/3 of the overall project cost was purchasing the property. 1/3 was the Great Build projects and renovations. It was a nice balance between “ready to live in” and “room for the imagination.”
The inner workings
Owners and residents wear separate hats
Flexible buy in
A now project, not a forever project (selling shares)
Set rents so that owners make target returns (no more, no less)
Principle #1: Transparency
Our first principle is transparency. And this post is written in that spirit. We are 100% transparent about every dime spent and earned with the community. Trust is critical in community and opaque financial processes can erode trust.
Principle #2: Owners and residents wear separate hats (structure)
We divided the world into two entities: The landlord entity (Big Cabbage LLC) and the community entity (Radish Community).
Big Cabbage LLC owns the property. It does all the normal landlord-y things like maintaining the property, holding insurance, and paying property tax. It firmly exists in the world of capitalism. It has shareholders, it produces a profit & loss statement every quarter, it has legal agreements, etc. A bank would look at Big Cabbage LLC and say “cool, I get it.”
The Radish Community (aka the current residents) govern how people live on the property. Radish Community is essentially the master tenant renting the property from Big Cabbage LLC. It does all the unconventional community things. It is fluid and self-governed. It firmly exists in the world of the communal. It decides how our food plan works, how we recruit new community members, and how rent is split between residents.
The money flows
We think of Big Cabbage LLC as existing to serve the Radish Community, present and future. It needs to produce enough income to attract investors to put money into the project, but its primary goal is to steward a long-term healthy community rather than maximize profit.
Principle #3: Flexible buy-in
Although these two entities are structurally and legally distinct, there is overlap in who participates in each.
We set it up this way to achieve a few objectives:
We wanted non-residents to be able to buy in. We had friends that wanted to own a small part of Bay Area real estate and were big supporters of the idea but they weren’t ready to live there.
Our friends have different means and we wanted people to be able to invest at whatever level they are comfortable. We didn’t want to obligate anyone to invest either. Residents can choose to invest or not invest and the amounts can vary based on means.
We wanted people to be able to move around the property easily. If you are simply renting your space, this is simple. You move spaces and pay a different rent. If you own your physical space, this is harder.
The purchase of the property (⅔ of total project cost) was funded by a small initial group of people along with debt from a bank. Kristen and I have the loan under our personal names and we are responsible for the payments on it. Our shareholding in the LLC accounts for this.
The renovations and construction (⅓ of total project cost) was funded by later investors and also by the bank (it’s a construction loan).
Principle #4: A now project, not a forever project (exit)
There are two ways investors can sell shares: 1) Selling to an incoming investor (e.g. a new resident who moves in) 2) When we sell the property.
Unlike other communities that intend to operate in perpetuity, Radish is designed as a 5–10 year venture. It’s the place that makes sense for us now in this life stage. And the financial and governance structure reflects this. Having an expectation for an exit allowed us to easier attract investors. Our friends and residents would have been reticent to put in money that had no timeline for return.
As new residents come in and want to invest, we can use this capital to buy out some older investors. We do an appraisal every ~2 years to guide pricing for those transactions.
This means in effect there is no guaranteed liquidity. You can’t say “I want to sell” one day and be guaranteed a buyer. Opportunities to sell do appear but they are irregular.
This impacts who we allow to invest. We are very careful not to allow people to invest with money they might need back soon. We only wanted people’s discretionary capital, not their nest eggs. And given that no one is putting i their nest eggs, there is typically less urgency to get their money back. All the resident-investors who left the community so far have chosen to leave their money in.
The investment is more like a 5–10 year bond. It produces dividends every year (target: 5%) and eventually will return the original capital when we sell the property or when a new investor wants to buy in. And the investors split any of the appreciation (or depreciation) on sale.
Principle #5: Set rents so that owners make target returns (no more, no less)
When residents are owners in different proportions, you need to figure out a fair way to set rent. There’s a natural tension where the people who are relatively more “owners” will want rent to be higher and the people who are relatively more “renters” will be rent to be lower.
We solve this via a simple method: We set a target rate of return for investors. We chose 5% as our target return meaning that investors should receive 5% of their invested capital back every year in the form of a dividend. This is a typical (not too high, not to low) rate of return on new real estate investments in the Bay Area.
So we estimated expenses and set overall rents accordingly. And if expenses are lower than anticipated, we can lower rents to hit that 5% target. It allows us to be transparent with incoming residents on why rents are the way they are.
The Radish Community decides how the rents get divided internally between the individual residents. They can choose to subsidize rooms to make something more affordable for someone who can’t afford ‘market’ rent. Or they can choose to leave rooms vacant. Like a normal landlord, Big Cabbage LLC just expects to get a fixed amount each month and doesn’t need to get involved in the details.
Each month, the Radish Community collects dues to pay for community expenses. Here’s what a typical month looks like:
^Typical monthly community expense breakdown per person
Note on “repayment of setup costs:” Big Cabbage LLC loaned the community money to get started with some upfront expenses … like kitchenware and gets paid back with 0% interest over three years.
Big Cabbage LLC is a benevolent dictatorship. Kristen and I are the managers of the LLC. The LLC makes big capital decisions like “when do we sell the property?” and “should we build a new building”
The Radish Community makes most of the day-to-day decisions that impact residents. It has a few layers of governance.
Any decisions that are reversible or small happen do-ocratically. If you want to paint a wall, just do it. If you want to buy a shoe rack, just do it.
Some larger decisions (e.g. spend > $50) happen by “The Senate” — a system where people vote in a Slack Channel. We’ll do a future post on this idea.
Decisions on new community members and changes to dues are done by consensus. We consider these to be the most impactful decisions and everyone must affirmatively agree.
Food: Make it appear
Food is a big part of the Radish culture. Shared meals are frequent. We believe food is a cheat code for community and we want to have it in abundant supply.
A Slack channel called “Make it Appear” personifies this. There’s a group of staples that always gets ordered. Anything else you want, you request it in #makeitappear and soon it appears by the magic of a bulk food order. On person shops on behalf of the whole group.
Interested in living at the Radish when we have openings in the future?
Let us know here.
^Radish Covid Quarantine: Day 83 of ????
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