Equity Share; A Term You Should Know

Real Estate Goes Through Many Cycles And Techniques Change

You will be in cycles where everyone is either a short sale expert, a flipper, new home seller, 1031 exchanger, rental property specialist, property manager, real-estate-owned agent, foreclosure auction buyer, 203K rehabber, or my field for many years: Syndication.

There Is One Term From The Old Days That Should Be Reconsidered: Equity Share

In a time where some renters do not have enough down payment while other homeowners have lots of equity, learn about EQUITY SHARE. I mean renters, homeowners, parents, and agents. Simply stated, you have a couple who are stable but with not enough down payment and another couple (friends, parents, associates) who have some extra money and would like to put some of their funds into an inflation-type investment like rental real estate.

The Transaction Can Be Worked Out In Many Different Directions

Basically party A puts up all or most of the down payment and their credit and party B becomes the owner-occupant and pays fair rent for the property.

The advantages to party A is that they have a rental with less fear of vacancy and less chance of severe tenant damage and better interest terms and an opportunity for some shared appreciation and possible tax write-ups. Plus they can help someone become a homeowner sooner.

The advantages to party B is that they can get started on their way to owning their own home with a chance of appreciation and in most cases a solid landlord. More important: they are in a house that they never would have been able to get as party of one.

When the parties agree, they can sell the property. Party B now has enough equity to buy their own property. Party A can sell and count their investment income, but it is recommended many times that they do a 1031 Tax Deferred Exchange and trade into a larger property and not pay any tax at that time. (Or party B could buy out party A, and own the property by themselves)

Do Equity Shares Work All The Time? No.

Do They Work Most Of The Time? Yes.

For agents, it can be a source of more sales and down the line more transactions. At time of sale: sale of the property, purchase of another property by A and another purchase by B.

Want Any Information On Equity Share Purchases Of Real Estate

Go to ever-there Google, and there is an IRS Code Section 280.

Want any information on 1031 Exchanges, go to APIEXCHANGE.COM.  I put their link in caps because they are so good.

Never, never, ever do an Equity Share arrangement without legal advisers for both parties, yes especially if they are parents and children.

Get started, time has a habit of disappearing.

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