Buying the property
For this example, suppose you want to purchase a house for $500,000. You qualify for a loan for $400,000 at 80% of the value of the house. Your Investor puts in the down payment of $100,000. You and your Investor split the equity of the property 50/50. You obtain a $400,000 loan at 6.5% interest rate and you monthly payments are $2,167.

Next Steps
As the Home Buyer you live in the house and make the monthly property payments. You and your Investor have chosen to hold the property together for a period of 5 years. After the 5 years you can sell the property, refinance and buy your Investor out, or chose to extend the Equity Share Agreement.

Tax Deductions
At the end of 5 years all mortgage interest and property tax payments are tax deductible. This means you are able to deduct approximately $160,000. Multiply this number by your tax bracket and this is the amount of money you have saved. Assuming you are in a 25% tax bracket you will receive $40,000 in savings.

Decide to Sell
Let’s say at the end of the 5 year period you decide to sell. Let’s also assume your property has appreciated 5% per year and is now worth $638,000. The outstanding mortgage is paid off while you and your Investor are each paid back your contributions. If you have made capital improvements to the property you are reimbursed and your Investor is paid back the down payment amount.

Assuming you did not make any capital contributions, your $400,000 mortgage is paid off and your investor is paid back $100,000. This leaves $138,000 of equity remaining. Because you have lived in the property you do not incur capital gains tax. You and your Investor each receive $69,000. Add your tax savings of $40,000 and your total return for this property is $109,000.

Decide not to Sell
Let’s assume you want to keep living in your house. You can buy out your Investor by refinancing the house and remain as the sole owner. You will avoid the fees associated with selling a house and pay only the costs of a refinance.

Every transaction is unique
We know that every transaction is different due to property location, market conditions, tax brackets, etc. What’s important is that Equity Sharing provides you and your Investor with safety and flexibility!