What are the biggest benefits for an Investor?
• Own property in a highly appreciating area
• Get high rates of return with a high level of safety
• Do not need to qualify or obtain a mortgage
• Do not need to make any monthly payments
• Do not hassle with renters who don’t care about your property
• Get tax benefits as a property owner
What is the cost of your service?
Using our matching service and working with an Equity Share Advisor is free. Completing the transaction with us we charge a flat fee (comparable to the cost of having another attorney create an Equity Share Agreement). The cost of our service is paid by the Home Buyer.
What if I want to buy out of state?
Equity Sharing allows you to easily and safely invest out of state. Instead of relying on a property management company and risking your property to renters you can partners with a qualified Home Buyer to safely invest anywhere in the United States.
I belong to a Real Estate Club. Can we purchase property together?
Yes. Use your investment club to pool resources and buy property together.
Can I purchase property with an LLC?
Yes. Many Investors chose to buy property using an LLC.
Can I use my IRA to purchase property?
Yes, as long as you use a self directed IRA.
What are the standard provisions of the Equity Sharing Agreement?
Length of agreement, occupancy requirements, payments to be made by the Home Buyer, the procedure for making improvements, how the proceeds are shared at the end, and what is done in the event of default.
Can I pool with other investors to purchase property?
Yes. This is a common way for Investors to lower their initial investment, buy more properties and spread their overall risk.
How is the ownership split between me and the Home Buyer?
Typically Investors and Home Buyers split the ownership 50/50. But every transaction can be negotiated depending on the specific circumstances.
What is the smallest percentage down payment I can make?
Typically down payments are between 10-20% of the purchase price. By being able to view qualified Home Buyers you are able to find investment opportunities where Home Buyers can afford higher monthly payments and require lower down payments for purchase.
What contributions will the Home Buyer get back at the end?
Per the Equity Share Agreement you and your Home Buyer will decide on what property improvements the Home Buyer can make. Also, you may approve additional improvement requests along the way. These property improvement expenses are reimbursed to the Home Buyer at the end of the agreement.
How does the IRS look at the Equity Sharing Agreement?
The IRS permits Equity Sharing per the Internal Revenue Code §280A which allows the occupier to claim his interest in the property as his principle residence while the Investor claims as his investment property.
Do I have to qualify for the loan?
No. If you want to participate in the loan you can, but typically the Investor does not.
Are me and the Home Buyer technically “partners”?
No. Technically you and your Home Buyer are not partners. You are co-owning property as “Tenants In Common”. We only use the word partner in the general sense of the word.
Does the Home Buyer have to live in the property?
Yes.
Can you choose to rent out the property?
Yes, as long as you and the Home Buyer agree together and determine the necessary requirements.
Who pays the selling costs or refinance costs?
The Home Buyer.
Who pays the property expenses each month?
The Home Buyer.
How can I be sure the Home Buyer is making the payments?
Per the Equity Share Agreement the Home Buyer will be required to provide you with proof of payment each month. If the Home Buyer does not make the payments you will know and can take necessary action.
What if the Home Buyer defaults?
A Home Buyer default can provide you with significant financial benefit. It is recommended to have a Quit Claim Deed prepared and signed by the Home Buyer in the event they default. You may have to go through the foreclosure process but will gain all equity in the property.
Do we need a legal agreement?
Yes. Specifically a detailed Equity Sharing Agreement prepared and reviewed by an Attorney specializing in this type of transaction. As part of our service we provide you with the agreement and customize it for your specific needs. We also have a specialized Equity Share Agreement review your agreement.
How do I protect against losing my investment?
As a co-owner you are listed as the property owner on the title of the property. Since you will take title as “Tenants In Common” your percentage ownership will be specified on the title.
What are the risks associated with this type of transaction?
As with any real estate purchase your property value can go down. As discussed above, your Home Buyer could default on the mortgage payments. Every real estate transaction can be complicated and unique so we recommend pursuing as much advice and counsel as you can.
When does the Equity Share Agreement end?
Before entering into the agreement you and your Home Buyer agree on an end date. If you want to end the agreement earlier you can with the agreement of your Home Buyer. You may also chose to extend the agreement past the end date.
How is the property valued?
The property is valued by a professionally licensed appraiser.
Can I use my own Real Estate Agent?
Yes. No problem. |
