Real estate professionals: Help Someone Get a Home And Help Yourself
(As reported by real estate educator Duane Gomer, http://duanegomer.com)
Today’s real estate market has many aspects. First-time homebuyers are missing in action. Many people who want homes do not have enough down or cannot qualify for a loan. Unemployment rates have dropped so many people do have jobs. Student debt is everywhere. Some homeowners have extra cash and are not thrilled with the stock market or other “opportunities”.
Solution: Equity Sharing. I have always been puzzled that more people do not consider this technique of home ownership. It is not new it has been around for years and is recognized by the IRS.
You have a young couple who are stable, working, and reliable. We will call them, Rental Partner. There is another couple with some investment cash and who like couple one. We will call them, Investor Partner. Couple one would like to start home ownership, but does not have the down payment or enough income to qualify for a home in their area.
Perfect equity share positioning. They go together and buy a home. To make it feasible they should structure the home as an equity share. First stop is an attorney who knows equity sharing.
Advantages for couple one are they get started on owning a home, building equity, appreciation, get tax deductions, etc. Couple two gets an investment with better loan conditions (probably owner-occupied), equity growth, leverage, appreciation, an investment probably with less maintenance, no vacancies and a strong feeling of helping someone, etc. Win, win.
Disadvantages: there are disadvantages and possible problems in all investments. Nothing is guaranteed in life, but with proper procedures these transactions work
An attorney can draw an agreement to cover all factors; some to consider include, Maximizing Tax Benefits, Calculating Ownership Percentages, Making Equity Shares Work, How to Handle a “Divorce” between the two couples, Moving On-Couple One to Moveup Home and Couple Two in a 1031 Exchange to a Bigger Property, etc.
One good source for information is andysirkin.com. Also, years ago I read an outstanding book on this subject by Diana Bull and Elaine St. James from Santa Barbara. The other day I thought of it so I bought a copy on Amazon. Published in 1990, but everything still applies except the loan tables are 1990. Title: The Equity Sharing Book. Many of you know Diana from her days as President of the California Association of Realtors and many other groups. A true expert and nice person. Check it out.
Study Equity Sharing. Real Estate Agents learn the procedures and sell some houses to couples. Try it, you might like it. So many agents in my classes complain that they have nothing to do most days. Try this and you could close sales and really help people.
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