Equity sharing is a relatively new concept on financing a home. Basically it is a meeting of an investor who wants to put his or her money in real estate and a buyer who wants to purchase a home.The investor puts up a sizeable amount of money for the home purchase. The investor does not live in the home. The home buyer occupies the property and pays all the expenses.
Investors can be relatives, the home seller, or just people who want to put their money in a real estate investment. Usually, the investor is named on the title of the property, but not on the mortgage loan, because being on the loan would affect the investor’s ability to invest in other properties.
The central feature of an equity sharing agreement is the legal contract between the two parties. That contract describes payback terms, which party gets tax deductions, and all the other financial aspects that make this a good deal for both investor and home buyer. It is crucial that an experienced real estate attorney draft this agreement. There are several tax implications that must be determined by someone who has experience with this type of home financing.
For the buyer, this is commonly an arrangement where the buyer must stay in the home for a five-year period. The buyer also must be willing to consult with the investor before making major renovations to the property. For the investor, his or her money is tied up for the same five-year period. The investor must trust that the buyer will keep up the property and continue to make payments. For both buyer and investor there will be compromises.
While this has not caught on in all of the country it probably will. Home Equity Share is a California organization that matches buyers with investors. Its website is very informative.
For local programs you should contact your state and the city you wish to buy a home in. Many of the larger cities will provide lowinterest mortgages or down payment assistance if you are willing to buy a property in an urban development area. You may also be able to get some state funding for a development area that is outside of the major cities, but you will need to look hard for those programs. The term urban development area usually means that the property is run down, could be in an area of high crime, and the government has now taken hold of the entire area in an effort to build it up.
Experts say that areas in our major cities all go through a similar lifecycle. They are usually built by the wealthy with all the options of the day. After many years the property is sold to the middle class for a temporary period. The middle class moves on to a home with current amenities and sells to those less fortunate who may not be able to keep the property up.
Eventually after several sales and a deterioration of the area the home sits in disrepair. The city then looks at the area, feels there is great potential, and puts up money for the rehabbers. Rehabbers come in fix up the property, adding the current amenities, and sell to the young urban professionals for an amount many times the original cost.
If you can be a rehabber you may be able to find a hidden jewel property that has unfortunately been mistreated and used for gang or other illegal activities.With the local financial assistance and lots of work you can turn this hidden jewel into quite a beautiful gem and be on the cutting edge of the next area that is undergoing an urban resurgence.
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Note: This article was sent to us by: Henry F. Regis at 06092010
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