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Equity Share
Sample Transaction - Humanitarian Investor/Occupant
We like to call this example “Investing With Heart”. It's a wonderful way to get involved with the community where we live and to feel we are helping to make a difference while growing our investment at the same time.
This is a bit different than the standard Investor/Occupant in that the Occupants need a helping hand up in order to realize the dream of owning their own home. Possibly they haven't even thought about being able to live in a home of their own because they feel they just will never be able to afford the cost on their own.
As an example we meet Occupants A and B who have worked hard all their lives and have always rented. They have only one month of salary saved for extreme emergencies but have stable jobs they've possibly held for a long time. Their combined income may be under $50,000 and their credit could be on the mend from some medical challenge in the past. They are good people with a good work ethic who hardly dare to dream of owning their own home one day.
In this example, Investors C and D have good jobs, adequate savings, great credit and a desire to not only invest in residential real estate but to make a difference in the lives of others. Rather than make a contribution to a charity, they believe in letting their money work and grow in a heart felt manner in touching the lives of other real people in their community. Investors C and D would make a larger than normal down payment or even the standard 20% down payment as well as pay the necessary negative cash flow to make the payments doable for the occupants. Let's say the home's purchase price is $225,000 and the total payment for principle, interest, taxes and insurance is $1690. The Occupants have been paying $1100 per month in rent. They can stretch and afford $300 more per month in order to own and will pay $1400 leaving $290 in negative cash flow for our Investors. In exchange the occupants would own a smaller than 50% portion of the house and the Investors would realize a larger portion of the tax deductions than in our earlier examples. There are many ways to arrange this Agreement and to insure that this remains a good and viable investment for our Investors.
With this method of Equity Sharing, we as a community would be able to accomplish in the private sector what seems to be an ever increasing problem for our governments to solve. This is a true win/win/win situation as the Occupants achieve a home they can say they own, the Investor has an excellent asset which is safe, leveraged and appreciating for the security of his family's future and the community wins by having its citizens step up to the plate to take action to cure some of the more pressing ailments of our time. For those with courage and heart, this is a beautiful method of investing in residential real estate while truly being 'Community'.
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This information is supplied by Great Condos, Inc. for educational purposes to introduce you to how this form of ownership may be used. All Deed and agreement documents will need to be written by an Attorney. It is also best to have your Tax Professional go over your specific Tax liabilities.