derrick@mcc-db.UUCP (Dwayne Derrick) (04/20/85)
After hearing, and reading information on equity sharing for residential homes, It would seem too good to be true. In fact it seems so good that I would think everyone would be doing it? It is a (so-called) new technique, so, Is it that nobody knows the full story? The story (briefly) as I've concluded is: I put a down on a house I advertise for a half-owner This half owner puts no money down, but, makes the full house payments and pays all upkeep charges. I get half the tax breaks The half owner gets the other half of the tax breaks At the end of a predetermined peroid of time (usually 5 years), I sell the house, and split half of the profits. The other half owner is "targeted" as someone who can't get a bank loan, or, come up with a down for the house. So they would be renting if they didn't go this route.. For a little more each month, they get the tax breaks, and a possible profit at the end of 5 years. I on the other hand have property which is being payed for by someone else, and, supposedly get a better tax break than I would if I just rented the place. The whole agreement is binded with a contract that says; if my new half owners quit before the peroid is up, they forfeit the possibilty of profit etc.. I then am capable of finding new halfowners etc.. Now for the advice: Has anyone in netland used this technique? Are there any pitfalls, advantages? If you haven't used this technique, what are your opinions? I am a novice to the worlds of Real-Estate and investments and would appreciate any and all advice. Thank you. Dwayne Derrick M.C.C. Microelectronics and Computer Technologies Corporation 12100a Technologies Blvd. Austin, Texas 78759 (512) 331-6200
klein@ucbcad.UUCP (04/24/85)
> I put a down on a house > I advertise for a half-owner > This half owner puts no money down, but, makes the full house payments and > pays all upkeep charges. > I get half the tax breaks > The half owner gets the other half of the tax breaks > At the end of a predetermined peroid of time (usually 5 years), I sell the > house, and split half of the profits. > > The other half owner is "targeted" as someone who can't get a bank loan, or, > come up with a down for the house. So they would be renting if they didn't go > this route.. For a little more each month, they get the tax breaks, and a > possible profit at the end of 5 years. > I on the other hand have property which is being payed for by someone else, > and, supposedly get a better tax break than I would if I just rented the place. This is an arrangement that my wife and I ran into while house shopping, but we would have been on the other side (no down, pay payments). We sat down and figured out the benefits and disadvantages, and for the side of the deal we would be on, it was pretty bad. The problem is that we would pay monthly payments substantially higher than renting an equivalent home (at that time), and that splitting the profit at the end absolutely destroys your return on investment. And only a certain fraction of your monthly payment is tax deductible, the rest being considered rent. Plus, many contracts hide your part of the down payment by subtracting it from the appreciation, THEN splitting that to find your profit. For people who are absolutely not able to buy a complete home of their own, this may be attractive, but is really quite risky, since the home has to appreciate enormously over the term of the contract to realize any gains out of it at all. Now, if you are the investor, you have it made. You put down the down payment (maybe subtracting some or all of it from the appreciation), you get the standard tax breaks, PLUS YOU GET DEPRECIATION. This makes it so worthwhile it seems to be hard to lose. Of course, much of your gain is your co-investor's loss. Each contract has its own specifics and you should study it carefully, preferably finding a standard contract that has withstood a number of legal tests (they do exist). -- -Mike Klein ...!ucbvax!ucbmerlin:klein (UUCP) klein%ucbmerlin@berkeley (ARPA)
hodor@hplabsb.UUCP (04/25/85)
I have heard several ways of structuring equity sharing deals in real estate. The most attractive and in my opinion the most equitable is what I heard from a television program by Paul Simmon (I may be wrong about the last name). He is an investor that works equity sharing deals exclusively. What I remember is: The investor puts down the down payment and gets to depreciate the property. The person that lives in the house pays the payments and makes all repairs and maintains the property. Since he is making the payments the interest deduction is his. The deal can be written for a finite period of time or written based on some other termination of a contract. The increase in equity is shared 50/50. This means when the property is sold the resulting gain in property value is split. The investor gets his down payment back and 50% of the gain in the property value. The person that lives in the house gets the amount he has paid off in the principle and the other 50% of the appreciation in the property value. The law seems to be very flexible currently. This type of financing should allow many other people to buy a home. The only problem that I have heard of is that of attaching leans to the property by either person. If either gets sued that property may have to be sold. If the investor gets sued the house may be sold out from under the person living in the house. I would be interested in anyone elses comments on equity sharing. I am currently considering this as an option for some future investments. Ken Hodor hodor!hplabs
shelby@rtech.ARPA (Shelby Thornton) (05/02/85)
> I have heard several ways of structuring equity sharing deals in real > estate. The most attractive and in my opinion the most equitable is what > I heard from a television program by Paul Simmon (I may be wrong about the > last name). He is an investor that works equity sharing deals exclusively. The last name is Simon with one 'm', and he lives in Arizona. > What I remember is: > > The investor puts down the down payment and gets to depreciate > the property. The investor can only depreciate the portion of the house that his "partner" owns. > The person that lives in the house pays the payments and makes > all repairs and maintains the property. Since he is making the > payments the interest deduction is his. Again, each partner gets to deduct his percentage of ownership. If it's 50/50, each partner deducts 50% of the interest. > The only problem that I have heard of is that of attaching leans to the > property by either person. If either gets sued that property may have > to be sold. If the investor gets sued the house may be sold out from > under the person living in the house. Not true, the investor could only sell his half, not the whole thing since both names are on the deed. Essentially what you are doing is working a single family home like a Duplex. The investor definitly gets more tax breaks, but he should, it's his deal. He depreciates half the house, gets to write-off half the interest paid, and half of any maintenance costs. At the end of the deal, he gets his down payment back plus half the equity (the down is subtracted out of the equity first). The live-in partner gets a home, with nothing down, to live in, and gets to write-off half the interest and maintanence, with a very reasonable return on their investment upon sale. A win/win situation. Shelby Thornton {amdahl, sun}!rtech!shelby ...ucbvax!mtxinu!rtech!shelby
brett@ucla-cs.UUCP (05/08/85)
> I have heard several ways of structuring equity sharing deals in real > estate. The most attractive and in my opinion the most equitable is what > I heard from a television program by Paul Simmon (I may be wrong about the > last name). He is an investor that works equity sharing deals exclusively. > > What I remember is: > > The investor puts down the down payment and gets to depreciate > the property. > > The person that lives in the house pays the payments and makes > all repairs and maintains the property. Since he is making the > payments the interest deduction is his. > > The deal can be written for a finite period of time or written > based on some other termination of a contract. > > The increase in equity is shared 50/50. This means when the > property is sold the resulting gain in property value is split. > The investor gets his down payment back and 50% of the gain in > the property value. The person that lives in the house gets > the amount he has paid off in the principle and the other 50% > of the appreciation in the property value. > What happens if I just want to live there for two years. Does that mean I'm just paying off interest and would only get the 50% gain in property value? How would we know what the property value is after 2 years. This sounds good for the average person who cant get a loan, but how many people could last enough time to be paying off principle on their loan? I would be intersted in comments from anyone who has further info. -- Brett Fleisch University of California Los Angeles 3804 Boelter Hall Los Angeles, CA 90024 Phone: (213) 825-2756, (213) 474-5317 brett@ucla-cs.ARPA or ...!{cepu, ihnp4, trwspp, ucbvax}!ucla-cs!brett -------------------------------------------------------------------------
bill@hpfcms.UUCP (bill) (05/14/85)
I've never heard of a half-partner who put nothing down. When my wife and I were in the market for a house, our current landlords were willing to pay half the down payment and half the monthly payment on a house we were interested in, enabling us to get in much easier. They would share half the tax break, and we would live in the place. After 5 years, we would buy them out for a predetermined amount. We didn't do it, because I'm a fairly conservative guy. If you do do something like this, make sure you're in with trustworthy people, and make sure your financial situation can handle the ENTIRE payment should the other half disappear sometime down the line. Also, make sure a contract is drawn up which is ironclad - no loopholes through which either party can escape their responsibilities. Again, be sure you can handle the ENTIRE cost of the house, because the other guy could leave town, or could become financially incapable of continuing the payments. Don't get stuck. However, I have no personal experiences to share. These are just thoughts that went through my head when I considered it . . . briefly. Bill Gates