Home equity sharing is the most secure and hassle-free way of investing in real estate.
As an investor with Homeshares, you can purchase between 5-10% of a property of your choice. As a fractional owner of the property, you are entitled to a share in appreciation of the property without worrying about ownership, including maintenance and tenants. If you purchase 10% of a property, you are entitled to a 25% share of its appreciation. If you purchase 5% of a property, you are entitled to a 12.5% share of its appreciation.
How it works
Let’s assume you purchase 10% of a $1,000,000 property for $100,000. If the value of the property goes up to $1,200,000 over the next 5 years, you are entitled to your original $100,000 plus $50,000, which is 25% of the appreciation of $200,000.
Since you are investing in the property, you are exposed to the risk of the property depreciating in value. If the value of the property goes down, the homeowner will pay you back your initial investment minus 25% of the downside. To secure your investment from short term declines in the market, the value of the property at the time you purchase is discounted 5-10% from the appraisal value. This ensures you have some protection as you have purchased the property for 5-10% less than market value.
The contract has a term of 10 years. The homeowner may also choose to buy back the investor’s equity at any time. If the homeowner decides to sell the property, they must buy back the investor’s equity first. At the time of exit through any of these 3 scenarios, the homeowner agrees to buy back the equity + or - a share of the appreciation or depreciation. The % share is of the appreciation/depreciation is dependent of the amount of equity sold to the investor. The value of the home at the time of exit is determined by an independent third party appraisal.
Home equity sharing is for long-term investors that want to realize the potential of real estate appreciation.