Getting involved in the real estate business can initially seem scary to those who are new to it all. One way to alleviate some of this fear may be to work together with another investor or with the individual that is currently occupying the home you are looking to invest in. A joint venture of this type would be a definite plus, even more so if the occupant is one who has some real estate experience or maybe just a working knowledge of the real estate biz.
Sharing the equity in your investment through and equity split agreement offers a variety of advantages, especially to the an inexperienced investor who may still be a little green in regards to the real estate market. One of the perks is that you maintain fifty percent of your ownership of the property.
Also, since the owner occupant now has a vested interest in the home or property will generally take better care of it as they now have the right to claim part ownership. He/she can also take more responsibility with the maintenance, repairs, and upkeep and will probably do so without mention from you.
The asking price can also be better negotiated with the new partner/occupants. They will probably be more willing to agree to your asking price s they are already comfortable in their environment and feel that they are “at home.” They may even offer to buy you out and take full ownership of the home. This is often an added bonus because selling costs are often eliminated and the overall cost of sale is usually lower as you are the seller of the property and no other extra fees will be involved.
Yet another benefit to partnering up with an owner-occupant is that as an investor, you stand to attain a high return on your initial investment if you opt to share the equity involved or offer to put up the down payment amount for the purchase of equity shares.
In addition, establishing a good working relationship with the occupant/buyer may lead to repeat business and referral business. Future opportunities may present themselves and working with an occupant/partner that you have established a rapport and a level of trust with can only lead to more promising and solid deals.
Forming a partnership with the occupant of a specific property may also bring about other related questions. As a potential investor, evaluating all of the positive aspects of such a partnership goes hand in hand with questioning what negative aspects may occur. Why is one important question. Why would an occupant want to become a partner and/or buyer, especially if he/she is in a comfortable and stable living situation? There are a multitude of reasons. For example, a renter may just be tired of renting and now wants to be part of the homeowners club. Claiming ownership of a residence is accompanied by stability and responsibility. Also, the monthly payments made will lead to the eventual ownership of the property.
Through this process, the former renter now has the ability to build his/her equity which will be beneficial to future financial investments, instead of just paying rent on a monthly basis. The former renter also stands to benefit during tax time. If a renter does not have any tax write-offs, opting to buy the home he/she is currently leasing offers that benefit when tax season comes around.
As far as a down payment amount is concerned, if acquiring a large sum of money for a down payment is and issue for an investor, an occupant will probably be more willing to compromise on the amount of the down payment if an equity split agreement is made available.
Overall, sharing the equity in an investment has good things to offer to both parties involved. The investor as well as the occupant, and possible potential buyer, can both benefit by working together and putting into to good use what each of them has to offer. If the partnership is solid and the agreement is satisfactory to both partners, everyone wins.