Posted by Joe Kaiser on April 05, 1999 at 18:49:49:
Tenants with deeds turned out to be too scary.
Equity Sharing - Posted by David D
Posted by David D on April 05, 1999 at 18:31:24:
Do you recall the Paul Simon Equity Sharing concept circa 1980s. What ever became of Simon? Why is Equity Sharing not being used today?
Re: Equity Sharing - Posted by Bill Gatten
Posted by Bill Gatten on April 06, 1999 at 20:03:26:
I’m a Paul Simon graduate and virtual “worshipper”: singularly the greatest teacher and seminar leader who ever blessed the planet (present company excluded).
His info-mercial got me two town houses, then when his tapes arrived I listened to them (14 hours) 25-30 times, learning more each time, and eventually began doing his seminars across the country (with his Kansas Good Ol’ Boy accent).
Originally we did over 300 Simon-type transactions (and acquired some 25-30 properties on our own) without a hitch, in the worst market California has ever seen.
When the market got worse and worse, equity sharing got better and better (in those days, it was a great way to acquire a home if you didn’t have any credit or money; and a great way sell a house if you didn’t have any equity).
In 1993, however, tiring of the holes and rough edges in the overall concept, we began underpinning our Equity Share Transactions with an Illinois Land Trust, and Voila (is that the way to spell that, JPiper?) the PACTrust was born!
Interestingly, at first it took us a year to realize that the PACTrust was not just an ideal legal shield for an Equity Share. It was, in fact, also a virtually foolproof way to shield all other creative financing techniques: Land Contracts, AITD’s, Lease Options, Lease Purchases, Rent to Owns, etc, etc.
Like Joe Kaiser and Bud Branstetter say, the problem with Equity Sharing was having a tenant on title (not to mention the Due-on-Sale aspect and the legal problems that could arise between parties as a result of the activities of one or the other of them).
However… all the down-sides of equity sharing were almost immediately obviated when we developed the PACTrust: no more DOS viol; no title transfer to the tenant; no more forced judicial foreclosures to evict; no more involving the parties with each other’s personal and legal problems, etc.
With the 3rd party land trust transfer, each party can take 50% of the beneficiary interest and have a safe “equity share.” Or an acquiring co-beneficiary can have 100% of the beneficiary interest, and have what is essentially a “Wrap” or Contract for Sale (with tax deductions from day one). An acquiring co-beneficiary can have a Contingency Acquisition, and be in what is tantamount to a “Lease Option”. Or one could do basically the same thing without the contingency acquisition, and have a “tax lease” (a tenant receives tax write-off in exchange for higher payments and an agreement to pay all costs maintenance and management).
I even use Paul Simon’s jokes in my seminars today: A lady calls the Fire department and yells, “Help, help! My house is burning down!” The fireman says, “Calm down lady… how do we get there?” The lady shrieks, “Oh my God! Don’t you have those big red trucks anymore??”
Thanks Paul!
Bill
Re: Equity Sharing - Posted by Kev.
Posted by Kev. on April 06, 1999 at 24:50:42:
Equity sharing is alive and well with us!
We have developed a very successful ES program that we have been using since 1983 in Illinois.
We buy property this way, we set up ESA’s for sellers, and we sell to people using the ES program. The concept came from a Simon infomercial in 1983. We have adapted it in ways and fine tuned it to make it bulletproof for us.
For example, we have a deal that we are working on right now: Almost foreclosed property that is worth $275K. We will buy it for $212K. We will then lease it back to the husband of a divorcing couple for 6 months. If payments are made on time, then he can go into an ESA with a three month security deposit and buy it from us for a value of $245K.
He doesn’t have a foreclosure, he has tax deductions for mortgage interest, he still has equity from the property, he doesn’t have to move, he owns a house.
ES works great for us.
It’s a GREAT way to BUY property, as well.
This has been my experience.
Kev.
Oh, we bought that house with NO money down.
Re: Equity Sharing - Posted by Bud Branstetter
Posted by Bud Branstetter on April 05, 1999 at 20:52:56:
Besides all the abuses that Joe alluded to there is a basic economic tenant for equity sharing. The value of the of the house needs to go up. With the low appreciation rates in most parts of the country equity sharing has gone out of style in most places. Paul Simon retired to the Phoenix area.