Maintaining Equity w/ Assignment - Posted by Mike G

Posted by Randy on July 19, 2003 at 17:37:04:

It?s called Equity Participation. This was around a few years ago with TV gurus hawking it on late night TV. The concept is drawing up an agreement that is recorded on the title. It usually states something to the effect that when the property is sold for more than $X dollars the proceeds are split between parties named in the agreement. I have a copy of it in my garage in box somewhere?

Maintaining Equity w/ Assignment - Posted by Mike G

Posted by Mike G on July 19, 2003 at 17:11:26:

One concept I love the idea of that I really want to start incorporating into the deals I assign to others is the idea of taking a portion (or all) of my assignment fee in the form of a small equity stake in the property. Obviously the purpose would be defeated for traditional rehabs since my buyer would be selling w/in such a short time period. But for any deal I get under contract and then assign to an investor who would be keeping as a long-term rental, I’d love to create as many equity positions as possible. The idea is that it would be a strictly passive stake (they wouldn’t have to worry about it until they either sold the property or refinanced…no pro rata share of monthly cash flow or capex, etc).

Does anybody do this? What’s the best way to document? I tend to think an equity sharing arrangement w/ a recorded performance mortgage tied to it would suffice. Anyone have any thoughts? Please share any experiences you may have using this concept. Thanks.

Mike G

Re: Maintaining Equity w/ Assignment - Posted by Brent_IL

Posted by Brent_IL on July 19, 2003 at 20:46:48:

If you want to do this, become a licensed real estate agent and take-back your commission as a percentage of ownership. Conserve your cash.

You will offer added value because if they don’t have to pay you in cash, sellers can afford to accept a lower down payment, which enlarges their market. The buyers who don’t have to pay as much down will have an easier time of coming up with the money. They’ll worry about you after they get into the house.

You can skim off the best deals for your portfolio.