We’re not sure if it was the matter of fact first two sentences that caught our attention (“Bill and Elaine Nolan paid top dollar when they bought their Tiburon house a few years ago at the height of real estate frenzy. Now, of course, the market is cooling rapidly.”) or simply the concept of “equity co-share/co-investment.” In either case, the Chronicle’s piece on Rex & Co. is worth a read (and perhaps some discussion).
A new way to tap equity without going into debt [SFGate]

Comments from Plugged-In Readers

  1. Posted by Observer

    Interesting financial toy, only for houses at present.

  2. Posted by Willow

    Very cool idea…The 5 year early exit period seems too long. 2 years would be more appropriate.

  3. Posted by Anon

    I wouldn’t touch this with a 10-foot pole unless you bought recently and you’re fairly certain your house will depreciate in the next five years. Home equity loans are still cheap enough that it would be a much better (cheaper) option than giving up such a significant amount of any appreciation. This sounds like free money, but giving up a chunk of appreciation is a real cost. If you think that the odds tilt toward substantial depreciation, this might be worth pursuing (and you still can count it as a win if your place appreciates).

  4. Posted by Wai Yip Tung

    I tried to do the numbers using the $750,000 house example an the end of the article. Let’s say you want the house but have concern of making such big investment. You also worry about the prospect buying at the market peak and suffer from the decline of real estate value. The idea of having a partner to co-invest to share the risk and profit sounds appealing.
    With Rex & Co. put in $100,000, this mean you share is only going to be $650,000. However you will split the appriciation 50/50. This does not look right?
    On the other hand, you have the right to live in the house. And you will make the call of when to sell.
    Still, does it look like a good deal?

  5. Posted by anon

    Another great scheme to take homeowners to the cleaners: for a 5% investment they are entitled to 10% of the appreciation (as per the example in the Chronicle). That sounds like a great deal – for them.

  6. Posted by g8grl

    I think it looks better if, in the example, you don’t own the house outright and instead only have $200K in equity. Then you can figure that you are giving up half the appreciation for half the equity and the payment of mortgage is considered the cost of living in the property. Of course the likelihood of them paying in half the equity for half the appreciation is minimal. More likely they’ll want more bang for their buck.

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