Fund Looks to Invest in Homes' Future Value
An investment fund will launch this fall to help recent home buyers by providing upfront cash as an stake in the future value of the property. Buyers Equity Fund will provide buyers with up to 15% of the home’s purchase price in cash as an equity sharing payment, the firm said in a release. Properties must be pre-qualified before the sale is complete to be eligible for the fund, but the agreement with the fund isn’t consummated until after the home sale transaction is complete. The private equity group managing the fund presented a hypothetical example of how its transactions work: A borrower buys an approved home for $240,000 and receives 10% of the value of the home after the purchase is closed, thus receiving a cash payment of $24,000. The buyer agrees to own the home for at least six years, but can own it for up to 40 years before it repays the fund. The hypothetical borrower then sells the home for $375,000, a $135,000 increase in value. The fund gets back its $24,000 investment, plus 30% of the increased value ($40,500). If at the time of sale, the property hasn't increased in value, the borrower isn't responsible for the repayment. “Our program is specifically designed for the home buyer to use the equity sharing option payment for anything they need including: repayment of loans, higher education, medical expenses, taking a vacation, or simply planning for a ‘rainy day,’” said fund founder Theodore Wojtas. “By purchasing a home that has been pre-approved by our Fund, buyers have the security of knowing that the property has been reviewed by outside experts who believe it to be a good long-term investment.” Write to Austin Kilgore.