Choosing an equity partner is a great way to partner up with a seller with equity who needs to update or do some rehab in order to sell their house for top dollar. This equity partner opportunity creates a nice win-win situation for both the seller and the investor.
Here is an example of how an equity partner process might work:
- Current Home Value After Repairs: $250,000
- Cost of Repairs or Remodel: $30,000
- Current Mortgage Balance: $150,000
- Cost of Sale (Realtor commissions, closing costs, etc): $18,000
- Profit: $52,000
So, the investor was able to purchase the property for the current mortgage balance of $150,000 with the agreement that after the rehab the profits would be shared with the homeowner.
Typically, these profits are shared 1/3 to seller, 2/3 to the investor since the investor is fronting all the cash and taking on the risks of the rehab. This is not always an ideal scenario for investors because of the risks involved in rehabs, so a lot will depend on the area, condition and price of the house.
An equity partner opportunity can take on many different forms even if you have little or no equity. It’s always best to share with us the details of your situation so that we can put our minds to work and figure out the best ways to help you.