How does the above subject line(share the equity growth with the tenant to keep the cashflow positive.)actually work. I am not totally sure how the concept runs.
thanks
Hi,
I’d imagine that it would be some kind of arrangement where the tenant pays a higher rent, but in return also gains an agreed percentage of any capital gains.
This might then be an incentive to add value to the property that will increase enjoyment for the tenant and also capital value.
I’ve not come across an example of this in real life… yet.
Bye,
Steve McKnight
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Sounds like an interesting concept that could be developed further, this “Renters Equity Share” thing. Hey this could be the next big wave in property investment, enabling cash positive brand new investments. hehe ! [8D]
Say at the end of the tenants lease, the property is revalued based on average property growth rates for that area. The tenant is paid back the sum of their extra payments, plus a capital growth component consisting of their yearly extra contribution. Hmm starting to sound like some kind of property renters mini super. hehe
formula
End Lease Rebate = total yearly extra contributions plus ( total yearly extra contributions divided by the property value times property value capital growth amount. )
For Example;
Say CG = 10% on a $200K property = $20K
ELR = TYEC + ( TYEC / PV * PVCG )
say the tenant paid and extra $20 per week
END LEASE REBATE = $1040 / $200,000 * 20,000
Thus in this case End Lease Rebate = $1144
Hmmmmm Rather long winded I guess so simply add 10% to the TYEC and you get the same result
i.e. $1040 * 1.10 = $1144 doesn’t seem much but this is 10% flat rate return for simplicity.
Not much of an incentive though
[
]seriously, I doubt it would take off though.
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