Does this describe you or someone you know?

I am a parent in a high tax bracket and I want to help my child purchase a home, maybe with down-payment and closing costs.

I am in a high tax bracket and I want to help my retired parents purchase a home.

I want to lend money to a friend to assist in a home purchase.

I am an investor interested in residential real estate investment who is looking for a solid, limited risk purchase.

I have limited savings — but good income – and I need a bigger house than I can currently afford.

If so, perhaps shared equity is something to consider. What does that mean? Shared equity is just what it sounds like: There are more owners than just the ones living in the home. One owner must live in the home.

So let’s discuss this using the situation where I am a parent, and I want my son and daughter-in-law to get into a house. We buy a home together, and they live in it. We are 50-50 on the deed. (I own half, they own the other half.) They live in the house. They pay half of the monthly payment, as well as half of the estimated fair market rental of this property. (A Realtor will be happy to get you that number and write a letter for you to keep in your file in case the IRS comes sniffing around.)

I, as the owner-investor, pay half the monthly costs and receive the rental income.

There are several things which must happen for this to work. First there must be a written equity sharing agreement. How long will this last? Will the kids be able to buy me out later? Everything should be in writing so there is no misunderstanding at a later date. Second, one of the owners must live in the house, claiming it as the principal residence. And whoever claims it as the residence must pay rent to the owner/investor.

Assuming you can work this out, this is one way for loved ones to help one another in this era of near-to-impossible real estate prices. It may be the only way to get the next generation into houses in California!