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Article Date:
March 2006

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How Shared Equity Protects the Rent-to-Own Arrangement

You can realize big benefits with tax law’s officially designed rent-to-own home program. This program, known in the tax law as a “Shared Equity Financing Agreement,” avoids many of the problems with the lease option, yet provides similar income-producing possibilities and the same, or better, potential for far less rental hassle.


You may have heard the expression, “Let’s get together!” That’s what happens in the shared equity. Both the landlord and the tenant have ownership interests in the home that the tenant is occupying.


For the landlord, the shared equity arrangement produces great results. Imagine a rental property where you have



no vacancies,


no hassles,


no management fees, and


a known and positive cash flow.

This is what shared equity can do for you as a landlord. It also produces great results for the tenant, giving the tenant a down payment on a home, as well as equity in the property. The landlord-investor and the tenant-homeowner share the property in this tax-law initiated and approved arrangement.


Example. Say you are the landlord. You own 65% of the house and the tenant owns 35%. The tenant pays rent to you for use of your 65%. This 65% is your rental property, treated the same as any rental property, even eligible for the section 1031 tax-deferred exchange rules.


The special tax-law defined shared equity applies to tenant use of the property as a principal residence only.1 This article gives you the details you need to get started in the shared-equity ... Log in to view full article.

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