Matching up property owners and investors for mutual gain

Matching up property owners and investors for mutual gain

In the previous post I discussed the rapidly growing price gap between
properties that are technologically current and those that are not.
Homeowners and rental property owners are facing the dilemma of whether
to significantly upgrade their properties or sell their property for far
less than their maximum potential value. Rebuilding or replacing all of
a house’s major systems is expensive and many property owners do not
have access to capital necessary to renovate and modernize their houses.
Large amounts of inexpensive capital is required. Can a method be
devised that would allow property owners in high appreciation areas
obtain access to low cost capital? Could they share their profits in
exchange for capital with investor(s)? Would high return potential
mitigate the potential risk for investors?

Traditionally, a combination
of complexity and poor liquidity has discouraged potential investors
from investing in single family residences and multi-unit properties.
How can investmenting in these properties become more attractive and
easier? The HomeBrik Team believes that it is possible to create an
environment that will make investing in residential and mixed use
properties easier and more attractive. HomeBrik devised the Profit
Participation Method (PPM)
to source capital
and inject it into residential, commercial, and mixed-use properties so
investors can participate in the resulting profits. The PPM uses profit
participation as a financial instrument. Profit participation is more
beneficial for investors as it allows them to participate in profits of
their investment and does not involve the ownership of physical assets
or their fractions. Two key elements of this method are the patent
pending HomeBrik Valuation Method and the Profit Participation Agreement
(PPA). The HomeBrik Valuation Method identifies the maximum potential
value of properties and estimates the amount of capital needed for these
properties to reach their maximum potential value. HomeBrik’s PPA is a
financial instrument enabling investors to share in appreciation and the
profits of property owners. The PPM also provides for an accelerated
investment exit if needed.

Upwardly mobile property owners and baby
boomers are the two groups that are most interested to maximize the
benefits of their real estate holdings can gain most from using the
HomeBrik PPM. Without access to a loan from a bank, many people with
older homes have no way to acquire the capital for fixing up their
property. But there are over 13 million accredited investors in the US
today with the necessary capital, waiting for opportunities to invest in
real estate. They earn over $200,000 per year ( $300,000 for married
couples) and are in possession of assets worth at least $1,000,000 each
(and $1,500,000 for couples). The accredited investors could provide
the necessary capital in exchange for profits from the improved
properties. Profit participation is defined based on property value
increases and rental and other forms of income. The profits might also
include income from selling electric energy produced by solar panels
installed on the property. Currently the Profit Participation Agreement
is an equity loan with 2% interest. The monthly payments are accrued and
paid off at exit, i.e. when the property is sold or at the end of the
term. Because it is a loan, neither property owners nor investors pay
taxes. Of course both property owners and investors will be subject to
capital gains tax at exit. Overall the cost of funds using the PPM are
much lower than so called no-debt investment instruments that are
available from different vendors.

Profit participation is a passive
investment; investors defacto invest in the property owner and it is
property owner’s responsibility to perform improvements to the property.
It is up to property owners and investors to decide on the terms of
investment. To provide liquidity for investors, PPM allows for investor
substitution and it will be followed by securities trading in the near
future when HomeBrik will create a Global Exchange for residential and
commercial property owners.

Legal disclaimer: HomeBrik, Inc, does
not provide investment or taxation advice. It is reader’s responsibility
to have their taxations questions answered by their tax advisers or
attorneys.

Access and Build Capital™ - HomeBrik’s mission is to
enable real estate asset holders to quickly access and build capital

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