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Equity sharing is a creative way for people lack of down payment to buy a home. It is also a possibility for investors to make relatively a low risk real estate investment that does not require property management and can provide tax benefits. It has been used by parents wishing to help their adult children buy their first home in areas where home ownership costs are high such as San Francisco Bay Area.

Equity sharing agreements typically involve two parties: an “occupier” and an “investor”. The occupier is the person who lives in the home and the investor provides cash to be used for down payment in a joint home purchase. In some cases, a traditional home mortgage is also involved. For an agreed term, the occupier lives in the home, maintain the home and pays all expenses. At the end of the pre-agreed term, the occupier buys out the investor or the home is sold, and the profit is split between two parties based on the agreement.

Buying a new home with equity sharing makes sense in the Bay Area because there are little maintenance to be made in the first few years, and price appreciation is faster, this makes the sharing agreement better outcome in the future and less possibility for disputes.