Shared equity is a type of real estate investment. This investment allows buyers to purchase property jointly with another party.
In Bangkok, entities such as the government or private investors often partner with buyers.
Shared equity differs from other real estate investments. Other investments might grant sole ownership or involve non-equity sharing arrangements.
Examples of non-equity sharing include traditional rentals or lease-to-own agreements.
Shared equity features reduced initial costs for buyers. This reduction occurs because the investment cost splits between the buyer and the partner entity.
Shared equity also includes shared risk between partners. This sharing means both parties absorb potential financial losses or gains.
Shared equity often comes with buy-back options. These options allow buyers to purchase the remaining equity from partners, often at a predetermined price.
Common features of shared equity involve joint decision-making. Decisions regarding the property require consensus between the buyer and the equity partner.
Maintenance responsibilities are also shared. Both parties contribute to the upkeep and repair of the property.
Profit sharing from resale or rental income is another common feature. This aspect ensures both parties benefit from property value appreciation.
Unusual features in shared equity agreements include flexible equity release. Some agreements allow buyers to increase their equity share over time through additional payments.
Another unusual feature is capped price appreciation. This cap benefits the buyer by limiting the buy-back price of the partner’s equity share.
Some agreements include a right of first refusal. This right gives the buyer the option to match any third-party offer to purchase the partner’s equity.
Unique to shared equity, some arrangements offer price protection. Price protection guarantees the buyer can sell back their share at a minimum price.
There are also inheritance clauses. These clauses ensure the buyer’s equity share can pass to heirs under specified conditions.
Exclusive use rights for the buyer, even when owning less than 50% of the equity, stand out. This right allows the buyer to occupy the property exclusively, despite shared ownership.
Shared equity provides a balance between ownership and investment flexibility. Unlike full ownership, shared equity reduces upfront costs and spreads financial risk.
Compared to rental agreements, it offers a path to ownership and potential profit sharing.
For more detailed information on shared equity and related real estate terms, please visit our glossary about Bangkok real estate.