Home Co-Investment – An Intriguing concept from Unison

I came across this interesting and intriguing concept from Unison. It is like “home co-investment” start-up, which means it wants a share of the equity of your home. To put it simply, they want share your appreciation pie which is expected in many locations over the years. If your home value goes up, then it wants some of the gain. If your home value drops, then it will absorb some of the loss. In exchange, the benefit to the homeowner is either an increased upfront home downpayment or the ability to cash out your home equity with no monthly payments.

That’s the basic idea, although they aren’t technically a co-owner of your home. The arrangement is structured as an options contract with a secured lien on your home, as laid out below:

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Unison is betting that over the long-term, your home value will go up and they will profit when you eventually sell (or when 30 years is up). In addition, they charge a one-time transaction fee at the time of closing (2.5% of proceeds) or at home-equity cash-out (3.9% of proceeds).

Unison’s business model depends on home prices going up over time in a reasonably-predictable manner, so they’ve done some research about the reliability of rising home prices.

As per my co-money blogger Chris from mymoneyblog.com, Unison will become successful, as long as they have patient sources of funding. Customers get a much bigger home down payment upfront, and the payback is not until later and only taken out of profits (less pain). That’s a pretty brilliant idea in the context of behavioral finance . As a homeowner, you are still essentially selling a piece of your home asset, but anything that makes it possible for people to buy a nicer house now is going to be popular.

It might be good business model but is it good for the homeowner ? Yes they can get bigger better new home expected to appreciate but at the same time you wanted that growth for you and don’t want to share it. Why would anyone willing to pay $40k for just $50k paid up front whether it’s 10 years from now or 30 years. That’s big junk of money. I would think about it many times.

Please do act accordingly with your discretion and after your own due diligence. We are just sharing the different ideas coming out in the market for investment returns.

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