11/06/2010 Equity Sharing vs. Cash Flow Sharing and FARJHO vs. SwapRent

This blog entry first appeared in InvestorsAlly.com blog on November 5th, 2010.

There seems to be still a lot of confusion on FARJHO and SwapRent among people who are new to the “equity sharing”, “fractional interest”, “partial ownership”, “shared equity”, “shared appreciation” and/or “shared ownership” concepts.

As mentioned before that both FARJHO and SwapRent represent the latest inventions of business methods with practical applications in the long evolutionary process of these “shared ownership” related economic concepts as applied to real estate properties and home ownership. Improved business methods, not economic concepts, are patentable under the US and many other developed countries.

http://www.InvestorsAlly.com was created to become the primary and secondary market for FARJHO/LLC member interests. InvestorsAlly provides a peer-to-peer matching service through a new improved business method based on the conventional simple “equity sharing” concept to own homes.

Among many other features, the key difference between FARJHO and all other previous methods employed by other companies are that FARJHO is an all equity based home sharing, while all previous other efforts before FARJHO were focused on a “equity down payment assistance” kind of concept to help potential home buyers to borrow mortgage to own homes. Under those primitive equity sharing schemes, homes could still be foreclosed when the the joint equity owners can not keep up with the monthly debt service and therefore the social stability factor was not introduced in all those earlier shared equity offerings that were available both here is the US and abroad before the introduction of FARJHO.

Since FARJHO/LLC structure discourage borrowing once the FARJHO/LLC is formed to purchase the homes. It would be an all cash deal for the newly created FARJHO/LLC to buy homes. There would not be any foreclosure possibility and hence the social stability could be achieved for the benefits of the tenant/partial home owners.

Individual members to the FARJHO/LLC structure could of course borrow before (and sometimes after) a FARJHO/LLC is formed in order to enhance the leverage of their own individual investments if they wish to. When they lose the monthly income capability they could simply drop off the FARJHO/LLC and be replaced by another new member without endangering the home occupancy status of the tenant/partial home owner.

http://www.REIDeX.com was intended to be the secondary market for a simplified consumer version of property derivatives or an innovation of a new breed of property “cash flow sharing” products, i.e. the SwapRent contract. We have been trying to work with the federal, state, county and city governments as well as some industry groups in this effort since 2007.

Unlike the conventional way of using a “shared equity” or “equity sharing” method to accomplish the shared appreciation objective, a SwapRent (SM) contract was invented to use a ground breaking innovative business method of mathematically quantifiable “shared cash flows” or “cash flow sharing” technique to accomplish the appreciation sharing objective of owning a real estate property. This has created tremendous flexibility in its implementation and commercialization.

For a review of the academic research background and theoretical foundations on SwapRent please visit the home site http://www.SwapRent.com again.

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