Has anyone here structured a shared appreciation agreement? How did you set it up?

Question

I’m exploring alternatives to traditional financing (HELOC, cash-out refi, etc.) and came across shared appreciation agreements (SAAs). The concept is that a homeowner receives an upfront cash investment today, and in exchange, the investor gets their principal back plus a % of the property’s future appreciation at sale/refi.

A few things I’m curious about:
– How did you structure the agreement (lien, contract, equity share)?
– Did you use an attorney who was familiar with these deals?
– How did you decide what % of appreciation to offer vs. how much cash to take upfront?
– Were renovations/upgrades factored into the agreement?

I’ve read about companies like Unison and Hometap that do this on a larger scale, but I’m more interested in how people here may have structured them on a private investor-to-homeowner basis.

Would love to hear any experiences, lessons learned, or resources that helped you set it up. Thanks in advance.

Henry Clark · Answer

OP.  As mentioned don’t do it.  But with that said.

Do an LLC with the Operating agreement spelling out everything.

Death, divorce, mental capacity, took to long, won’t sell the property, who decides to sell, can’t refi outside the LLC, bankruptcy, cost overruns, your labor costs, 1st lien, 2nd lien positions, etc etc how can a deal get screwed up???

Nicholas L. · Answer

@Connor Jones

hello.  i would strongly recommend against something like this.

good luck