How Does Co-Investing in a Home Work?

Housing costs continue to rise, making it harder for younger generations to buy their first home. And skyrocketing costs and ongoing student loan and credit card debt mean many current homeowners could benefit from tapping into their home’s equity to cover expenses. But how?

Whether you’re a current homeowner or hoping to buy a home, co-investing in a home could be the right move for you. Home co-investing makes it easier for people to buy a home, even if a traditional mortgage doesn’t work for them, and for people to tap into their home’s equity without taking on the debt of a traditional home equity loan. Below, we’ll explain what co-investing is, how it works, and the pros and cons.

What is home co-investing?

Home co-investing is a strategy for buying a home or tapping into your home’s equity while forgoing the traditional mortgage or home equity route. How it works depends on whether you’re buying a home or trying to tap into the equity of a home you already own.

• If you’re buying a home: Co-investing lets homebuyers purchase a home with an investor who shares in the equity from the beginning. You purchase what you can, and the co-investor covers the rest.
• If you already own a home: Co-investing as a homeowner means you’ll sell shares of your equity to an investor. You’ll get a lump-sum payment in exchange for a percentage of your home’s future value.

Co-investing in real estate for homeowners vs. homebuyers

Both of these strategies—co-investing as a homeowner and as a homebuyer—are nuanced and have several risk factors to consider. We’ll break down the pros and cons of each below.

Co-investing for homeowners

If you need cash—to cover emergency expenses, fund a big purchase or renovation, or consolidate debts—you can tap into your home equity with a traditional home equity loan or home equity line of credit (HELOC).

But another option if you don’t want to take on more debt is co-investing (also called home equity sharing or a home equity investment).

In home equity sharing, you’ll sell off shares of your home’s equity to an investor, almost like stock in your home. In exchange, you get a lump-sum payment to use for any purpose. Unlike home equity loans, you don’t take on any debt in this scenario, so immaculate credit is not crucial. (Scores as low as 500 may be eligible.)

You could earn significant funding, depending on the investor, but it depends on factors such as:

• Your home’s location
• The appraisal value of your home
• How much you owe on your mortgage
• How you use the property (primary residence, rental, etc.)

You won’t need to make any monthly payments or pay interest (though you’ll still retain your mortgage), and the arrangement will last between 10 and 30 years—or until you sell the house.

At that time, you’ll repay what the investor paid you, plus a percentage of your home’s appreciated value. Given that homes tend to become more expensive in the long run, you could wind up owing a large amount to the investor.

Pros and cons

Pros

• No monthly payments

  Unlike a home equity loan, co-investing does not require monthly payments (or interest). Instead, you must buy the investor out by the end of the term, paying the appreciated value of their equity shares. (Note: You may need to refinance or sell the home to cover the costs.)

• Easier access to borrowing

  The minimum credit score for a home equity loan varies by lender but is typically at least 620. Co-investing options are available to borrowers with lower credit scores, sometimes as low as 500.

• No debt involved

  Taking on more debt may not be an attractive option, especially if you already have a mortgage, car loan, student loan, and credit card debt. With co-investing, you don’t add more debt to your name.

Cons

• Still need to pay mortgage

  Though you don’t owe monthly payments when co-investing as a homeowner, you still must pay your mortgage, including property taxes and homeowners insurance.

• Lose out on future value of the home

  If your home appreciates in value, you’ll owe more for the equity shares the investor purchased. So rather than enjoy the increased value of your home, you’ll need to come up with more money to repay the investor. For many, that could mean selling your home at the end of the term and using some of the proceeds to pay off the investor.

• Not available in every state

  Home equity investment companies such as Unlock or Hometap are not available in every state. Unlock, for instance, is available in 14 states, mostly out West and on the East Coast.

Co-investing for homebuyers

If you are in the market for a house but are worried you don’t have a strong enough credit score to buy one—or you’re simply unable to afford a high monthly mortgage payment—you can consider co-investing instead.

You’ll pay a portion of the home’s asking price, and the co-investor will cover the rest. Your name will be on the title, but the investor will hold the deed.

Rather than pay a traditional mortgage, you’ll instead make monthly payments to the investor over a set number of years (for instance, 10 years). Throughout the term, you can purchase more equity from the investor or sell off equity you have to get an influx of cash.

At the end of the term, you’ll sell the house, renew the contract with the investor, refinance, or purchase the investor’s shares of your home’s equity at their current value. (Hint: Houses tend to appreciate long term, so those shares will likely cost more than the investor paid for them.)

Pros and cons

Pros

• Easier access to homebuying

  Skyrocketing house prices have left many younger buyers feeling like they can’t afford to buy a home. For many, it’s much easier to co-invest in a home than it is to save for a down payment, qualify for a mortgage, and make a monthly mortgage payment.

• Lower monthly payments

  Though it varies by home and by investor, the monthly payments are typically lower than what you’d spend for a mortgage.

• No debt involved

  Taking on debt can be overwhelming, especially if you’re already drowning in student loan or credit card debt. By co-investing to purchase a home, you won’t need to worry about adding more debt to your name.

Cons

• Still responsible for maintaining the home

  As with a traditional mortgage, even though you don’t own the home outright, you’re still responsible for all maintenance and upkeep, as well as property taxes and homeowners insurance.

• Lose out on future value of the home

  At the end of the term, you have a few options. You can sell the home, but you’ll need to repay the investor the value of their shares of equity—which are likely to be much more than they paid. You can also renew your contract with the investor (and continue making monthly payments), refinance, or purchase the investor’s equity and stay in your home. No matter what, you’re missing out on future value and may wind up spending significant money to stay in your home.

• Not available in every state

  Co-investing as a homebuyer is still a newer concept, so it’s not available to everyone. Haus, for example, is only available in a few states out West. Point, another co-investing company, is available in select regions of 23 states and Washington, D.C.

Companies that offer single-family home co-investing

Several companies offer single-family home co-investing, both to homebuyers and to homeowners. Most are only available in select states, so you may be limited to a select few options, depending on where you live or where you’re hoping to purchase a home.

Haus is our top choice for co-investment for homebuyers. For current homeowners looking for a co-investor to tap into home equity, we recommend Unlock.

Company	Co-investment for
Haus	Homebuyers
Unlock	Homeowners

Haus – Home co-investing for homebuyers

Find out more

• You are on the title and can customize the investment to match the terms you want
• Buy more equity anytime, or sell when you need cash
• Control your equity from your Haus dashboard

Haus introduces a unique co-investing program designed to help homebuyers acquire property without the need for a traditional mortgage. In this program, prospective buyers select a house within certain qualifying regions, and Haus then splits the home’s equity into manageable shares. 

Buyers can purchase as much equity as they can afford up front, while Haus covers the remaining shares. Over a 10-year period, homeowners have the flexibility to buy additional equity from Haus at their own pace. This innovative financing option is available to homebuyers in California, Oregon, Washington, and Colorado. 

The agreement lasts 10 years, during which homeowners make fixed monthly payments. At the end of the term, participants must decide whether to purchase the remaining shares from Haus, sell the property, or renew their partnership agreement. Participants are listed as the official owners on the title, with Haus holding a deed of trust on the property. This ensures that buyers gain homeownership with a clear path to acquire full equity.

Our expert recommends: Consider this

Chloe Moore

CFP®

While co-investing in a home as a homebuyer requires less cash upfront, it’s still a home purchase and should be taken seriously. You’re still required to make a down payment and cover the costs associated with owning a home, including property taxes, insurance, and maintenance. Run the numbers before going into this purchase, and make sure you’re prepared for homeownership. 

Unlock – Home co-investing for homeowners

View Rates

Best overall

• Access $30,000 – $500,000 in home equity
• No monthly payments or interest charges
• Option to buy out Unlock’s share in partial payments over the term

Unlock offers a home equity agreement that provides homeowners with $30,000 to $500,000, tapping into their property’s equity without the constraints of monthly payments or interest rates. Instead of traditional loan repayments, homeowners can choose to buy out Unlock’s share in their home equity through partial payments over the duration of the agreement.

The process to start with Unlock is streamlined and user-friendly. Potential clients can receive an estimate of how much equity they can access without any impact on their credit scores. However, an origination fee of 4.9% applies. Unlock’s services are available in a diverse range of states, including Arizona, California, Colorado, Florida, Michigan, New Jersey, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia, and Washington, making it accessible to a broad audience of homeowners.

This program is suitable for homeowners looking for liquidity without the immediate burden of repayment, giving them breathing room to manage their finances or invest in other areas. By providing significant equity access with no monthly payments or interest, Unlock presents a viable solution for those needing financial flexibility, coupled with the opportunity to regain full ownership of their equity over time.

Our expert recommends: Consider this

Chloe Moore

CFP®

Even though co-investing in a home as a homeowner is not the same as a traditional home equity loan or HELOC, there’s still risk associated with the transaction. If you are unable to buy out the equity in your home by the end of the term, you’ll need to sell your home. If you earn a steady income, can afford monthly payments, and have good credit, you may be better off with a home equity loan or HELOC.