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Conversion to Equity
At the property owner's discretion, the annual payment may be "paid" in part or in full with additional equity rights granted to the investors. The amount "underpaid" (i.e. the amount owed minus the amount paid with cash) is converted to additional equity sharing rights at the end-of period interim home value.
Equity Sharing Increase at year n = Underpaid Amount at year n / Interim Home Value at Year n
Adjust the sliders below to try it out.
Input:
Income Payment owed
$
00000
2500Income Payment made with cash
$
0000
1100Interim Property Value at year end
$
0000000
550000Output:
Underpaid Amount
$- $
2500
1100
= $
1400
Equity Sharing Percentage Increase
= $/ $
1400
550000
=%
0.25
So, if at the beginning of one period, the Equity Sharing Percentage were %, then the equity sharing percentage would be % +% = % at the beginning of the next period, which would be used to calculate next period's annual fee and also used to calu
10
10
0.25
10.25
More Info About Conversion to Equity
At the property owner’s discretion, a portion of the annual income may be paid with additional equity sharing percentages. The underpaid amount (amount owed - amount paid) is divided by the to produce the increase the equity sharing percentage for that year:
In other words, any amount the property owner opts not to pay of the annual payment they owe in a given year is automatically reinvested into the property, increasing investors' equity sharing percentage for the next year.
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