Cash is the lifeblood of real estate investing, but for many investors, access to liquid capital can feel like the biggest hurdle. The irony? Millions of Americans are sitting on significant untapped equity in their primary residence and may not realize it can be used creatively to fund new investment opportunities.

Traditionally, the main way to access home equity has been through a home equity loan or line of credit (HELOC). But while those tools can work, they also come with trade-offs: interest payments, monthly obligations, and increased financial exposure.

Now, a newer option is emerging that offers the benefits of tapping equity without the monthly payments. It’s called home equity co-investment, and it may offer a more flexible alternative for investors looking to unlock capital.

What Is Home Equity Co-Investment?

Home equity co-investment is exactly what it sounds like, you bring in an investor to share in your home’s equity, not a lender to create new debt.

Instead of borrowing money against your home, you sell a portion of your equity in exchange for a lump-sum cash payment. There are no interest charges, no required monthly payments, and no repayment obligations until a future event occurs—such as refinancing or selling the home.

Here’s how it typically works:

• A homeowner with equity enters into a legal agreement with an investor

• The investor provides an upfront payment (often based on a share of the current equity)

• A lien is placed on the property, usually subordinate to the mortgage

• The agreement is repaid when a “qualifying event” occurs (sale, refinance, etc.)

• At that time, the investor receives their share of the appreciated (or depreciated) equity

Unlike debt, this structure gives homeowners immediate access to cash, without taking on monthly obligations.

Real Example: How It Works

Let’s say you own a home worth $250,000 and have a mortgage balance of $150,000. That gives you $100,000 in equity.

Now imagine you’re eyeing a multifamily investment and need $50,000 to fund your share of the deal. Rather than tapping into a HELOC or refinancing your primary mortgage, you could enter into a home equity co-investment agreement.

You receive $50,000 upfront in exchange for giving up 50% of your home equity.

Let’s say five years later, the home appreciates to $350,000 and the mortgage balance drops to $90,000. Your total equity is now $260,000. Because the investor owns 50% of the equity, they’re entitled to $130,000—more than doubling their original investment.

The upside for you? You didn’t have to make loan payments along the way. The trade-off? You gave up a portion of your home’s future equity gains.

Pros and Cons of Home Equity Co-Investment

Benefits:

• No monthly payments or interest

• Access to significant cash without new debt

• Quick closings—sometimes in as little as 10 days

• More flexible approval criteria than a HELOC

• Investor shares in downside if the home loses value

This structure can be especially appealing for investors who are self-employed, have variable income, or want to deploy capital without increasing leverage on their primary residence.

Drawbacks:

• You give up a share of future home appreciation

• The investor typically has a say in major decisions (e.g., sale, refinance)

• If your home appreciates significantly, the cost of capital could be high

• Contractual terms can be restrictive so make sure you read them carefully

In essence, you’re taking on a partner in your home—and like any partnership, that comes with both power and responsibility.

Is This the Right Strategy for Real Estate Investors?

For investors looking to fund a down payment, cover renovation costs, or participate in a syndication, home equity co-investment can offer a no-debt alternative to traditional financing.

Still, this strategy isn’t for everyone.

If you’re confident your home will appreciate substantially—or you want full control over decisions like when to sell—you may prefer to retain 100% equity and consider other capital options.

That said, in a market where home values have risen sharply and financing is becoming more restrictive, home equity co-investment can be a powerful tool when used strategically.

A Growing Market with Untapped Potential

As of late 2019, U.S. homeowners had access to over $6.2 trillion in tappable equity, according to Black Knight Financial. With home values climbing over the past decade, that number is likely even higher today.

While still a niche financial product, home equity co-investment is gaining traction—especially among investors who want to stay nimble and reduce their monthly obligations.

Several private companies now offer these agreements, and as demand grows, so does the flexibility and availability of the product.

Final Thoughts from Rod

Like any financing strategy, home equity co-investment has pros, cons, and fine print. It’s your responsibility to do the homework.

But as an investor, one of your biggest advantages is creativity. And in today’s market, finding new ways to access capital can be a game-changer.

If you’re considering this path, talk to professionals, read every line of the contract, and always consider the long-term cost of giving up equity.

That said, if you’re sitting on untapped equity and have a great deal in front of you, this could be a bridge between where you are and where you want to be.

— Rod