#280 Home Equity Agreements: A Different Way to Invest in Real Estate ft. Jesse Stein of Homeshares

Introducing HomeShares and Jesse Stein

Peter Kim opens the episode by introducing Jesse Stein, CIO of HomeShares, to talk about home equity agreements, a lesser-known real estate investment option. Peter shares that this topic intrigued him because it represents a fresh way of thinking about real estate outside of the usual syndications or debt investments.

Jesse begins by giving his professional background. He started as an equity trader, later moved into real estate investment banking, and eventually created niche investment platforms. His experience includes building trading platforms for real estate securities, partnering with Nasdaq, launching a mobile investing app called Compound, and later serving as Head of Real Estate at Republic.

While at Republic, Jesse became involved with NADA, the parent company of HomeShares, through a joint venture called City Funds. He served on its board before officially joining as CIO in March. This coincided with the launch of the US Home Equity Fund, signaling a big step into scaling this investment model.

Peter clarifies that NADA is the parent, while HomeShares is the brand for investment products. Jesse confirms they are used interchangeably. This sets the stage for a deeper dive into home equity agreements.

The conversation is framed as both an educational opportunity for Peter and his listeners. Jesse’s expertise helps ground the discussion in credibility, while Peter positions the audience as co-learners alongside him.

What Are Home Equity Agreements?

Jesse explains that single-family residential real estate in the U.S. totals nearly $50 trillion in value, most of it tied up as equity. Homeowners, especially those who have owned for decades, often have large amounts of equity but no way to easily access it without selling or refinancing. Rising interest rates have made traditional refinancing even less attractive.

Home equity agreements provide a solution. They are contracts (usually 10 years long) where investors give homeowners cash upfront in exchange for a share of the home’s future value. Importantly, these are not loans. Homeowners don’t make interest payments. Instead, investors are repaid when the home is sold, refinanced, or the contract matures.

Jesse highlights that proceeds can be used for almost anything: home improvements, debt consolidation, college tuition, or even vacations. For homeowners, it provides liquidity; for investors, it opens a new asset class.

Peter shares a personal example. He notes his house value rose significantly since purchase, but he wouldn’t refinance due to his low interest rate. He asks if people like him are ideal candidates for this. Jesse agrees, adding that older homeowners especially benefit because they have equity but may not want additional debt.

Investor Perspective and Market Potential

Jesse shifts focus to investors. He compares home equity agreements to preferred equity in homes, with overcollateralization offering downside protection. For example, if a homeowner takes $100,000, the investor might record $185,000 against the home. This structure ensures protection even if home prices decline.

Peter asks about the scale of this industry. Jesse says they are one of five major originators, with the market projected to surpass $2 billion in 2025. What sets them apart is raising capital not just from institutions but also individual investors, expanding access to this investment type.

Jesse outlines where this fits on the passive–active investing spectrum. Unlike rental properties or commercial syndications, which require heavy management, home equity agreements are fully passive. The “property manager” is essentially the homeowner. Investors don’t deal with tenants, maintenance, or vacancies.

They discuss macroeconomic uncertainty. Jesse argues that the product is resilient. Returns don’t depend on rapid appreciation. Even moderate or flat markets still produce returns because contracts are structured with built-in protections and capped returns of 20% annually on short-term exits.

Finally, Jesse explains repayment patterns. Though contracts are 10 years, many repay earlier due to refinancing or sales. They also plan to leverage securitization and bulk sales to provide liquidity and distribute returns before the 10-year term ends.

Downside Protection and Risks

Peter asks about downside protection. Jesse uses an example of a $1 million home with a $300,000 mortgage. If they invest $200,000, the home would need to fall drastically in value before the investment is impaired. Even with a 20% decline, their position remains safe. This security is a big draw for institutional investors.

They clarify that HomeShares typically holds second-lien positions, ensuring repayment upon sale or refinancing. Title companies enforce this, much like standard mortgage processes.

Peter confirms that investors aren’t picking single properties. Jesse explains they invest in a diversified fund, currently holding about 140 agreements worth $12 million. Pooling assets spreads risk and opens exit strategies like securitization or selling in bulk.

They discuss future risks. If interest rates drop, demand for equity agreements could fall as refinancing becomes cheaper. Still, Jesse argues demand will persist from certain demographics, like retirees who don’t want debt. Additionally, faster repayments in such a scenario could boost returns on existing portfolios.

Peter reflects that many homeowners don’t even know this option exists. Jesse notes the industry is still young but growing rapidly, doubling annually. Big institutions are fueling awareness and expansion, helping normalize the product in financial markets.

Taxes, Investors, and Future of HomeShares

Peter raises taxes. Jesse explains the fund is a Delaware limited partnership, issuing K-1s to investors. Most profits are treated as capital gains, unless repaid within 12 months, in which case it’s short-term. Distributions blend return of capital with gains.

They discuss the investor profile. Many invest through IRAs, where the lack of steady dividends is less of an issue. Targeted returns of 14–17% make it attractive, especially as a safer alternative within real estate portfolios. It’s also appealing as diversification since it’s neither traditional equity nor debt, but a hybrid.

Peter asks about the company’s future. Jesse says they’re focused solely on home equity agreements given the strong momentum. However, their team’s background in mortgages and home equity lines leaves room to expand into other products in the future.

The episode closes with Peter summarizing. For homeowners, it’s a new way to access equity; for investors, it’s a fresh real estate opportunity. He encourages listeners to explore HomeShares if they’re interested.