Masaba Synthetic Equity Rent-2-Own

Synthetic Equity is an innovative approach to homeownership that bridges the gap between renting and owning property. The model offers a structured path to homeownership for individuals (particularly those aged 22-40) who may otherwise struggle to get on the property ladder.

In this model, tenants rent a home while simultaneously building "synthetic equity" - where a portion of each rent payment accumulates over time as vested financial interest in the property.

Key features:

• Tenants qualify for a set purchase price after five years of consistent payments
• At this point, they can exercise their option to buy the property
• If they choose not to exercise, like traditional options, the equity expires
• The synthetic equity evaporates in case of default or breaking of terms

The accrual rate determines how much of the rent payment converts to synthetic equity:

• 25% Accrual: Basic rate where a quarter of rent builds equity
• 33% Accrual: Medium rate often used for students on 4-5 year courses
• 40% Accrual: Premium rate for higher-qualified tenants

After a qualifying period (6-36 months depending on credit rating), the accrued synthetic equity can be used as collateral for low-interest loans (as low as 0%).

The Option Collar provides stability and predictability for both property owners and tenants:

• The model employs market tools such as puts and calls to manage price volatility
• The Trust sells call options to tenants and buys put options from the market
• This sets both ceiling and floor prices for the property portfolio
• Tenants have the option (not obligation) to buy a property at a predetermined price
• Reduces the risk of overpaying if housing prices fall
• Limits upside potential if prices soar significantly

"Sacrificing potential upside gains for present stability is something many people do anyway."

For Tenants:

• Builds equity while renting
• Creates pathway to homeownership
• Financial stability through collateralized loans

For Property Owners:

• Consistent rental income with lower vacancy rates
• Enhanced property value through tenant maintenance
• Reduced turnover costs

For City Councils:

• Increased housing stability
• Support for affordable housing goals
• Enhanced property standards

For Communities:

• Higher community engagement
• Improved property conditions
• Long-term resident stability

1. Acquire 5 properties in the Greenbank Area

   Properties can be owned or managed under 5-year agreements with existing landlords

2. Make offers to 10-20 vetted individuals

   Distribute across three types of housing:

   • 4 x 1 bedroom - for four council tax paying individuals
   • 2 x 2 bedroom - for 2 council tax paying couples
   • 1 whole house - for families or groups paying as a unit

3. Ensure all parties understand options and terms

   May only be suitable for graduates who can demonstrate requisite understanding

4. Implement Land Value Taxation strategy

   To ensure derelict houses are put to use