It is quite encouraging to learn from recent news that there seems to be more and more people who have come to the realization of the power of the simple economic concepts of shared equity and shared appreciation to own homes. It may be time to revisit some introductory explanations again on what SwapRent and FARJHO mean relative to these shared equity and shared appreciation concepts. It may be helpful to let people understand where SwapRent and FARJHO stand and how they could effectively help implement these shared equity or shared appreciation related economic concepts.
Most people who are new to these concepts can not distinguish whether it is the new “concept” or the new “method” that they are learning. It could be very difficult for them to distinguish the two if both are new to them. At the moment most people are simply amazed at what the new concepts could do to help us build a new alternative housing finance system and to help restore our national economy.
Usually, only after they have had a chance to learn the “concepts” well from reading about the potential applications of SwapRent and FARJHO then it would be easier for them to start asking questions and learning what business methods may be best to make these concepts a practical reality. That is when they could really start appreciating the quantitative, technical and systematic details of SwapRent and FARJHO that I have put in more than 10 years of research work to develop. An economic concept is not patentable but business methods are.
To use an analogy again, a generic concept of “mechanic transportation” could be new to people who used to ride horses only in the old days. They would not be able to tell the economic utility of an electricity battery motorized SUV from that of a bicycle as both are mechanical, both have wheels on them and both fall into the “mechanical transportation” category that move people from one place to the other.
Due to the fact that the whole concept is new to them they would not be able to know that the end products are actually results of very different “business methods” to implement the same simple generic concept at very different evolutionary stages. To put even more bluntly, if a person who does not speak French, he or she may not be able to tell a baby gibberish from a poetic recital in French simply because both sound new and foreign to them.
Shared equity and/or shared appreciation related generic concepts are not new and they have mostly been practiced in the UK for over 30 years. Most recently in the US and Australia we had also seen some commercial ventures back in 2007 trying to introduce those same old methods before the mortgage crisis started. These concepts have not caught on simply because those primitive business methods engaged in the UK and more recently in Australia and the US to provide the economic benefits to consumers were not good enough. There existed plenty of room for new innovations on new business methods in this field back then, similar to the opportunity of how Steve Job’s iPhone had potentially replaced Gordon Gekko’s Motorola platform shoe sized cell phone. Social sciences evolve just like technologies would.
That was exactly the reason why the deliberate research efforts of the SwapRent method, its subsequent simplified version of FARJHO and their related various new mortgage instruments and markets were originally embarked on and were subsequently invented back in 2006. These events were chronicled in the original patent applications back in 2006 and many subsequent academic publications or in many leading trade journals listed on the SwapRent.com web site. In short, SwapRent and FARJHO represent the more mature and the latest developments of “actual business methods” in the evolution spectrum of the “shared equity or shared appreciation concept” to own homes.
In fact, unlike the conventional way of using a “shared equity” method to accomplish the shared appreciation objective, a SwapRent (SM) contract has created a new class on its own to use an innovative business method of quantifiable “shared cash flow” to accomplish the shared appreciation objective of owning a real estate property.
Without the crisis in 2008 few would pay attention to and appreciate the timely new economic utilities of these new inventions of real business methods to make the simple shared equity concept practical and possible but these new inventions were not created in 2006 only to simply anticipate and cater to some particular needs of solving the crisis, such as rescuing the underwater houses. These new inventions together would provide an alternative housing finance system with many potential application opportunities that have very broad implications to our capitalism society.
Regarding the investor’s sentiments, the currently proposed economic implementation strategy to our country’s decision makers to help boost free market based investor’s confidence is to make it a self-fulfilling prophecy without using debt. The more free market participation the more likely the property prices will indeed rise, hence the more likely the economic prosperity will be brought back up, hence the more likely the investors will make money through SwapRent contracts and hence the more likely investors will flock to offer to provide the SwapRent cash flows to property owners who are willing to do this exchange of cash flows for appreciation potential. “Wealth begat wealth” is what self-fulfilling means in this new twist of an innovative implementation of the basic capitalistic mechanism.
The only caveat emptor is that when it is done with excessive debts, i.e. borrowed money, hell may break loose. As we have seen now and many times in our history in the past. So although this new economic policy management tool of SwapRent may be similar to how the Fed uses monetary policy to lower the interest rates to “stimulate the economy” or to “corner the property market up” in the past but there is no debt or any borrowing concepts involved this time around with this new SwapRent program.
Now that many people have understood the powerless state of the conventional monetary policy to channel credit down to the small businessmen and property owners in the local communities across America in order to restore our economic prosperity, perhaps it may be time to consider using some new innovative equity based home financing methods such as SwapRent to “stimulate the economy” or to “corner the market up”. These concepts and specific detailed methods on what the government or central banks could do were again described in the HFI-IUHF paper that I have published in December 2009.
The beauty of all these inventions is that these new economic benefits would be made available to everyone on a pure free market basis. Nobody would force anybody to accept and give up anything unwillingly. Consumers make their own choices for their own good and pay for what they want at a fair market value in an uninhibited marketplace.
If some folks do not like some particular aspects of these potential applications for ideological, religious, opinionated, individual preferences and tastes or any other reasons, they could simply skip those applications and move on with those that would make more sense to them in their particular situations. These are exactly the kinds of free market spirits that the marketplaces for the innovative shared cash flow product SwapRent and the latest shared equity product FARJHO, i.e. REIDeX.com and InvestorsAlly.com were originally based on and will continue to operate on.