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Shifting your private company equity to home equity: the case for homeownership

In today’s market, people are looking for new ways to hedge their investments against inflation. In reality, markets can always take a turn – for better or worse – and it can be difficult to plan ahead for volatility. On the other hand, market volatility can present new circumstances that may be the impetus for action to better safeguard your financial future. There may even be unexpected opportunities… homeownership could be one of them.

Homeownership has been regarded by many economists as a valuable inflation hedge. So while your savings account and investment portfolio may take a substantial hit, your home equity may remain intact and continue to grow over time. Plus, real estate is an investment that can provide utility in the form of a roof over your family’s head or rental income while you wait for a more stable environment.

With the housing market as hot as it is (and has been over the past few years), successful home buyers are making cash offers to stay competitive. There are many individuals who don’t have that kind of cash on hand, but rather, have equity tied up in private company equity. Using your private company shares now in order to make a competitive cash offer on a home could be a smart move in today’s market. Furthermore, in light of the Fed’s most recent rate hike (the largest increase since 1994), a cash offer may help buyers avoid increasing mortgage rates. In fact, at Liquid Stock, one of the most common reasons our counterparties reach out to us is to be able to make a large purchase, such as a new home.

There are different pathways to liquidity you could take to use private company shares to buy a house. One way is by selling your shares on the secondary market. However, private company shareholders can be wary of selling their shares before IPO, knowing that they could be losing out on a much bigger payout in the long-term. This may be particularly true as we enter a  “bear” market, with tech companies taking the biggest hit so far, meaning shareholders may see more limited sale opportunities and lower valuations offered by secondary buyers. It may not be the best time to sell shares for shareholders who believe the value of their equity will rise again in the future.

But life happens – you may need liquidity now to take advantage of the new opportunities in front of you. The good news is that there are other solutions that allow you to “have your cake and eat it too.” Meaning, you may be able to obtain the liquidity you need now to purchase a new home or achieve other goals, without giving up share ownership. The Liquid Stock solution enables private company shareholders to maintain upside by accessing needed cash, while still benefiting from future share appreciation. Our solution also provides potential tax advantages that you wouldn’t necessarily enjoy in a traditional sale of shares.  With the Liquid Stock solution, you could make use of your hard-earned startup equity to buy the home you’ve been dreaming of and build your future.

We encourage all of our counterparties to discuss their options with their financial advisors when deciding when and how to seek liquidity for private company shares. If homeownership is something you’re interested in – obtaining liquidity for your private company equity could be the opportunity you’ve been waiting for.

About the Author:
Shane Larkin, Founding Team Member at Liquid Stock, is an investment professional with an engineering background and MBA.

This blog post is intended for general informational and education purposes only.  Liquid Capital Management, LLC (together with its affiliates, “Liquid Stock”) makes no representations as to the accuracy of information in this post, and no representations or guarantees as to specific outcomes from relying on this post. No content in this post is intended or should be construed as tax, investment, legal or accounting advice by Liquid Stock, or as an offer to sell or solicitation of interest to purchase any securities offered by Liquid Stock. Liquid Stock does not provide tax or other financial, legal or regulatory advice to its transaction counterparties. While reasonable steps have been taken to ensure that the information herein is accurate and up to date, no liability can be accepted for any errors or omissions. All views and information contained herein are as of the date hereof and subject to change. Information contained in third-party links has not been independently verified by Liquid Stock and inclusion of such links should not be interpreted as an endorsement or confirmation of the content therein. Prospective investors considering an investment in a Liquid Stock fund should not consider this content as fund marketing material.