Initial Capital Contributions

Initial capital contributions in an equity share agreement are the initial costs of buying the property. These include the down payments made on the property, closing costs, and -if the seller is participating in the equity share- any owners equity previously held.

Closing costs can be tricky to define in an equity share. If the seller is remaining as part owner in the equity share, the inclusion of the sellers closing costs as an initial capital contribution will need to be negotiated between the equity sharing parties. In other words, the issue will be that of who pays the seller's closing costs, the seller or the buyer.

Property taxes and homeowners insurance should not be included as initial capital contributions. Although they are generally pre-paid at the time of purchase along with closing costs, they are pre-paid expenses and not capital contributions.