Awhile ago, I wrote a post about home equity agreements and how they were probably not a very good idea for doctors and why HELOCs were likely better. In fact, I’m not a big fan of using your own home equity as an investment at all. But what about using someone else’s?

How would that even work? Well, this is a newer area of alternative real estate investing. New key resource, Homeshares, is working to use home equity to help doctors build wealth through home equity funds. It’s a good potential option for diversification of especially your real estate portfolio.

Let’s explore a bit more deeply…

Doctors are no strangers to balancing risk and reward

Whether it’s on the floor, in the operating room or managing personal finances, making smart, long-term decisions is part of the job. For many, that means building wealth through tried-and-true assets like stocks and bonds like the strategies I talk about in this blog. But when portfolios become too concentrated in these traditional vehicles, it can be time to consider diversification as is fitting with your written personal financial plan.

That’s where home equity investing comes in as a newer potential option.

What Is a Home Equity Agreement (HEA)?

HEAs allow homeowners to unlock equity in their homes without taking on new debt. Instead of loans or monthly payments, homeowners receive a lump sum from investors in exchange for a share of the home’s future appreciation.

But as an investor, you’re not lending money or using your own home—you’re purchasing an option on a percentage of the future home value of someone using an HEA. It’s a structured agreement, backed by a lien on the property, and it provides an efficient way to gain exposure to residential real estate appreciation.

Why Physicians Are Paying Attention to Home Equity Agreements as an Investment

1. Targeted, Attractive Returns

Funds like the U.S. Home Equity Fund I aim for net annual returns in the 14–17% range—outpacing the long-term average of the S&P 500 and most fixed-income products. The structure of HEAs provides leveraged exposure to home value growth, allowing investors to earn outsized returns relative to their initial capital.

2. Institutional Confidence in the Asset Class

While HEAs are still new to most individual investors, they’re gaining traction among major institutional players. Firms like KKR, Fortress, and Carlyle have poured capital into this space. In 2024 alone, over $1 billion in HEA-backed securities were issued, and the market is expected to double in size by next year.

3. Built-in Downside Protections

HEA investments include several safeguards designed to minimize risk:

• A home would have to depreciate by 45% for an HEA contract to lose money
  
• The investment amount typically represents a fraction of the home’s value.
  
• Each agreement is secured by a property lien and spread across a diverse pool of homes nationwide.

This structure helps reduce the volatility typically associated with real estate investing.

4. Diversification That Actually Works

True diversification comes from assets that perform differently from the market. Since home equity doesn’t closely track stock or bond movements, it can help smooth out your overall portfolio returns. It’s a way to tap into the largest source of household wealth in America without becoming a landlord or flipping houses.

5. Transparent, Professional Oversight

The U.S. Home Equity Fund I is managed by experienced real estate professionals and provides institutional-quality reporting, including:

• Ongoing updates on fund performance
  
• Details on underlying home investments
  
• Quarterly financials and asset-level insights
  

It’s a professional-grade approach that fits well alongside other private market strategies.

Where Home Equity This Fits in Your Investment Portfolio

Physicians seeking stability and long-term growth will find that home equity investing is a compelling addition to the alternative sleeve of a portfolio. Advisors often recommend allocating 10–20% of your portfolio to alternatives like private real estate or structured credit, and home equity can fulfill that role while offering unique benefits.

You may want to consider HEAs if you’re:

• Overweight in stocks and bonds and looking to rebalance
  
• Interested in real estate but not in managing tenants
  
• Concerned about inflation and seeking hard asset exposure
  
• Focused on long-term growth with a defined risk profile
  

Final Thoughts

By including home equity as a core component of your wealth-building strategy, you can potentially unlock greater returns, increase diversification, and reduce risk in a hands-off way. It’s can be part of a solid strategy to build long-term financial resilience.

If you think an investment in home equity may fit in your investment portfolio, I encourage you to learn more at Homeshares.

And if you are not sure if this fits in, I encourage you to dedicate some time to developing your written financial plan to help make informed and individualized investment decisions like this in the future. Here is my updated written financial plan if you need a cheat sheet!

And for more on different options to invest in real estate as a physician, check out these resources:

• A Real Estate Investing Guide for Physicians
• The Complete Physicians’ Guide to Real Estate Syndications
• 401k vs. Real Estate: Which Is the Better Investment?
• Should Doctors Invest in Real Estate Just for the Taxes?
• How To Actually Buy A Real Estate Investment Property

What do you think? Have you heard of home equity as an investment vehicle? Would you consider it in your portfolio? Why or why not? Let me know in the comments below!