Over the years, one of the most common questions I receive is, “How did you get started in real estate investing?” I can answer this question in a lot of different ways. But to be perfectly honest, we would have never been able to get going if it were not for my father-in-law (future father-in-law at the time). He loaned me (and my then-fiance Liz) $30,000 to buy our first investment property, which was a duplex in Philadelphia, 12 years ago.
Related: How to Win Over Private Money Lenders or Partners for Your Deals
This was the beginning of our investing career and also the beginning of utilizing family members’ money and private money to buy investment property. Most often when you get started and are growing your investing business, family is a likely place to go in order to pool money together for down payments and equity. And it makes sense since family members already trust you. Having family loan you money or become partners with you in your projects can be incredibly helpful for your growth. However, investing with your family’s money can also cause problems and issues. The last thing you want to do is get your family member into a deal and then lose their money.
Related: How I Find Private Money Lenders to 100% Fund My Deals (& How You Can, Too)
5 Tips to Avoid Issues When Investing With Family Money
There are a ton of do’s and don’ts when it comes to this topic of investing with family member’s money. Hopefully these five tips help you avoid any problems down the road.
- Put everything in writing.
- Have an exit strategy.
- Send regular updates (like you would any other private money investor).
- Have a detailed plan in place (don’t just take the money).
- Start small and don’t bite off more than you can chew.
Have you ever invested using family money? Why or why not? Any tips you’d add to the list?
Let’s chat in the comments section below!