Family Deal good idea or no?

3 Replies

Hello All! I am new to this website and my husband and I are very eager to get started investing in real estate as we are in our late twenties! We don't have much saved as we just purchased our own home. Therefore, my husband has an uncle that is wanting to help us get started investing by giving us the down payment for our first investment property for 50% of the profit we make each month. Does this seem like a fair deal? I don't like getting involved with family and money but my husband feels like we have no option right now if we want to start investing right now. Advice needed please!!!

50% of something is better than 50% of nothing. :-D

Real question is what is your relationship with the Uncle and how did he become interested in "helping". If he's got more experience than you and your husband, it might be a safe way to start getting involve in the investing arena assuming his interests are aligned with yours.

What other options are you considering? (Rhetorical question)

Weigh your alternative and get involved in a way that you are most comfortable with.

I've got a partner that I split 50-50 with but he has the general contractor (GC) experience & I have the Finance experience (and my wife has the vision that neither of us have :-) ).

Until you can stand on your own, you'll likely need to partner up with someone (e.g. Banker, Private Lender/Hard Money, GC, etc.) whether or not you call it partnering or not....they will still take a cut of the profit on your way from purchase price toward After Rehab Value (ARV) and thus share in the deal.

Family might be a little more lenient than say a hard money lender but that's where family relationships get a bad wrap. Family can feel like they are being taken advantage of and there is more at stake than a business relationship with them.

Managing expectation of all parties to the deal and being transparent builds relationships (Family or not). The big difference is feeling uncomfortable at family functions if a deal goes poorly. You don't have to worry about seeing a non-family partner at a family functions.  Honesty & Integrity (and your Uncle's understanding that you are in a learning phase) should go a long way to making issues palatable when that undoubtedly arise. Fortunately, if the first deal goes well or not, you'll likely know whether you'll do another deal with that partner. :-D

Best of Luck! Cheers!

-PRJ

I would start with this.   As long as your Uncle and you all are all on the same page then Paul is correct.   50% of something is worth more that 50% of nothing.  You all are beginning.  To have financial backing like this is golden if you take care of it.   Make sure its a fair deal down the line.   You also may want to consider giving him a return on his investment as opposed to giving him 50%.    Make it an attractive enough percentage where he makes a decent return on his money.   If you all can create cash flow for him and yourselves pretty soon you won't need his help.   

@Chelsey Jimenez   As others have mentioned, having a line of money when you start out can be a great thing.

Keep in mind though, you have to be good with the fact that the uncle in this case is going to take 50% of the profit while you presumably deal with all of the day to day stuff.  Maintenance calls, rent collection, tenant disputes, etc..  If you are OK with that and you and your husband won't resent the uncle in the process for not having to deal with the everyday stuff then I say go for it.

The way I see it is he wouldn't be able to invest without you dedicating your time and you wouldn't be able to invest without his money.

Michael Noto, Real Estate Agent in CT (#RES.0799665)
860-384-7570

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