Interest payback on family loan to get started

8 Replies

Hello All! I'm new to BP and am absorbing all of the great info on this site. I want to focus on fix & flips, but I have little to no money to get started. I'm thinking of swallowing my pride and asking my father for a 25-30K loan to get started. This amount would be my "skin in the game" for a hard money loan. My question is this... What is the best way to structure the payback of this loan to make it of benefit for my father?

I think that instead of just asking for the money outright, I would find a deal that you have already contracted, use the financing contingency as an out if you cannot get the funds, go to your Dad with the deal and show him the potential profit with hard numbers (sold comps, repairs, expenses, etc.).  This way you have something solid for him to appreciate. I would explain to him that he would be protected by a first lien position in the property and you could structure the payback as an equity split on the back end when you sell it.  Say 50/50, 60/40 or whatever is comfortable for the two of you.

I'd say: find another way other than borrowing from your father...especially since you have not done this before.  So many things could go wrong and you would risk losing his money.     Then what?!

I'm with Art.   If you have no experience doing flips, working in real estate or working with contractors.   You run a very good risk of making serious mistakes.  

No company avatar mediumBrian Mathews, Brian's Heating and Cooling | [email protected] | 512‑350‑8704 | http://www.brianac.com

Art A. & @Brian Mathews
I'm considering a hard money loan that offers 90% of PP + all rehab costs. I realize that hard money loans require "skin in the game". I have only 6K in reserves and am thinking my initial out of pocket investment will be closer to 20K or more. Other than borrowing from family, what might you suggest to get started? Any thoughts would be appreciated.

I'm ok with borrowing money from anyone who will give it...But I think you need to bring something more to the table.

Maybe try to find someone in the business to partner with. Maybe consider becoming a real estate agent so you can have some experience negotiating and closing deals. Maybe you simply bring an Amazing deal to the table. 

Originally posted by @Rachel Gill :

Art A. & Brian Mathews
I'm considering a hard money loan that offers 90% of PP + all rehab costs. I realize that hard money loans require "skin in the game". I have only 6K in reserves and am thinking my initial out of pocket investment will be closer to 20K or more. Other than borrowing from family, what might you suggest to get started? Any thoughts would be appreciated.

Be patient and save it up or get a 2nd job.   The problem with borrowing money from a family member is that Thanksgiving dinner tastes different and anytime you buy something for yourself or take a vacation, you will feel scrutinized.   It will change the dynamics of your relationship with your father.  It's not worth it in my opinion.  I don't borrow or lend money to family members.  If I have it and can afford it, I'll give it to them, but never will I lend.

No company avatar mediumBrian Mathews, Brian's Heating and Cooling | [email protected] | 512‑350‑8704 | http://www.brianac.com

First off I am with the others that your first fix and flip is probably not the best deal to borrow money from your parents on.  I have done that on a place, but it is a buy and hold with a written five year loan at 5% interest which is better than they could get at the bank, but better than I could get on an investment mortgage.  Both my parents and I also have experience doing buy and holds so we know what to expect.  In the future we will probably do regular partnership deals.

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