Looking for some answers.

3 Replies

 I would like personal and professional opions, also I would like to hear from some people from the Chattanooga Tn and Ringgold Ga area.  Problem #1 my current cash money lender is my mom and I know, but this is something we had disscussed this before and I understand this is a lot of money to them and if it goes wrong it could hurt them. My two biggest problems are the time length it takes to get her to accept that this is a good deal and my numbers are good. The other problem is we are limited on the amount they have to lend and both are killing my deals before they start. Problem #2 is when I figure the problems with the house I fix the problems instead of covering them up unlike I have seen past rehabers do. I really like to sleep at night and the home owners, buying this house come first and foremost before my profits. Problem #3 this is a 3 partner deal, I have a contractor that works for me as a partner he gets paid by the hour not a lot but recieves 30% of the profits as well do I. My mom takes 35% and pays the taxes and she wants to do this to keep it in a lower tax bracket. So at the end because me and my partner do roughly 85% of the work on the home we need probably a little more money on the profit side to justify us working on the house.

The main question is do I need to look in a different route all together. The whole thing is racking my brain and I really need some advice as which way to go, all advice is appreciated and thank you in advance.

My personal opnion:

This business sounds a lot of stress into a relationship between all the "partners"

It sounds that you are feeling underpaid and your mother has the power to pull the plug on any deal that you find.

I would just scracth everything, and start from zero. Do a small for profit deal and build your investment power, maybe wholesaling for a while?

Write a clear business strategy, name the roles in the business and outsource some of the contractors, only if he is feeling underpaid too.

I would start over again, small, but this time or either you have a partner that works togheter to equal interestes or you have just a "lender" and make the big decisions yourself.

Best wishes

Val Garrow

My initial thought is to see if you can renegotiate the terms of the lending you are receiving from your mother.  If she is truly taking 35% of the profit, that means she is taking a bigger percentage than most of your hard money lenders out there (obviously this depends on how much she is loaning you, but you get the idea...the rate of return a hard money lender is seeking is typically not going to equal 35% of the deal's profit).  This is counter intuitive considering most people I work with that use hard money are doing so for one of two reasons: (1) they want to leverage their cash across multiple deals (the smart play), or (2) they have no other means to getting into a deal so they HAVE to use hard money.  The people that don't use hard money and don't have cash of their own fall into a third category - these are the investors that have a friend or a family member that will lend them money at a friends and family discount.  It sounds to me as if your mother is acting as a lender, but expecting a payoff as if she is a partner.  So, that is my suggestion.  Have a very real conversation with you mother and see if you can renegotiate the terms of your agreement.  Find a set rate of return that you can both agree on that you will pay her on the dollar amount she lends you.  

I wish you the best man.  I'm always free to bounce ideas off of, just reach out.  

@Mat Farmer the reason she is talking the 35% is to absorb the taxes that will be owed, I think she said her tax bracket is 22% due to her age, but I really think like Val Garrow I think I need to go a different route i think having a partner is good and I think I will keep it that way but I think I need to look for money lenders in my area.

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