So here's the deal, I have been interested in flipping real estate and possibly owning rental property as a business for some time now but have never dedicated the time to learning where to start or had the funds to do so. A few months ago my wife got a new job being a nanny for a family and the family has a few rental properties. My wife and I are newly wed and in our 20's and have bought our first home last year so naturally, we don't have much money and need and investor or some kind. So my question, should I ask the husband of the family my wife nannies for (btw my wife is an awesome nanny and they love her!) to invest in us to make a flip? Could that damage the relationship between my wife and them? Any advise would be appreciated!
I personally would not do it. Any souring of the relationship in one area can't help but to bleed through in the other. With a lack of experience on your end, the odds of a conflict or a major difference of opinion (even if it's on a paint color) are highly increased.
I agree a financial transaction could be a very bad idea. However I do think they could be a good source of advice. They approach real estate from a more conservative approach, but if it works for them, there are likely lessons to be learned.
Sounds like a great opportunity to get a mentor.
I say try to leverage the relationship. Express an interest in learning from them, rather than simply asking them to invest. Once you close your first deal (investment, not personal residence), keep an open dialogue with them about your experience and keep asking for advice.
When the time comes to close on a truly great deal, you will have investing experience and you will have built up a solid rapport with them. This is when you make a private money inquiry.
Unless you have the resume/experience currently, I think asking for private money is a horrible idea. You have to build the relationship and prove your worth.
I'm a firm believer in doing your first couple of deals by yourself. Think of it as proof of concept, not so much on the experience side, but on the money managing side. If you say you have no money, I may be inclined to think you can't manage your own finances, so there's no way I'm going to invest with you. But if you tell me you have no money because you recently picked up two three-units, then I'll assume you can at least manage your money well and my risk is somewhat reduced. See the difference?
Too often I see people saying they "need" investors because they have no money and no experience. That's a backwards thought - the real question is: why does the investor need you?
Gotta start somewhere, but believe me, you're gonna screw up your first deal 100+ ways. Save some money and do a small one to start. I agree that you should ask for advice and not ask for money and see where it takes you.
I'm a firm believer that if the deal is right, the money is always there. Get the right deal and call me, I'll fund it if it makes sense and there's money to be made. 90% of rehabbing is buying right. I've done well over 100 and still screw them up on the regular. I'm $12k over on one and $7k on another as I type this. Lost money on one last year. Second time ever.
When I got back in after getting knocked in the dirt, I bought a house for $14k, put $20k in it and sold it for $54k. Borrowed the buy from my dad and the rehab from my roommate because I was broke. Next deal was $165k buy, $8k cleanout, $295k sale. That'll right the ship pretty quick. Man, do I miss 2012. Got all of the money to do that deal from my (rather wealthy) roommate, because I borrowed $20k and gave it back with interest. He still funds most of my stuff. Moral of the story is you gotta perform, then that stuff will snowball. My real estate agent actually asked me if she could loan me money because she saw me borrow and pay back my roommate so many times. She took out a HELOC and gave it to me to do deals with.
I'd actually suggest borrowing the money from a hard money lender on your first one. That's not a plug, the lender will actually keep you from doing anything stupid. Borrowing from friends or relatives sometimes lets the optimism (and fake TV shows) paint too rosy a picture.
Thanks everybody for the advice! Ya I was reading through the forum's and material and I think I will find a hard money lender and talk to the husband to get any advice I can. Houston has always been a good housing market so I'm excited for what comes next!
I agree with what is said, sounds like this could be a guy who could be a mentor.
I will tell you that even through the person is a mentor to start it can evolve from there. My first mentor was just going to "show me the ropes" on his next deal and once he saw how eager, how hard I was going to work for it, and what I had already known about rehabbing he brought me on as a partner with another investor and we still are going strong 9 years later.
Most real estate investors usually are open to helping people out because that is probably how they started. I say you approach it that way and then build the rapport and see where it leads you.
Find a great deal and you will always get the funding. If they are true investors then they would be happy to help you. Why wouldn't they want to make a profit from your labor. You have more time than money and they have more money than time. Win win in my book. Matter of fact bring me a deal at 50% and I don't care who you are I'll JV with you.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.