Private investing from parents?

Question

Hello all! I'm a new investor who's looking into private lending to begin my journey into BRRR investing in single family houses in my area. I'm 26 years old and have been financially independent from my parents for six years. My dad owns a local painting/drywall company, and has expressed willingness to borrow against his house's equity to help me get my first deal.

To add context, myself and my dad are not going about this as if he's "doing me a solid". We want this to be mutually beneficial so he can get a return on investing in the flip-and-hold. What are some general ways that I can work out a model that gives my father a worthwhile return?

Also, if someone is experienced in house renovation, are banks generally willing to do an equity loan for house flipping projects? Thanks for the help!

Spencer Abeyta · Answer

Hi Andrew welcome to BP!

There are a couple ways to give your dad a worthwhile return. You could borrow the money from him that he is pulling out of his house at a higher rate than it costs him. Example: If a HELOC costs him 5% interest you could borrow the money from him for 10% interest so he would be making 5%. Another way would be to partner on a deal and split equity however you two seem fit. He brings the money and you bring the deal is a good way to go about it. And because you want to do a buy and hold you could split cashflow with him so he would be making a return on his money.

Andrew Graham · Answer

Much appreciated. Thanks!