Borrowing money from parents to get started?

New to Real Estate · Louisville, KY · Member since 2019 · 127 posts · 86 votes

Hello BP community-

Does anyone have experience borrowing money from their parents to get their foot in the door with real estate? How did it go for you?

Let me explain my situation. I am going to be a sophomore in college this fall, and living in a very expensive market. However, I also am hoping to begin house-hacking sooner than later, and would like to do this in the next few years. At this point, waiting tables over the summer I just about break even with college tuition and expenses (I live relatively frugally) and likely would not have enough money for a 3.5% down payment. My parents, however, have offered to lend me money towards a down payment if I am able to find a place that meets my criteria for a good house-hacking investment. Has anyone else borrowed money from their parents to get started?

4 Reply

251 views

Most Popular Reply

Gina SternPro Member

Investor · Boca Raton, FL · Member since 2019 · 1k+ posts · 160 votes

@Cory Carlson don't ever feel ashamed for using the resources that are available to you. The smartest people realize what they have and take advantage of a good situation. Good luck on your future endeavors!

[email protected]561-430-2616

11 Reply

See this reply in the discussion

82 Replies

Jump to latestLatest

Sort by

Isaac Pyle
OP
New to Real Estate · Louisville, KY · Member since 2019 · 127 posts · 86 votes
7y
@Jonathan R. I will keep that I’m mind. Thanks for putting so much time into this post!
1 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
7y
@Isaac Pyle There will be different opinions, you have to chose the one that works best for you. It is the same with buying a house, depending on what different people did, they may say buy a home vs rent, rent rooms vs rent the entire house, rent vs flip. The nice thing is there are many different options that people can do and they need to decide what is right for them...and that may change over time.
You are smart to ask for advice and do your research before buying a place.
0 Reply
Isaac Pyle
OP
New to Real Estate · Louisville, KY · Member since 2019 · 127 posts · 86 votes
7y
@Theresa Harris that’s true. Thanks for the reminder. I’ll have to do more research before I decide anything, but ultimately I will be the one that decides. Thanks for the input!
1 Reply
Grant Rothenburger
Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
7y
Originally posted by @Isaac Pyle:

@Jonathan R. Thanks for the input. I'm not saying I will or won't do anything yet, but I will definitely keep this in mind. I am sorry that is how it worked out for your friend / family member.. but both of those cases sound pretty extreme. This is definitely closer to having my parens "help me launch", not buying me a house or anything (they definitely aren't multimillionaires). But I will keep this in mind. At this point it's just frustrating because I make enough money from my summer job and other things to qualify for a pretty sizable mortgage, but prices are so high where I live that it doesn't matter.
@Grant Rothenburger of course not, I would have to be crazy to try to live off of any income from a house I am still living in. The idea is that my main other option is getting Student Housing from the college I am going to. Which is ~$1400 a month. This would be more money up front, but investing it into something that is mine rather than giving it to the school. Can you elaborate on Why your dad co-signed on your first mortgage with you? @Jonathan R. is making a pretty strong case as to why that is a bad idea.
@Theresa Harris That was my plan, although I have heard differing opinions from other people. Thanks for the input!
Again, just to clarify: I am not trying to start arguments saying who is right and wrong here, I am just trying to collect as much information as I can so I make the best investment when the time comes.
He has a great story, I respect the hell out of it. But people get handed stuff all the time and go on to make more out of it and succeed at high levels. Conversely, it also happens the other way and they blow it all (or snort it).
But the same is true for people who are handed nothing. Some work hard and are incredible success stories, others are in the same spot or worse than they started. The only constant is people. If someone wants to be a success and stays consistent, they'll be a success regardless of their upbringing (generalities here, always exceptions to both sides). If someone wants to party and blow money, they'll party and blow money and/or make really bad decisions that affect the rest of their lives. I would argue the difference between Jonathan and the others that blew it was a mindset, not property or money.
BTW, a lot of larger, syndicated deals are completed with a "co-signer" or loan guarantor, there's nothing wrong with leveraging other's bank statements to secure an investment.
All that being said, I was a business owner with decent income but banks didn't care because it wasn't w2 income and was only like 1.5 years of income. I wasn't as resourceful then as I am now with real estate (if I knew then what I know now, I'm confident I could get my own financing) so my dad co-signed for me. That was my first home and first investment as well. Made about $30k rehabbing while living in it.
2 Reply
Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
7y
@Issac Pyle
I am at 20%. I know of other investors that the best they can do is 25%. Depends somewhat on the bank, your relationship with the bank, and your track record.
Irish Jones Realty4.947 Reviews
View Page
1 Reply
Isaac Pyle
OP
New to Real Estate · Louisville, KY · Member since 2019 · 127 posts · 86 votes
7y
@Grant Rothenburger I see. Obviously it is ultimately up to me to decide what to do, so I am glad I am getting input from differing perspectives. Thanks for sharing your side of it! I am curious, if you don't mind me asking, what do you know now that would let you get your own financing?
0 Reply
Kristen Mathias
Rental Property Investor · Baltimore · Member since 2018 · 35 posts · 20 votes
7y
I am in the process right now of breaking into the real estate market. I am going to Grad school and am unable to work while in my program and will not have income. I have savings but its harder to qualify based on my lack of income while in school, so.. I am having my father help me as a co-signer. I have savings and will be able to make the payments with the help of roommates, but having my father help is such a gift. I was hesitant because it can be complicated, but it is such a help. And as soon as you are in, there is always the option to refinance to buy something else to increase cashflow or to just refinance to hold the property in your name.
BEST OF LUCK!
0 Reply
Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
7y
Longmont, CO is great area to invest! Not as spicy as Denver or Boulder. I don't have much to add since this thread is filled with good information. If you have good credit you can get a conventional loan with 3% down. I would only talk to local banks and credit unions.
Most people agree we're at the top of the market so tread lightly. You could be a good situation either way.
0 Reply
Grant Rothenburger
Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
7y
Originally posted by @Isaac Pyle:

@Grant Rothenburger I see. Obviously it is ultimately up to me to decide what to do, so I am glad I am getting input from differing perspectives. Thanks for sharing your side of it! I am curious, if you don't mind me asking, what do you know now that would let you get your own financing?
People lol. Loan officers, mortgage brokers, PML's, more flexible banks and the people to talk to at those banks.
0 Reply
Jonathan R.
Investor · Wichita, KS · Member since 2017 · 584 posts · 813 votes
7y
@Isaac Pyle and I‘m not saying don‘t keep your parents as an asset on your tool belt. I‘m simply suggesting to try to do your primary residence on your own. I‘m cool with partnering with Mom and Dad a bit down the line when you both know what you‘re doing. That is a win-win scenario. You can help make their life a bit easier by being a true partner of equals on non primary residence deals. I also can give into a co-signer on your primary or initial house hack, but you got to cut the apron strings asap by getting them off that loan. There is a lot to be learned by being resilient and cutting a path. Real estate investing is hard. It‘s going to be 5 years or so for me of living like I‘m impoverished to build something life changing. There may be times you‘ll need $100 to feed yourself, Mom and Dad are great for that. Look deep within and great things will happen. I wish I had found BP at your age.
0 Reply
Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
7y
@Isaac Pyle , I borrowed $1,500 from my parents for the downpayment on my first condo. (Pro tip: don't buy a condo unless you've vetted their reserves, management company, etc. I didn't. Big mistake.)
My parents had to sign a doc stating it was a gift, not a loan, but between us, we knew I would be paying them back and I did.
Are you familiar with the costs associated with buying in Boulder? It's really expensive, and if you're not from around here, you may be shocked at how pricey it is.
Longmont is a MUCH better option, still close to Boulder but without the prices. (We are doing our best to catch up, though.)
My advice is to hammer out everything with your parents before you buy. Who is responsible for property management? Paying the mortgage? Repairs? How will it be sold? When? Can you buy them out or vice versa? At what price? Who pays the mortgage if all the tenants leave? How will you handle non-payment of rent? Do you have a solid lease? (Hint: BiggerPockets sells leases specific to each state.)
Before the property is purchased, everyone's happy and lovey dovey. "What could possibly go wrong? We'll make so much money!"
But once the property is purchased, there are issues - there always are. Try to account for as many issues as you can while everyone is still excited about real estate investing.
[email protected]Podcast Guest on Show #261
2 Reply
Nathan Boyer
Real Estate Agent · Manheim, PA · Member since 2018 · 37 posts · 20 votes
7y
@Isaac Pyle Hey I am in a very similar situation to you. 19, in college, and my plan is to use some sort of financing from my mom for my first property. I cant qualify for a loan so I may need her to cosign. If I asked my mom to fund a deal a year ago she would tell me to get out of town. Since then I interned at a Property Management company, got my real estate, sold a couple properties and analyse investments for buyers. That being said, I've built up a lot of confidence to buy a property and am able to explain the whole situation to my mom and how one deal is a good investment. Now that she knows I am heavily invested into succeeding in RE and that I have a network of people to help me, she is more comfortable with helping me. Through selling properties I have build up some cash to put a sizable down payment on a house, which will reduce risk on her part, and I may partner with someone else to reduce risk even more. I want to be as responsible as I can with the money.
I don't think it's a bad thing at all, and as you know, 98% of college kids our age are concerned with fortnite and alcohol at this time. If we go down this route we will undoubtedly have to deal with people who tell us we were handed success. But as Elliot said above, smart people learn how to make the most out of their situation and shouldn't be ashamed of it.
0 Reply
Isaac Pyle
OP
New to Real Estate · Louisville, KY · Member since 2019 · 127 posts · 86 votes
7y
@Kristen Mathias Sounds somewhat similar to my scenario. I think the options once I am in would play a big part in whether or not I started. Proper exit strategies will be a must. Thanks for the well-wishes!
@Jaron Walling 3% down on a conventional? That sounds incredibly cheap. That is not FHA either? Do you have more info on that?
@Grant Rothenburger That is one thing that I will only get by experiencing more people. Guess I will have to wait that one out.
@Jonathan R. Thanks for the advice, I don't know what I am going to do yet, but I will definitely consider what you have written here.
@Mindy Jensen Firstly, I am not looking at a condo XD. Secondly, I am originally from Estes Park, and I know the market at Boulder is ridiculous. I am almost exclusively considering Longmont at this point. I haven't had a chance to discuss a large amount of this with them yet, but they got me started on BiggerPockets, so I am pretty confident if I do my research they are onboard. I am managing property, paying the mortgage, likely doing repairs, and in charge of reselling. I will definitely discuss the other points there with them. Currently, I am in school 5 hours away from them, so I can't easily discuss these things yet. Thanks for the advice!
@Nathan Boyer Sounds almost identical to my situation! It's nice to know someone else my age is on here, started to feel lonely XD. Let me know how you proceed from here if / when you do!
0 Reply
Grant Rothenburger
Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
7y
@Isaac Pyle Networking, going to meetups specifically will do amazing things for your business if you approach it the right way. You'll find more flexible lenders and loan officers at real estate meetups, probably even PML's.
0 Reply
Isaac Pyle
OP
New to Real Estate · Louisville, KY · Member since 2019 · 127 posts · 86 votes
7y
@Grant Rothenburger sounds like a great plan. I am not in the area yet, but I will be this fall, and fully intend to attend at least a few different meetup groups.
1 Reply
Syed H.
Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
7y
Nothing wrong with borrowing from your family for the first one. If you can make them money it’s a great feeling.
BUT, be careful. It’s one thing to lose your own money, It’s a totally another thing to lose someone else’s money, let alone your own parents. It’s a HORRIBLE feeling. Trust me, I’m speaking from experience here.
Even to this day, I only invest my parent’s $ into homerun deals. If there is some risk, I’ll cover it personally. I wouldn’t let them lose a dollar.
0 Reply
Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
7y
@Isaac Pyle yes conventional loan. I purchased a property in December of last year. PMI kinda sucks but it's only $40 per month! It's nice reading a thread like this.
0 Reply
Isaac Pyle
OP
New to Real Estate · Louisville, KY · Member since 2019 · 127 posts · 86 votes
7y
@Syed H. That makes sense, I wouldn't want them to lose a cent because of an investment I made.
@Jaron Walling I looked into this a little bit, the only way I could find a conventional loan for 3% down is if the property is a single-unit. I am currently only looking at duplexes in order to house-hack. Am I missing something?
0 Reply
Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
7y
@Isaac Pyle I am mistaken. It's only available for SFH. Sorry about that.
0 Reply
Patrick Philip
FL · Member since 2016 · 912 posts · 107 votes
7y
Originally posted by @Isaac Pyle:

Hello BP community-
Does anyone have experience borrowing money from their parents to get their foot in the door with real estate? How did it go for you?
Let me explain my situation. I am going to be a sophomore in college this fall, and living in a very expensive market. However, I also am hoping to begin house-hacking sooner than later, and would like to do this in the next few years. At this point, waiting tables over the summer I just about break even with college tuition and expenses (I live relatively frugally) and likely would not have enough money for a 3.5% down payment. My parents, however, have offered to lend me money towards a down payment if I am able to find a place that meets my criteria for a good house-hacking investment. Has anyone else borrowed money from their parents to get started?
Don't do it. It might seem like a good idea now, but if you don't pay them back they might break your shins.
0 Reply
Isaac Pyle
OP
New to Real Estate · Louisville, KY · Member since 2019 · 127 posts · 86 votes
7y
@Jaron Walling No worries! I just wanted to make sure. Thanks for the info anyway!
0 Reply
Melissa Gittens
Real Estate Broker · Windsor, CT · Member since 2015 · 1k+ posts · 268 votes
7y
@Isaac Pyle great question. I never borrowed money for my down payment but the option was always there. I would suggest that they make sure to give it to you as a gift or give you the money well In advance so that the money can season in your bank account.
0 Reply
Isaac Pyle
OP
New to Real Estate · Louisville, KY · Member since 2019 · 127 posts · 86 votes
7y
@Melissa Gittens Correct me if I am wrong, but it only needs to be seasoned if it is not a gift, right? If they gift it and sign a form (not sure how the papers would work), it does not need to season?
0 Reply
Tiffany Perry
Member since 2019 · 15 posts · 11 votes
7y
@Isaac Pyle
I would recommend that you not borrow money from your parents since you don’t have a steady job. Waiting tables is not steady money. If you get sick, break an arm, etc you can’t work and you get no income. In order to own a home, you need money for repairs in case something breaks, which it will. Do you have money in reserves for repairs? It sounds like you don’t. Don’t be in a rush to buy a home. Save up your money and then when you graduate and get a job you’ll have the steady money to save for emergencies.
0 Reply
Isaac Pyle
OP
New to Real Estate · Louisville, KY · Member since 2019 · 127 posts · 86 votes
7y
@Tiffany Perry Those are fair points. I don't see myself investing for a while anyways, just educating myself in what my options will be once I am presented with the opportunity. I have looked at numbers and figures prior to posting this, though, I do know that repairs are a very necessary component to consider.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.