Partnering with family a good idea when I don't have the funds?

Question

Alright so I would like to start investing sooner rather than later. I only have $10K in cash but I am currently in an entry level role with $38K Salary. I also have $4k in non- interest debt. My aunt & her husband have $20k accumulated, however I have the highest credit score out of the 3 of us and I am not sure if my debt to income will come in to play in this scenario. So I am curious if partnering would be a good idea.

I am not familiar with how partnerships work and if the returns would be better together or separately. Could we even qualify for an FHA loan or would it have to be a conventional 20% down type of loan.I am still very much learning everyday so pardon me if this is a novice question but I just want to know what experienced investors would do in this case.

Thanks!

Jonathan Bombaci · Answer

Yeah i think partnering in this scenario would work out well for both you and your aunt/uncle. The nice thing about real estate is that you're buying a hard asset together. As long as you clearly define roles of each person up front it should be a pretty good relationship.

You could qualify for a FHA loan but it would get a little tricky. To buy a 3-4 family you only need 3.5% down but you'll need 3-6 months of reserves after closing. Normally how this would play out is that you would be buying the house and your aunt/uncle would co-sign for you and then gift you the $ you need. Now they would be on the loan and you would own the house together but you would still want an operating agreement in place to clearly define how things would work and what roles everyone is going to play.

I think househacking is the best way to get started in real estate. You'll learn a ton and you'll do it with very little money down which greatly limits your risk. Best of luck.