What should I tell my Dad?

Rental Property Investor · NM · Member since 2017 · 38 posts · 32 votes

5y

Let your dad know the benefits! Tell him what your bringing to the table. Let me rest assured that your knowledge of real estate and work ethic will mean that the income from the investment will be highly passive to him!

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Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

5y

It's your father. It's OK to lose money in order to help your father. Sooner or later, with more experience, if what you say is true, your father is going to see that what you are saying is fair and agree to adjust the share percentage accordingly. But for now, do it his way.

Of course, I'm saying this from a different perspective from yours -- my dad's dead. He died when I was in my twenties. I don't think you're factoring this possibility into your calculations to make more money, and you should be.

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Matthew Irish-JonesBusiness Member

Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes

5y

@Christian Walker he’s your Dad, help him for free. If you do a fantastic job you should be able to inherit some of the wealth building you help him with today some day in the future. In the meantime your dad will get the benefits, assuming there are some, of all his hard work and savings for decades.

Until then... would you really want him to pay for your knowledge? Do you have specific knowledge he can’t find through a professional real estate agent, and property manager or other professionals in the field?

That is normally what professionals with tons of experience do, guide people with money but, much less experience into good investments.

Seasoned professionals get anywhere from 3-6% of a sale as a one time fee. Property managers get 10% of Rent and can be fired for not doing a good job.

Why would he give up 50% equity if he can get a team of pros for less?

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Christian Walker

OP

Investor · South East Texas · Member since 2019 · 65 posts · 11 votes

5y

@Matthew Irish-Jones

Thank you for your response, it’s just hard on me too because I have bills and stuff I need to pay too (and have other people willing to partner up to make that happen).

I want to build up together but it’s kind of hard on my side as well. I have information and different routes that most people in my area don’t know how to do. Like not to sound like I have all the knowledge and have the “pathway to success” (because I don’t) but I’m here teaching huge million dollar investors methods that might work in their systems that they didn’t have any idea existed.

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Mack BensonPro Member

Rental Property Investor · Woodbury, MN · Member since 2018 · 299 posts · 299 votes

5y

My first reaction is that this is business but then I read the previous posters and they seem to tug at the heart strings. With that said I think it's noble to want to help your dad but... this is business. I don't think you are out of line with a 50/50 arrangement as long as your justification is logical and you aren't trying to railroad him. If you have offers from other investors for that sort of arrangement then I think it is more than fair to expect the same from family. As long as you provide the value you think you do and can present a business case I would find it hard pressed to argue against it.

If this wasn't your dad and if you weren't his son what would an arrangement look like? If the only reason an equitable split is not an option is because you are family it would be cause for me to hesitate too.

Something you might try is come to an agreement other than 50/50 for the first purchase until you prove your worth. Another thing to consider is what the difference between a 50/50 vs 60/40 or whatever other arrangement is on the table. Does it make much of a difference in the long run? Would it be worth taking a smaller split to help out? I think you are the only one who can answer those questions based on your goals and situation.

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Marlen Weber

Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes

5y

Amazing advice on this thread already, but do what you can to ensure that your dad won't be struggling in 2 years when he doesn't have a job. In fact, if he is financial secured you might have an easier time as well. Of course, I understand wanting to grow your investments as well, and you'll get there. Lead this situation with your heart and the rest will follow. @Christian Walker

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Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

5y

Originally posted by @Christian Walker:

@Matthew Irish-Jones

Thank you for your response, it’s just hard on me too because I have bills and stuff I need to pay too (and have other people willing to partner up to make that happen).

I want to build up together but it’s kind of hard on my side as well. I have information and different routes that most people in my area don’t know how to do. Like not to sound like I have all the knowledge and have the “pathway to success” (because I don’t) but I’m here teaching huge million dollar investors methods that might work in their systems that they didn’t have any idea existed.

The more you write, the sorrier I feel for your pops.

12 Reply

J. Mitchell Bernier

Lender · Southwest Georgia · Member since 2017 · 312 posts · 278 votes

5y

@Christian Walker My initial thoughts are be man to man. Tell him straight up what type of partnership it will be. I have found that when doing business with family, the more you treat it like business the more they respect you. And if at the end of the year you want to give him “a bonus” so be it. I know it’s tough but the sooner you treat him as a equal the better.

Good Luck!

1 Reply

Alexandre Marques dos Santos

Rental Property Investor · Member since 2020 · 215 posts · 137 votes

5y

@Christian Walker

When you say 50/50is from profit? If so its super fair.

What u need to explain is how things works. A property manager charges 10% of rental. Considering tax, maintenance, mortgage, this can be as much as 50% or more!

And another important, u bring knowledge and he can trust you. And you get paid only if theres profit!

0 Reply

JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

5y

Originally posted by @Christian Walker:

Hello,

So I am kind of stuck on an issue that I could really use your help on. So to have a quick recap, I am currently an investor and have 2 properties with one if them being a partnership with my dad. I have a ton of knowledge but not much money. My dad is about to lose his job in about two years and wants to get enough rentals to get him safe. He asks me for advice now with what he should do. He is semi knowledgeable about the subject. He has 1 property of his own. I have a lot of knowledge and pretty much know what I’m doing. I want to help him but go in half’s on the deals we do together. But he thinks that 50/50 is too much. There are other investors that have come to me and have said that they want to go in half with me. But I want to help family out first. What could I say or do to convince him that 50/50 would benefit him and me. I’d hate to go and leave him high and dry but I still need some advice.

Disclaimer: this post is not for everyone. Side effects may include nausea, cramping, fits of rage, melancholy, and other consequences. Check with your inner child before proceeding.

1. If you have that much knowledge how come you only have 1 investment of your own?

2. Why is your Dad losing his job in 2 years? Forced out because of age? He's quitting on his own?

3. When you say 50/50, are you talking 50/50 money or 50/50 he's putting up the money and you're putting up your knowledge and systems?

To me, for the most part on partnerships money talks. If there's 100k in a deal and each side put up 50k then it's a 50/50 split. If one side puts up 70k then it's a 70/30 split. If there's *real* knowledge that can be quantified - i.e. one party does all the GC stuff because the other one has a job or is clueless - then that knowledge should be quantified and compensated accordingly. If a GC would cost 10k to oversee the renovation, and you do it just as well and just as cost-effective, then you should be compensated 10k.

What I mostly see is people who have dubious claims of knowledge or expertise attempting to use that as a lever towards partnership when they don't have any money. At the end of the day, it takes dollars to buy real estate.

As for your father, what is his plan to buy more rentals and how will that keep him going once he loses his job? Unless he has a ton of money socked away, the cash flow from an additional house or two isn't going to make a big dent in his life. It sounds like his plan needs some tweaking.

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Jason P.

Investor · Bay Area · Member since 2020 · 42 posts · 19 votes

5y

@Christian Walker maybe I’m not understanding this. I read it as he is putting the money down and you’re putting experience?

If you have others that want to partner 50/50 then jump on those as well as helping your dad out. Family first IMO.

4 Reply

Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

5y

I'm sure you have more than one deal, so why not help him? He is your dad.

I don't know why he's losing his job in 2 years, maybe he's retiring, but that isn't a lot of time to plan.

1 Reply

David M.

Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes

5y

@Christian Walker

Honestly, this is a personal matter for yourself. Your own personal ethics/morals need to govern.

That being said, I agree with the other posts in that your partnership arrangement with your father is not clear. Furthermore, your profile says you are new to the REI, have some 2 years of experience (not sure how that is calculated), and in business school. How do you have tons of knowledge?

Aside from how a little bit of rental income will really help out your father... and my starting statement.. Have your done your cost benefit analysis and/or some sort of alternatives analysis? I don't know what you are studying. But, maybe as a family you could do better if you go with other partnerships, he preserves his liquid cash (assuming he was putting it in), and you help subsidize your father's retirement. Or, maybe its better to partner with your father so when he passes away his interests gets a step up in equity (sorry to be morbid, and also since I have no idea how you are partnering I'm not sure how/if this is applicable).

Since its a non-spousal partner, how would divy up the proceeds anyway come tax time without a legal entity and subsequently have to pay for commercial loans?

Look, like I said, this is a personal/family value issue for you. After that, if you want to look at the business case, there is a ton of aspects to look at. Understandably, you don't want to be putting it out on a public forum, but there really isn't a lot to go on here. Good luck.

0 Reply

Fred Cannon

Rental Property Investor · St Augustine, FL · Member since 2019 · 264 posts · 279 votes

5y

@Christian Walker. Lot of information missing but here is my .02 as a Dad, and as an investor in RE. As a dDad it would be great to have this type of relationship with a son or daughter. I would actually be helping them out in the long run by building wealth that could be past on. As an investor on a fixed income I would welcome being a partner on a deal that I could afford and be comfortable with.

I think there are other things your Dad can help with. Showing the property when it's vacant, making minor repairs or doing maintenance between tenants, etc. As an investor you know there is a long check list of things to do between tenants. You Dad could handle those in retirement, giving you peace of mind and keeping him busy. A big win all around, especially as your holding grow to 4 or more homes. I think your Dad has more to offer that a 50/50 partner. Consider yourself lucky for his offer to partner with you.

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Matthew Irish-JonesBusiness Member

Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes

5y

@Alexandre Marques dos Santos. Not really because a property manager does not become an equity partner at 50/50 and you can fore them for performance issues.

Good luck firing your son who also happens to be a 50/50 partner.

I don’t know if any professionals getting a 50% equity share for knowledge. Sound advice to his father would be to pay an agent and a PM company, keep all the equity and manage the professionals that manage your assets.

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Michael Noto

Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes

5y

Assuming you are tight with your dad and the relationship is good I would do what I could do to help him. Think of all he's done for you. If you are not close with him, treat him like you would every other business partner.

1 Reply

Alexandre Marques dos Santos

Rental Property Investor · Member since 2020 · 215 posts · 137 votes

5y

@Matthew Irish-Jones

Doent seem you understand my proposal. I never advise to have 50-50 equity.

In fact if you read my post i ended up with 20-80.

I saw some posts mentioning 50-50, but i think this proposal to be obscene. Who will give that equity after putting 90% of the cash?

50-50 on profits i think its fair. This is because he wont get commission, he will do most of the work, and he will enter with 10%.

Good luck

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Josh C.Pro Member

Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes

5y

If your systems are such gold and everyone is all over you as you say then go do that and give your dad some free advice.

My partners parents have some rentals that we charged 0% commissions helping them buy and 0% property managements (forever). It reminds me of the times I paid 0% for room and board growing up.

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Alexandre Marques dos Santos

Rental Property Investor · Member since 2020 · 215 posts · 137 votes

5y

@Matthew Irish-Jones

Sorry mixed posts...lol. Will make same rational on here...

I still mentioned 50-50 from profits. Not from the capital. The equity needs to be treated differently. If there will be a rehab it changes...

If you buy and rehab a property, lets say you can make as much as 30% profits.

After buying you have 130 of a 100. If you put zero and he puts 100, then splitting profit, you have 115 for him and 15 for his son. Then 15% of the equity is fair

If the son put 10% and dad 90%, then you have 25/130 and 105/130, which is closer to 20% equity.

Again, 50-50 from profits is not from equity!

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Aigo Pyles

Flipper/Rehabber · Memphis, TN · Member since 2020 · 758 posts · 285 votes

5y

For me, it depends on the amount of money you are investing. If you are putting 50% and he is putting 50% then the split would be 50/50. Since he is your dad in the first place, so your efforts can be counted as a help. If he is putting 60% of the money and you are putting 40% of the money. Then it should be 60/40, 60 for him and 40 for you.

0 Reply

Brian Ploszay

Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes

5y

This is your father. Your family is important and you can help him. However, do not do any deal that would stress out your relationship. Be on the exact same page.

2 Reply

Blaine Alger

Investor · Waco TX / Conroe, TX · Member since 2017 · 376 posts · 228 votes

5y

Check out doing an equity split.

Your dad will get a loan and bring the down payment and then yall split the cashflow but you use your cashflow to pay him back until yall are 50/50 in the down payment. From there, you can just keep the CF.

Check out this BP article, it gives a better rundown of the structure:

https://www.biggerpockets.com/...

-BA

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Nat C.

Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes

5y

Sorry to sound harsh but you are not an experienced, hot shot investor when you own 2 properties. Not even close.

These days people are listening to real estate podcasts and suddenly they think they’re an expert.

You sound like the epitome of an entitled millennial. I barely know where to begin.

Your father no doubt financed your living expenses for at least the first 15 years of your life.

If all was fair and even and 50/50 you would have paid him back the costs incurred plus interest.

It is an honor for a child to be asked to help their parent at any age. In most cultures, this would be seen as a privilege for you to have such an opportunity.

A couple of years ago I helped my mother find 2 investment properties and then I managed the entire remodel project and found qualified tenants. I also paid for most of the remodel. I would not even consider asking her for some ownership stake in those properties.

It was my DUTY to help her. I felt grateful I had the opportunity to pay her back a little. I was extremely happy to see her taking what she’s considered was a risk and steps to fund her own retirement.

I could go on and on about the lack of respect and appreciation of parents and the elderly in western culture but I’ll finish here.

32 Reply

Fred Cannon

Rental Property Investor · St Augustine, FL · Member since 2019 · 264 posts · 279 votes

5y

@Nat Chan. I was thinking the same thing. " what an ungrateful kid". But there is not enough info in his post. Not sure what he means by 50/50. Is that equal cash or maybe something else. If the Dad is putting all the money the kid should be happy to help him for zero, just like you helped your Mom. Also not sure how you can be an expert at investing with just one property. Maybe he watches late night TV. I do wish him luck but I would advise his Dad to look for a better partner.

4 Reply

Chelsea Conley

Real Estate Agent · Rye, NH · Member since 2019 · 13 posts · 6 votes

5y

@Christian Walker

You could Get him to agree to a starting “contract” but in it, place a contingency to renegotiate x after x time after the project is started. Do so much work and be so good that it would be irrational and impossible for him not to re-negotiate at 50/50.

If losing you on the project means not finishing, I’m sure he’ll come to that conclusion.

Less percentage person means it makes it easier for that person to step away for a better offer, he should understand that.

family and business can be hard so if you do it —- put lots of “stop signs” in place for renegotiation and formal check ins down the road.

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What should I tell my Dad?

What should I tell my Dad?

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