What should I tell my Dad?
Investor · South East Texas · Member since 2019 · 65 posts · 11 votes
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.
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.
@Christian Walker helping your dad with advice doesn’t take money out of your pocket. Why wouldn’t you do it?
Also, if he can’t afford to live in 2 years, he’s likely to ask you for money or a place to stay. I’d give him the advice, man. It’s a lot less invasive.
@Christian Walker help your dad man. Money is good, but family is more important. I'm sure he made sacrifices for you during your life, now it may be time to return the favor. If you can't convince him to do 50/50, then find some type of compromise. Maybe partner with him on just a few deals. Help, but don't sink yourself.
@Christian Walker
If you have other investors willing to split 50/50 and they're putting up all the money, Then do that and maybe offer your dad a good return on his money like 12% in first lien and do some flips. I don't think 50/50 is fair or unfair but I do believe if you're begging for money right now when it's basically free you're doing something wrong lol. Help your dad and run your business you can have more than 1 partner.
@Christian Walker my suggestion is to listen to this podcast that aired recently (the first part where the guy went in 20% for the first deal). If you want to help him, perhaps do 20% or 30% on your first couple of deals. Once you have proven your value and helped your dad you can go 50/50. My two cents.
@Christian Walker
I would take a lower split for some time until he gets himself settled as well as you start making some money in those deals. Will you be just renting with him or flipping?
Once you have more money then you can go in at 50/50 deals with your Dad and you’ll have the opportunity to have a better portfolio to show more than to just say you have knowledge. I feel that’ll bring you better opportunities with the others investors as well who are offering you 50/50 right now. IMO
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.
Hi Christian,
However you and your Father work this percentage thing out, it would be intelligent to look into each of you having a living trust set up to handle these (and other) assets in case something happens to either of you.
Just my 2 cents.
I didn’t read through every single post but one thing that might be helpful is to run your dad through the same process you would with other investors. Sometimes, I’ve found that we skip some the important “process” steps with family because of relationship and they don’t get what value we add to the deal. After you run through the entire process, then open for negotiation. If he wants to keep more of the split, maybe that means you offer less of your service. What’s most important in transactions with family is that you all completely agree and don’t feel resentment about any part of the partnership. Otherwise, it comes up, even if everything ultimately goes well, and that’s not worth the negative impact on the relationship.
Hope that helps.
As an expert investor have you talked to your dad about the risk of investing all of his savings into real estate? You mentioned he will not have an income in two years when he retires. There are many red flags in your post and that is one of them.
It sounds like your dad needs to build more reserves prior to risking his retirement on flips and BRRR. He may want fast and high returns but considering all that you shared, it's too risky for him. If he must invest, at this stage, turnkey may be a better option for cash flow since they are lower risk.
You also mentioned that you have the stress of bills that need to be paid. It really sounds like both of you have a money/ personal finance problem that needs to be addressed first.
Communication is so important in any relationship and your communication is another area that needs improving before attempting to structure any deal.
Self reflect and be honest with yourself about your level of expertise. Work from a space of knowledge, confidence, gratitude, and openness to learn more. Right now it sounds like you are coming from a place of entitlement, over confidence and financial insecurity. You’ve received a lot of great advice in this thread; listen to it and you’ll be fine.
Best wishes to you and your dad.
@Christian Walker unless you are paying cash for these rentals no way 9 homes can generated 6k a month. These post are all over the place with no background information.
@Christian Walker - Several actionable thoughts for you. 1. Sign up for an online real estate agent class and get licensed ASAP. Hang your hat with a cheap brokerage that gives 100% commission and charges a flat fee like $600/deal. Then you can get paid 2-3% gross purchase price ($3000 per $100k - $600 flat), for every deal you help your dad buy. Plus you can get into properties immediately and lock up great deals as soon as they hit the market. This may help you “pay for your life expenses” and it doesn’t cost your dad anything unless you fail to negotiate for repairs and lower purchase prices as well as a more experienced agent.
2. I’ve done 50/50 PROFIT splits on rehabs with an investor partner. Like you and dad buy a house together, you find the deal SO GOOD you could wholesale it for $5-10k but you KEEP it, then you manage the whole flip as the GC (so you’re not paying someone a 20-40% overhead) and dad provides 100% of the money, as an agent you sell it for free on your side and only pay buyer commission, and you two split the post-sale profits 50/50, like you keep 25k and he keeps 25k. You owe him extra % split if you take longer than x months like 6 or go over $$ budget. That’s fair to me. But everyone’s version of fair is different.
3. If your dad’s burn rate is $72,000/year in retirement, his life is too expensive. At a 4% withdraw rate he’d need like 1.8M in invested assets at the time of retirement. I think He needs to read Dave Ramsey, sell expensive cars/trucks, adopt a side hustle where he can deduct his vehicles, travel, health insurance, etc. Let’s say his ultimate burn rate is closer to $40,000/year. How many properties does he need to net this?
4. If he’s retired, he can do more PMing or GCing so you’ll want to switch what work he’s doing in Your business. Can he fix up or GC some rehabs for you? Most refinery workers are pretty good problem solvers. Also you’ll want to keep your dad busy and productive. I’ve heard bad things about people dying shortly after retirement because they don’t have a sense of purpose or value and they waste away doing nothing but eating Cheetos and watching tv until they have a heart attack a few years later.
5. Refinery workers make pretty good money. Can you work together to raise capital to buy some larger deals via syndication and he can benefit from his current network before it goes away? I’m sure they’re all interested in having stable income going forward.
Good luck. Let us know how it goes.
Thanks for asking the question. This forum should be a safe space for people to work through thoughts.
Given that it is your father, I would recommend that you give your expertise for free. Just imagine sitting down and having thanksgiving with your family, enjoying a great meal and a nice time and the saying “mom, that meal was great, let me give you $50”. Some things are just not about the money. You may not remember it but as a dad to a four year old I can say your old man gave you a lot of knowledge growing up. As best as humanly possible, avoid bringing market economics into your household relationships.
If you are going to be actively managing the property, then it does not seem unreasonable to take 10% of the rent. However, you might actually be better giving up that 10% and having a pro property manager do it. Depends how much you price your time out at, really.
As other mentioned, you are really just investing forward, as I dare say one day the place will be yours and your siblings.
Take full ownership of your choice, whatever you do. You don’t want to resent anything down the line just because some folks on bigger pockets said x or y.
when did a no equity partner ever get 50/50? im so lost. ill try and not call you an entitled millennial because i hate that term. but at most you should get 20% ownership and that is because he is being generous. business is business. 50/50 would be you taking advantages of your father.if you have other investors who want to give you 100% financing and give you 50/50 split please send them my way ill do 70/30 me getting 30 all day. you have bills so charge him 10% property management like a typical person would and make the other 10% on sales.
can you break down how you think finding the deals and being a PM is worth more then 20-25% maybe that will help people give you better responses. right now you just sound like someone who has a little knowledge and thinking he is meet Kevin or Grant Cardone
@Jonathan R McLaughlin
Thank you for your response! Okay I’m going to try to hit all your points. He is losing his job because the refinery is closing down. He needs about $6000 per month to live comfortably. Which is roughly 7-9 properties to make that happen which is very doable in my area. He doesn’t really have other options beside trying to find a new job. This is primarily to help him reach that goal because I want him to achieve that without worrying. I would love for me and him to build the business together and both benefit from it but on my side I’m kinda getting the short end of the stick. Because I can go elsewhere to make that 50/50 happen (but I really don’t want to do that). What I’m really looking for is advice on how to pitch a 50/50 partnership together. I don’t want to mess up a relationship in the process too because I hear business and family is a very tight rope. Hope that covers most of your questions.
You can go anywhere and make the 50-50 split happen. I am simply quoting what you said. Are you saying y’all are both going to sign the loan and put down cash at the same amount. If he’s trying to buy rentals that is different than flipping together. You didn’t verify what exactly your business plan was. The more you miss mentioning that the more I think you’re green. Do you know how you are going to build your business? You speak of other people that are trying to go with you 50-50 Which is hard to believe unless you’re good at talking big game with folks that have less than two properties. I understand that if you build up a real estate business you want to profit from it, but you have not identified as of this post what exactly you are going to try to do as far as build a business.
Dude...talk about karma and bad energy....
The simply fact that you posted this, is for 2 things: Attention and more attention....I would never understimate people even when they do or say the most stupid things....My friend (who was an HR Regional Director for Home Depot for the entire Florida Region for 25 years) once upon a time told me: Before I give your first Managerial position Luis "ALWAYS and ALWAYS remenber that everyone has an agenda"....and honestly I do not think this post is an exception...
I am sure you are quietly smiling at all the replies including mine...Kudos to you Christian! I am sure after getting all this feedback nothing will stop in becoming the most sucessful son a father can have....
On the opposite side of this..I wish your dad the best of luck!
Oh...I forgot to ask you this: arent you going to end up with everything anyways?
Well the world don't move,
To the beat of just one drum,
What might be right for you,
Might not be right for some.
But still, I am put in mind in mind of stories of WWIi and my grandfather. My dad was born in 1939. The Stukas started dive-bombing my grandfather's village in 1941. My grandfather would run out to the fields, holding the baby, away from the village homes the Stukas were targeting. As the bombs fell, Grandpa would put Dad under him and lie down over him to protect the baby with his body from a stray bomb or shrapnel. And this went on, night after night, week after week, bombs exploding, people screaming, mayhem everywhere, and the Jericho sirens wailing over all...
Would my father have done it for me? Not a single question in my mind about that, of course.
Such misguided sadness in this thread. How far from the values, the promises to the people I love, that led me to real estate.
@Christian Walker
50/50 seems crazy to me unless you are also providing the financing. Sure you bring experience, but asking for 50% is nuts. Let's suppose you buy a house together for 100k. If the partnership fails, which many do, then you would need to sell. So your dad's 100k gets divided i half.qnd he now has 50k. How is this helpful for him? I would think you could charge him a reduced rate for the different help you provide. You act,as real estate agent, charge a percent or 2. He saves so.e money, you make money. You manage property, charge him as a property manager, but discount some as he is family.
"Yea like he funds the deals, that's all." this one statement speaks volumes to your youth and inexperience.
My BS detector went off right away when I heard the comment about "millionaire investors" wanting to work with you. Then I looked at previous forum posts and two months ago you post the topic that you are having problems finding lenders.
My guess is you are looking for someone to fund your projects. Take whatever deal dad offers and consider yourself lucky.
@Christian Walker
I'm going to go against the grain on this one.
"Hes your dad, help him out for less"
Can be flipped over to "hes your son, give him half"
If your dad is going to be cheap now he will be cheap later. Your dad does not sound destitute. You are not his retirement plan.