Private Lending From Family Members

[Matthew Gardner]

Hello BP,

I have been investing in RE for about 2.5 years now. I am running out of liquid cash to keep the ball rolling. Some family members have expressed interest in investing as well. If they want to essentially become the Private Lenders for our projects. We are wondering, what is the best way to set up the organization? Do they set up an LLC and business bank account, and everything is handled through there?

Appreciate the insight/experience people may have in this area!

- Matt

[Will Fraser]

Hi @Matthew Gardner, the "next steps" here would completely depend on everyone's comfort level. in my personal work what we do is simply have them invest the funds into the LLC that is doing the work, secure it with a promissory note and a mortgage if desired, and then distribute the funds later (depending on the strategy) according to the agreement we struck.

In my opinion it is important to treat the agreements with family and friends just like you would with any other private money partner (with whom you have a good level of trust).  It's easy to gloss over some of the prudent details with family and friends because of the closeness, but if something happened (namely untimely death, a less-government-handheld pandemic, etc) it would be prudent to have ducks in a row for the sake of all.