Well to do friends want to give me money to invest in RE

8 Replies

So I have been doing well with buy and hold properties and I talk to my friends about it. I have even debated selling a car to purchase another place or two. Friends from the automotive world have expressed an interest in being a silent partner and splitting the profit with me on my RE investing. They are talking 50-100k +

I have the ability to self fund a few more places but this could grow very quickly with an influx of money. Should I be looking at apartment buildings? I work full time and it is not in RE.

I would love to have my wife stay at home with the kids and manage the rental property but I fear all that would happen is she would call me and tell me to go to XYZ property to check on something. ( no way she is going to do showings, or repairs with two kids under 3 at home.)

How do you guys suggest I even approach this partnership? would it be an LLC? or do you suggest I just ask them to be hard money lenders ?

You have to do it. There is a great book you should read that could really help clear up a lot of questions you may have about pooling money together to buy deals (otherwise known as syndicating). It's called The Inside Game to Syndication Wealth. You can google it...it's being offered as a download for free Keep us posted on what happens.

You probably don't want to hear this... but I recommend against involving friends and family in business deals. When things get tough, and they do from time to time, the strain on these valuable relationships is just not worth the money. Something to consider.

@John Souerbry Two are close friends that I have known for ten years while one is an acquaintance I just see a car club events every few months. Good point about that though.

Thank you @Nikki DeLellis , I will look it up!

Most new syndicators need to rely on friends and family for their first deals because of the lack of a track record....it can be very hard to get investors otherwise. Best thing to do is make sure you have a great investment strategy and an even better deal so that you're friends love you in the end for making them tons of money!

I second the recommendation for the Craig Haskell book. I would also give a listen to the interview I did with the uber intergalactic syndication lawyer and teacher Gene Trowbridge:

biggerpockets private money 101

https://www.youtube.com/watch?v=b49qnAWnUHQ

@Judd Campbell when stating out, most likely you will need friends and family to pool money in order to get that first one under your belt. I am putting a syndication together now and am targeting everyone I know. While I am approaching some friends and family, I'm certainly also reaching out to every aquaintance I know as well. The important thing to do is to always ask if they know someone else that might be interested. That's key to expanding your network.

Also, you would create a LLC for the property that you are syndicating - the investors would be have a share of the LLC based on the amount invested and you would have a share for being the managing member. Good luck!

There are tons of posts here on BP on using private lenders- do a search (upper right hand corner) and you'll have plenty of reading material :)

A lot of those discussions will be about using private funds for fix and flips. Buy and hold is a little trickier, I think- but it depends on you and your investors, and what each of you considers a good/fair return. A simple joint venture/equity share or private loan is probably a much safer way to proceed than trying to do a syndication. (You need to read up and make sure you understand the difference between the two. There are a LOT of legal concerns/expenses with syndication)

Good Luck!

Medium team zen logo vJean Bolger, 33 Zen Lane | http://www.solidrealestateadvice.com

I agree that using friends and/or family is a double edged sword. And a Catch 22. Hard to start without them, should be cautious of doing business with them.

The best way to approach that, in my opinion, is to seek an experienced lawyer to draft the syndication contracts AND to make certain that responsibilities, distribution details, PROBLEM RESOLUTION, and every other "oh no" scenario that the lawyer has seen or read about is covered in the document. Then you must ALSO meet and review the provisions in detail with your friends and/or family BEFORE executing.

Is this certain to prevent issues? Absolutely not. Will it help? Almost certainly.

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