Should I agree to be the credit proxy for my parent’s flip?

Question

Hello! I am a freshman in college majoring in real estate and I got inspired to pursue a career in real estate because of my mom, who was a successful realtor for a very long time. Unfortunately, the family business recently shut down and caused my parents to go into bankruptcy in 2020. Because of this, my mom’s credit, which has been near-perfect all her life, is now not high enough to secure a loan from a private money lender to finance a flip she is very eager to do. I have a credit score of 700 and my parents are forcing me to become the  credit proxy for this deal. Obviously for an 18 year old, this is a huge situation which while I am grateful for the opportunity, I am understandably weary. If this project is a success, I will be given a share of the profits and my score would boost tremendously. But if it fails, I would not be able to engage in real estate investing, and much worse. Even though they are forcing me to comply, I want to know if I am wrong for being weary about this, and if not, what can I do to make sure this all goes right? A response would very appreciated, thank you!

Jeff S. · Answer

Find another hard money lender. These are not conventional loans and many private/hard money lenders do not require a credit check. Of those that do, even fewer actually report to the credit bureaus. The successful completion of a flip will not boost anyone's credit score.

Credit should not stop your Mom from being able to flip a house.

Rick Pozos · Answer

I would think the bankruptcy would have been the main reason why you would NOT co-sign. If mom was a long time successful realtor she should be making TONS of money right now. If they had to file BK last year, something is wrong. This is the best time for realtors making money.

I dont believe that parents can force an 18 year old to do something. No one can make you do anything that you dont want to do.

Michael Glist · Answer

I agree with the above statements. First off if you are not comfortable with the deal or risks associated with it then I would say stay away from being a part of it.

I also agree with the fact that they can look for a hard or private lender to do the deal. There are a lot of lenders that will not require a specific credit score to do a deal (especially on the private lender side). If it is a good enough deal than there will be someone willing to put up the capital and or back it with their credit.

Kevin Sobilo · Answer

@Dylan Salem, if you aren't confident in it, then don't do it! You are an adult and will have to deal with any ramifications not them. You should base your decision on your comfort level, not what they tell you to do.

If you parents want to do a flip have them look at a hard money loan. Those are short term loans made based on the deal and the ability of the borrower to execute on the deal. So, if they have flipped before they would likely be able to get such a loan. They are short term loan with high interest rates, but this way the risk would be your parents not yours.

They could also find a partner who has better credit. One who is experienced and comfortable with the risks.

There is no reason you need to be involved unless you want to be. So, don't let them bully you.

Should I agree to be the credit proxy for my parent’s flip?

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