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Kristina Lugo
  • Rental Property Investor
  • Chicago, IL
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Borrowing money from parents for down payment

Kristina Lugo
  • Rental Property Investor
  • Chicago, IL
Posted Mar 5 2019, 12:37

I'd like to purchase a 2 unit building with a 203k loan that I'll eventually BRRR. I have some money in savings, but not enough to cover a down payment, closing costs, and reserves to hold me over for a few moths while I manage the construction and vacancy.

I'm considering asking my parents to withdraw $10k from their 401k. This will be used for a down payment and closing costs while my personal savings will sit in reserves. I've never asked my parents for money, so I'd like to approach them with a simple strategy. I'll show them the numbers, how the property cash flows and the plan to cashout refi to repay them the loan plus the 10% withdraw penalty.

I understand all investments involve risk, but how can I protect their investment from any loss? Lets say the whole deal tanks. How can they recover their $11k?

Thanks so much!

KL

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