Disclosures/Legality of Receiving Private Funds from Friends and Family

1 Reply

Hi everyone, 

I was hoping you may be able to get me pointed in the right direction. I recently received a lead from a family friend on a house to buy and flip. The deal looks very attractive. I have discussed this opportunity with a few people I know (a couple close friends and my father) and they have expressed interest in loaning me the capitol. I am just starting to discuss what kind of returns they would be looking for but have no idea where to start from a legal perspective. I sent a few emails to local real estate lawyers this afternoon but have yet to hear back. 

Does anybody have experience with this? I assume I will need to provide them with disclosures, but don't know what they would have to say. What SEC rules apply. Any help would be much appreciated. THANKS!

FYI - I live in California if the laws vary by state

If I were you, I would set up something like dad puts in 50% of money brother puts in other 50% we split profits 33.3 each since I'm doing all the work. You can do this with a simple partnership agreement hold title in all three names or form an LLC. Go to Office Depot they have software programs that have standard partnership agreements or visit sites like legal. If you form an LLC you will need an organizational agreement. Never ever do on a handshake, all needs to be in writing. Most accounts can help you with this and will set up with best tax structure for your situation and cheaper than attorney. Warning many relationships have been destroyed or seriously strained by business partnerships so I would exhaust other alternative, bank or seller financing ect. first Good luck

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