Convince a sibling to invest in realestate

9 Replies

My brother and I are on the deed of a duplex we inherited from our parents, and we both live in each unit. The property is owned free and clear and appraised at approximately $150,000 just this year. Several years ago I purchased a five unit apartment building and made every newbie mistake in the book and ended up taking a bath on the property. Because of this it has taken me years to get my credit back to a respectable level. I now work a full-time job and with the equity of the duplex I want to invest in real estate (the right way) again. The problem I am running into is my brother is old school (work for a company for 30 years retire with a pension) and is convinced I would only make the same mistake again. A HELOC would be my only current source for enough cash to get back into purchasing real estate properly.

My question is, how can I convince my brother to let me use at least some of the property equity without taking any type of a legal route.

My suggestion for you is to make a professional presentation for him. 

Layout the numbers.  Show him a couple opportunities of what you can do with that money.  Show that you are responsible and show that you have learned from your past mistakes. 

I would think that would help him grasp that you are ready for this again.  

Can you get a loan at decent terms on an owner occupied property?  A couple years of house hacking would allow you to build a small portfolio and strengthen your credit.  While in this scenario you don't pull equity from the duplex, your rental income can be used towards financing when you are ready to purchase via an investor loan.

Does you brother plan on living in the duplex long-term?  Maybe with some investing success he would be willing to finance you buying out his portion.  This might be especially useful once you max out conventional bank loans.

Originally posted by @Stephen Jacquindo :

My brother and I are on the deed of a duplex we inherited from our parents, and we both live in each unit. The property is owned free and clear and appraised at approximately $150,000 just this year. Several years ago I purchased a five unit apartment building and made every newbie mistake in the book and ended up taking a bath on the property. Because of this it has taken me years to get my credit back to a respectable level. I now work a full-time job and with the equity of the duplex I want to invest in real estate (the right way) again. The problem I am running into is my brother is old school (work for a company for 30 years retire with a pension) and is convinced I would only make the same mistake again. A HELOC would be my only current source for enough cash to get back into purchasing real estate properly.

My question is, how can I convince my brother to let me use at least some of the property equity without taking any type of a legal route.

 How about considering selling the property?  The split would have been the cleanest.   You can even consider selling it to him.

This is simply a possible solution - whether or not you should sell is a personal decision ultimately.

Originally posted by @Che Chiu Wong :
Originally posted by @Stephen Jacquindo:

My brother and I are on the deed of a duplex we inherited from our parents, and we both live in each unit. The property is owned free and clear and appraised at approximately $150,000 just this year. Several years ago I purchased a five unit apartment building and made every newbie mistake in the book and ended up taking a bath on the property. Because of this it has taken me years to get my credit back to a respectable level. I now work a full-time job and with the equity of the duplex I want to invest in real estate (the right way) again. The problem I am running into is my brother is old school (work for a company for 30 years retire with a pension) and is convinced I would only make the same mistake again. A HELOC would be my only current source for enough cash to get back into purchasing real estate properly.

My question is, how can I convince my brother to let me use at least some of the property equity without taking any type of a legal route.

 How about considering selling the property?  The split would have been the cleanest.   You can even consider selling it to him.

This is simply a possible solution - whether or not you should sell is a personal decision ultimately.

 I agree with Che, when ever some negative thing came up you would be responsible, yet the positive aspects would most likely be overlooked. Sell and then you are your own man.

This ought to be interesting to watch!

"A man convinced against his will is of the same mind still". 

@Stephen Jacquindo Convincing him will be hard and even if you do convince him, is he the kind of guy who is going to throw it in your face every time something goes wrong?

Originally posted by @Jesse T. :

Can you get a loan at decent terms on an owner occupied property?  A couple years of house hacking would allow you to build a small portfolio and strengthen your credit.  While in this scenario you don't pull equity from the duplex, your rental income can be used towards financing when you are ready to purchase via an investor loan.

@Stephen, I think this is a great option.  Hopefully your credit has rebounded enough for you to qualify for a O-O loan for an inexpensive duplex?  Financially, it should work.  You could rent out your current apartment, move into one half of the new building, and rent out the other half of the new building.  After a couple of years of owning the new building and continuing to rebuild your credit score, you should be able to get another loan to purchase your next building ... and so on ... and so on.  

However, if your current credit score is too low to qualify for a loan, that's a real problem.

I think trying to convince your brother is not the path to choose.  From his perspective, it would be beyond foolish for him to allow you to pull equity out of his home.  Were I you, the only way I would approach him regarding the building you share with him would be to ask him to buy me out.  If he's willing to own 100% of the current building, and he's willing to take on a mortgage to do it, you could walk away with a good chunk of money to do whatever you like.  You could then put down as much as it took to convince a bank to loan you the rest to purchase the new building.

If your brother is unwilling to even consider buying you out of the building he lives in, you're back to square one.  

Speaking of square one, have you saved any money since the earlier learning experience? Hopefully, you have a sizable nest egg to help finance your re-entry into REI. If you do, showing your brother how much you've saved to prepare to invest in Real Estate again might prove to him that you're serious about doing things right the second time around. It might not push him fully on your side, but it might be a start.

Good luck, @Stephen

You are asking your brother to accept a liability and risk of losing his home to fund a real estate investment by a person whose track record to date includes one spectacular failure and no successes. Reverse positions for a minute. Would you let him do the same if positions were reversed?

Forget it. Move on. Find other means. Even if you do get him to say yes, the very first hick-up will cause a rift between you that could destroy the relationship. I've seen it happen. You can do better!

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