financing and partner advice

4 Replies

My name is Jeff, I am in the St. Louis area.  I have flipped 2 houses with one in progress.  First house profit was 45K split 3 ways,  2nd was 30K split 3 ways and this one will be around 30k split 2 ways.  From the time we find a house, close, flip and find a new one it had been about 12 months.  We have done all the work ourselves minus some foundation and heating/cooling work.  I would like to do multiple flips a year by hiring someone to do some of the more time consuming work.

I think my partner and I are on a different page and may not been staying together after this flip. I am trying to figure out what some good options may be for financing in the future. I am new to most of the lingo and my skills are in the rehab process and my determination. I have learned a lot in the past few days from this site and the podcast. If my father is willing to get involved to help with financing does anyone have suggestions on how to set that up. Should I form an LLC and include him in that? Should I do it all in my name and basically take a loan from him. I know there may be legal obstacles so I would take with an attorney to set that up.

Any suggestions (sorry if that was a little long, I shortened it 3 times)

Originally posted by @Vince Mayer :

@Jeff McNutt

You could set it up as a mortgage with your Father as the bank. You would set the terms of the loan, (interest rate, split of profits, length of the mortgage which is usually one year or less) and how everything would be paid out. If you default, your Father can foreclose.

Does he have a self directed IRA? 

With respect to this last question, it does not matter. You are a disqualified party to your father's IRA and his IRA may not transact with you or a company you own in any way.

Ok, thanks for the advice. Any thoughts on the cleanest way for the two of us to make this happen, if that is the way we decide to go. I was thinking the LLC as partners would give more flexibility. Just not sure if one option stands out as being better than the other (any obvious drawbacks).

@Jeff McNutt

I would invest with an LLC but it depends if your Dad would be your partner or your private lender. You could split 50/50 with your Dad providing the money and you all of the ground work and labor or he is a private lender which would probably mean you pay him interest on the money and maybe a cut of the profits.

Does your Dad want to take on some liability and be more involved or does he want to be passive. You may want to do this as an entity either way.

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