Borrowing from a friend for flip rehab?

2 Replies

I’m in the middle of my second flip, first rehab done and under contract now. Im always looking for good funding sources so today I got a call at work from a lender I checked into a long time ago about getting a loan, rates were not good enough so story over. Nope. My friend, full disclosure he works for me for my painting business, overheard me discussing with this lender some numbers and later asked me if he could loan me some money on my next project. He knows full well about the two flips I’ve been doing and wants to park his money with me on a deal. I was kind of floored, however it should be a win win for both of us. My hesitations are borrowing from a friend/employee, and how to structure the loan and what documents to use to protect both of us? Anyone have suggestions or experiences to help guide me? Thanks in advance.

I borrowed from my father in law for a couple houses and my father for a house. Neither "needed" that money, so neither had any stipulations on payback. Honestly if you spell out your buy, ARV and rehab costs and can show you have a track record, I think borrowing from family can be a "good" thing.

I know borrowing from a parent could be a very easy with loose terms or safeguards for either party. How about one step further where both parties need some assurances without all the vetting. Is a term sheet and some signatures enough? A second place on the mortgage? Attorney or google simple contract? Last thing I want is to ruin a friendship. I went into a business partnership with a friend once that was a disaster.

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