I REALLY SCREWED UP, HELP! 24 y/o, first property.

Timothy Eaton · 2024-03-31T23:18:19-07:00

Hi everyone, I am 24 years old have been on and off of Bigger Pockets for a bit as I save up for my first home. I am 24, live in Seattle and just closed on my first home. The property is a single family home with a separate entrance into the unfinished basement which will be converted into another unit. While I am very excited about this purchase, there are some complications. This is where I desperately need you guys' help. Before I bought this property, I worked for two years to save up enough for a down payment, closing costs, and 3 months worth of reserves. I am purchasing this home and have had the plan that my brother would live in it with me and help me pay the mortgage. The mortgage is roughly $4,000 so it will be split $2,000 for each of us. This is where things get hairy. We had the idea that I would grant him partial equity in the property for paying half of the mortgage. I decided this because fair market value for rent on the entire house is roughly $3,000, which would make his portion of the "rent", $1500. So he is over paying by $500 to live here rather than rent at market value. I know this is not traditional as the whole point of house hacking is to have someone help pay your mortgage rather than give someone part of your home. I have also told him that we would split the renovation and whatever percentage of the renovation each of us pay, then we will retain that percent in equity depending on the increase in assessed value, post renovations. It has come to my realization as I put up all of the money I have worked so hard for, that he has no skin in the game. My name is on the title, not my brothers. And I worked everyday, ate almost every meal at home with cost effective foods and sacrificed 90% of my social life to be able to save the way I did. (Prior to graduating college and getting a full time job, I was an incredibly social person, so this was a huge change of mindset to sacrifice the way I did). And on the other end, my brother decided to start his own business while I was working and did not work hard as he spent money like crazy and eventually went bankrupt (filed 1 year ago) . He is now doing well and getting back to where he needs to be. But I just feel like I am losing at my own investment by giving so much of the opportunity up to someone that did not do what I did to make this possible. As of right now we have agreed that after renovations are done, if I were to have put more money into it than he, then he would repay me the amount to become 50/50 partners on this property. This essentially means that, during renovations, he has the opportunity to bring himself all the way up to 50/50 partners with me, or close to it. What does not sit right is that I have created this whole opportunity and would like to feel compensated by retaining significant value in the project rather than opening the doors for losing 50% of my investment when I am certainly able to do it on my own. Can anyone help me out on a way to explain this to him without hurting his feeling or give me an alternative way to still make this seem like a valuable option for my brother without giving up such a significant portion of the equity in the property? While I told him already I will never cut him in on a deal out of "being my brother" I think it is right that I grant him some sort of value because he would be over paying on rent by $500 by living here and I have already told him I would give him an equity split, far more than what I will actually end up giving him in the end. This is my first investment opportunity and I have made mistakes and I need help trying to resolve them appropriately.If any of you would like see the contract I have written up for this, please contact me and I can explain it more. A phone call might be nice too, so I can explain any further questions you might have.

Dave MeyerPro Member

Head of Real Estate Investing at BiggerPockets · Seattle, WA · Member since 2015 · 224 posts · 826 votes

2y

Timothy -- sorry to hear about your situation.

It makes sense that you're frustrated, as you have done many of the right things to make this deal happen. Unfortunately, these things happen with partnerships, especially with friends and family where there is more 'trust' and less legal definition.

It sounds like your proposed solution is solid. If you can get him back to 50/50 that seems like a decent outcome given the situation. Is it perfectly fair to you? No -- but it might be the best thing you can get while preserving your relationship with your brother, which I will assume you value.

If it were me, I'd be happy I could get back to 50/50 cost sharing, and then file this in the 'lessons learned' folder. Every investor has a folder full of these. It's not your ideal outcome, but you should come out okay financially, and you'll have learned two important lessons.

1. No one will every care about your business or your deals as much as you do. No employees, no family member, no one. If you put the deal together, you're going to care the most, and you're responsible for making it happen, whether it's fair or not. Thats your job as the lead investors.

2. Always have clear contracts and deal terms laid out, by a lawyer, ahead of time. Don't skip this, even with a family member. It sounds like you have a contract, but my guess is that it wasn't clear enough, and didn't cover some of the potential issues that could arise.

Hope it clears up for you. Get made whole financially, learn what you can, and move on.

Podcast Guest on Show #186

13 Reply

Lynn McGeein

Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes

2y

@Timothy Eaton Starting off your business by breaking your word to a business partner may harm you more in the long run than honoring your word and making less. But if you really feel you’ve made a huge mistake, then just be honest and explain new terms and why you are changing it, and maybe he’s fine with it, because he is family and you likely would not have agreed if he wasn’t. However, if he’s not fine with it and expects you to honor the terms you agreed to, maybe plan on honoring your word but on a short-term timeframe, planning to sell and move on and make better decisions with the next one.

2 Reply

Timothy Eaton

OP

New to Real Estate · Seattle, WA · Member since 2020 · 24 posts · 25 votes

2y

Quote from @Dave Meyer:

Timothy -- sorry to hear about your situation.

It makes sense that you're frustrated, as you have done many of the right things to make this deal happen. Unfortunately, these things happen with partnerships, especially with friends and family where there is more 'trust' and less legal definition.

It sounds like your proposed solution is solid. If you can get him back to 50/50 that seems like a decent outcome given the situation. Is it perfectly fair to you? No -- but it might be the best thing you can get while preserving your relationship with your brother, which I will assume you value.

If it were me, I'd be happy I could get back to 50/50 cost sharing, and then file this in the 'lessons learned' folder. Every investor has a folder full of these. It's not your ideal outcome, but you should come out okay financially, and you'll have learned two important lessons.

1. No one will every care about your business or your deals as much as you do. No employees, no family member, no one. If you put the deal together, you're going to care the most, and you're responsible for making it happen, whether it's fair or not. Thats your job as the lead investors.

2. Always have clear contracts and deal terms laid out, by a lawyer, ahead of time. Don't skip this, even with a family member. It sounds like you have a contract, but my guess is that it wasn't clear enough, and didn't cover some of the potential issues that could arise.

Hope it clears up for you. Get made whole financially, learn what you can, and move on.

Thank you, I really appreciate your opinion. I do want to clarify that the house is 480,000. Meaning I have the potential to keep all of that (not including appreciation or renovations). And if we were to go 50/50 on the house after renovations I don’t feel like giving up 240,000 worth of equity is fair to myself at all. Especially when the earlier years matter so much. Does your opinion change based on that?

I truly do feel like my efforts to get to this position of being able to purchase in the first place would be significantly undermined if I went ahead and split the home through a jointly owned LLC.

My new idea was to clarify with him that I would maintain 100% of the initial investment equity potential, but we can still go 50/50 on the renovations/sweat equity portion. So if we put in, for example, $50,000 on renovations ($25,000 each) and sweat equity equaled to $100,000 then we would both have created $50,000 worth of value, each. Do you think that is still fair?

1 Reply

Timothy Eaton

OP

New to Real Estate · Seattle, WA · Member since 2020 · 24 posts · 25 votes

2y

Quote from @Lynn McGeein:

@Timothy Eaton Starting off your business by breaking your word to a business partner may harm you more in the long run than honoring your word and making less. But if you really feel you’ve made a huge mistake, then just be honest and explain new terms and why you are changing it, and maybe he’s fine with it, because he is family and you likely would not have agreed if he wasn’t. However, if he’s not fine with it and expects you to honor the terms you agreed to, maybe plan on honoring your word but on a short-term timeframe, planning to sell and move on and make better decisions with the next one.

Lynn, thank you so much for your response. I responded to another gentleman with this same answer. But I would like your opinion too.

I do want to clarify that the house is 480,000. Meaning I have the potential to keep all of that (not including appreciation or renovations). And if we were to go 50/50 on the house after renovations I don’t feel like giving up 240,000 worth of equity is fair to myself at all. Especially when the earlier years matter so much. Does your opinion change based on that?

I truly do feel like my efforts to get to this position of being able to purchase in the first place would be significantly undermined if I went ahead and split the home through a jointly owned LLC.

My new idea was to clarify with him that I would maintain 100% of the initial investment equity potential, but we can still go 50/50 on the renovations/sweat equity portion. So if we put in, for example, $50,000 on renovations ($25,000 each) and sweat equity equaled to $100,000 then we would both have created $50,000 worth of value, each. Do you think that is still fair?

0 Reply

Dave MeyerPro Member

Head of Real Estate Investing at BiggerPockets · Seattle, WA · Member since 2015 · 224 posts · 826 votes

2y

Sorry @Timothy Eaton I don't fully understand. You have $480,000 in equity in the house, or the purchase price was $480,000?

I'm going to assume you put 20% down as the downpayment, but its not clear from your post. So if you put 20% down on $480,000 then you have $96,000 in equity. I think its fair that you keep that $96,000 in equity. But past that you need to ask yourself if you want to be partners with your brother or not? Unless you do the renovation and flip it, how will you tell what is his equity, and what is yours? You will improve the property, and he gets a 1-time benefit for that -- based on what valuation? Will you have it appraised? In the event you keep it as a rental, what is his opportunity cost for keeping his equity in your deal for however long you decide to hold it?

I understand you see this as unfair, but you need to simplify this situation. If it were me, I'd tell my brother than I get my downpayment back first, then we split and additional profit at sale 50/50 (presuming he matches your other expenses). It may not be the most fair system, but otherwise its too complicated and will just get messier when you go to sell.

Podcast Guest on Show #186

6 Reply

Timothy Eaton

OP

New to Real Estate · Seattle, WA · Member since 2020 · 24 posts · 25 votes

2y

0 Reply

Timothy Eaton

OP

New to Real Estate · Seattle, WA · Member since 2020 · 24 posts · 25 votes

2y

Quote from @Dave Meyer:

Sorry @Timothy Eaton I don't fully understand. You have $480,000 in equity in the house, or the purchase price was $480,000?

I'm going to assume you put 20% down as the downpayment, but its not clear from your post. So if you put 20% down on $480,000 then you have $96,000 in equity. I think its fair that you keep that $96,000 in equity. But past that you need to ask yourself if you want to be partners with your brother or not? Unless you do the renovation and flip it, how will you tell what is his equity, and what is yours? You will improve the property, and he gets a 1-time benefit for that -- based on what valuation? Will you have it appraised? In the event you keep it as a rental, what is his opportunity cost for keeping his equity in your deal for however long you decide to hold it?

I understand you see this as unfair, but you need to simplify this situation. If it were me, I'd tell my brother than I get my downpayment back first, then we split and additional profit at sale 50/50 (presuming he matches your other expenses). It may not be the most fair system, but otherwise its too complicated and will just get messier when you go to sell.

I apologize for the confusion. The home is $480,000 and I put 5% ($24,000) down, not including closing costs which brought it to $35,000. I look at this as a long term hold given the land it sits on has great opportunity to develop later.

Here is what is going through my head. I purchased the home and have no real need to include my brother in this purchase other than it would be nice for him and he would pay half of the mortgage. But I have others that would do so as well and I would not be giving any equity to them. And by going 50/50 on a property that I have worked so hard for, and have all of the risk in, feels like I have shot myself in the foot.

When it comes to the value of the home, I could achieve full ownership of the $480,000 when it is paid off plus the value put into with renovations (this does not include the long term development play on the property). But by handing over 50%, I would be losing $240,000 in equity when things are paid off (not including renovations, sweat equity, and appreciation). So as you can see I am giving up a whole lot of opportunity costs when thinking about this. And for someone to get so much of the fruits of my labor seems like an injustice to myself.

does that help paint the picture a bit better?

0 Reply

Dave MeyerPro Member

Head of Real Estate Investing at BiggerPockets · Seattle, WA · Member since 2015 · 224 posts · 826 votes

2y

This is starting to sound like a bit of partnership remorse on your part, so now you have to decide if you want to honor the deal you made with your brother, or look for alternative partner. Not sure I can advise you on that, since it's a family situation.

I will just say that if your bother puts any money in, and it's a long term hold, he should be cut into some part of the profits you generate. You're going to be using some if his above-market rent to pay things off (which you're omitting from your logic above), and he has money in the deal -- which is an opportunity cost he is incurring.

Do you want a partnership, or do you want it all?

Podcast Guest on Show #186

2 Reply

Timothy Eaton

OP

New to Real Estate · Seattle, WA · Member since 2020 · 24 posts · 25 votes

2y

Quote from @Dave Meyer:

This is starting to sound like a bit of partnership remorse on your part, so now you have to decide if you want to honor the deal you made with your brother, or look for alternative partner. Not sure I can advise you on that, since it's a family situation.

I will just say that if your bother puts any money in, and it's a long term hold, he should be cut into some part of the profits you generate. You're going to be using some if his above-market rent to pay things off (which you're omitting from your logic above), and he has money in the deal -- which is an opportunity cost he is incurring.

Do you want a partnership, or do you want it all?

Well as of right now he has zero dollars invested into the property in any way. So that’s why I am trying to figure this out now. I think allowing him to make the money off of renovations would still be a great opportunity to potentially double his money. But I know he wants more than that and I’m not sure if I’m willing to give up that much. Thank you for your opinion and giving me someone to bounce my thoughts off of. I will have to reconsider this as a partnership. Thanks!

0 Reply

Lynn McGeein

Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes

2y

@Timothy Eaton so for your $35,000 initial investment you want the first $480,000 received in any sale, then for any over that, you each get paid back the cost of renovations you contributed, then split any remaining profit 50/50? But he’s supposed to pay 1/2 mortgage from day one, more than market rent, to help you pay down that mortgage for your first $480,000, and contribute to renovations? If nothing is signed between you yet, maybe admit you didn’t think through how complicated and messy that will all be, and he can rent from you at market rent if he wants to but you’re keeping ownership. I doubt he understood you wanted the first $480,000 plus reimbursed for renovations before he sees anything. That seems a little aggressive on your part for a partnership with your brother.

1 Reply

Peter W.

Member since 2020 · 351 posts · 329 votes

2y

Well I think you should have this conversation with him. Taking less return to preserve family relationships is probably worth it. I think the suggestion that you recoup your up front equity (either down payment or cash to close) upon sale and split everything else 50/50 is a reasonable proposal. Here’s the hard truth, partnerships are never 50/50 but you always have to pretend they are.

3 Reply

Plato Asadov

Real Estate Agent · Somerville, MA · Member since 2022 · 31 posts · 22 votes

2y

Hello Timothy, I understand your concerns that you have invested so much of your time, money, and energy to make it happen and now want a fair outcome. Since you put only 35K down, and your brother pays you an extra $500 for the rent, he will pay his portion within 35 months with no interest on the money you lend him - 17.5K(half downpayment). As long as he keeps paying you for 35 months, you are good to go, and you can add it to your agreement with him if you want. You can certainly add some interest to this balance, let's assume 5% interest only, then he will have to pay additional $2625 which is equivalent 5 extra months of payment. With this option, he will have to rent your house from you for 40 months with an extra $500 to pay his portion back to you. You can have this contract subject to the monthly payments. I think my thought process should be clear, and you won't feel he took advantage of you. Let's keep this aside.

Other than being partners, certain things in life must always be more valuable than money. I assume you are very close to your brother and family overall. Keeping this in mind, you can always make money, but you cannot have another brother. Sometimes, you will sacrifice yourself for your brother and expect your brother to do the same to you when the time comes. You will be the one who sets the standards in your relationship. Don't ever let money get involved in your relationships. You may feel that you are doing more now, but at some point in your life, your brother may do even more for you. You are not losing anything right now, trust me. You are just starting. Again, if you are close to your brother, make it the best partnership that can last forever. Don't let money or greed take control of your relationship with your brother.

2 Reply

Rick Villarreal

Member since 2024 · 1 post · 3 votes

2y

Hello Timothy,

Just want to say to you, congratulations on your purchase of your first home at 24 years of age. Being a father of 3 and also a grandfather, I want to praise you on your commitment and discipline at 24 years of age. Your hard work and saving for the down payment need to be recognized. I would compare that to running a marathon in the Olympics. As for the situation with your brother and a partnership, co-ownership, I would sit down with him and have a long talk, if you haven't already done so. Also, asking advice here shows how intelligent you are. Have you asked advice from your father?

3 Reply

Dave KushPro Member

Frankfort, IL · Member since 2022 · 204 posts · 132 votes

2y

Hi Timothy,

Tough situation. Partners can be difficult. Family first, the money isn't worth the relationship. I can understand why you're frustrated with your brother's actions. It doesn't sound like it was all mapped out and now what transpired left you feeling this way. I would too, and I've been in partnerships where I was doing all the work (and one was with my brother!). It sucks. But, it is what it is. Talk to him, share how you feel diplomatically and emphasize that you want to find a workable, fair solution for you both. I think it's fair to express, kindly, that you've created the opportunity and done all the work, but you also recognize this is the agreement you made and that you are willing to compromise. You might end up with less than your effort should provide, but that's the learning cost of the shaky deal.

The bright side is that there seems to be several workable solutions, and the two of you are on good terms. Keep it that way. It doesn't sound like he's tried to take advantage of you, it's just that the deal panned out in an unexpected way.

Good luck. Keep us posted

0 Reply

Dave KushPro Member

Frankfort, IL · Member since 2022 · 204 posts · 132 votes

2y

Quote from @Rick Villarreal:

Hello Timothy,

Just want to say to you, congratulations on your purchase of your first home at 24 years of age. Being a father of 3 and also a grandfather, I want to praise you on your commitment and discipline at 24 years of age. Your hard work and saving for the down payment need to be recognized. I would compare that to running a marathon in the Olympics. As for the situation with your brother and a partnership, co-ownership, I would sit down with him and have a long talk, if you haven't already done so. Also, asking advice here shows how intelligent you are. Have you asked advice from your father?

That's a really cool idea

1 Reply

Vishnu PrasadPro Member

Member since 2019 · 2 posts · 2 votes

2y

@Timothy -

Agreed with many of the comments regarding family first approach and keeping your word. If you wanted to do this to help your brother, that shows high character and value on your side. It's a small financial sacrifice to show love and help a close family member. Keep that mentality as you think this over.

If you don't want the partnership at all, then you should ask your brother if he is okay with that and instead maybe you give him a market rent or even a few hundred below market for a year or two as a "my bad, I didn't think his through but I still love ya." (as long as you're able to afford the mortgage.) If you need money for renovation then maybe your brother is a debt partner and you give him a guaranteed return. He may be in a position to want some money NOW than later.

If you don't want the partnership longterm, you should bring it up to your brother on a few possible exit strategies and collectively agree on 1 or 2 possible "outs".

Don't over think it. Talk to your brother, and let him know that you don't want to "feel" like you're being taken advantage of (even though you know your brother never would do that) but you still want to help him out, etc and just be open about it .

If your brother is excited about the house and wants to continue with the deal then honor it. It's fine. Nothing wrong with helping family win.

Good luck and congrats on an amazing achievement!

0 Reply

Dan Panea

Member since 2022 · 13 posts · 10 votes

2y

Here is my 2 cents: the reason you went with your brother is because you know each other very well, plus there is a level of trust between the two of you. I think you made a deal with your brother as a mental support for you. It helped you go over some obstacles knowing that your brother is there, although he was not really fully engaged and liable in any way.

In my opinion you have 2 steps to take: 1. talk to your brother about your liabilities, not only about the gain. Discuss the future options as family and separate business individuals. Keep in mind you might have to walk away from your deal with your brother, and you need to get his permission. 2. you might have to go with renting tenants at full price. This is where the money are. You need to do this legally, complying to all existing laws. By going with outside tenants, you will become financially independent. You own the house and the business, and this is the only way to get peace of mind. Good luck!

0 Reply

Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

2y

I'd put things in writing. If he's paying half of the mortgage and half of all costs, you need to decide how you want to deal with it when you want to sell or if he moves out.

I'd keep all of the down payment and closing costs separate from the mortgage. Decide how you want to deal with the profit when you sell. Do you simply get your down payment back and split the remaining 50:50 after the mortgage is paid off or you do you interest on the money you used as a down payment or does that simply amount to 2/3 of the profit (1 part from the down payment, 1 part from half the mortgage) and he gets the other 1/3 for his paying half of the mortgage).

If the house was 480K and you sell it, you won't have all of that in equity (unless you keep it 25 years and pay off the mortgage in which case, if your brother has paid $2K a month for 25 years, he will have paid $600K and I would say he's entitled to a good chunk of that equity).

Based on your comments, I think you'd be better off simply renting it to him or someone else for market value. Otherwise, you are risking your friendship with your brother because one of the two of you is going to feel that you got the short end of the stick. If he's paying for half the mortgage (which is more than market rent) and half the costs for renos, he's a partner. You just need to decide how you are dealing with the down payment portion when you sell.

0 Reply

Marcus R.

Real Estate Agent · Denver CO · Member since 2019 · 209 posts · 332 votes

2y

I agree with many of the above points and now that you're this far along I think you have to make this work. Let's say your brother agrees to exit today with minimal ROI...what happens 7-10 years from now when you have $300K of equity in this property and he has $0 because he exited early? That would also strain the relationship. Figure out a way to make this work, you'll both be better off for it. This could become a viable partnership and accelerates how quickly you'll scale.

Couple of other thoughts...

1) Who's responsible for repairs? Is it 50/50?

2) When this becomes a LTR could your brother handle most/all of the property management to help bring this closer to 50/50? Over a long enough hold period this could help even out each person's contributions.

0 Reply

Rick Albert

Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes

2y

This is certainly complicated, especially with family.

I agree with @Dave Meyer that you need your down payment back. You could have easily put that in a high interest savings account with less risk.

Because of how complicated this can get and you don't want to go back on your word, you could devise an exit strategy. Maybe at $X price, you sell and move on. The first red flag was the bankruptcy. I wouldn't have gone into business with someone who had a recent bankruptcy (really at any point but people can learn).

You could also have him put money into this if he truly wants this to be 50/50. For example maybe pays any additional $500/month that goes directly into your pocket until you achieved $17,500 (half of the down payment and closing costs). That is a stellar deal for him because it is effectively a 0% interest loan and he is still banking on the appreciation.

Something to consult a CPA about is the tax write offs. You are on title and on the loan, so how would that work? Maybe the compromise is you take full benefits of the tax write offs up until a certain point.

1 Reply

Scott TrenchPro Member

Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes

2y

Timothy - Here's one approach for your consideration - a lot of good advice on this thread.

A good partnership structure (which you didn't set up and acknowledge) has a termination clause.

The termination clause I have with my partner (been going well for nearly a decade at this point) is a "Shotgun" clause.

The essence of the "shotgun" is this:

- If a partner wants to get out of the contract at any time, they can offer to buy the other partner out.

- The other partner has two options in response to triggering a shotgun - they can either accept the offer for a buyout, OR they can in turn buy the OTHER partner's interest at the offered price.

This structure is very simple, and potentially effective for a situation like this. It allows for speedy termination, cuts through a ton of other details, and incents a very thoughtful offer from the person triggering shotgun - there is no negotiation beyond that point.

Here's a potential way to put this into action (talking points to your brother):

- Hi Brother - I want to end our partnership. I'm not feeling like this is profitable for either of us. I still love you as family and don't want this to end in a bad place, so I'm willing to discuss several ways to end this.

- A common practice for terminating a partnership involves a "shotgun clause" - here it is. Will you agree to allowing me to put this into a contract? (End conversation, paper this up with a lawyer).

- If you are not aligned with this approach, please provide a different framework for me to consider.

- If we can't even agree on a fair "tool" to use in structuring a future termination of contract, then this is completely doomed and I will cut my losses. I will sell the property, resulting in a nearly 100% loss for all of your $500 extra payments, and my down payment.

(Conversation resumes after partnership + termination structure is papered with attorney):

- Right now, this property has very little equity in it. It's not worth anything, net of transaction costs right now.

- I am willing to return to you all of the $500 payments you have made thus far + $2500 for good measure to end the partnership. If you don't like that and we agree to the shotgun, then YOU can buy ME out for that same price. Please note that I will require you to refinance the property in your name - I will not be on the mortgage following the sale.

I think that it will be hard to move on from this deal without ANY hurt feelings. But, this might be the way to do the least damage, in the end.

Podcast Guest on Show #223

1 Reply

Terry Madden

Investor · Jersey City, NJ · Member since 2016 · 39 posts · 10 votes

2y

Tough position to be in with family. I try and keep a distance from mine when it comes to investing/business as emotions tend to be a big part of decision making, etc.

My advice to you is to have an operating agreement drawn up by a lawyer where you retain the equity you put into the deal when you purchased the property. So if you put 20% down, you retain 20% of the home until it's sold, etc. You can split the remaining 80% equity 50/50 as long as you felt the splits on all renovation costs/sweat equity are 50/50. In my opinion, this is the most fair way to structure the deal since there were a few moving parts after you closed on the property.

Good luck my man!

0 Reply

Craig Janet

Member since 2019 · 223 posts · 261 votes

2y

Wow this is a very complicated deal. If you really value your relationship with your brother you may have to tell him you got cold feet and want to sell the property and move on. You might loose a little money but you would have lost more from this one sided deal anyway.

0 Reply

Nathan Harden

Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 378 votes

2y

Tough tough tough situation.

I ALWAYS try and leave business and family separate if possible. It's an unfortunate truth but you are going to have bad partners and it's always best if that partner doesn't share the same blood.

I think you are digging yourself into a deeper hole by believing that he will pay you back one day to become a true 50/50. What if he gets another wild hair and tries to start another business? Nobody is going to care about your investment like you will. Proceed with caution.....

0 Reply

Travis TimmonsPro Member

Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes

2y

First, be kind to yourself. We've all done things like this. I have a failed partnership in my past as well...feel like we all need 1 to remind us that partnerships are really hard. 10 years from now this won't matter unless something happens that causes you to be estranged from your brother. The money will sort itself out.

You can be right or you can have a good relationship with your brother. Figure out which you want the most (I assume a good relationship with your brother) and be willing to let things go so long as that goal is achieved.

What does worry me is the sense or feeling of superiority that I feel you have over your brother. While you are not married, you may need an attorney to break up here, so it's close enough. The biggest cause of divorce is marital resentment and contempt. That essentially means that one partner looks down on and does not respect the other. If that contempt and resentment festers, this will not end well. I think you have a conversation with your brother that starts with humility, vulnerability, and honesty. Say that you feel like you screwed up and don't know how to get out of it. Ask him what he thinks is fair and stop talking. And you need to be comfortable knowing that you didn't get the best deal possible...it won't seem fair and might not be. That's gonna have to be okay. Get out of this without setting a pile of money on fire and without losing your relationship with your brother. Those should be your only goals.

2 Reply

I REALLY SCREWED UP, HELP! 24 y/o, first property.

I REALLY SCREWED UP, HELP! 24 y/o, first property.

Most Popular Reply

32 Replies