Invest myself or with my family?

Question

Hello all,

After many hours listening, reading, and saving. I'm ready to make my first deal.

I want to purchase a duplex that I've finally found where the numbers work. Here's the quandary:

My father will be retiring and will come into a end of contract bonus, they don't really have any other investments and he's talked many times about wanting to invest in a home with me...

I can afford the down payment on the property if I do it myself, and I think it would be a good first property for me. If my father comes in, he could probably pay for it outright.

So, should I just invest in it myself? Or should we partner together. If we partner what would that look like? If I put down 20% and he 80%, would we split the cash flow to those percentages? If we do that then I'm not really leveraging my money and am just using it as a more "traditional" investment.

Any thoughts or experiences would be appreciated. Thanks all!

Thomas S. · Answer

First you must understand the value of cash. This topic is discussed in many threads under "leverage".

As a investor you do not want to take your cash or your fathers and bury it in a rental property. Doing that will only save (or earn) the amount you are avoiding paying on a mortgage, maybe 5%. That return is not worth the bother of investing in rentals.

I would use your fathers money but it needs to be spread around multiple properties by using minimum down payments and leverage. Provided you buy smart properties should have positive cash flow with a hypothetical 100% financing scenario. If a income property can not still cash flow with 100% financing it is a poor investment as a income property.

By using leverage you maximise your returns multiple fold.

Partner with your father, his money, your management and purchase 5 properties with leverage instead of one with cash and multiply your returns 10 fold.

Samuel Barton · Answer

I would suggest that if you are tying up your own funds for a while, then do not do the deal.  If I were you, I would pass the deal off onto him, use the BRRR strategy for him to pull a lot of his money back out.  Then pull both of your money together to start flipping houses or making other active income.  Split everything 50/50 and put just as much skin in the game as him.  "Traditional investments" are in other words "not a good deal".

Michael Henry · Answer

@Saeed Sulaiman partner up to limit your exposure.

Invest myself or with my family?

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