8 Reasons You Shouldn’t Mix Family With Real Estate Investing

by | BiggerPockets.com

“Keep your friends close, enemies closer, and family as far away as possible.” — Engelo Rumora

We all love our family very much, and we’re always trying to help them out or make them happy. We want to see our family prosper, and real estate investing can definitely help accomplish that. However, as I quote above, when it comes to business, especially the sensitive area of real estate investing, it makes sense to keep your family out of it. “Why’s that?” you may ask. Here are a few important reasons.

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8 Reasons You Shouldn’t Mix Family With Real Estate Investing

1. Generational gaps cause conflict.

Scenario: Parents tell their children to get a “normal” job.

Most of our parents have been brought up the old fashioned way, giving them a stereotypical view of life. Our parents might want us to take life step by step. They want us to go to college, get a degree, buy a house, and spend the rest of our lives paying it off! That was the way of life during their time, and to them that defines “success.”

It’s almost impossible to shift their thinking. Instead of getting agitated or showing them what investing feels like, it’s better to listen to them — and then ignore what they say. I have seen way too many investors give up on real estate just because their folks wouldn’t see their point of view. That’s because real estate investing needs a different way of thinking. So it’s more important to just follow your dreams and leave the generational gap for what it is.


2. Feuds happen within families frequently.

Scenario: Fights repeatedly happen over inherited properties.

Check any type of family business in any country, and you’ll see a history of feuds. You will see family disputes about who owns what share of the business or about how one family member was duped by another. Disputes over inherited property happen all the time.

In real estate investing, you’d see family back out of a deal just when they’re needed the most. They might have gotten a better deal elsewhere, and you’re unsure whether to be happy for them or feel sorry for your situation. And these feuds don’t just happen between cousins. There have been many instances when I’ve seen feuds over business between parent and child, siblings, and married couples as well.

Related: 3 Ways to Partner With an Experienced Investor For Your First Multifamily Deal

While I don’t say that this is true for every family that invests together, the numbers are quite alarming. Add personal implications into professional endeavors, and it’s easy to see why it’s smarter not to mix work and family. Some of the best deals we’ve ever bought were estate sales where the siblings were greedy and just wanted to sell their house for anything they could get.

3. Trust issues run rampant.

Scenario: “But I trusted you.”

If you thought that issues with trust only existed when you didn’t know people, here’s news. Trust-related problems can come up with family as well. In this case, you may have to deal with “over-trusting.” We maintain strict professional boundaries with colleagues, which ensures the success of a business. We tend to trust our colleagues at face-value, but do not give credit where it isn’t required or deserved.

On the other hand, the comfort of family relationships can adversely affect this equation. This is because family members tend to over-trust each other, which can lead to clouded judgment. Not all decisions that a family member makes are right, but because you trust them, it can lead to losses and disruptions. Think, for example, about contracts. “You’ve seen it, so I’ll just sign” is a simple statement built on trust. But just imagine what would happen if the deal goes south just because the paperwork wasn’t complete or correct. What would your family member say? “I trusted you.” Those three words will put all the blame on your shoulders. Decision-making becomes emotionally driven, and common sense takes a backseat.

4. Just because they’re your family doesn’t mean they have experience and expertise.

Scenario: Your cousin might own a few properties — but that doesn’t make him an expert.

Family members often lack the experience you require from a real estate investor, which makes them unsure. Their expertise often lies in other subject areas, and they’re here just to dabble. True, in some cases you may know a cousin who deals with real estate. While you might feel that this cousin can help you get a home, it may not be entirely true. This is because they could lack expertise in the particular needs you have, or they have no networks in your neighborhood.

Also, families that invest together do it because of goodwill, and this comes with a lack of expertise and experience, two aspects that can prove costly when making a deal. For a business as demanding and dynamic as real estate, expertise is the most important strength to have. Knowing your investment portfolio, knowing where to invest and at what time to invest, and having great negotiation skills are key.


5. Family members can be incompatible in their goals.

Scenario: A father wanted to simply make money from a deal, while the son wanted to build his investment portfolio.

We get to choose our business partners, but never our family. Therefore, when you involve your family in business, you could end up having “compatibility issues.” A family member who is compatible in personal life won’t necessarily be compatible in professional life as well. More often than not, people who get along well personally can have contrasting goals in their professional lives.

Most people who have good personal relationships do not take worst-case business scenarios into consideration. This, in turn, leads to incompatibility at work and distress in goal setting. Similarly, bad business relationships lead to bad personal relationships as well.

6. Money matters can bring out the worst in everyone.

Scenario: A son sues his father, who was one of his partners at their real estate firm. The reason was that he felt he had been undervalued. The father lost the case.

Families thrive as long as they have a common understanding about money. However, lending on or financing a deal, especially in real estate, can change equations. Once a huge amount of money comes into the picture, conflicts may arise, which in turn can adversely affect business decisions. Browse the internet, and you are sure to find hundreds of stories where one family member sued the other because they felt that they had been unjustly treated over a business deal.

7. Family creates a lack of leverage.

Scenario: “OK, whatever” is the catchphrase in most decisions.

One factor that most people don’t consider while working with family is that they lose leverage to operate. In a professional relationship, you can demand rework, be harsh with deadlines, and even haggle on price. However, when it comes to family, it creates an awkward and difficult situation, where haggling is just not an option. Everything is based on how a professional decision could affect your personal lives, and this lack of leverage just hits both.


8. Family can lead to subpar work.

Scenario: A person called in his friend to do the interior of his apartment. He definitely saved money, but the quality of work was bad, and there was nothing that could be done about it.

With family, legal paperwork feels awkward, and often you end up working without proper contracts in place. When you do not have a contract, each party assumes fictional details about the deal. This leads to disparity between the two of you, and work suffers. Also, because family is involved, you might not be too strict with deadlines either, causing delays or slower speed of work. There have been many stories of how family and friends have had to see work suffer just because of family relations.

Related: 4 Key Traits That Define a Good Employee or Business Partner

After all, they have your best interests in mind, but relationships do suffer when any of the above issues come up. They suffer when a business goes down, creating financial implications. They even suffer when business improves. Spouses who are in the same line of work find it difficult to take a holiday together, as one of them needs to be constantly on the job. And as a result, irrespective of whether the real estate deal turns out good or bad, the family suffers.

While there are some occasions where mixing real estate investing and family may work, it isn’t a bright idea in most cases. That’s because, more often than not, you end up putting a lot of mental and emotional energy into the wrong issues. You tend to feel obliged to help those you love the most. More importantly, at the end of the day, while this stresses you out, it hurts your family too, making matters worse. And that is an outcome you do not want. The next time a family member you know asks for assistance or guidance, provide those two in a different way. Just don’t try to get them into business with you — because you could end up in a court, publicly fighting with someone you care about very much.

Investors: What do you think? Do you have stories of working with family effectively — or stories of disaster? 

Let me know with a comment!

About Author

Engelo Rumora

Engelo Rumora, the Real Estate Dingo and your favorite Australian, quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate all over the world and has bought, renovated, and sold over 500 properties. He is currently in the process of launching an ICO that will "Decentralize The Real Estate Industry." He's also known for giving houses away to people in need and his crazy videos on YouTube. His life’s mission is to be remembered as someone who gave it his all and gave it all away.


  1. Mike McKinzie

    While your reasons are sound for most situations, sometimes the exact opposite is true. My family is a multi-generational Real Estate Family. Parents, Uncles, Aunts, Cousins and other family members are real estate investors, some of them are up to a six figure PER MONTH rental income. So think of it this way, do you think you will be teaching your children about real estate investing? Do you think they should glean from your knowledge and experience? Yes, be very careful with family WHO IS NOT INTO REAL ESTATE, but don’t be afraid to introduce them to it if they show interest.

    • Engelo Rumora

      Thanks Mike and agreed,

      The unfortunate reality is that not many folks have family members that are successful real estate investors.

      Its quite on the contrary, many folks will have the closest ones to them trying to bring them down and prevent them from investing in real estate.

      I also like this saying “The first generation builds it, the second expands it and the third looses”

      I appreciate your recent comments on my blogs and please keep them coming.

      Have a great day.

  2. Maggie Tasseron

    Hi Engelo: Your first point strikes a particular chord with me. My oldest sister told me some time ago that when she was in her thirties she asked our dad, who was an accountant, whether he thought she could afford to buy a house for herself. She gave him all her financial figures and after looking them over, he told her that she could, but that if she had just one money emergency she could be in trouble. She decided not to do it and told me during this story that it was a good thing she hadn’t, as shortly afterward she needed some expensive dental work. Now at age 75, she never has owned a home and I roughly estimate that she has probably paid around $250,000 in rent during all those years.

    My first thought was that she could have borrowed the money for her dental work; she has worked at the same secure job in the medical field, never married but always earned a good income and spent modestly. My second thought was that my dad probably would have been even quicker to give me that same advice; I’ve switched jobs several times and eventually became self-employed, I’ve also never had the benefit of a second income from a spouse, probably never earned as much as my sister, both in salary and job benefits, and probably was not as frugal as she has been. However, I bought my first property at age 29, have owned up to 7-8 properties at one time while flipping, and now have a nice retirement fund.

    I should add that our personalities are very different and that my sister was probably secretly somewhat relieved to hear my dad’s advice, but I think it’s a shame, as she is someone who really likes houses, design and decorating, to never have had the pleasure.

    Thanks for your article; I’m sure a lot of readers will see the truth in what you say and that you will help them avoid some of these pitfalls.

    • Engelo Rumora

      Hi Maggie,

      Thanks for your comment and well done on your success.

      I believe that we should all have role models and someone we look up to.

      I love my parents and they are the best people in the world but they both never succeeded in business or real estate so I don’t really take advice from when it comes to those things.

      Advice on people and other life experiences are something they are amazing at so i go to them for these things.

      I always say, find out who is doing or knows something that you want and brush shoulders with such individuals as much as possible 😉

      Much success and thank you.

  3. Jerry W.

    Investing with family can be bad, or it can be good. The same arguments can be made about investing with friends or even business associates. When you inherit property you have no choice in who the other owners will be. When you partner or invest together you can choose. Just choose wisely. We all have relatives who are flakes or those who you cannot trust or are greedy. Most of us also have great relatives who you can trust implicitly, or who you can always count on. There are good things and bad things to having family involved, take the time to make it work. I have seen family fights over small amounts in probate, and I have seen family be gracious and kind and considerate. If you want this article taken seriously provide some facts or figures on how often family deals go bad compared to non family deals.

    • Engelo Rumora

      Thanks for your comment Jerry,

      I try to avoid all investments with family and friends. Have made the mistake in the past so why try go own the path of doing the same again. If you can’t beat it, avoid it is my motto.

      Also, one day we might have the luxury of piling through statistics for every blog we write but now my marketing team and myself are super busy actually making it happen in real estate rather than just talking and writing about how we make it happen.

      I’ll tell you what tho, I am looking forward to the day of just typing away all day long like many successful real estate investors that have already made it do now.

      Much success.

  4. Peter Mckernan

    Great article Engelo, all these situations are very true and could cause many different fights within family members and families. I have always felt hesitant, and had a guilty conscience just thinking about asking! That is a tough battle and hard to face for me to even task, so that is why I never did and will never ask.

    • Engelo Rumora

      Thanks Peter,

      I asked, received and lost. Spent years paying it back.

      Worst feeling ever. Folks that have never lost their families savings won’t understand.

      Still, it all depends like Mike mentioned above.

      Some families are super entrepreneurial and get it.

      These days I mostly like using my own $$$. If loose, I only have myself to blame. The easy route is to burrow or JV with someone else. That hard way is to work your A$$ off and save every penny yourself.

      Thanks again and much success.

      • Ken M.

        Hey Engelo – intriguing article based on your own personal experiences. Thanks for sharing. But your blanket statement of “I try to avoid all investments with family and friends.” sounds like a good approach for you, but I think you may want to be a little careful suggesting that should be everyone’s approach. I’ve had tremendous success with family members – but they are the “right” family members. Meaning – I’ve done my research ahead of time. Maybe you should consider making that the title of the article: “Do your research before investing with Family Members.” Just a t thought. Otherwise, the uneducated on this site get a very bad feeling about any type of family collaboration in real estate the moment they see the headline. I think that’s very misleading and not the spirit of this site. Caution is always good but just try to be careful about the unintentional message some of your blanket statements may be sending.

        • Engelo Rumora

          Thanks for your comment and suggestion Ken,

          Also, well done on your success with family members.

          To be honest, I have no intentions of walking on my tippy toes for investors that might find a heading harsh or slightly misleading. If they want to read romance novels they can jump on Amazon and buy a ton of books there.

          They will get smashed on a daily basis in the field of real estate investing so if folks get offended by an article, then real estate is definitely not for them or for that fact any kind of business. Its a tough gig with many ups and downs.

          Plus my personality and style is that of being very rude and raw so take me as I am or watch me as I go is my stance.

          Please keep in mind that the bloggers (myself and others) don’t choose the heading of the blogs so if that’s an issue I’m sure they can follow up with Brandon or Allison.

          Thanks for reading and much success.

  5. Susan Maneck

    I did get my family involved in real estate and it turned out okay. My foster sister lost both her house and her job to the recession. I persuaded my mother that she needed to diversify her portfolio and that there was a way of doing that and help my sister at the same time. We set up an self-directed IRA for my mother. We then found her house for about 65K and my mother’s IRA became the mortgage holder (Warning: this would have been a prohibited transaction had my foster sister been her legal daughter.) Her mortgage payment at 5% interest was half of what she had been paying in rent after she lost her home. That house is now worth twice what she paid for it. The remainder of the funds in the self-directed IRA were used to buy a house in Mississippi. We paid 15K for it and it rents for about $700 a month. The rent combined with the mortgage payments give my mother enough income to pay the bulk of her minimum distribution so that she doesn’t have to touch her mutual funds in a bad year. From there we purchased a house together (outside of retirement funds) as an investment. Purchase and rehab combined came to about 40K and it now rents for $840 a month. After we owned that house for a year, we got a HELOC for 30K and used it to pay off the credit card debts. We paid that off the following year and then took the money out again to purchase a mortgage for my son’s first home which cost 23K. Later he married and bought a second home and used the first as rental property. He recently refinanced the rental property, paid me back and is using the rest of the proceeds to buy his third house.
    Granted getting family involved can complicate things, but in the end isn’t part of what we are doing is trying to create family wealth?

    • Brad Lohnes

      Hi, Susan. This is where I see it working – parents helping responsible children. After my wife and I got into real estate investing, my father-in-law and brother-in-law decided to get involved as well. They went halves on a couple of rentals. Obviously, there are going to be some long-term mismatches in financial goals, and this scenario falls directly into #5 from the article. My father-in-law will want to retire in about 7 years, while my brother-in-law is starting up his portfolio.

      I think the key here is to understand what each party’s goals are now and in the future. I’ve run the numbers to show them how the younger can buy out the older with equity when the time is right, so that they don’t have to worry about coming up with cash, etc. This seems to align with where they want to be.

      My kids are very young, but I’m hoping that if we have taught them enough about money, investing and real estate, then we would be willing to do something similar when they are old enough.

      I think the key is to look at the upside, downside and expected cases. If your child doesn’t end up coming up with the money, then either drop the deal or have enough to do it alone. If there are costs to be shared along the way, make sure that there are legally-binding ways to deal with these. If the younger never wants to buy you out, then be prepared for that eventuality. At the end of the day, this approach is about helping the next generation get started.

      Otherwise, I tend to agree…funnily enough, I’m not keen to enter into a partnership with any other family members as I don’t want the hassle of asking permission (other than my wife, of course!).

      • Engelo Rumora

        Thanks Brad,

        Great comment.

        How about this scenario.

        You kick A$$ for years and educate your kids on financial literacy from a young age. Really make them grasp the fact of how hard it is to earn a dollar so they don’t do stupid things later on.

        Then when the time is right, you hand over all investments to them and let them further grow it with your experienced input and support from the back.

        Just a thought 😉

        Have a great day.

        • Susan Maneck

          Here is the thing, everyone learns best by doing. It seems to me that handing over all your investments suddenly when they haven’t been involved on some level before hand could be a recipe for disaster. I now own eight houses, i you include the one I live and the one I co-own with my mother. Then there is the property I manage on my mother’s behalf. No other family member is involved in six of my rental properties. However, since I helped my son get started with his first house which is now turning into three, by the time I’m ready to hand over my real estate portfolio he’ll know what he is doing.

        • Brad Lohnes

          Hi, Engelo. Thanks for your comment.

          Don’t get me wrong, the goal is to kick A$$. 😉 But the way I see it, if kids can get started early, even in their early 20’s, then they can build quite a bit for themselves, hopefully well before I pass on. By then, they’re standing on their own, and whatever I pass on in terms of actual assets is really just a bonus – their real inheritance was the knowledge, coaching and potentially financial assistance getting started.

          Like Susan, I think that people learn better by doing. Look, I haven’t built a fortune yet – I’m just working on it. But I have given some thought to legacy and I don’t like the idea of handing over a life’s work only to have it squandered. Of course, there’s actually nothing I can do to prevent this. But I can try to make it less likely. I believe that it is less likely if the next generation already has some skin in the game and is building their own fortune.

    • Engelo Rumora

      Thanks for your comment Susan and it seems like you guys did some very creative investing successfully.

      My #1 purpose in life is my family and I do what I do for them. I prefer keeping them out of my business tho except for Dominique. We founded Ohio Cashflow from scratch and have been running it together side by side ever since. Once everything is said and done, my family will be the first to reap all of the rewards even tho I don’t want to mix my real estate investing with them hehe

      Thanks again and much success with your endeavors.

    • Engelo Rumora

      Thanks Susan,

      And that is where years of guidance comes into play.

      The “Go out and do it on your own and I’ll have your back” type approach.

      Read the Art of The Deal by Donald Trump. His dad was pretty harsh on him but definitely taught him how not to take things for granted.

      Have a great start to the week 😉

  6. Oliver Roberts

    Hi Engelo,
    Thank you for putting this into writing. I guess we’ve always known it, heard it or saw it happening with other people but until someone else writes it down, before we truly believe our gut feelings in the first place.

    The first two reasons resonated with us very much; luckily we were able to get out of the potential messy situation with the in-laws who were “jointly” owned a real estate investment with my husband. His parents always held the investment over his head in ANY disagreements to win the arguments. It was especially discerning because my husband was the primary party in the mortgage and the rent payment was direct deposited into his parents’ bank account.

    Fast forward soon after my husband (then fiancé) and I got married, I asked him to break away from this investment. It took over 8 months of silence treatments from them, then with follow-on screaming, threatening, numerous emails, uncivilized phone calls on their parts with bank employees, their involving other family members to “mediate” (i.e. to change our minds to their liking) us and 3 lawyers before we finally broke this toxic tie. Everything you said in the article happened and came to light during this process.

    • Engelo Rumora

      Hi Oliver,

      Very sorry to hear about your negative experience.

      I hope things are back on track for your guys.

      Feel free to add me on Facebook and if you have any questions, I’ll help whenever time allows.

      Thanks and much success 😉

  7. Karl B.

    This is all 100% true. My siblings and I own commercial real estate (our father owns trucking and warehousing) and one of the siblings is the President. Our dad told us our sibling who works for/with him has been dishonest about some thing and the sibling also takes liberties, including working 30 hours a week – at best.

    One sister and brother wanted out previously and after my dad told my other sister and I what the sibling in question was doing with funds Dad stated he thought it would be best to sell the properties. And of course the sibling in question did not take this well – nor did his fiancee (who screamed at my sister and then bashed the family VIA social media – we simply ignored her) he said he felt betrayed and denied any wrongdoing which angered me because being lied to is sometimes worse than the act of deception itself.

    Based on the experience, personally, for me, with real estate I want to be the one solely in control with a great team built around me.

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