Relative Wants To Invest In My Rehab Company
I have a relative that wants to invest some money in my relatively new (one house so far, closing soon on another) rehab company. What kinds of programs do you guys set up with private investors you work with? Do you have them invest on a per property basis and pay a percentage of the profit made? I'm looking for solutions that would be beneficial to both of us.
Thanks in advance for your ideas.
Hi, I'm in the same situation. I have 4 family members that are interested in getting involved. I guess the question to you is, are they going to be involved in the work or just as passive investors? My advice is to work all the details, major, minor and exit strategies for every member and then make sure everybody is happy before signing the doted line. Yes, make a clear contract to make them adhere to the rules. Otherwise, especially with family, it's not going to be a very pretty picture. Been there, done that... Good Luck!
Take my advice and never work with family or friends in business, especially real estate!!!!!!!![]
I would disagree on working with family and friends, I think they are a good source of money/labor to get deals done. One VERY IMPORTANT point though is that you need to treat them as though they are a total stranger when it comes to contracts, etc.
Put everything in writing including expectations, understanding of who is responsible for what, and what payments will be made by whom and when.
You can set the deals up however you want - steady return on their money, lump sum payments when a property is sold, payments on a loan until it is repaid, whatever fits into your plans and meets their investment needs.
You should clearly let them know what your goals are and make sure (by putting it in writing and having them sign off) that they are aware that some deals do not always go according to plan and that there may be a delay in getting their money and that their money is at risk just like any other investment. Immediate access to their money may not be readily available and they may have to wait up to XX amount of days in order to get their money. I always put 90 days.
Too many family members see other member making money in real estate and think that all deals go well all the time, as scheduled, with expected returns. We all know we have hiccups in the process from time to time and family members need to be aware of that no matter how bad we want them to think things are going just fine. Also they should NOT be investing money they need to live on day to day or that would not be at risk in some other type of investment.
I agree 100% - NEVER work with family or friends. It can ruin relationships in ways you never dreamed. And people are very different when it comes to money!
Quote:
On 2004-12-21 09:59, grabaum wrote:
Take my advice and never work with family or friends in business, especially real estate!!!!!!!![]
I agree, set it up as a contract. I have had one relative so far invest. I borrow in the form of a promissory note and I offer anywhere from 12-15% interest on the money they loan me. I am not looking for partners per se but offer a decent interest rate if they want to loan me the money that I then use for the rehab. I would be wary of partnerships, I prefer passive investors that I can offer a specific return, yet there is no other involvement on their part.
To date I offer 12-15% with a one-year term payable anytime up to the full term and calculate the interest rounded up to the end of the month I pay back the loan. If I want to extend the loan past a year we can assign an extension in writing if both parties are in agreement or I pay off the loan by the original term if not. Good luck