Asking parents for loans:/ Best strategy for paying them back

[Daniel Peterson]

Hello,

I am messaging you today in hopes that I may get some advice on how to approach a private lender (my parents) in regards to investing in my first turn key real estate investment...I only need a down payment from them as I should be able to finance the rest my self from a mortgage lender.

Question: Though I can pay my parents back in interest I would like to know the best strategy for paying them back. For example...Option 1, should I pay them the monthly cashflow for an estimated 5-6 years until they are paid, which will leave me with the refinance money to invest in another property? or option 2, pocket the cashflow myself and pay them back in whole with the cash out refi? or option 3...?

My priority is to start accumulating rental property, so losing the cashflow on the first property to get started is not a big deal if it means that I can use the cash-out refi to buy my next property. I dont know if my debt to income ratio will be adequate though...?

Thanks for your time. I will try to make this message a little shorter next time. I am very new to rental real estate and am certain this is where I want to spend my time. All your feedback is appreciated.

Dan

[Chris Simmons]

Step 1:  Make sure you have already moved out.  In order to have a good sales pitch about being an asset to them, you need to quit being an expense.

Step 2:  Do your own laundry and quit raiding the fridge.

Step 3: Think about what your parents want. Are you going to them because you know they would have an interest in loaning a novice money to invest in real estate and are interested in the associated ROI? Or are you going to them because you have a dream and they have always supported you and how could they possibly turn their sweet, innocent child down?

Investor types have no problems negotiating terms.  If you are going to them as their child with a hope and dream, I think the details of the loan repayment is the least of your worries.