Auburn, AL · Member since 2017 · 14 posts · 1 vote
I am currently in college and I have parents and grandparents that may or may not want (they are "iffy") to invest in real estate and of course they are not wanting to take the time to go out and look for an amazing deal. So as you would've guessed I am the one looking more than they are and they seem like they don't have as much interest as I do. They have the money to do a 50-50 deal with me (they fund the deal and I manage it). However, I haven't been given the "green light" from them, i.e. I don't really know if they have their seed money ready to be invested. I don't want to waste anybody's time so should I wait till they give me the so called "green light" or should I go find a deal and show them the numbers? I was thinking that if it was an amazing deal they would go find their seed money as quick as they could or I could go find someone else to invest with. I guess is what I'm trying to ask is should tell someone I am going to buy their house (I guess that would involve a contract) without having a definite way to finance the deal. I know I will be using private money but Im not quite sure who from.
Family and investments can be a sticky mixture (and messy).
I suppose some situations that are well defined (like a clear "one time" deal) and involve sophisticated parties (that know the risks) may work, but if you can stand on your own two feet and make your own deal, all the better. It's much cleaner in my opinion.
Even if it is creative financing--it will be your deal and you sink or swim on your own abilities. Seek your own financing, owner financing, or look at how you can use conventional sources in the near future (and I would not make any offers without some financing sources, creative or standard).
For example, maybe you buy a place using owner financing to house you and other students near campus; or buy a fourplex as your first home out of college (a couple of years into your first job)... In short, your own deal....
The neat part of real estate is being your own boss and waiting for others' arbitrary green or red lights seems limiting and frustrating; that runs counter to why I am in rei....
Also, I think investing with family can be a no win situation.... Even with saintly relatives, human nature and large sums of money can lead folks to the lowest common denominator......
Suppose, you suggest and lead an investment that is a home run. The reward is probably they ask for another and another (and their friends may ask, too!). If you turn them down (say, when you have your own capital), you may be seen as the selfish one for not including them on your deals (even if you try and explain the rationale, good luck)...Today's privileges are tomorrow's demands, as the saying goes.
And if you keep doing deals with your family, inevitably you will have a dud of a deal (at least in their opinion). And if it is strike out, it is all your fault and you are the know-nothing, good for nothing who lost their hard-earned money. They knew all along it was a loser but just went along for the ride, etc....In retrospect, they may even remember all the winners as really their great ideas (they gave the "green light" after all; the losers were really your ideas, etc).
So I think you potentially could lose either way in the long term mixing family and real estate investing.....
Worse yet, you get to revisit these potential ill feelings at each family gathering or in any family conversation. Fun. Fun.Fun.
I am currently in college and I have parents and grandparents that may or may not want (they are "iffy") to invest in real estate and of course they are not wanting to take the time to go out and look for an amazing deal. So as you would've guessed I am the one looking more than they are and they seem like they don't have as much interest as I do. They have the money to do a 50-50 deal with me (they fund the deal and I manage it). However, I haven't been given the "green light" from them, i.e. I don't really know if they have their seed money ready to be invested. I don't want to waste anybody's time so should I wait till they give me the so called "green light" or should I go find a deal and show them the numbers? I was thinking that if it was an amazing deal they would go find their seed money as quick as they could or I could go find someone else to invest with. I guess is what I'm trying to ask is should tell someone I am going to buy their house (I guess that would involve a contract) without having a definite way to finance the deal. I know I will be using private money but Im not quite sure who from.
Thanks, Karsen
Hi Karsen, find the deal first. If family won't fund you there are plenty of people that will. Besides, oftentimes it takes the first deal to convince the family that it can be done. I funded my own first deal back in '97 and once my family saw that I was serious and saw the project, they were over there helping me clean, paint and do whatever they had the ability to do. It was fun and brought the family together.