Helping relatives invest using our income/credit..

[Dave Anderson]

My wife and I have excellent credit, no loans, and a high income. We've never done real estate investing before, but are considering out-of-state turnkey properties (we're from the Seattle area, particularly bad for cash flow investments I believe) to diversify out of our current stock index fund only investments.

Her parents & brother make less income, and have very little (to no) credit history. However, they've both saved enough to be wondering what to do with their money. They're risk adverse, considering how long it took them to save.

With the usual caveats for protecting ourselves financially, we'd like to help the family members as much as possible get a leg up on investments. A few questions below:

1. To reduce single investment risk for any one party, I was thinking we could buy a few properties, but keep them in a partnership/LLC with shared ownership. A legal entity which spreads the risk out of a single under-performing property. One of my worst case scenarios is that we help the brother (for example) buy a property, but it has issues & ends up being a very poor investment. Does anyone have good resources for forming a legal entity with trusted family members? Downsides to doing this?

2. We'd qualify for loans, they may not. Am I assuming correctly if we all are co-signing on a loan, that our income/credit would help the entire "group" qualify for these loans?

3. In the longer run, I don't want our finances tangled for the next 25 years. At least it feels like it'd be a source of potential stress. If you build a legal entity with a number of co-owned properties, am I assuming correctly that it'd be a bit of a nightmare to untangle those to flip back to individual ownerships?

4. Would it make sense for each property to be in its own legal entity, so someone could "buy out" the others on each property?

5. I'm early into my research on how this all might work. Anything I should send more focus on? Things I haven't thought about yet?

I greatly appreciate any help/advice! :)