Investing with in laws

[Chloe Ralston]

We are looking to purchase a rental property deal through an LLC my husband and I have created. It's bigger than we originally planned for our first deal, but my father in-law offered to help and we are trying to find a way to make it work. It is a newer four plex and they are asking $550,000. We have $40,000 to put down and my father in-law is willing to put up to 100,000. We can purchase this property through the LLC or through the VA Loan that is available to us. How would I go about creating a deal that will benefit both parties if we decide to work with family?

**My father in law mentioned he would like to make his money back plus a percentage of the equity. My father in law would be a private investor, we would be the ones managing it. 

[Kevin Hoodwin]

You definitely have options.  Some that come to mind:

• Create a new LLC with two members, your current LLC and your father in-law. Split profits as you see fit.
• Joint venture with your father in-law.  Write into the agreement the terms of the transaction and distribution of profits.
• Accept a loan from your father in-law and secure it with a 2nd lien on the property.  This is ideal because it would give y'all control of the property while fulfilling your father in-law's wishes.  It would also be a selling point to you father in-law because his investment is backed by the property, reducing risk to him.  Write negotiated terms into the note.  (I suggest this one)

Remember if you're buying the property in your personal name with the VA loan, it will not be under your LLC. You will have to deed it from you to your LLC. This could prove problematic if the bank has a due-on-sale clause.

Hope this helped!