Parents are forcing me to be a credit proxy for their flip.

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Parents are forcing me to be a credit proxy for their flip.

Dylan Salem
Miami, FL · Member since 2020 · 2 posts · 0 votes

Hello! I am a freshman in college majoring in real estate and I got inspired to pursue a career in real estate because of my mom, who was a successful realtor for a very long time. Unfortunately, the family business recently shut down and caused my parents to go into bankruptcy in 2020. Because of this, my mom’s credit, which has been near-perfect all her life, is now not high enough to secure a loan from a private money lender to finance a flip she is very eager to do. I have a credit score of 700 and my parents are forcing me to become the credit proxy for this deal. Obviously for an 18 year old, this is a huge situation which while I am grateful for the opportunity, I am understandably weary. If this project is a success, I will be given a share of the profits and my score would boost tremendously. But if it fails, I would not be able to engage in real estate investing, and much worse. Even though they are forcing me to comply, I want to know if I am wrong for being weary about this, and if not, what can I do to make sure this all goes right? A response would very appreciated, thank you!

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Damaso Bautista
Rental Property Investor · Hawthorne, CA · Member since 2018 · 655 posts · 900 votes
5y

@Dylan Salem

Hey Dylan this is a tough situation all the way around for you. I will answer it from a different perspective then the previous two responses.

Ask yourself the following questions and you might look at this differently:

Who is paying for my college education?

Who is paying for my rent and has been doing so for the past 18 years?

Who is putting food on my plate and clothes on my back the past 18 years?

What would happen to me if my parents completely cut me off financially right now as an 18 year old college student?

If you analyze the situation you may have way more to loose by not helping your parents out.

I would never put my kids in this situation but if I was down on my chips, I hope my kids would consider helping me out based on what I have done financially for them.

I hope everything works out for you!

Good luck!

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  • Tim Hall
    Flipper/Rehabber · Tallahassee, FL · Member since 2014 · 462 posts · 237 votes
    5y

    @Dylan Salem you’re 18, you don’t have to do anything. If you don’t want to do it say no. See this as an opportunity to start your real estate career and life by looking at the deal, calculating the risk and saying yes or no to the case in hand. Rejection is part and parcel of real estate and your folks should be used to it by now since they’ve been in the business a while. People tell me all the time what I should do and at the end of it I do what I want, you should too.

    3Reply
  • Damaso Bautista
    Rental Property Investor · Hawthorne, CA · Member since 2018 · 655 posts · 900 votes
    5y

    @Dylan Salem

    Hey Dylan this is a tough situation all the way around for you. I will answer it from a different perspective then the previous two responses.

    Ask yourself the following questions and you might look at this differently:

    Who is paying for my college education?

    Who is paying for my rent and has been doing so for the past 18 years?

    Who is putting food on my plate and clothes on my back the past 18 years?

    What would happen to me if my parents completely cut me off financially right now as an 18 year old college student?

    If you analyze the situation you may have way more to loose by not helping your parents out.

    I would never put my kids in this situation but if I was down on my chips, I hope my kids would consider helping me out based on what I have done financially for them.

    I hope everything works out for you!

    Good luck!

    15Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    5y
    Originally posted by @Dylan Salem:

    Hello! I am a freshman in college majoring in real estate and I got inspired to pursue a career in real estate because of my mom, who was a successful realtor for a very long time. Unfortunately, the family business recently shut down and caused my parents to go into bankruptcy in 2020. Because of this, my mom’s credit, which has been near-perfect all her life, is now not high enough to secure a loan from a private money lender to finance a flip she is very eager to do. I have a credit score of 700 and my parents are forcing me to become the credit proxy for this deal. Obviously for an 18 year old, this is a huge situation which while I am grateful for the opportunity, I am understandably weary. If this project is a success, I will be given a share of the profits and my score would boost tremendously. But if it fails, I would not be able to engage in real estate investing, and much worse. Even though they are forcing me to comply, I want to know if I am wrong for being weary about this, and if not, what can I do to make sure this all goes right? A response would very appreciated, thank you!

     OK, tough love time :)

    1. What private money lender is going to consider you an asset? You're 18, broke and in college, and yet have a credit score higher than your parents. The lenders I know would run far away from all of you.

    2. Anyone that does consider you an asset with your 700 score is probably charging some usurious interest rates, which doesn't really speak that well about your parent's judgement.

    3. Since you are 18 no one can force you to be a party to the application.

    4. I can't speak to your parents or family dynamic but I can tell you I would never put my kids in that situation. I would figure it out on my own. Personally, I don't think risking your child's future speaks highly of your character, but that's my own personal opinion. 

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  • Damaso Bautista
    Rental Property Investor · Hawthorne, CA · Member since 2018 · 655 posts · 900 votes
    5y

     @JD Martin @Account Closed

    This scenario sucks all the way around for this kid.  

    Like JD said I would never put my kid in this situation.  I also have my finances set up in a way that I don't believe I will ever go bankrupt either.  

    3Reply
  • LeAnn RileyBusiness Member
    Real Estate Broker · Minneapolis, MN · Member since 2015 · 116 posts · 67 votes
    5y

    @Dylan Salem Wow that's quite a predicament, usually it's the parents credit that is being used. So sorry to hear about the change in your parent's finances.

    Since your studying real estate do you know the numbers so you can feel comfortable with the deal...have they explained them? No matter if it's your parents or a business partner you need to see the numbers to feel comfortable. Is there any way that you can be involved in the deal to make sure it's done on time, has the right contractors so you are learning how it's done. I'm hoping they have done flips before and this isn't just a desperate move.

    So...from an experienced flipper and coach just be sure you have all the information. After all it is your credit at risk.

    2Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    I can't see a bank lending you money as an 18 year old.  If you are a college student, how much are they going to let you borrow as I'm guessing your income is really low.  Plus if your parents went bankrupt last year, where are they getting the money for the down payment?  Why can't your mom use some of her old contacts from when she was a realtor and go into a partnership.

    2Reply
  • Emery Jensen
    Real Estate Agent · San Diego, CA · Member since 2018 · 29 posts · 9 votes
    5y

    Lot's of good responses here, but this is indeed a tough situation. 

    From the sounds of it your mother may know what she is doing and is just simply trying to bounce back after the unfortunate bankruptcy. These things happen to millionaires and most make a come back. 

    Personally I would take that into account and just look at the flip she wants to do as any other deal you may possibly do in the future. Ask to be shown the numbers, EVERYTHING. From the financing, rehab, holding and closing costs, and comps in the area. It seems like you could use this as a valuable experience to learn a lot. Obviously though, if the numbers don't work or something stands out to you that's too risky, then don't follow through with it and respectfully decline, or help her find the next potential deal. 

    1Reply
  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    5y

    1) I'm not familiar with the term "credit proxy" and would love to hear from folks what that means in this context, sounds sketchy. 2) your mother has been a broker all her life but has she done flips? 3) what does "forcing you" mean? Sounds more than sketchy or are you being dramatic? 

    From afar, it sounds like they are putting you in an awful situation which is a huge red flag in and of itself. 

    1Reply
  • George W.
    Investor · NJ · Member since 2018 · 869 posts · 921 votes
    5y

    Not to sound mean but to me it sounds like your parents are in a tough time. Tough times will make people do some desperate things. 

    If i were in your situation I'd try my best to help them but I'd also tread very carefully. One lesson I've learned with family is not to lend them anything you arent okay with getting back.

    2Reply
  • Justin Hoggatt
    Investor · Morrison, CO · Member since 2015 · 221 posts · 177 votes
    5y

    This is a very interesting thread.  It certainly seems like you're reaching out during a time of despair.  It sounds like you're parents are trying to use your as leverage for a loan since you're in a real estate program, but without actual income, like it was previously said, you're really not likely a real asset to the deal.  I'd love to know how your parents went bankrupt.  As a real estate broker, you're not hanging onto any business liabilities - except for a possible lavish lifestyle of personal liabilities.  Where did they go wrong?  That would be my questioning as any type of lender or partner in the deal.  

    Anytime that you're signing paperwork to do a deal, you need to be certain that you know what you're looking at and that you're comfortable moving forward.  Obviously real estate is risky but Miami is certainly exploding right now and a flip might be a very lucrative project.  If you are weary of the project, then don't do it.  You're fully capable of making those decisions.

    1Reply
  • Suzanne Ludlum
    Investor · Fredericksburg, VA · Member since 2019 · 37 posts · 17 votes
    5y

    @Damaso Bautista @Dylan Salem He doesn't owe his parents because they raised him. If they are holding his college tuition as ransom then shame on them and I would not want to engage with anyone who did this (not saying they did however). Everyone here is right, he's an adult and they can't force him. He has a choice what to do but I would want to know why after such a successful career, his mom's business went bankrupt. Not enough info here to judge or recommend, really.

    2Reply
  • Marian Smith
    Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
    5y

    @Dylan Salem Weary is tired. Wary is apprehensive.

    1Reply
  • David A Lisowski
    Rental Property Investor · Inlet Beach, FL · Member since 2018 · 199 posts · 111 votes
    5y

    @Dylan Salem

    You have a credit score...

    You are also the qualifying income on the loan?

    This scenario makes no sense. Who is forcing you to sign paperwork or provide anything at all to the lender?

    Sorry to see that others are justifying them "forcing" you to do this just because they decided to have a kid. Sorry, but paying for you to live to the age of 18, and providing you with an education, isn't carte blanche to demand things of you.

    I know family situations are complex, but you need a healthy boundary.

    If you really think this is a good investment opportunity, then go for it. Otherwise, save your credit score (and whatever else you have to provide) for the next deal.

    1Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    5y
    Originally posted by @Dylan Salem:

    Hello! I am a freshman in college majoring in real estate and I got inspired to pursue a career in real estate because of my mom, who was a successful realtor for a very long time. Unfortunately, the family business recently shut down and caused my parents to go into bankruptcy in 2020. Because of this, my mom’s credit, which has been near-perfect all her life, is now not high enough to secure a loan from a private money lender to finance a flip she is very eager to do. I have a credit score of 700 and my parents are forcing me to become the credit proxy for this deal. Obviously for an 18 year old, this is a huge situation which while I am grateful for the opportunity, I am understandably weary. If this project is a success, I will be given a share of the profits and my score would boost tremendously. But if it fails, I would not be able to engage in real estate investing, and much worse. Even though they are forcing me to comply, I want to know if I am wrong for being weary about this, and if not, what can I do to make sure this all goes right? A response would very appreciated, thank you!

     CALL THE POLICE and tell them what's going on.

    0Reply
  • Jean Rychlik
    Real Estate Agent · Deerfield Beach, FL · Member since 2014 · 21 posts · 6 votes
    5y

    @Dylan Salem I SO feel for you and am sending you virtual hugs. Please don't allow anyone, ever, to FORCE you to do something against your will. If you do, the consequences will be on you. My son owes me nothing for bringing him into this world and feeding, clothing, and sheltering him for 20 years. Your parents sound desperate (understandably), and desperate people don't always make the best decisions. Since you use the word "force" it sounds like it is not something you feel you should do. Go with your gut. If your parents can't understand, they will never be a good business partner for you. All the best on this very tough situation. Keep us posted . . .

    0Reply
  • Christopher Guerriero
    saddle brook, NJ · Member since 2016 · 16 posts · 5 votes
    5y

    @Dylan Salem

    I'd do it without hesitation, that's your family man come on.

    0Reply
  • James Ma
    Burnaby, BC · Member since 2017 · 282 posts · 268 votes
    5y

    So many people are hung up on the word "forced" as taking it as a gun to the head which I don't believe the OP is meaning but more speaking to that his family is very insistent on it and saying no will hurt them a lot and may even bring a lot of tension to their relationship. 

    It's a tough spot as they're your family. I think you should treat it though as most business deals but with a softer approach since they're more than a random or even a friend. I would sit them down and let them know your concerns and see how they address it. If they make you feel comfortable then great you can move forward. If not, you've already let them know how you feel and it will hopefully help them understand why you're not comfortable moving forward.

    You want to get into real estate investing as well so perhaps you can "partner" with your parents instead on this deal and work on it together? I wouldn't put too much weight into a credit score increase coming into play for your decision, scores easily move up and down so thats no big deal. I'd be more concerned if the flip doesnt work out, how much it will impact you financially.

    0Reply
  • Damaso Bautista
    Rental Property Investor · Hawthorne, CA · Member since 2018 · 655 posts · 900 votes
    5y

    @Suzanne Ludlum

    I 100% agree with you on where I stand on this point.  I also know that life is not linear and there are way more factors into life decisions and many different perspectives.  

    Life does not shape to my personal perspective but I feel it would be wrong not to give this young person a different perspective to consider before making a decision on the matter.

    It doesn't matter how each one of us feel personally about the matter but all of our different perspectives may give this young person some insight to help him make his.

    0Reply
  • Suzanne Ludlum
    Investor · Fredericksburg, VA · Member since 2019 · 37 posts · 17 votes
    5y

    @Damaso Bautista Agreed!

    0Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    5y

    Something that is critical to life successes is the ability to say "no"....  you can even practice.   Say it over and over and over until you are very comfortable saying it. Then when your mom calls /texts you and asks for your credit you can say "Hey mom, thanks for the  opportunity - I really appreciate it, but I am not comfortable doing this so I am going to decline your offer"   

    or, you can just say "no" 

    1Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    5y

    A credit score with no provable income is meaningless when trying to borrow money. I personally wouldn't want to be financially involved with someone that just went bankrupt as this is evidence there are money management issues. (I fully realize this is "family" and there are dynamics involved related to that.) My guess is that what you're alluding to would possibly be considered loan fraud or at minimum unethical but with the sketchy details we're all just speculating. If it makes you feel uncomfortable, just decline. You need to focus on your studies at this point in your life, not embroil yourself in a mess.

    1Reply
  • Curtis Mears
    Property Manager · Raleigh, NC · Member since 2014 · 728 posts · 596 votes
    5y

    @Dylan Salem

    So is a bank actually loaning money based on your score? Do you work or in school? Seems to me no invester is going to accept you unless you meet all credit requirements.

    If a bank will lease to you, then I would research the deal first to make sure it makes economic sense. Also, although it may be difficult as it is your parents, make sure the deal with parents us I writing and you have a way out if need be. This could potentially ruin your relationship with parents if it goes south.

    0Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    5y

    Reminds me of this Dave Ramsey video. Ramsey: "You're broke and you decided to start flipping houses? ... This is a good way to go bankrupt for sure. You should not be flipping houses when you are broke...."

    We Decided To Flip Houses After Going Broke

    2Reply
  • Coleman Bonney
    Member since 2019 · 4 posts · 4 votes
    5y

    @Damaso Bautista

    None of this matters!

    First off forcing requires rope and a gun.

    Secondly, desperate people do desperate things. The writer seems very smart for 18 and in school for real estate therfore look at the situation, evaluate the risk and at the end of the day the decision is yours. However know it could get messy and if you do it then you are willing to ruin your relationship with your parents. If you do decide to do it make sure the "profit shares" are in writing and fair for all.

    Good luck

    0Reply
  • Coleman Bonney
    Member since 2019 · 4 posts · 4 votes
    5y

    @Mike Baxter

    Agree 💯 percent with everything!

    Yes Thanksgiving dinner taste a little different when someone owes someone at the table money.

    2Reply
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