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Updated over 3 years ago,

Account Closed
0
Votes |
1
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House Flip with Family Members

Account Closed
Posted

Hello,

My husband wants his brother and parents to go in on this deal with us (he didn’t even talk with me in agreeing to work with his family members (sighs))  My husband’s coworker is moving out of state and selling his home very low, like almost $40,000 under the county’s appraised value, and the house’s selling price could be definitely worth more than appraised value in the current real estate market. The house is from 1950s and needs a new roof and some cosmetic updates but there’s been a new a/c unit, water heater installed within the last two years.
My husband and I were preapproved by a local bank under our LLC with the terms of us finding a property, cash flowing as a rental property. But we want to do a flip and sell the house as-is (no rehab or possibly small cosmetic improvements) at a higher price than purchase price.
If the bank agrees to give us the loan not minding that we are no longer purchasing the house as a rental property, then I don’t see why we need to involve my husband’s brother and his parents as investors/ partners but my husband feels “guilt” because we talk to them about real estate a lot and they have been trying to work together for awhile but no good deals have popped up until now.

I understand his guilt but I feel why include so many family members?
My husband and I have enough for a down deposit and if the bank backs us up, I don’t see a need to involve family members just to split the house’s down deposit, closing fees, selling real estate agents fees, and so on.

However, if the bank does not back us up, we definitely need the brother’s and parents’ help because we wouldn’t be able to afford the house on our own in cash. But my husband says they probably won’t have the money to invest if we all had to split 3 ways in cash.

IF the bank does back my husband and I up for the deal: since my husband and I found the deal, viewed the house, negotiated the deal, closed the deal with the buyer, would it be wrong to ask for higher profits than the other family members?

The house will be purchased under my husband and mine's LLC which does not list his brother or his parents as members and won't be since we use that LLC for a current rental property. In regards to the taxes for short term real estate gains, I would want to make sure that it is fairly split among my husband/I , brother in law and parents in law. Would that need to be written in a agreement/contract?

Thanks for any advice!