Safeguards for financing with family

[Tyler Stephens]

Hey everyone!

I've secured financing for my first flip... from my girlfriend's parents. I've heard and seen horror stories about family working together and how bad things can get around the dinner table when things go south in the business relationship. I'm looking for any advice to help ensure I don't end up a victim of the same problems. I love my girlfriend (buying the ring soon!) and her family is awesome, and don't want to do anything to jeopardize our personal relationship.

A few details: I've been learning everything I can from BP and talking to anyone I can, and had started looking for ways to secure financing when her parents generously offered to finance the first house. Specifically her dad offered to buy it for us. The opportunity is too great to pass up, and so now I'm trying to solve a couple of issues. 

One is how we should structure the deal. We can either do the deal like a hard money loan (but with better terms), or go into the flip as partners and split the profits. If we go in as partners, and they finance everything, and the flip goes bad and we lose money... do partners typically hold themselves partially responsible for repayment of the losses? How are those deals structured not among family? I get the feeling they aren't looking to make a profit, and just want to help us get started.

The second issue is the more important one. What steps should I take to ensure that if our business deal somehow goes bad, it doesn't create personal tension in the family? Obviously we need some sort of written agreement, but are there any specifics we might cover that will make things easier for everyone?

Thanks all,

Tyler