Repay my mother or buy another duplex!

[Quwan Booker]

I purchased a duple thats is fixer upper! I be got to pay my mother 550 a/month for 5 years or 38000! I want to purchase other property ASAP. My stepmom told me I can give her $20,000 once I refinance the duplex and we can call it even! When I refinance the house I’ll be getting in the ballpark range of $30,000-$40,000. Should I give her the $20,000 or use the $30,000-$40,000 to purcharse another duple, and just continue to pay her the $500 for the duration of the 5 years?

[Jeremy Roberts]

Talk to your mom with what you're considering. Don't burn a bridge with a loyal investor or family.

[Quwan Booker]

@Jeremy Roberts I just want to know if I should just continue to pay her the $550 or just give her the $20000 and call it even. She’s willing to accept the $550 for the duration of the 5 years!

[Oren K.]

This should be her decision. For all you know, she may need those funds for some other purpose.

She is the lender and has already offered, I assume, more favorable terms then originally agreed to. If she is willing to fund your next project, that is a separate decision / transaction. Also, especially with any friends / family borrowing, making good on the original agreement builds trust / confidence / reputation / etc. (holds true for anyone).

[Jeremy Roberts]

@Quwan Booker - Since mom is aware of the plan, I'd weigh the ROI on the duplex vs. the money you save by paying back the loan early. Also, it's worth considering you are building a good credit history by paying back the loan early...like a solid line of credit. It is definitely a great thing to have family helping you out. Also, you'll still have $10-20k to build on.

[Quwan Booker]

@Oren K. There is no loan on the house at all. The house is paid off!

[Quwan Booker]

@Jeremy Roberts there is no loan out on the property!

[Caleb Heimsoth]

@Quwan Booker If you take money from family you should treat t like any other investor even if they don’t. Therefore the smart decision (regardless of what she says) is to pay her off entirely in full. Each and every time.

[Quwan Booker]

@Caleb Heimsoth she said I have an option of paying $550 a month for 5 years or pay her a lump sum of $20,000. She said it’s up to me, it doesn’t matter to her.

[Oren K.]

Quwan,

I, and I assume @Jeremy Roberts, understand that there is no loan registered against the duplex. Our posts crossed so I was not aware that your mother was fine with both options (payoff now or installment payments).

As Jeremy posted, it now mostly becomes a math game regarding what is in your best interest but I would still weigh the value of 'making good' on the original loan from your mother. Being a parent not withstanding, good will is difficult to build and very easy to loose.

I would rather owe the banks and if a jam develops have family back me up then get into  a jam with family. Makes those thanksgiving dinners and other family events very awkward :)\

Oren

[Sherry Gao]

I agree with Oren. My bad pertinence told not to lend $ to family ever again.  I lent $ to my brother in the past for his remodeling biz. And he did not try to pay me back in full.  So I lost faith in him coz I would had had paid back in full to family and even add a little insterest or a gift card to thank for the effort of helping me.   

 Family 1st because they will always be on your side.   Do the right thing. 

[Dennis M.]

@Quwan Booker When you refi .. pay her back what is owed in a lump sum . You never know what life will throw at you in the future and family is all you really have in life . This isn’t some rich lender down the street or some bIg name banking institution , this is your mother and you got to get her money back first before anything else . Family first

[Randy E.]

@Quwan Booker,

Part of this depends on your financial situation.  You've already said you wish to invest in another property soon.  What you haven't said is does your financial situation allow you to do so?

Scenario 1: You have a high credit score, a good-paying job, and after refinancing your duplex and pulling out the $40K, you would have no trouble getting a mortgage on your own to buy another property.  If this is the situation, then I would continue to pay her the $550/month and quickly buy another property.

Scenario 2: For whatever reason, once you refi your current duplex and pull out the $40K, you will not be able to qualify for another mortgage to buy your next property.  You will have the $40K cash from the refi that I assume you think will be enough to buy another property in your investment area.  If you spend all or most of the $40K on the next property, and if you will have some cash reserves for emergencies, I can get behind this scenario where you would continue to pay her $550/month.  There is higher risk here for your mother, and to account for that, I would suggest you set up a separate savings account and put at least 4 months' payments to your mother in that account.  That way, if you run into a financial hiccup, you can temporarily pay her from that account until you steady the boat.  Ensuring she gets her money each and every month should be your highest and best priority, because none of this would have been possible without her assistance in the first place.

Scenario 3: You have a terrible credit situation, a low-paying job, no savings.  You plan to refi, spend all the refi-money to buy another property, and from that cash flow you think you can make the monthly payments to your mother -- and even if you're a little late, you know she'll understand because, hey, she's family.  If this is your plan, you should refi, pay her the $20K, and risk the remainder however you see fit.  But you should pay her off the top, in full.

But whatever you do, because she backed you the first time, you owe it to her to keep her informed every step of the way.  Until you repay that loan in full to her satisfaction, it's still her money you're playing with.

Good luck

[Jack Edgar jr]

@Quwan Booker recommend paying them back at the discounted rate and find another opportunity. Once you do, ask them if they want in again with a new agreement in place. They stay in control of their loans and you win loyal investors/private lenders.

[Quwan Booker]

@Jack Edgar jr I won’t need her after this is this paid to her!

[Stefan Ross]

@Jack Edgar jr I agree with you on this.  @Quwan Booker the best of both worlds is to pay her the lump sum and then once you find another opportunity you can she if she is interested in investing again.  This is the best of both worlds.

[Quwan Booker]

@Stefan Ross I won’t need her anymore to invest into a property after the first one is done! I’ll have enough equity to make my own deal!

[Janina S.]

@Quwan Booker @Jack Edgar jr never said you'd need your step mom. He said by paying her in full you have the ability and they option to user her as an investor in the future. You seem very aggressive in your responses. I think Randy gave you solid advice. If you are steady and are able to pay the 550 a month easily even without the 40k refinanced money..... then use the cash to invest in another smart deal. Use the cash flow from the second deal to pay her more. Ex: 1100 a month instead of the 550. But if you aren't able to pay it back easily, and would honestly rely on the success of the second deal to pay her bank consistently.... then take the love reduce repayment and pay her back the 20k. Personally I'd do that and offer her to be a part of your second deal.

[Steve Vaughan]

The big question is... Do you still live in her basement?

Pay her off. Who borrows from their own mother?

[Terry Miller]

Originally posted by @Steve Vaughan:

The big question is... Do you still live in her basement?

Pay her off. Who borrows from their own mother?

 Many famous people whose stocks you own and/or whose products you buy started off with loans from parents. Hell, most people's first car is a full or partial "Daddilac" (or "Mammalac").

[Steve Vaughan]

Originally posted by @Terry Miller:

Originally posted by @Steve Vaughan:

The big question is... Do you still live in her basement?

Pay her off. Who borrows from their own mother?

 Many famous people whose stocks you own and/or whose products you buy started off with loans from parents. Hell, most people's first car is a full or partial "Daddilac" (or "Mammalac").

 Fair enough, Terry.  Mammalac. LOL

 Let me re-phrase... Pay her off.  Who borrows from their own mother for longer than absolutely necessary?

[Caleb Heimsoth]

@Steve Vaughan Don’t be hating on people who live in their moms basement. It’s super comfy down there...

[Steven White]

Pay off your Mom... if she wants to go in on the next deal great but let that be her choice after u pay her back.. In the long run it builds trust in you and and I am sure it will open more doors not only with her but other friends and family.. Focus on the big picture here and what would benefit you more. 

[Stephen G. Wolff]

Pay mom in full. End of decision.

[Joe Splitrock]

@Quwan Booker 

Not that it matters, but $550 for 5 years is actually $33,000 - still pay it off because a $20,000 loan with $550 monthly payment is a 22% interest rate. I am sure you can refinance into something way more reasonable so this is a simple math problem. Still as others suggested, being in debt to family should be avoided once you get going.

[Jason D.]

@Quwan Booker pay her back and save the $13,000. Then save up for the next property