Private lending to family

[Christian Menchaca]

Hi, I’m new here thought I would ask what’s y’all’s experience in investing with family. My cousin who ownes and runs construction company asked me to invest in a property he got under contract for 500k I have another cousin who is a successful wholesaler. I asked him to take a look at it and got back to me saying it’s worth 700-800k based on near by comps. We came to an agreement in equity and some cash for the deposit to purchase and some allowance for reno. I haven’t gotten anything signed yet. What should I do continue to go through with this or just say no.

[Steven Goldman]

I would begin analyzing this deal as follows. Are you helping your cousin or trying to make money? I hope the answer is trying to make money. What is the scope and cost of the rehab.? If the rehab is extensive and the ARV is 700 you are playing with a thin margin considering the investment you will need to make. I What do you want to make and are your comfortable that your cousin will make enough money to pay you back with interest? How are you going to secure your stake? You need to answer those questions to see if the deal makes sense. Are you investing in the deal or lending your cousin a bridge loan? Good luck!