Borrowing Money - Parents

[Donnie Wilson]

Since my parents have retired and the uncertainty of the stock market (where all their investments are at) I'm trying to help them by putting their liquidity to use. How do I go about borrowing money from them to put towards cash on a down payment for real estate? I would pay my parents 2% each month on that sum (30K) for 6 months, then pay back in full. We need cash towards the rehab.

-Promissory note has been drafted between my dad and I.

-Do I involve a lawyer? I don't want to if I don't have to.

-Do I issue a 1099 at the end of the year? Or can this loan be done with out that and my dad an I? We still have a joint account set up since I was in college.

Again, I'm helping my parents put the money to use outside of the stock market, any guidance on making this a smooth contract between my parents and I would be helpful.

Thanks!!

[Derek Dombeck]

You should treat family loans as if they were any other lender. 

You should provide a Lenders Title Insurance policy, a note secured by a recorded mortgage or deed of trust, and add them as Lenders on your property insurance policy. 

All of this will cost you a little bit of money, but it protects them and their money.