Funding from mom, opportunity or nightmare?

[Ian Korpel]

Hello BP. I am looking to get into multi-family rentals and may have stumbled across an opportunity (or liability). My original plan was to purchase single family properties for a few years and use the rental income to save towards a multi-family, then sell the single-families. Ideally, I would have a complex with a dozen or so units in 5-10 years. My thoughts here are that a multi-unit building would allow me the capacity to hire a property manager and minimize my workload with multiple single-family units.

Now, I was chatting about this with my family and my mother said she is very interested in investing. Obviously, I am cautious of this since I hear a lot of horror stories, so I would have a legal contract written. My question for the community is if this is something worth pursuing? In my mind, I think it would be foolish to turn down cash aid which would allow me to "skip some steps" of finding single family home deals, and I could jump to the multi-family plan, though perhaps at 4-6 units instead of a dozen to start with.

The way I see it there are two approaches. I could write her in as a business partner for this one property and provide income payments to her as a silent investor at some type of split (45-55) or something like that. Or, I could take a loan from her, and pay her back interest plus principle over 3 years or so, which would leave full ownership of the company to me after that time. 

Now, full transparency, I do not yet own any investment properties. I was buying a year ago but had to postpone due to a baby coming into the picture and had to be (understandably) conservative with my savings. That is another reason I am interested in a multi-family with a management company (if the numbers work of course). 

So, I ask the community. Feel free to be fully honest with me! I am obviously new at this and you won't hurt my feelings!

Best, 

Ian

[Nicole Heasley Beitenman]

My dad is my business partner and PM. We've been working together for 5-6 years now. You're already aware of the need for operating agreements that spell out who does what. Make sure you stay in your own lanes and trust one another to do what they are most skilled at. Good luck!