Managing my dad's property as a landlord?

[Kyle Germany]

Hi, I am in the beginning stages of the real estate business here in Arizona, and my dad has expressed his desire to help me get started.  So far we have talked about the idea of him buying a house with 100% of his own money (no mortgage), and then he would let me function as the landlord.  So while the house would remain in his name, I would be the one responsible for pretty much all the expenses, but I'd also be able to receive 100% of the tenants' rent checks.  So basically my dad has offered to give me a massively big piece of the pie without a whole lot of risk on my end.  

The main downside is that neither my dad nor I have any real estate investing experience, so I'm a little concerned that I will make a huge mistake right off the bat. For example, I'm wondering if there would be any significant legal/tax ramifications about the idea of the rent checks going to me directly despite not being the homeowner. Would it help at all if we started up an LLC and/or partnership? Or can my dad and I accomplish what we're trying to do without taking this step?

Again, I'm brand new to this whole business, so anyway you can help point me in the right direction would be greatly appreciated. Thanks a bunch!

[Thomas S.]

You need to start off by reading everything you can find on this site related to income investment properties. There is a lot to learn in this business and a few suggestions on a thread such as this is going to do you more harm than good. You need to research which avenue of real estate investing you are best suited to and what your long term goals are. This is a business, you will be a business owner, there are a load of state landlord tenant regulations for you to learn before you even think of buying a property.

Many will suggest you jump in with both feet. That would be a major mistake to start a business with your fathers money on the line. It would be similar to driving his brand new car with a blind fold on.  Personally I would advise you not accept any of his money other than in the form of a loan with interest or partner with him on the investment.

There is a lot to learn and if done properly it will take a individual 6 months to a year to get fully up to speed to confidently enter into the business. Many investors will go bankrupt some to stupidity some to bad luck but most to ignorance.

As a example it is a major mistake to purchase a property all cash. Obviously your dad has no investing experience and you should not do what he is suggesting. A far better approach would be for you to borrow the down payment required to purchase a property with bank financing for the rest. It should be a multi plex and it would be preferable if you live in one of the units.

All of that is of course if long term hold is your best choice for real estate investing.