investing with friends/ family

[Joseph Vu]

Hello everyone, I just recently bought my first rental property and it is currently doing well. My friends and family (brothers) heard about what I was doing and wanted to invest in real estate as well.

Does anyone have any experience investing with multiple individuals? I think we would continue with SFH and slowly scale into multi-family homes.

I think this would be a faster way to acquire properties because it would take me about 1-2 years to save up for another property if I continued down this path alone.  I more curious to how the structuring would work, especially taxes.

Hoping to hearing from your responses!

[Nathan Gesner]

Be careful. Many people make the mistake of thinking business with friends/family is easy because you already have built a relationship of trust. However, you need to be extra cautious with friends/family. If something goes bad, you'll lose the business AND you'll lose the relationship.

Find an attorney that can help you structure an partnership agreement. You need to be very clear on what everyone's responsibilities are, who makes decisions about improvements, who approves applications, how payments are made, building a reserve, paying for maintenance, etc. And if you're finding the deal and then managing the property, how are you going got get paid for your services?

I would try to avoid lumping multiple investors into the same pool together because that creates complexity. Buy an investment with brother John, then a different investment with your friend Gayle, then another with mom and dad, etc.

You don't necessarily need an LLC for each purchase but you do need a strong written partnership agreement.