All Forum Posts by: Doug Karkow

I'm under contract for my first property in the Seattle area - a duplex in Puyallup.

Assuming I get the property, does anyone have a referral for an insurance company? And what coverage is needed - just the building, any contents inside, an umbrella policy for liability protection, etc.? Any help is greatly appreciated!!

@Account Closed For your first statement, this is what I had assumed. Cash is cash, and there's no lender obstacle. However, back to the scalability issue, I can't keep borrowing $100k at a time from my folks. That well will run dry quickly too, unless I do some delayed financing tricks or something. But you're absolutely right, I don't want to lie to anyone about anything. I'm looking for a creative, yet LEGAL, solution for scalability. Like I said above to Steve, I guess my next step will be to let my lender weigh in on this topic ...

Thanks for your help everyone!!!

@Steve Vaughan Thanks for your thoughts, Steve! And don't worry, I would tip-toe very carefully with anyone's money, and this certainly includes funds from family/friends. I would do my best to make sure the terms of the deal are sweeter than those of the loan so that the loan is basically producing it's own payments (i.e. loan fund deal, and the cash flow repays the loan plus extra).

Any other considerations besides potential family disputes? 

Will lenders balk at financing the remainder of a deal if the down payment funds come from a private loan? 

Does the IRS care how properties are purchased?

Are there any limits to the amount of private money that may be loaned from (or to) a non-accredited investor?

Hello BP community! This is my first post, so set your expectations low! Here goes ...

Rather than save my way to down payments using my W-2 income, it is easy to imagine how using private loans could accelerate my REI goals. Perhaps this is a bit naive, but are there any legal or financing concerns with using a private loan from friends/family for the down payment of an investment property (SEC regulations, underwriting difficulties, etc.)?

- Hypothetically, if I were to borrow $100,000 from my folks and try to buy a $100,000 house entirely with cash, will I run into any issues?

- How about if I borrowed $20,000 at 5% interest over 30 years - can I use that private loan to fund the down payment for this $100,000 house?

The thought process here is that I may be able to make a 15% (for example) return on my own cash while accepting the risks associated with real estate investing, whereas a private party may not want the risks or fluctuations in income and be perfectly happy with a 5% return on their loan. They could give me a loan with a guaranteed return (i.e. 5%), and I could use the loan to go after higher returns (i.e. 15%). They get their guaranteed income, and I get cash flow with no/low money down. Win-Win!

Can I do this?! If so, is it as simple as, "Hey Dad, can I borrow $20,000?"  

Hey Andrew,

    I'm looking in the Iowa City/Cedar Rapids areas. I'll send you a message shortly!

Doug