Should you borrow money from your family to flip real estate?
Without question, it’s an awesome time to flip real estate and make profits in the housing sector. Done right, it can be a low risk opportunity to turn a profit and have a lot of fun. However, what if it means borrowing money from family? Where do you draw the line on lenders?
First, know that you can flip real estate with little to no money of your own, even with poor credit. Of course, some startup and working capital can go a long way. Being a cash buyer in today’s housing market can definitely be a plus.
As they should, many investors will value the relationships with their family above the earnings potential. However, if your family has extra cash to invest, then you could be doing them a huge favor. Using family money WISELY can potentially net everyone more profits.
On the other hand, if your plan would reduce the family savings to zero and strip their home of equity, you might want to think twice and work harder to find another way to accomplish your goals. At the very least, gain the proper education so that you know what you are doing before you invest your family’s money.
There are still many other tips for flipping houses and funding sources to explore. Crowdfunding, peer to peer lending websites, hard money lenders and transactional funding are each viable options. But if you can help your family benefit with you, why wouldn’t you?
If you are set on borrowing from friends and family, don’t pull the trigger without first laying out a written agreement. Discuss expectations, make sure all parties are happy with the worst case scenario and above all, invest in your real estate education. Eliminate as much risk as possible when trying to flip real estate.
