Posted by JPiper on April 05, 2001 at 07:29:02:
Your family business can loan you money. Whether this is a wise course would depend on the deal. Hopefully you are aware that there are several ways to start with little or no money ie lease/options and wholesaling. See the How To Articles for more details.
Can my parent’s company loan me money - Posted by Jeremy
Posted by Jeremy on April 05, 2001 at 03:39:50:
I am just beginning my investing career and was wondering if the family business can legally be lending me money for my first few deals. The only reason I would want this to begin with is because I have no cash of my own at this time to invest. The business is an automotive corporation. I am reading this site, and as many books as I can right now in order to get as much knowledge about this subject as I can. Let me know if this is a good idea, or should I look for other ways of getting the money. If other options would be better, what would they be and could I, being a 20 year old college student, take advantage of them. Thank you.
Re: Can my parent’s company loan me money - Posted by SueC
Posted by SueC on April 05, 2001 at 08:22:40:
How about the family business being a partner, instead of loaning you the money? You set up the deal and do all the leg work, they put in some cash, and you split the profits on the back end. I would prefer this to being on the hook for a note. There are questions of course whether there are tax issues for their corporation with regard to profit they make, but they’d have taxable income in the form of interest as well (unless they’re making you a no-interest loan), and plenty of corporations invest in other businesses either directly as I’m suggesting or indirectly through buying stock or whatever.
I wouldn’t walk away from their offer, but see if you can’t structure it so it’s a little more to your benefit. I think ultimately it will depend on the deal: if you’re looking at picking up a place for $.50 on the dollar, and instead of having to get hard money they’ll give you a no- or low-interest, no-payment note, I think getting a loan from them is a great idea. If they’re charging you the same interest and terms as a bank, and expecting you to put in down money, and the deals are $.75-1.00 on the dollar, then there’s not much benefit to you.
I always caution too - if any or all your deals go south, how will your personal, non-business relationship with your family suffer? Worth discussing with them.
Re: Can my parent’s company loan me money - Posted by TRandle
Posted by TRandle on April 05, 2001 at 07:46:47:
I don’t recommend a loan as the way to start your investment career. Yes, having access to funds may open more doors, but in my opinion, it also makes you weak. I speak from personal experience and still am highly leveraged at times. However, I’m also a CPA and was a financial planner so I’m able to understand and mitigate my risks to a degree. Again, I don’t recommend it.
If you haven’t spent much time here, you will soon notice there are certain folks who are quite successful without using their own funds or debt. I admire these people because they have taught themselves to create money out of ideas. Once they have acquired that skill, they will always have it.
As Jim said, I would suggest reading this entire site forwards and backwards and practice on developing that skill. Then, you can use your available funds for marketing as necessary. My two cents…