This Is What You Should Be Aware of When Investing With Family

Investing with family can be complicated.   In this episode, discuss things you should take into account when investing with family and some of the agreement structures that are common for this.  ---  Michael: Hey everybody. Welcome to another episode of the remote real estate investor. My name is Michael Albaum and today I'm joined by,   Tom: Tom Schneider   Emil: and Emil Shour.   Michael: And today we're going to be talking about partnering with family to do real estate deals, this can often be a hotly contested and debated topic. So I'm curious to get everybody's insights. Alright, let's get into it.   Alright guys, family, money, sex, drugs, rock and roll, all the cool things, all the fun things we want to talk about in the show. Have you ever done a deal with a family member? Tom?   Tom: I have not I've approached family member but I think my family is generally a little bit risk averse and doing this kind of work. And that's okay. I you know, I've heard horror stories of friends doing stuff with family members were friends that it's gone south, but I personally have not done so. I'm going to be sniping in some some questions and maybe throwing some pessimism shade. But I've heard of people being successful. But anyways, long answer No. Short answer long. No.   Michael: So when you say that your family is risk averse, does that imply that real estate investing is super risky?   Tom: I think that it's fear of the unknown. Michael, if you're not familiar with it, it's can make you concerned that…   Emil: It is a very common consensus.   Tom: For sure. We'll have to kind of drill into some of that on another episode, but not risk averse. But just yeah, fear of the unknown. That's where I'd say my lot my family, I think a lot of people like a lot of them, like get it and want to do it. But man that going from zero to one is a pretty big move. That hasn't happened.   Emil: Yeah, everyone has heard that horror story too, right? Like, oh, I had a friend who bought real estate and it became a crack house. And then it's like, okay, we're gonna pull the one. Everyone's heard that story. And so I think that's where the scariness of real estate is coming from, right? Michael: No one ever says like, Oh, yeah, I had a friend into real estate and worked out really well. So I want to do it now, too.   Tom: Yeah, I mean, I think with a lot of people, it's fear of like, looking like a dummy, you know, and like throwing money away. And I think anytime you're quote, unquote, like making moves, like there's some risk for that. And a way to think a lot of people is just turn into a turtle and just do nothing.   Michael: I like turtles,   Tom: Nice throwback, cultural reference.   Michael: It's interesting. Like, I would argue more people invest in the stock market, via retirement accounts, or via taxable accounts than invest in real estate. And so it's almost become normalized to say, like, oh, man, the stock market went down. So I lost a bunch of money today. And I was like, Oh, yeah, like that happens. That sucks. Versus in real estate, I think because there are less people doing it, it's probably talked about less. And so people are getting less exposure to it. And so they don't want to be that one person that looks bad, who went and lost money in real estate versus all their friends, family, whatever other acquaintances are losing money in the stock market, no one thinks twice about it because it's been normalized.   Tom: Yeah. It's like what weighs heavier like the aversion for loss? Or the what's the opposite of aversion?   Michael: Wanting? Desire?   Tom: Desire, there we go, versus the seeking gain seeking. Yeah, aversion is a very strong force.   Michael: I think loss aversion is stronger than gain. I think we did a book club at the Roofstock Academy, where we were talking about negotiation and that kind of thing. And people's loss aversion is a stronger driving factor in their decision making than ability to win and gain