Real Estate Development - Leverage Your Way to Success: Develop a Property Your Family Already Owns

If you want to get started in real estate development without spending a cent, why not develop a property that your family already owns? It could be a house belonging to an aging relative who is about to go into assisted living, a cabin that you and your siblings inherited but never use - or a vacation condo that your uncle owns, but hasn’t visited in years.

Many families end up owning more unused properties than used cars. If you can pinpoint some, your next step is to structure a real estate development deal that works for you and all relatives who are concerned. Here’s some advice on putting together a deal that works:

• Work the numbers carefully before moving ahead. Realistically, what is the property worth as a sale or a rental? How much total profit can you make from developing it? And how many relatives will want a piece of the profits? (Remember, more relatives than you expect may suddenly appear.) Because you will be doing the hard work by renovating and marketing the property, you deserve a bigger piece of the profit than your passive partners. Make sure the income from the property will be substantial enough to repay you for your time and effort.
   
• Make the real estate development deal benefit everyone. It can be done. I recently spoke with a contractor named Carl whose mother was about to leave her house in Pennsylvania and move into an assisted living community. Carl talked to his brother and sister and they agreed that Carl could fix up the house and sell it for far more money that it could be sold for in its current condition. The proceeds of the sale would pay for about eight years of assisted care for Carl’s mom. And Carl would get 20 percent of the selling price, in addition to compensation for his renovation expenses. It all worked as planned. Carl’s mom is now set up in assisted living and Carl walked away with a profit of $12,000, which he used to buy his second investment property.
   
• Try to develop a property that you can sell, not rent. Selling lets you take a lump sum profit that you can invest it in other projects. A rental, on the other hand, provides cash flow which can be pretty minimal. I know a man, for example, who fixed up his late parents’ condo in Florida and now rents it out. It only produces a modest income every year, which he has to split with his sister.
   
• Tailor your approach to your family’s way of doing things. You know how your family makes decisions. Maybe your family’s style is to hire a lawyer before anything discusses anything. Or maybe you and your siblings make agreements by shaking hands over breakfast or a round of golf. Or maybe all family decisions have to be presented first to Grandma or old Uncle Bill. But stop to think about the following point too . . .
   
• If your family can’t handle this kind of real estate development deal, don’t even try. If you and your siblings have a history of squabbling over money for example, or if the property you are considering is owned by an unstable uncle of yours, it might not be worth trying. I spoke with one woman named Elizabeth, for example, who inherited half ownership of a cabin in New Hampshire that was owned by her parents. The problem is, her brother owns the other half - and he is an erratic guy who doesn’t want to sell the cabin because he intends to live there “someday.” The place is filling up with bat guano and the roof is sagging, yet Elizabeth’s hands are tied. So she bought a foreclosed house instead as her first investment. “The day will come when my brother needs some money, and will want to sell the place then,” Elizabeth says. She is smart because she is moving ahead in real estate, not letting herself get stalled.
   
• Spell everything out. Even if your family has a casual way of making decisions, get the agreement written up by an attorney and signed by all family parties. And remember, you aren’t only dealing with the people who are in your family today. A family is like a revolving door. Your relatives will get married or divorced, have children, and those children will grow up and get married. If you are structuring a real estate development deal for a rental or investment property that will be owned by your family for years, you need legal protection for your position in the deal.

To learn more powerful ways of getting your start in real estate development and investing, become part of Trump University’s Real Estate Investment Training program.
 

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