Is a 50/50 split fair to sell half of an investment to family?

Question

I have a fixer-upper that I owned for a year. I put about $4000 into the fixes plus 4 months of sweat equity. Well, the house burned down 6 months ago and it's in the process of being rebuilt. Well now I can't afford to pay the mortgage anymore. So my bro offered to pay half of the downpayment that I put on the house in exchange for 50% of the equity when I sell. Is that fair? I owned the house for a year now and paid for the repairs. I also paid the mortgage for the last 6 months that it burned down. But my bro says he's strapped for money and the only way he'll do it is if he gets 50%. It's hard for me to think straight as to whether this is fair becuase he is my bro, and he's helping me out, but my gut says it isn't fair. But I know that if I don't accept his offer, I may loose this house as I can't afford to pay the mortgage anymore.

Answer 1

If the house hadn't burned, then I'd say you should get the bigger share. But didn't you have insurance? If not, well, you gambled and lost. It stinks, sure. But your brother isn't responsible for your bad luck. You have to look at what you have now, not what you had before the fire.

Look at other options that you might have. If nothing better is on the horizon, your brother's offer isn't bad. I'm assuming that from here on out, he's going to pay half of the mortgage and expenses. If not, then no, you're getting the short end of the deal.

Answer 2

I'm not sure whether your brother's offer is equitable but can imagine you're feeling uncomfortable with the situation; an offer of 'help' shouldn't be entangled with or, attached by strings.

Talk to your bank about getting a new appraisal on the property based upon the new structure you are building. You may be able to get a home equity loan or, home equity line of credit to assist you in paying the mortgage until the time you are able to sell.

If that doesn't work, relax a bit and clear your mind. You are feeling uneasy & perplexed because your situation is becoming hurried and 'forced' which is offensive and feels oppressive. Spend some time 'away' from it before making a decision.

Remind yourself that you are the one in control and also, that you truly do have options: walking away, selling some things, taking out a personal loan, putting off the payment of other bills, etc.

Once you have explored all of what you could do, along with all of what could happen, you will be in a better frame of mind to leverage the alternatives against the costs of your brother's suggestion.

Answer 3

Both of you should contact a lawyer first. I had a situation where a business partner and I bought a fixer-upper together and half way through the project he died. I was left with a partnership with his immediate family, had to finish the house by myself with over $16,000 of my own money and 7 months of sweat equity. We still lost money when we finally sold the house because we were about to go into foreclosure. That was 4 years ago and the proceeds left from the sell ($47,000) are still in dispute because we never established a partnership or LLC.
If your brother can help, great, but make sure you both understand how the equity will be split in the end. Maybe he will agree to compensate for your time and materials prior to equity payout. Keep in mind you don't want to bring family or friends into a situation that could potentially be detrimental to the relationship, especially where financial well-being is concerned.
Again, find a lawyer for advice.

Answer 4

If you get to make a little money and your brother does too, great!

You already know your other options right? Private investor, maybe a bank, etc.

When you work or deal with family, you'll need to walk softly and do what it takes to get out of the situation your in. It's tough and not always fair, but the best thing is to save yourself financially and keep peace within your family.

Good luck

Answer 5

go to the bank with a payment plan..
the mortgage company../bank/
talk to the loan officer and give them a plan..
tell them the alternative that you could get a family loan..(at50%)
or if they will do something like a smaller (interest only or something similar)...
my bank has been very fair to me.....
the bank may do a re-appraisal..and give you a decision..
with some kind of defferal agreement of payments......
which may include something like 6% on a balance or some such thing..
also I have gone to my credit card..and had them give me..5%

not to name names but Citi Bank is aggressively looking for new accounts.....they may give you a temporary/short term line of credit............and the introductory rate is 5% (not sure how much they may lend you but it won't be a 50% rate).