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Things You Should Know Before Investing With Someone.

Posted by david | May 25, 2007

This article I just read reminded me of something my Dad once told me when I was a kid (will explain below). The article was discussing how investing in or with a friend or family member can be a risky proposition. There are all sorts of problems that can crop up in terms of your relationships outside of the money issues themselves. To be better prepared, you might want to have a checklist of things you should know before you sign on the dotted line.

Some questions to get answers to:

The term of the investment, payment amount, payment schedule and the interest rate if there is one.

How to handle late or missed payments.

How or if a loan has to be repaid if the investment fails.

The percentage of ownership you stand to gain by investing in someone or a business.

Do you get voting rights?

This is according to an article in Kiplinger, but I can give you an example of a contract that I once had to sign. When I was 14 I wanted a new guitar amp so I could play louder in my new rock “band”..if you could call us that. But my parents were not about to go out and just buy me a $800 amp and I did not have that kind of money. So they made me sign a contract saying I would pay them back X amount of dollars every week until it was paid off, and I happily signed it as I wanted the amp. This taught me something very valuable at an early age about getting things in writing in order to make things go smoothly and to have backup to any verbal discussions. The same goes for any high investment or business you choose to get involved with, even if it is your best friend or your parents…contracts and agreements are king.

technorati tags: investing, friends, family, business, contract