Summary: family flip house with my $50K investment might need to be sold mid-flip to cover other investor cashout, should I add $150K to cash out another investor and salvage it to help family?
I'm looking for advice on an investment involving family. My brother-in-law does home construction and is on a third house that he's bought, fixed down to new plumbing, electrical and sold. My involvement started late on the first house. I got a tour of the house mostly completed, except for some expensive parts that remained uncompleted - kitchen cabinets, bathroom fixtures including tub, toilet and sink. The snag was financial - all the money was tied up in the house, and couldn't be unlocked without a few grand. I called a few days later and offered, unsolicited, $10K or so to finish the house, and a 10% interest rate. We settled on a 20% interest rate so it could be good for both of us. (A note on what we've been doing - it's technically 20% per house, not per year, so it kinda matters how quickly he can flip the house, but it simplified our math at the time) That all worked out great, and a second house worked out fine as well.
The situation today is this house was first bought in 2020. I had $10K in it in 2020, and added an additional $40K in 2022. I imagined the situation in 2022 was similar to the first house - a bit of expensive pieces left to finish that this money could resolve, but it hasn't worked out that way. As it sits, the house has a new roof, new electrical and plumbing, siding, insulation, and exterior landscaping. It needs drywall, flooring, kitchen cabinets and sink, bathroom toilets, sinks showers tubs and cabinets. I estimate it needs about $40K to $50K to finish.
But another investor wants out, and that's going to cost maybe $115K - the funds aren't there to cash them out, and there's a court judgement. I feel I'm looking at losing my $50K investment due to having to sell the house as-is, or finding $150K to salvage the deal and finish the house. It would 100% be up to me to offer the money, I don't think they assume I have this much available. I'm FIRED, and while I have that much in retirement accounts accessing it all at once would cost me a lot in higher insurance premiums, insurance for my kids, and 10% early withdrawal penalties.
We have them looking at hard money lenders, and advised them that bankruptcy would protect the house they live in and some other assets, but haven't offered any additional funds. We can lose the $50K, and the potential $10K profit without risking FIRED life, and while keeping good feelings for the family. Not sure how it'd be on their end, they're far from FIRE-bound.
FIRED facts: $2.5M in investments without this deal, FIRE budget of $65K