How do four people buy a residential multifamily?

[Jon Schwartz]

Hi everybody,

I'm mulling a scenario, and I'd love anybody's input.

Three friends and I want to pool our capital and BRRRR a residential multifamily. The part we can't figure out is the refinancing. I think we'd have to do one of the following:

1. Buy the property in cash and put all four names on the deed. When we refinance, all four of us would be on the loan. This would allow for a low-rate, 30-year residential loan, but the loan balance would be on everybody's balance sheet in the full amount. (Not to mention that underwriting four people for the mortgage would be a real hassle.)

2. Establish an LLC, fund the LLC, then purchase the property through the LLC. When we refinance, get a commercial loan to the LLC (as though the property were a commercial property). This seems simpler, and potentially saves our personal balance sheets, but we won't get as good a rate and we won't get a 30-year term.

So, to anybody who's purchased or BRRRR'd residential property with partners, how did you do it?

Looking forward to feedback! Thanks so much!