Helping my brother get into landlording

10 Replies

So my brother is about to graduate with his PhD in engineering and is looking to buy a MFH when he relocates for work. Being a PhD student - he has never had a "real" job with a W2 income - but he has 25% down.

He is looking at Boston which is not a cheap market, so even though he will have a good salary without 2 years of employment history they can't count it. And he can't use the rental income to qualify because he does not have 2 years of land lording experience.

So my questions is, could we form a LLC and with me having 25% ownership so it will take into consideration my landlording history / income / credit. Then after 2 years we could transfer title to him and then he could refi conventional. Will that work? Are there other ways I could leverage my experience to get him started?

Medium second city real estate logo   white close upBrie Schmidt, Second City Real Estate | [email protected] | http://www.SecondCity-RE.com | IL Agent # 471.018287, WI Agent # 57846-90 | Podcast Guest on Show #132

OK Brianna,

Are you getting back at your brother for something he did to you? LOL

Sounds like he is getting in way over his head if he has no experience in owning or landlording even with your help.

To answer your question The bank will most likely not allow you to remove your name from the LLC they will want you to be 50% on the LLC, they may even want you on the note to personally guarantee the mortgagee.

This also could be very disruptive to your relationship, no matter how close you two think you are now. I'm not saying to not do it just tread lightly and see a lawyer to write up a separate agreement between you two.

My other thought would be to start him off with one or two small deals to get his feet wet with and to test the waters for yours and his capability to work together. Either way tell him Congrats on the move in to real estate investing.

@Brianna Schmidt - He needs to shop around for a great mortgage company. I bought my first house about 6 months out of college (BS mechanical engineering), so obviously I didn't 2 years of employment history.

Originally posted by @Brianna Schmidt:
So my brother is about to graduate with his PhD in engineering and is looking to buy a MFH when he relocates for work. Being a PhD student - he has never had a "real" job with a W2 income - but he has 25% down.
He is looking at Boston which is not a cheap market, so even though he will have a good salary without 2 years of employment history they can't count it. And he can't use the rental income to qualify because he does not have 2 years of land lording experience.
So my questions is, could we form a LLC and with me having 25% ownership so it will take into consideration my landlording history / income / credit. Then after 2 years we could transfer title to him and then he could refi conventional. Will that work? Are there other ways I could leverage my experience to get him started?

Not sure what banks you're using but I can use his income if its salary or base pay with less than 2 years just need his diploma and transcripts to document his education time as work history. He can be freshly out of college but as long as he can obtain an employment contract or has his first paystub from his job then I can use his income for the purposes of qualification. I just cant use income that requires 2 year history such as: bonus, commissions, reimbursements, over time, etc etc (variable income).

With regards to landlord experience, the 2 years is only necessary if the loan is sold to Freddie Mac or a portfolio lender who requires 2 years, Fannie Mae does not. With Fannie I can immediately use 75% of gross income - mortgage payment and qualify him for a non owner property or owner occupied property.

No LLC needed plus FNMA/FHLMC cannot fund into entities only live names and living/revocable trusts.

Only lenders who will fund with LLC holding Title are portfolio or other non conforming lenders/banks.

Hope that helps.

Medium new american funding logo  Albert Bui, New American Funding | [email protected] | 949‑514‑5106 | http://albertbui.com | CA Lender # 345453, WA Lender # 345453, TX Lender # 345453, TN Lender # 345453

@Account Closed - This would be a buy and hold duplex with him living in 1 unit so I am comfortable with his ability to handle it.

@Bryan L. - I had the "rules" bent for me, but I know people who "go the extra mile" he is looking in where I know nobody.

@Albert Bui - Wow, I did not know all that. Thanks for the info. So he may not even need my help Do you lend in MA?

Medium second city real estate logo   white close upBrie Schmidt, Second City Real Estate | [email protected] | http://www.SecondCity-RE.com | IL Agent # 471.018287, WI Agent # 57846-90 | Podcast Guest on Show #132

Originally posted by @Brianna Schmidt:
@Account Closed - This would be a buy and hold duplex with him living in 1 unit so I am comfortable with his ability to handle it.
@Bryan L. - I had the "rules" bent for me, but I know people who "go the extra mile" he is looking in where I know nobody.

@Albert Bui - Wow, I did not know all that. Thanks for the info. So he may not even need my help Do you lend in MA?

I am not sure how to tag, does the code immediately know to "tag," or "mention," someone if I put @Name ?

Anyways yes through my bank I can help you. I will send you some info or if you have any questions you can PM me as well.

Medium new american funding logo  Albert Bui, New American Funding | [email protected] | 949‑514‑5106 | http://albertbui.com | CA Lender # 345453, WA Lender # 345453, TX Lender # 345453, TN Lender # 345453

@Albert Bui - to tag you type the @ sign and immediately after start typing the person's name. then at the bottom to the left of the "post" button their name will appear and you click on it. They have to be a colleague or a poster in that current thread to tag them

Medium second city real estate logo   white close upBrie Schmidt, Second City Real Estate | [email protected] | http://www.SecondCity-RE.com | IL Agent # 471.018287, WI Agent # 57846-90 | Podcast Guest on Show #132

@Brianna Schmidt what a great sister you are!

I'm glad to help your Brother, my Lending Offices are in Woburn and Marblehead Plus I'm frequently in Boston!

Will he manage or someone else will?