Investing as a group -- How to structure mortgage?

[David Famiglietti]

Hopefully this is going in the right place, and yes, I searched and found very little on the topic which I find strange, so I'm going to see if I can get more input.

I have a handful of employees (3-6 that are serious about it enough to follow through at the end of the day) that are constantly asking me questions about my real estate investment deals, how I started, etc.

None of them alone have the cash sitting around to risk on a down payment for a decent rental here in Las Vegas.  "House Hacking" a Multi Family doesn't work well here because of where they are situated.  

We sat down and started brain storming and if a few of them got together with $5K - $10K each and formed an LLC they would have enough to put down on a cash flowing four plex or 2 nice cash flowing SFH's in our area of the city. They could save the income inside the LLC and even re-contribute from personal savings yearly to continue to buy property. Their shares would be based on equity in assets held and cash, so they could buy in or re-buy in unevenly, or buy each other out down the road, etc.

The more I think about the situation their in, the more I want to help them facilitate an investment group. I can walk through most of the inner workings in my head, but the one thing I can't get figured out is how do 4, 5, or 6 people become responsible evenly on a mortgage? Even if the LLC is technically buying the house, they'll have to sign personally for the mortgage and from what I understand banks try to limit co-borrowers to 2 or so.

Does anyone have any experience setting up such a group?  I'd appreciate some input on the "who signs the mortgage" part as thats basically the only thing I can see as an obstacle.  I understand the importance of using a lawyer and accountant to help set up the actual structure, but before wasting time and money on that level, I'd like to get a better understanding of how they would share responsibility for the mortgage.

Thanks in advance for any input or feedback from your personal experiences!

[Chris Mason]

@David Famiglietti,

I've done many love triangle and couple-of-couples mortgages (welcome to the Bay Area), it's not really a super big deal once you've got the first one under your belt as a lender. There's no reason this would be any different, marital status or romantic involvement in general is not any sort of requirement in 2016. Two bros that want to be bros together, and a gal that wants in on it, can go buy a house together with all of them on the mortgage. No biggie.

Call around until you find someone licensed in the state where they wish to purchase, that has done it before. 

If they are looking to buy in California, obviously I'd suggest pretending that I just said a bunch of BS about how it's something that I and only I offer because I'm a magical mortgage wizard. (In all seriousness though, yeah, just call around until you find someone in the relevant state that's done a few of these guys before.)

No fannie/freddie loans to LLCs, obviously. There are many existent threads about putting properties into LLCs post-close, so I won't comment on that.

Mind Schedule E on the tax returns. Ask the lender you find about how everyone's Schedule E should look if all of these people are looking to continue to be qualified for future investment property mortgages. There's some nuance here that I will not go into in this thread.