BP, My wife and I are in the market for a 4 unit house hack. Super pumped to use this amazing tool to jump-start our investing journey. In order to get a conforming, low interest, 30-year arm loan we will need a co-signer (we don't have regular income). I would like to give a percentage of the deal to our co-signer but will likely own this house in our names (to make refinancing into a VA loan down the road easier). So how do I structure the deal so that I can pay my co-signer while keeping my CPA and uncle sam happy? Can I just pay them out of the personal checking account that I use for expenses?

As always thanks for the help.

You are thinking big @Gregory Schwartz , which is good. Your co-signer is taking a risk that you will keep the loan in good standing. How does one put a number on this? If you default, the co-signer is on the hook with you. Until then, the co-signer is not putting any money into the deal, but has an important role. There will be a day that the property has enough equity that the co-signer will no longer be needed. Does the co-signer get a portion of the rents? This would be part of the business so do not use your personal funds. Co-mingling personal with business is frowned upon.

How can you express his equity share in the business ownership? Try reading one of Garrett Sutton's books about making LLC's work for such a situation. The answer might be in there.

@Kathy Henley thank you for the help. I was thinking a co-sign was worth up to 10% of the equity. To keep things simple I would offer 10% of the profit from a sale or 10% of the money refinanced out. The co-signer will likely be a future investor so I want to show that I can provide a solid return to anyone who partners with me. I'm worried about my ability to get a conforming loan in an LLC.

I will pick up Garrett's book today! thanks for that recommendation.