All Forum Posts by: Jesse Waters

I would talk with a few banks and see who offers the best terms. The lenders that I have dealt with when it comes to rentals will count the rent from the property (based on their calculations) towards my income when calculating DTI, so long as I put 20-25% down. Also, if you are planning on applying as an owner occupant they will want to know what you are doing with your current house, assuming that you own, and they will look at the distance the property is from your job.

@Bill Gulley You are correct, this arrangement could be very convoluted & complicated, however it does work for us for a few reasons:  First, everything is 50/50.  We each have put up 50% of the cash & split profits accordingly.  Also, this is a stepping stone in our larger plan.  Once we properties are moved to a blanket loan, this will no longer be an issue.  We also have a good team behind us making sure that we keep things straight (lawyer, CPA & financial advisor.)

Like you said, partners die, we have planned for this, both in wills & the operating agreement.

Question for you, if we did a house hack, how would you suggest structuring it to avoid co-mingling issues? I know lots of guys that own an office building in an LLC & lease back one office to another business that they own with out issue. So long as only one entity either my partner as an individual or the business as a whole claims the deductions on the property I would think that we should be good. Or, would we be better off selling the property to the business after the requisite holding period? As always, I look forward to your input.

I agree with Jeff, working for a property manager is a great way to get the fast track on owners who want to sell.  I have gotten some great leands from my property managers.  They seem to have a good pluse on who wants to get out of the business.  The last lead I got was for a package of 10 properties, unfortunately, the numbers just didn't work out.

To echo what @Mehran K. said, you may want to look into a blanket loan. Since your properties are free & clear you should be able to leverage the equity there on the down payment of something larger. The lender will want appraisal's on each property & want to make sure that you will have a decent DCR on the entire package. Also, I have talked to a few lenders that have minimum loan requirements of $500k financed, since it takes just as much work to write a small loan as it does a larger loan. I'll send you a PM with a few of the lenders that I have talked with.

@Damien C. The loan solely in my name was a little scary when we first started it.  However, my business partner & I have known each other for quite a long time & have personal history.  We became friends at the academy, both served in Afghanistan (at different times) and are more like brothers, so it wasn't much of a leap for each of us to trust each other on this deal, also that wasn't our first deal so the track record had already been established.  We also have the plan of moving everything from our personal credit to the business under a blanket loan & commercial loans for some larger properties that we are looking at.  I wouldn't recommend this option for everyone that has a business partner, however, if you use it, make sure that you structure your business accordingly.  We have a strong operating agreement in place to dictate how we manage our business, as the managing member I provide a quarterly report & the books are always open for review.  We both have access to view our business accounts online.  We decided when we started that we want to go big and thought it best to structure & run the business in a way to accommodate that.

Hope my rambling's help.

Welcome to BP.  

My top three are: "ABC's of Real Estate" by Ken McElroy , "The Real Book of Real Estate" by Kiyosaki, its a written by a collection of contributors covering just about every topic, great way to get started, and "Loopholes of Real Estate" By Garrett Sutton.

I have read each of those books & learned a ton from each one.

Since you are just starting out, take some time to get your education.  Talk to folks, find a mentor, read books, listen to the podcast & use the forum.

All the best.  I am envious that you are starting out so early, wish I did.

I have one property that I offer standard with the washer & dryer since the hook ups are in a small space & it requires a stacked unit.  I don't actually get any higher rent for it, but if I didn't provide the washer & dryer I would have a much harder time renting the property out.

@Philip K. There are a few things that you could do to get into another rental property more economically than shelling out a ton for another down payment.  I'm not completely sure of your living situation, but here is a thought.  If you are willing to move, you can purchase another tri or quad, live in one and rent the rest out, house hacking.  Generally, you should be able to qualify for the property as an owner occupant with a much smaller down payment.  If you and your business partner were both willing to do this, you can end up with two more properties relatively cheaply.  Since you have a business partner I would suggest that you pay rent for the unit you are living in to the business.  At the same time you can rent out the house (if you own & the numbers work) that you were living in.  I would keep that separate from the business.  

If you each do this, you now have 3 rental properties in the business and each have one outside of the business.  After the year required for owner occupied property you can either repeat the process or move back to your previous primary residence.

Just my thoughts & suggestions.  I wish I could follow my own advice, but I would have a heck of a time convincing my wife to move out of our house into a 4-plex.

Welcome to Bigger Pockets.

Welcome to Bigger Pockets.  Great place to learn, ask questions & share your experiences.