Quote from @Brad Smith:
Quote from @Josh Bowser:
Brad - read through most of this thread so far.
Most everyone mentioned to avoid this due to mortgage fraud which is correct.
Additionally, you won't be able to obtain a homestead exemption, LLC ownership, and DSCR loan as these do not go together.
You may want to have your friend look at an owner occupied loan for this (you would want to clear everything through a mortgage broker / loan officer to make sure you're compliant). You and the other members wanting to invest may be able to loan in second position after closing with a dodd frank compliant seal of approval. This is still gray to me so you'd want clear this with an experienced mortgage broker and do not hold back any info.
Cleanest way to do this is probably a higher LTV owner occupied loan and a lease or managment agreement to sublet the property while the owner is occupying the property when they travel. Again - i'd run that past a mortgage broker as well to ensure you're compliant.
Yes, thanks... Looks like:
- if one of the part-owners pays rent to the LLC, he will not be considered as the "owner" and therefore, cannot apply for homestead exemption which is a pre-requisite for getting an STR permit.
- And on the other hand, if he doesn't pay rent considering he is a part-owner and applies for Homestead, it will make us ineligible for DSCR loans because DSCR loans don't allow any direct or indirect members to occupy the property.
Would you know if there are any "owner-occupied loans" that don't require a "personal income" eligibility requirement because this member doesn't have high enough income to qualify and may have just one year of income tax returns?
Looks like I'll have to drop my plans on this one unless I find a solution to this problem. :(
Hmm, the only way I think you could get an owner occupied loan without income is if you have a lot of cash or other assets. However, it might be worth exploring buying a small multifamily (2-4 unit) - most of the time, they can use in place leases or projected lease rates to help with the income. Additionally, two years tax returns typically come in to play when the person is self employed or payed through 1099. If the individual is on Salary, they can typically just underwrite that income.
If none of this sounds like it will work - you may need to pivot markets or strategies.
I think you could likely go the co-living route on a DSCR which has similar return metrics as STRs. Currently, there aren't any permits in ATL to operate a co-living property, but municipalities are pretty open to it excluding for a few. DSCRs right now are between 25%-30% down - most are towards the higher end with rates, rents, and taxes as majority of lenders will underwrite based off long term rents for new investors.
If you have any questions on that - shoot me a PM and I'd be happy to chat you through the co-living model and any other strategy related questions. Always down to problem solve!
