New Investor Business Structure Options

[Mitch Kline]

Hi Everyone,

Looking for some advice on business structuring as I am currently under contract for my first investment property.

Situation: My brother and I have decided to partner up and tackle real estate investing together. We both have high credit scores and low DTI. We intend to buy houses in our personal names and go back and forth with who is on the mortgage so that we can each scale to 10 properties and own 20 properties between the two of us. Our current property is under contract and I am buying it under my name with a conventional loan and we intend to short term rent it and my wife is going to manage it (she currently manages STRs for a Co-hosting business).

One of the lenders we talked to who is also an investor recommended that we start an LLC and rent the property to the LLC so that we can erase the DTI since we wouldn't be able to do that if we short term rent it. I like this option, but want to get opinions on the best way to structure this.

Question: Do we start an LLC 50/50 ownership as property management company with me and my brother and then sign a year long lease from me personally to the business for PITI so that it removes it from my DTI? We intend to pay my wife 20% of income for the property management, would it be best to make her an employee of the LLC and pay her commission? Or have her act as a contractor to the LLC? Additionally, if we go the LLC route would it be better to run all of the income and expenses through the LLC? Or should I run all income and expenses through my personal accounts? How would insurance work? Would I have to get STR insurance as the owner (personally) and STR insurance as the business?

Goal: Grow our portfolio and reduce our DTI by showing income from these investments. Find the best way to reduce the amount of taxes we get stuck with. Employee my wife so that eventually she is making enough in her own name so that we can add another 10 houses down the road under her name.

Thanks in advance!