All Forum Posts by: Ayyoub Feza

Hello,

We recently purchased a rental property and created a domestic limited liability LLC (two members - my spouse and I). Title company is asking the EIN/TIN of the entity. Is it better to create a new EIN or is it better to create a TIN or just use my personal SSN?

We would like to keep the operating revenue and expenses separate from our personal stuff but want to file them along with our personal tax returns. What is the best way? Also, do you suggest we create a new bank account to manage property? Could you please provide suggestions?

Thank you!

Hey Ayyoub - 

Depends on your goals/strategy. Are you looking for something turnkey or are you open to rehabbing? What is the price range you are looking for? Happy to connect and chat further. Thank 

The list is long.  What are your requirements?  What are you working with as far as funding?  Where are you located?  What strategies do you know?

Hi Ayyoub-

Great question and I am right up the road from you in Ann Arbor.

Certainly, getting a conventional loan may provide slightly better rates than an investment loan like a DSCR loan.

However, if you are buying income property you can use the income to qualify for the loan with a DSCR or Debt Service Coverage Ratio loan and not so much your personal finances like a conventional loan.

Basically, you need three things.1. Decent credit. 2. The income from the property to pay the mortgage. 3. The down payment funds.

Additionally, you can get as many DSCR loans as you would like; whereas, with conventional, you are capped at 10 properties per individual, usually, unless you pay one property off for example.

Lot to like about DSCR loans.

To your success!

If an investment property can go the income route where your debt to income is analyzed or go the DSCR route.

Some DSCR lenders will go down to a $75K value and a $55K loan amount. It's the same work to do a $55K loan as a $500K loan so the fees will be higher due to the loan amount but will still be much lower than what a lender or broker gets paid on a higher loan amount. $100K and above loan amounts will get you more lender options.

DSCR loans won't use your income to underwrite the loan.

DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

Here's a bit more in detail about how rates are calculated for DSCR loans:

1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.

I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350, Insurance = $100, Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250, Insurance = $100, Association Dues = $25

Total PITIA = $1875 Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.

Happy to connect to discuss further. 

Hi Ayyoub,

What kind of purchase would this be? Primary residence or a rental? You could put both names or create an LLC if it's a rental.