All Forum Posts by: Eric C.

Thanks for your input Mark. I did speak with my CPA about it and yeah there are definitely tax benefits of leasing. I'm waiting to hear back to see if I could put the lease under my company name to avoid it effecting my personal DTI or not. If not then I will just buy something older and cheaper with cash even though my main objective was to have as minimal cash outlay as possible. That's what was so attractive about the $0 down lease since I could have nothing out of pocket and minimal monthly payments versus $10k or whatever it will end up costing to buy something outright all at once.

The cheapest I have seen was $125k for a turnkey ADU with garage below. It's going to take some time to recoup that investment. Are you sure the neighborhood you are looking at has correct zoning for ADUs? Does the property have the footprint to support it?

@Eric C. one year of rents on tax returns is totally fine.  Again, a bank may have an "overlay" but Fannie/Freddie are totally ok with 1 year of rental income being on your tax returns. 

@William Henning and @Samantha A. this is no problem. Using an LLC is for liability purposes. When purchasing a property, the property can be absolutely vacant, and Fannie/Freddie will use the rental income from that property to qualify you. If you currently own properties, and they aren't reporting on your tax returns, then we just use the executed lease to show the rental income. It doesn't matter what bank account the income goes to or what LLC the property is under. As long as you have that lease, you are good. BE VERY CAREFUL THOUGH - a bank may not follow this rule.  There is this thing called "overlays" in the mortgage industry.  An overlay is a rule that a bank puts on TOP of the Fannie/Freddie loans. Usually very big banks have overlays and that's why we talk about using smaller banks.  So when you are interviewing lenders, ask that specific question - "how do you use rental income when it's not on tax returns" - and see what they say.  If they say "we use the lease", then that is a good response.  It should not matter where that income is deposited just as long as you have a lease.  Hope this helps!

We use this strategy on our property in Hawaii. The key to it is understanding the fundamental difference between simple and compound interest. We were able to get a HELOC for 85% of the APPRAISED value of the home. This is drastically different than a HELOC based on a percentage of the equity in the home. Anyway, we took the HELOC and paid off the entire mortgage. Here is a quick rundown of numbers to help illustrate...

Appraised value= $725,000

Mortgage payment= $3200 monthly($1700 of each payment lost to interest)

HELOC= $600,000 @ 1.75% simple interest paid off the remaining mortgage balance of $533,000

New interest only payment= $770!

I charge my tenants $3650 monthly.

In real numbers all this equates to a savings of $364,000 in interest payments and the entire line paid off in 5-7 years. We take it a step further where we deposit our entire income into the HELOC. We're roughly depositing $18,000 monthly. You can just imagine how quickly we're attacking principle when our interest payment is only $770 and goes down with every payment. Another great feature is as we pay down the line we have access to it again.

Haha JD, I'm quickly learning prices are pretty high right now in Asheville. The other place I'm actually thinking about is Chattanooga! Do you do any investing there?

Looking forward to meeting everyone.