All Forum Posts by: Rebecca Pantschyschak

Quote from @Sylvia B.:

Here is our LLC structure:

All real estate is owned by one of the 3 RE LLCs. They have no other assets.
The Management LLC acts as the public face of the company. It acts as Landlord, collects rents, screens potential tenants, hires and pays contractors, pays all bills, etc. It has no assets.
The Partnership LLC is the sole member of the other 4.

Thank you Sylvia! So how do you categorize expenses for the properties when you file taxes? Do they go in the Management LLC and if so how do you count them as expenses towards the property if the property is owned by RE LLC? Which entity gets the depreciation for the property and if it's in the RE LLC (because that one owns the property) then RE LLC has no income to offset the depreciation?

Quote from @Martin M.:

@Jin Zhang

There's another loan option that you may or may not be aware of. It's called a "DSCR" debt service coverage ratio loan.

Most lenders that specialize in single family homes don't issue these. Investor focused lenders do.

The DSCR lenders tend to look at whether or not the income on the property covers the mortgage as opposed to looking at your own income or your DTI. They'll look at this too but it's not the main factor.

Keep in mind though, even though this particular type of loan isn't centered around your personal DTI, it will increase your debt obviously and that'd impact your ability to borrow future loans that do factor in DTI (as paying for the DSCR loan increases your monthly debt)

 Also agree with this!

Quote from @Brandon Rush:

Hey Rebecca,

Yes this is possible as I know other investors (not myself) who are doing this. You can create an LLC for each of your properties and also create a management LLC in which all of the operational funds flow through. On acquisition, I would say work directly within the property's LLC. Another option is to not put every property into an individual LLC, but group multiple properties per LLC. I have heard that $1 million in property per LLC is fairly common (assuming you are looking at properties of that value). Sorry this was not very helpful, but figured I give you the little knowledge that I know.

Good Luck!

Thank you Brandon! Good to know I’m not crazy. I am also interested in building credit and income for my business LLC so that I have better credit later for lines of credit etc. so need to figure that into the mix.
still interested in feedback from others! 

I've talked to accountants and tax agents and no one seems to think this is a normal situation, but my understanding from the BP world is that people do this all the time - am I wrong? 

I want to own my properties in separate LLC's for asset protection, but operate them through one "business" name that I can use for all accounts/transactions (think: Google Voice, email address, web domain, one credit card, paying all the contractors, property manager, etc.) and that one "business" is an LLC separate from the property LLC's.

However, my tax agent basically told me this doesn't work because the property LLC's own the property and the expenses for that property have to fall under that LLC in order for expenses to offset income for taxes. Otherwise, my separate "business" LLC has all the expenses but no property income to offset it.

That explanation makes sense, but how do other people set this up?? Is anyone else operating in a simplified manner where all your work is under one business but the assets are protected separately? 

Not seeking real legal or accounting advice, just want to pick your brain. 

Hey I'm in the same boat right now - about to use a HELOC to purchase with cash and then REFI with BRRRR. I was up front with my lender and they calculated the monthly interest payment of the full HELOC amount towards my DTI, and I got pre-approved for an initial with the HELOC in my DTI. But, another lender I was pre-approved with didn't take the HELOC into account and wasn't too concerned about it (this was TheOneBrokerage - David Greene's brokerage; but once I'm connected with a specific lender by the brokerage, they could care more about the HELOC, not sure yet).

Long story short, I'd identify a few lenders you'd be interested in using for the cash out REFI, and explain the scenario to them just to be sure you're not screwed when you try to REFI later.