All Forum Posts by: Tina Tsysh

Having a mortgage under an LLC requires an LLC to have enough assets and income. If it's a brand new LLC and you want it to be on the mortgage, banks will require you to be a personal guarantee for the mortgage, meaning they will be looking at your DTI, tax returns, etc. Basically the same thing as getting the mortgage in your name.

If you want to protect yourself without going through a headache of making an LLC, get an umbrella insurance policy and pick the coverage that you want. Most investors go this route instead of forming an LLC.

Everything depends on your risk appetite. There are some investors who have less than 5% of their own money in their investments whereas others won't touch a property unless they have 20% down and only use bank financing. 

When investors have too many mortgages where one's debt-to-income ratio becomes too large and doesn't allow them to qualify for more mortgages, they go to commercial lending. Commercial lending is based on the asset's income, not on your personal income. Multifamily that has 5 units or more is considered multifamily. The lender looks at the income that the property brings, property's cap rate, and your execution plan regarding the asset. They don't require you to have a minimum DTI or look at your tax returns.

Is she only co-signing or also helping with any costs (downpayment, reserves etc)? 

I would do an analysis and see which option makes more sense. Some of the things to take into consideration:

- if you do not move in and let other tenants stay there, what would be your monthly expenses out of pocket? (however much it costs you to live in another place minus CF from the duplex). If it costs you more to live elsewhere vs moving in, then I would move into one side of the duplex. 

- do current tenants pay market rent? 

I don't see why it's a deal breaker. As long as you make the termination date on the agreement after the prepaid rent is run out. You get your rent upfront and the couple has a home to live in - both parties win. 

Typically you build out a model in excel or other software and make a nicely format summary of investor's returns (you can even use graphs etc). How often you want to pay out is between you and investors. There are some investors who are okay with being paid once a year and there are some who want their distributions quarterly. 

BP calculator presents a nice summary at the end regarding the property analysis. You can re-create something similar to show what investors will get depending on their initial investment amount.

You typically get higher returns with leverage and OPM. If you use leverage, you have other people trusting you and relying on you to make the monthly payments. If you do it successfully, you can see your returns double or even triple compared to using all cash. However, with higher returns comes higher risk. If you miss out on payments, your credit score and much more can get impacted. But I have never heard an investor say that they regret using leverage on their properties. 

Your returns are always higher with leverage because you are using someone else's money. 

If you buy with all cash, then you have $500k sitting in a house that produces 6% return ($2,500*12 / $500,000) which does not account for any deductions for vacancy, maintenance etc. 

If you use leverage, you can buy a small multifamily and see your returns jump to 15%+. You can then use cash flow and principal pay down from that property and put it down on your next investment. Leverage is a great tool if you learn how to use it right. 

Are you comfortable locking in your money for a few years without a guaranteed return? I have seen this scenario go two ways (both in CA from working at a real estate development firm): depending on a location, you could either end up with a significant return on your money or end up selling at a discount because the location is not desirable. 

Have you considered putting that money towards real estate instead so you can get immediate return on it? Cash flow, appreciation, tax right offs etc.

Get a side hustle or a second job. There is nothing wrong with that! The sooner you save up for the down payment, the sooner you get to the point in your life where you are financially free. Many investors start the same way working 2-3 jobs and not a single one of them regrets doing it because of the long-term gains. 

Also if you don't already budget your expense, I recommend you start doing it because you may realize that you are wasting money on something you don't even know.