All Forum Posts by: Zhenyang Jin

When the number of unit is 6, I can manage property myself with my formal W2 job. When the number of units reach more than 20, I find it occupies too much time even if my wife is helping me.

Would you please share the experience that when you begin to contract a property manager, how many units that you and your partner own?

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Quote from @Keith Jablonowski:

I wouldn't overcomplicate things. One account with three different payment methods is enough to know which LLC to charge each expense to.

Thank you.

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Hi all,

I have three LLC holding three multifamily. To make accounting clear, I used separate business account and credit card for each LLC.

My question is: To make accounting clear, should I
(A). create separate Amazon business account for each LLC
(B). Only one amazon business account and when doing purchase using different payment method and shipping address
(C). other better solution

What's the preferred method?

Regards, Clark

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Hi all,

I am a newbie in multifamily investment and has one question about multifamily type selection:

1. Premium area like Menlo Park, Palo Alto where cap rate is about 3.7% but has potention high appreciation

2. Cash flow area near by like Mountain View, Sunnyvale, Campbell where cap rate is about 4.7% which is 1% higher but the appreciation rate may be lower than Preium area.

My target is to hold for at least 5 years or more and the IRR or cash on cash return is my first priority.

Suppose this property has the same potential on value add. I don't know which type I should choose. It looks like 1% higher cap rate can not accumulate much higher profit even holding the property for 5 - 10 years. May I have your insight?

Regards, Zhenyang

1 Vote

San Jose, California

I got the commitment letter and Chase will do funding tomorrow. Some update about the lending requirement of my Chase loan program:

Product:

DSCR > 1.2

Borrower:

Net Worth > Loan Amount

FICO

Liquid Proof > 10% loan amount

DTI: They told me it is not important and don't mention about it

It looks like as long as DSCR of the product is used, it will likely borrower's DTI will not be used. I am not sure whether my understanding about Chase commercial lending rule in Bay Area is correct or not.

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San Jose, California

Hi all,

I am newbie in RE investment and closing a 6 unit multifamily this Friday. Shall I sign new release agreement with each tenant during this transition?

Regards, Zhenyang

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Quote from @Natalie Kolodij:

Who owns the LLC?

I'm not an attorney but to me this offers no benefits. The LLC doesn't actually own the asset and most real estate lawsuits involve the actual property, so I'm unsure that it's providing you protection.

A key point of the LLC offering protection is the separation - so if a name/asset is in your name but the bills/loan re paid from an LLC we don't have that separation. It is by default intermixing.

Also the expenses should be reported to the business activity (the property) they legally are generated from; not necessarily the entity they are paid through.

But your entity doesn't own that rental property; so reporting it on a partnership tax return can potentially create issues as well.

Natalie, thank you for suggestion.

1 Vote

Quote from @Bill Hampton:

@Zhenyang Jin

If your LLC includes you and your business partner, yes you should file a 1065 partnership tax return. The due date for 1065 returns is March 17th this year.

Yes, you can deduct all property related expenses on the 1065 return.

I recommend that you work with an accountant that has experience with real estate taxation and partnership tax returns.

Good luck.

Bill, thank you for suggestion.

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I purchased one fourplex in CA last year with one partner. Meanwhile, I created one LLC and business bank account to pay property tax, mortgage and day-to-day operating cost.

Per lender's requirement, the title is held by individuals as "tenants in common" rather than LLC. Property tax and Form 1098 is sent to individual and paid using my LLC account.

My question is: Can I use form 1065 to cover all the costs like property tax, mortgage 1098 whose receipt are for individuals?

Would you please share your insights?

Regards, Zhenyang

2 Votes

Quote from @Erik Estrada:

Quote from @Zhenyang Jin:

I am a software engineer working in Bay Area. I found out that:

Case 1. When doing business loan for 4+ units multifamily, my W2 can not be used to calculate DSCR. For the top tier area like Palo Alto where cap rate is 4.0%, LTV can only be limited to 40%~45%. For the 1.5M downpayment, the target price is only 2.5~2.73M.

Case 2. When doing residential loan for fourplex, my W2 + my partner's W2 can be used to calculate DTI. LTV can reach 70~80% even the cap rate is only 4.0%. For 1.5M downpayment, the target price can reach 5~7.5M if DTI is allowed.

Due to the big difference on target price, I raise this topic to confirm whether my understanding is correct or not. I wonder whether expert can confirm this?

Because my DIT is low, maybe Case 2 for fourplex is my preferred loan type than Case 1 if I want to invest locally. Any advice is welcome.

Hi Zhenyang

It sounds like you are looking to determine which kind of loan will allow you to afford a higher price point based on a $1.5 Mil down payment?

Case 1 sounds like a DSCR loan. Lenders do not look at your personal income or debt and will use the current market rent or lease (up to 120% if the lease is significantly higher than market rent or vice versa) as qualifying income. Generally, most DSCR lenders will want a 1.00 Ratio or higher using the PITI as the monthly expense. There are some instances where you can still get a higher LTV loan being below a 1.00 DSCR; however, the rate and cost will be much higher. You also should be aware of the Pre Payment Penalties on this loan, especially if you are incorporating a BRRRR strategy. The benefit to this option, however, is that you are able to hold the property in an LLC orCorp and you will not be limited by your personal DTI.

Case 2 sounds like a conventional loan. You should generally be able to afford a higher price point if your W2 income is strong, and you and your partner have low debt. Unlike the DSCR loan, there is no prepayment penalty on this loan, so you will not be stuck in a high-interest-rate loan for 3-5 years. Rates are generally better on a conventional loan when accounting for all fees and prepayment penalties. The drawback is that you are not able to close the property in an LLC or corporation.

Thank you, Erik. Good comparison.

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All Forum Posts by: Zhenyang Jin

Zhenyang Jin has started 11 posts and replied 25 times.

Post: How many units to begin contracting a property manager

Post: Should I create separate Amazon business account for each LLC ?

Post: Should I create separate Amazon business account for each LLC ?

Post: Which multifamily type you will prefer: potential appreciation or 1% higher cap

Post: Will personal DTI impact underwriting of commercial loan for 6-units multifamily

Post: Re-sign release during closing escrow

Post: Tax Treatment: Individual or business entity

Post: Tax Treatment: Individual or business entity

Post: Tax Treatment: Individual or business entity

Post: Affordable target price comparison between business and residential loan