Hi - you sound like a perfect candidate for the "DSCR Loan" option - its the loan type thats popular wwith investors and one of the big reasons why is the exact situation you are describing - running into DTI troubles. 

If you live in the illegal apartment, and it's separate, then what you've done is use an R-1 (single family home) zoning as an R-2 (duplex), and since that wouldn't be legal, the tenant may be able to successfully sue you for renting an illegal unit - even if you are in the illegal apartment - just because it's not legal to have 2 separate apartments on that property.I'm wondering if you could somehow rent it as a roommate situation, though, and get around that.  

We put a journalist on a particular story, and no source is willing to discuss the situation publicly. 

What do you do in that situation? 

I know the podcasts and books speak about being in a deal with zero skin in the game, but that is an outlier situation not the norm. 

My attorney says he prefers it when there is a business reason for the state of the LLC, and he said either your home state or where the property is located is suitable.A much bigger topic is whether or not having an LLC is a good strategy given your personal situation. 

You are in a tricky situation. 

Consult a real estate CPA or tax attorney to assess if the benefits outweigh the fees and risks for your situation, and consider alternatives like 1031 exchanges or installment sales for simpler strategies.This post does not create a CPA-Client relationship.

Complexity in Management: Managing multiple properties as collateral can complicate financial situations, especially if one property is underperforming or requires significant repairs.3.

And it most likely will.There are some loan products available for low downpayment if you are willing to do a live and flip situation.