Delayed financing or DSCR loan

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Delayed financing or DSCR loan

Chelsea Allen
Member since 2024 · 27 posts · 2 votes

Hello again. I am looking to purchase a 2 door MF investment property in Florida under an LLC. I do not have the LLC formed yet. I am very confused about whether it is best to pay cash (which I would not have to borrow) and then do delayed financing , get a DSCR loan, or something else.

A local credit union also mentioned something called a "savings secured loan" which can be used for anything (even going on vacation), but I don't know if there are tax benefits to that and I don't think I can do that under an LLC. My concerns with delayed financing are the double closing costs.

I don't understand the mechanics of the different loans and what the tax benefits are of the different options.

Thanks to everyone who has replied to my previous questions.  There is so much information and the more I hear, the more questions I have :)

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  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    2y

    Why do you think you need to buy this under an LLC or why do you want to? That's a common misconception, especially for new investors. The majority of first-time and second-time investors do not have properties in LLCs. In general, it's a smart idea, but it's not usually an option when you are getting started unless you are paying cash. To get the best rate, you will want to use a conventional mortgage so you can't put it in an LLC. If you paid cash and put it in an LLC, it may be harder to refinance they way you want.

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  • Chelsea Allen
    OP
    Member since 2024 · 27 posts · 2 votes
    2y

    My understanding was putting into an LLC is a good way to protect against liabilities and stay "anonymous?"

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  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    2y

    @Chelsea Allen why are you becoming a landlord to stay anonymous? You want the tenants to be accountable to a person, not an LLC. They won't care about the house as much if they think some big conglomerate owns your 2-family. LLC members are not hard to find online so you won't be anonymous. LLC can provide personal protection, but you have insurance for a reason. You are going to spend a bunch of time wringing your hands about an LLC and not about the property itself.-

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  • Chelsea Allen
    OP
    Member since 2024 · 27 posts · 2 votes
    2y

    Thank you.  That said, what is the conventional mortgage that works best for an investment property? 

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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 667 votes
    2y
    Quote from @Chelsea Allen:

    Hello again. I am looking to purchase a 2 door MF investment property in Florida under an LLC. I do not have the LLC formed yet. I am very confused about whether it is best to pay cash (which I would not have to borrow) and then do delayed financing , get a DSCR loan, or something else.

    A local credit union also mentioned something called a "savings secured loan" which can be used for anything (even going on vacation), but I don't know if there are tax benefits to that and I don't think I can do that under an LLC. My concerns with delayed financing are the double closing costs.

    I don't understand the mechanics of the different loans and what the tax benefits are of the different options.

    Thanks to everyone who has replied to my previous questions.  There is so much information and the more I hear, the more questions I have :)


    LLC or Not, DSCR financing will allow you to cash out after 90 days seasoning. When it comes to delayed financing. You can either put 20% down up front or pay all cash and get up to 75% cash out after 90 days. Jonathan is generally correct about the LLC comment. It doesn't necessarily add any layers of protection. The one major difference is that when you close under the LLC and you use a non-recourse lender or one that doesn't report the debt to your name, everything is separate from your credit. i.e., - the mortgage will not be reported under your own credit, but live within in the entities EIN. Good luck!

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    3d

    Delayed financing really makes sense if you are under a time crunch to close and cannot do a standard 21-30 day close, the property needs rehab and cannot qualify for traditional lending, or you are borrowing from a line of credit that needs to be paid off fast.

    Are you able to close in 21-30 days? If you are able to, and the property is turnkey you can purchase with a DSCR loan and have only 1 set of closing costs.

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