DSCR Loans for LLC-Owned Properties vs Personally Owned

Lender · Ann Arbor, MI · Member since 2021 · 686 posts · 232 votes

Hey Scott!

We do a LOT of DSCR and whether the property is vested in an LLC or your personal name won't change the rate one bit. Not sure why they've said there is any difference unless they're a commercial lender compared to residential. The biggest determining factors for your rates/costs are the DSCR (rent to payment ratio, higher the better), property type (single family, condo, multifamily), credit score, and prepayment penalty.

Regarding trends for DSCR rates, follow the 2 year treasury. Typical mortgage rates follow the 10 year treasury almost identically, but for watching trends in the DSCR world the 2 year treasury will more similarly mirror pricing (plus a spread to manage risk).

Happy to give some more context or ideas if it might be helpful for you though.

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Scott Bowen
OP
Member since 2023 · 21 posts · 18 votes
1y
Quote from @Derek Brickley:

Hey Scott!
We do a LOT of DSCR and whether the property is vested in an LLC or your personal name won't change the rate one bit. Not sure why they've said there is any difference unless they're a commercial lender compared to residential. The biggest determining factors for your rates/costs are the DSCR (rent to payment ratio, higher the better), property type (single family, condo, multifamily), credit score, and prepayment penalty.
Regarding trends for DSCR rates, follow the 2 year treasury. Typical mortgage rates follow the 10 year treasury almost identically, but for watching trends in the DSCR world the 2 year treasury will more similarly mirror pricing (plus a spread to manage risk).
Happy to give some more context or ideas if it might be helpful for you though.

Thanks for the sharing this information. To your point, I am finding that for lenders that allow DSCR loans in both LLCs and personal names, the rates are generally similar. That said, where I'm finding the most competitive rates is with lenders that offer DSCR loans exclusively to LLCs. These are the lowest rates I'm finding and are coming in about .75 percent below the others. I'm guessing these are commercial lenders, as you mentioned.
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Derek BrickleyBusiness Member
Lender · Ann Arbor, MI · Member since 2021 · 686 posts · 232 votes
1y
Quote from @Scott Bowen:

Quote from @Derek Brickley:

Hey Scott!
We do a LOT of DSCR and whether the property is vested in an LLC or your personal name won't change the rate one bit. Not sure why they've said there is any difference unless they're a commercial lender compared to residential. The biggest determining factors for your rates/costs are the DSCR (rent to payment ratio, higher the better), property type (single family, condo, multifamily), credit score, and prepayment penalty.
Regarding trends for DSCR rates, follow the 2 year treasury. Typical mortgage rates follow the 10 year treasury almost identically, but for watching trends in the DSCR world the 2 year treasury will more similarly mirror pricing (plus a spread to manage risk).
Happy to give some more context or ideas if it might be helpful for you though.

Thanks for the sharing this information. To your point, I am finding that for lenders that allow DSCR loans in both LLCs and personal names, the rates are generally similar. That said, where I'm finding the most competitive rates is with lenders that offer DSCR loans exclusively to LLCs. These are the lowest rates I'm finding and are coming in about .75 percent below the others. I'm guessing these are commercial lenders, as you mentioned.
Could be, at that LTV those rates seem standard so not exactly sure
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Chris SeveneyBusiness Member

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

1y

DSCR rates in the 5’s - who is quoting that. Recently quoted a few in mid 6’s but nothing in the 5’s

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Derek BrickleyBusiness Member
Lender · Ann Arbor, MI · Member since 2021 · 686 posts · 232 votes
1y
@Chris Seveney takes a 5 year prepay, a lot in origination and a hefty buydown haha no clue though
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Ko KashiwagiPro Member

Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes

1y

Hi Scott,

Every lender/program is a little bit different but I do a lot of DSCR loans under personal names and often times rates won't change whether it's personal or LLC. Some programs do have lender adjustments on LLC vs individual but it's just a matter of which program has the best rates for your specific scenario at that specific point in time of market.

I'm not sure what kind FICO score, buy down/points or prepay you're working with but high 6's for a 55% LTV sounds like it's on a little higher end if you have good FICO/Credit.

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Scott Bowen
OP
Member since 2023 · 21 posts · 18 votes
1y
Quote from @Ko Kashiwagi:

Hi Scott,
Every lender/program is a little bit different but I do a lot of DSCR loans under personal names and often times rates won't change whether it's personal or LLC. Some programs do have lender adjustments on LLC vs individual but it's just a matter of which program has the best rates for your specific scenario at that specific point in time of market.
I'm not sure what kind FICO score, buy down/points or prepay you're working with but high 6's for a 55% LTV sounds like it's on a little higher end if you have good FICO/Credit.

Credit score is around 760. I'm at 55% LTV with a $75K loan amount, using the max buydown, and a 5-5-5-5-5 prepayment penalty. Right now, personal-name DSCR loans are pricing at about 6.7%, while LLC DSCR loans are coming in closer to 5.95%. If I could find something in my personal name in the low 6% range, I'd go that route, but so far I haven't seen it.

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Ko KashiwagiPro Member
Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
1y
Quote from @Scott Bowen:

Quote from @Ko Kashiwagi:

Hi Scott,
Every lender/program is a little bit different but I do a lot of DSCR loans under personal names and often times rates won't change whether it's personal or LLC. Some programs do have lender adjustments on LLC vs individual but it's just a matter of which program has the best rates for your specific scenario at that specific point in time of market.
I'm not sure what kind FICO score, buy down/points or prepay you're working with but high 6's for a 55% LTV sounds like it's on a little higher end if you have good FICO/Credit.

Credit score is around 760. I'm at 55% LTV with a $75K loan amount, using the max buydown, and a 5-5-5-5-5 prepayment penalty. Right now, personal-name DSCR loans are pricing at about 6.7%, while LLC DSCR loans are coming in closer to 5.95%. If I could find something in my personal name in the low 6% range, I'd go that route, but so far I haven't seen it.

Hi Scott, if you're buying down at higher PPP you can hit that low 6's range. Feel free to DM me.
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Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
1y
Quote from @Scott Bowen:

Quote from @Ko Kashiwagi:

Hi Scott,
Every lender/program is a little bit different but I do a lot of DSCR loans under personal names and often times rates won't change whether it's personal or LLC. Some programs do have lender adjustments on LLC vs individual but it's just a matter of which program has the best rates for your specific scenario at that specific point in time of market.
I'm not sure what kind FICO score, buy down/points or prepay you're working with but high 6's for a 55% LTV sounds like it's on a little higher end if you have good FICO/Credit.

Credit score is around 760. I'm at 55% LTV with a $75K loan amount, using the max buydown, and a 5-5-5-5-5 prepayment penalty. Right now, personal-name DSCR loans are pricing at about 6.7%, while LLC DSCR loans are coming in closer to 5.95%. If I could find something in my personal name in the low 6% range, I'd go that route, but so far I haven't seen it.

5% PPP for 5 years can cost you a small fortune. would never sell that to a borrower.
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Benjamin Louie

Property Manager · Erie & Millscreek PA | Maggie Valley & Haywood County NC · Member since 2024 · 264 posts · 119 votes

1y

That's interesting. Usually, I see LLC loans cost more, not less. If you're really getting ~0.75% lower, I'd definitely run the numbers because that could outweigh the yearly LLC expenses pretty quickly. Just make sure to check the lender's fees, future refi rules, and how it plays with your long-term plan.

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Erik EstradaBusiness Member

Lender · Member since 2022 · 6k+ posts · 1k+ votes

1y

Quote from @Scott Bowen:

I currently own nine rental properties under my personal name with conventional loans, but since I'm approaching the ten-loan cap, I've started looking into DSCR loans. My initial plan was to continue borrowing in my personal name, but I've noticed that DSCR loans for LLC-owned properties often come with lower interest rates than those held personally.

Based on conversations with multiple lenders, rates for LLC-owned DSCR loans are roughly 0.75% lower (at 55% LTV with points, about 5.95% vs. 6.75%). I hadn't planned on forming an LLC for liability reasons (I'm comfortable with the level of risk in my own name), but financially, the lower rates make LLC ownership appealing. Even after factoring in the added costs of maintaining an LLC, the stronger net cash flow from better rates seems to outweigh those expenses.

I'm trying to make the best long-term decision and set myself up for success, as I plan to purchase at least 10 more rentals over the next two years. Why do LLC-owned DSCR loans carry better interest rates than personally owned ones? Is this just a temporary market trend, or is it likely to remain consistent over time?

There is no difference in rate when you finance a property under an LLC or Personal Name using a DSCR loan.

Likely you are seeing a difference in rate spread from lenders that ONLY allow vesting in an LLC versus ones that don't care. Usually business-purpose focused lenders such as Kiavi, Finance Of America Commercial, Easy Street Capital, and I believe some states with CV3 only allow you to close in an LLC. There are many other lenders that will allow you to close in a personal name, especially if they do other NON-QM loans.

Be very careful with the business-purpose only lenders, as they have a very poor process when it comes to disclosing rates and fees. You will usually not get a Loan Estimate, and some of them may or may not lock in the rate until the appraisal is completed and approved by underwriting. I would suggest working with a reputable account executive or broker if you decide to try this route.

On the other hand there are wholesale lenders, that you will usually need to work with a licensed broker to obtain a loan. These lenders typically provide a Loan Estimate and disclose automatically if there are any changes on the loan terms during the process. You can also lock in a rate for 30-45 days prior to ordering any appraisal. These lenders will typically allow you to close a DSCR loan in a personal name, as it is not a guideline requirement.

I would suggest shopping it around a bit more, and really understand who the lender is and if the account executive or broker has a successful track record. Too many times I see investors both seasoned and novice get baited with the terms, and not close on the transaction.

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Andrew Zamboroski

Lender · Member since 2021 · 498 posts · 131 votes

1y

Quote from @Scott Bowen:

I currently own nine rental properties under my personal name with conventional loans, but since I'm approaching the ten-loan cap, I've started looking into DSCR loans. My initial plan was to continue borrowing in my personal name, but I've noticed that DSCR loans for LLC-owned properties often come with lower interest rates than those held personally.

Based on conversations with multiple lenders, rates for LLC-owned DSCR loans are roughly 0.75% lower (at 55% LTV with points, about 5.95% vs. 6.75%). I hadn't planned on forming an LLC for liability reasons (I'm comfortable with the level of risk in my own name), but financially, the lower rates make LLC ownership appealing. Even after factoring in the added costs of maintaining an LLC, the stronger net cash flow from better rates seems to outweigh those expenses.

I'm trying to make the best long-term decision and set myself up for success, as I plan to purchase at least 10 more rentals over the next two years. Why do LLC-owned DSCR loans carry better interest rates than personally owned ones? Is this just a temporary market trend, or is it likely to remain consistent over time?

DSCR loans can be very similar with rates and are pretty aggressive at the moment. However, I am not sure I would ever do a 5% for 5 years or max buydown. The likelihood you refinance/sell should be considered, in addition to your break even costs. For example, at 55% ltv and a 3-year prepay at mid to upper 6’s, it may be a better option if costs are less. On a loan of 75k, rates make less of a difference than what most people would generally think. 2% to buydown a rate would take a while to break even as an example.

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Nick BelskyBusiness Member

Lender · Orlando, FL · Member since 2021 · 1k+ posts · 704 votes

1y

@Scott Bowen

I love how diversified the lending options are! I have to agree with most, a hard 5% 5yr PPP is something I'd rarely try to sell to a client, but on a $75,000 loan, that has very minimal impact if you were to sell/refi before the period ended. On the other side of the coin, a 0.50% difference in interest rate is also negligible on a loan that small... Most experience investors for long term holds don't hang up on rates so much as other loan features that have far more impact. You can easily offset a slightly higher interest rate with a small rent increase or hunt for cheaper insurance. You can't control a fixed rate not that is in place or taxes. You do have control over other factors that go into your NOI.

For the initial questions, there are some lenders who allow vesting either way, some have a pricing hit, some don't. IF you are interested in strictly lowest rate at 55 LTV with a $75,000 loan amount you may be able to hit floor rates under 6%, but many also give rate hits for lower loan amounts and limit buy down option to no more than 2pts... There are an endless variety of how different lenders price things. I haven't seen a difference of 0.75% for entity vs individual, though, that seems high. Generally speaking, yes, lenders with entity only vesting will have better pricing. They do this to attract certain types of borrowers. It's intentional.

Shoot, if you want to pay 3.5pts to the lender, we can price this down to 5.86%...

Cheers!

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Mills Thumser

Lender · Member since 2025 · 36 posts · 7 votes

1y

@Scott Bowen Hi Scott! Some great advice here in the comments regarding the DSCR Loan rates under an LLC vs. your personal. I would love to chat with you further to discuss your rental portfolio. Feel free to send me a message or find my direct contact info in my profile. Curious to see where we'd land on this.

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Timothy Hero

Lender · United States · Member since 2020 · 1k+ posts · 499 votes

1y

I quoted a 55% LTV deal yesterday at 5.7%. I don't advertise those rates because most are seeking 70-75% LTV, so I don't want to do false marketing.

For max LTV, my lowest rate guys are around 6.5%.

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DSCR Loans for LLC-Owned Properties vs Personally Owned

DSCR Loans for LLC-Owned Properties vs Personally Owned

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