DSCR Loans for LLC-Owned Properties vs Personally Owned

[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?

[Jay Hurst]

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.