DSCR Loan for a multi-member LLC

[Prashant Kumar]

Hi BP community,

I along with a 4 friends formed an LLC to invest in rental properties. We have bought 2 properties and are looking at taking loans for buying our next property. However, we were told by a mortgage broker, that we cannot take a regular loan on the LLC, even if its against the properties. All the 5 members of the LLC would be liable for the full loan amount each. i.e. if the loan is 200K, then each member will have a loan of $200K on their names.

I was told that there are options for taking DSCR loans in the name of the LLC including taking HELOC or similar loans against the 2 properties. I wanted to check, is this possible, where none of the 5 members, have the loan reflected on them, and the loan is purely against the LLC. How does this work?

The ideas is to use the equity in the 2 current rental properties and get a loan against that. Any guidance will be appreciated. 

[Stuart Udis]

@Prashant Kumar The loan officer is referring to the personal guarantee. Even when the property is titled to an LLC the lender will expect the members to personally guarantee the loan. Depending on how the operating agreement is drafted and the lender's internal policies one or only a few members may be required to personally guarantee the loan, instead of all 5 members of the LLC. I don't see a situation where you're avoiding a personal guarantee on a real estate loan.