DSCR loan to purchase rental property under LLC

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DSCR loan to purchase rental property under LLC

Lauren H.
Homeowner · DE · Member since 2023 · 3 posts · 0 votes

Hi everyone, 

Question - If I were to purchase an investment property through my rental property LLC using a DSCR loan, can I rent the property from my own LLC (would live there while updating the property)?

Interested to learn the pros/cons from financial/tax/legal standpoint. 

Thank you!

Lauren


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  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    2y

    I am not 100% sure but I don't think that's allowed. You can fix it up but to owner occupy and update I think that wouldn't be allowed. 

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  • Ryan ShortPro Member
    Investor · Boston, MA · Member since 2016 · 77 posts · 55 votes
    2y

    @Lauren Huff you can definitely rent to yourself from your LLC. Business do this all the time. You are just another name on the rent roll. This is a good way to deduct if you are renting the space for your business or the real estate LLC. You most likely will not get owner occupied benefits from your bank though on the loan.

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  • Ryan ShortPro Member
    Investor · Boston, MA · Member since 2016 · 77 posts · 55 votes
    2y

    @Ryan Short what are your trying to get out of this scenario? Are you trying to help qualify for something with this income or just want to live there while renting it out? You can do anything you want because it is your property just depends on what your are trying to gain from it.

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  • Shafi Noss
    Lender · Nationwide · Member since 2018 · 571 posts · 310 votes
    2y

    DSCR won't allow this, the property has to be non owner occupied at all times. There are legal ways to get close but has some tradeoffs.

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  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y
    Quote from @Lauren H.:

    Hi everyone, 

    Question - If I were to purchase an investment property through my rental property LLC using a DSCR loan, can I rent the property from my own LLC (would live there while updating the property)?

    Interested to learn the pros/cons from financial/tax/legal standpoint. 

    Thank you!

    Lauren



    No - DSCR Loans are strictly non-owner occupied and you will need to sign legal documents at close attesting you will not do this

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  • Brett Wright
    Member since 2018 · 1 post · 0 votes
    2y
    Quote from @Shafi Noss:

    DSCR won't allow this, the property has to be non owner occupied at all times. There are legal ways to get close but has some tradeoffs.


    So what's the penalty IF someone gets a DSCR loan and ends up occupying that home at some point?

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  • Shafi Noss
    Lender · Nationwide · Member since 2018 · 571 posts · 310 votes
    2y
    Quote from @Brett Wright:
    Quote from @Shafi Noss:

    DSCR won't allow this, the property has to be non owner occupied at all times. There are legal ways to get close but has some tradeoffs.


    So what's the penalty IF someone gets a DSCR loan and ends up occupying that home at some point?

    A lawyer would best answer that. One thing that can happen is the lender calls the loan. 
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  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y
    Quote from @Brett Wright:
    Quote from @Shafi Noss:

    DSCR won't allow this, the property has to be non owner occupied at all times. There are legal ways to get close but has some tradeoffs.


    So what's the penalty IF someone gets a DSCR loan and ends up occupying that home at some point?


     Generally you will have to sign a document and prove up you are not living in the property or intending to use the property when the loan is originated.  However, if circumstances do indeed change over the course of the loan, there shouldn't be a penalty involved if you move into the property down the line for unforseen / unintended reasons (such as maybe in a couple of years there is a family emergency requiring a need to temporarily move into one of your rental properties etc)

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
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