Just formed my LLC and ready to purchase my first property. Lender advice?

Ocala, Florida
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Just formed my LLC and ready to purchase my first property. Lender advice?

Sherry SumpterPro Member
Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes

I formed an LLC with my sister. I'm the realtor and she's the designer/construction expert. We are wanting to buy our first investment property this month. I have tapped into a HELOC and would like advice on the right type of loan to get. I reached out to a Credit Union who was going to prequalify me but when I said the property would be in the LLC, he said oh that will be another department with higher rates. The conventional rate was 7.5%. Any advice would be appreciated! Many thanks in advance.

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Austin ClarenceBusiness Member
Lender · Phoenix, AZ · Member since 2023 · 136 posts · 32 votes
6d

Starting with Conventional is recommended and pivoting later on to DSCR later on as your debt to income ratio starts to exceed the 50% threshold allowed by lenders. However if the LLC is extremely important to you, you could look at doing a DSCR loan instead. Many investors will buy with conventional then switch the title to the LLC post closing, although this strategy has other pros and cons.

[email protected]650-906-2376
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  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    1w

    There shouldn't truthfully be any meaningful difference in rates from a bank, assuming the personal guarantor is solid. Your personal credit score, income, and liquidity will be factors. Since this is an LLC consisting of yourself and your sister, understand that the lender will expect both of you to personally guarantee the loan. Lenders often have different policies, most commonly requiring anyone with ownership above 10% to 20% to personally guarantee, although this can be negotiated. I assume you will be equal partners or fairly close to equal, so expect both of you to be called upon to PG the loan.

    One thing to consider with many credit unions is their inability to charge prepayment penalties on certain loans. Given the high interest rate environment we are currently in, nobody has a crystal ball, but if rates were to decrease, the absence of a prepayment penalty would make refinancing more cost effective.

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    • Sherry SumpterPro Member
      OP
      Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
      1w

      Thank you Stuart for the quick reply. Yes, we are equal partners and am glad to know that the rates should not vary simply because we are an LLC. I also appreciate the point about prepayment penalties, especially if we have an opportunity to refinance later. I'm going to check with a few more credit unions and lenders before we make a decision. Thanks again for taking the time to explain this!

      0Reply
  • Divin KanyamaBusiness Member
    Accountant · Seattle, WA · Member since 2025 · 361 posts · 135 votes
    1w

    @Sherry Sumpter The credit union's response is fairly common. A conventional residential loan is generally made to individuals, while a property purchased directly by an LLC is often treated as a commercial or business-purpose loan with different underwriting, higher rates, and sometimes a shorter term. It is worth comparing several options—including an investor conventional loan in your personal names, a local portfolio loan, and a DSCR loan—based on total cash required, fees, amortization, prepayment penalties, and whether a later transfer to the LLC is permitted by the loan documents.

    Also be careful about using the HELOC for the down payment: the variable payment and lien on your home should be included when stress-testing the deal. From a tax perspective, interest deductibility generally follows how the borrowed funds are used, not simply which property secures the loan, so keep a clear paper trail showing the HELOC proceeds flowing into the investment. Since you and your sister are co-owners, the LLC will typically be taxed as a partnership unless another election is made, which means separate filings, capital-account tracking, and clear treatment of each person's cash, labor, profits, and losses. A written operating agreement and a conversation with a lender, real estate attorney, and tax professional before closing can prevent expensive misunderstandings later.

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    • Sherry SumpterPro Member
      OP
      Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
      1w

      Thank you Divin. I have cash for the downpayment so I will only use the HELOC for improvements if necessary. Would it be better to purchase a property in our personal names for now and transfer to the LLC at a later time?

      0Reply
  • Dominique Alexis
    Member since 2026 · 1 post · 0 votes
    1w

    @Sherry Sumpter Have you considered a hard money lender? For a new investor, a hard money lender can offer a faster and more flexible way to purchase an investment property than a conventional lender. Hard money loans are typically based more heavily on the property’s value and potential than on the borrower’s credit history and income, which can make them easier to qualify for when you’re just getting started. They can also close much faster, giving you an advantage when competing for properties that need a quick closing. And the right hard money lender can help guide a newbie to avoid some common pitfalls. As hard money lenders ourselves, we strive for the borrower's success so as to rinse and repeat.

    The tradeoff is that hard money loans generally have higher interest rates and shorter repayment terms than conventional loans. For a beginner investor, the speed and flexibility can be valuable when purchasing, renovating, and refinancing or selling a property—provided the deal’s numbers support the higher financing costs.

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    • Sherry SumpterPro Member
      OP
      Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
      1w

      I would definitely be interested in considering a hard money lender. Just trying to get started on the right path.

      0Reply
  • Austin GoetzBusiness Member
    Lender · Minneapolis, MN · Member since 2026 · 30 posts · 10 votes
    1w

    You should have no issue closing under an LLC if you are using a DSCR loan to qualify for this investment property. Conventional financing typically will not allow you to close under an LLC.
    DSCR loans can range but they can start at 15% down payment. Typically, once you get closer to 25% down payment you start to see some better rates. In my experience, you will see higher rates with DSCR versus conventional qualifying. DSCR loans can come with prepayment penalties as well typically anywhere from 1-5 years. The longer the PPP, the better the rate/fees are. I think 3-year prepayment being a sweet spot for most investors.
    Happy to answer any questions you have about DSCR and be resource.
    Good luck!

    [email protected]952-797-2007
    Magnolia Bank
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    • Sherry SumpterPro Member
      OP
      Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
      1w

      Thank you Austin. This will be my first investment purchase, so I am not familiar with a DSCR loan. I am open to learning the best route to take. I am interested in buying a SFR with minimal cosmetics in the Ocala, FL area.

      1Reply
    • Austin GoetzBusiness Member
      Lender · Minneapolis, MN · Member since 2026 · 30 posts · 10 votes
      3d

      Since you are not tied to holding it in an LLC, it is great to explore both traditional credit options and the non-traditional/DSCR options. This will allow you to compare what rates and fees for each avenue.

      DSCR- Pros- Less paperwork, can close under LLC. Cons- Can come with prepayment penalty, higher rate than traditional conventional loan.

      Conventional- Pros- Lower interest rate than DSCR, no prepayment penalty. Cons- More paperwork, harder to qualify with your DTI ratio as you build your portfolio of investment properties.

      Reach out if you want to discuss further or run through numbers.

      [email protected]952-797-2007
      Magnolia Bank
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  • Austin ClarenceBusiness Member
    Lender · Phoenix, AZ · Member since 2023 · 136 posts · 32 votes
    6d

    Starting with Conventional is recommended and pivoting later on to DSCR later on as your debt to income ratio starts to exceed the 50% threshold allowed by lenders. However if the LLC is extremely important to you, you could look at doing a DSCR loan instead. Many investors will buy with conventional then switch the title to the LLC post closing, although this strategy has other pros and cons.

    [email protected]650-906-2376
    Austin Clarence with NEXA Mortgage552 Reviews
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    1Reply
  • Sherry SumpterPro Member
    OP
    Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
    6d

    That sounds good. The LLC is not critical, I just thought that was what we needed to do. I appreciate your advice!

    0Reply
    • Ryan KellyBusiness Member
      Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
      6d

      @Sherry Sumpter if you want to purchase the property directly in the name of the LLC, you will need to use a commercial loan or DSCR loan, as traditional conventional loans are for individuals, not businesses. Another option, which is popular iwth investors, is you can purchase the home in your personal names using a conventional loan, then after closing, you can work with the title company to transfer the deed into the name of your LLC. Discuss this option with your lender and title company to ensure you are protected from any due on sale clause aspects, but just know this is a very common practice.

      [email protected]512-674-5478
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  • Sherry SumpterPro Member
    OP
    Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
    6d

    Thank you Ryan!

    0Reply
  • Gregory AcsPro Member
    Lender · MD · Member since 2025 · 194 posts · 74 votes
    5d

    Hi Sherry,

    Congratulations on getting everything set up. Buying through an LLC can open up different financing options, but it's true that many lenders treat LLC loans differently than conventional owner occupied loans, which can mean different rates and guidelines.

    The best loan really depends on your investment strategy, whether you're planning to hold the property as a rental, renovate and refinance, or flip it. Since you already have a HELOC, it's worth comparing that against investment property loan options to see which gives you the best overall return and flexibility.

    I'm a mortgage broker and work with investors purchasing through LLCs. I'd be happy to go over your goals and help you compare the available financing options. Feel free to send me a message.

    0Reply
    • Sherry SumpterPro Member
      OP
      Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
      5d

      Thank you Gregory for your advice!

      0Reply
  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    5d

    WHOA Paris. Our mare's name is Paris. San Peppy Badger quarter horse.

    No matter what I say still move forward investing in REI.

    LLC- I like it. You are marrying your sister, her family, her job and financially. The Operating Agreement is the most important step you will take. Exit- who dies, who divorces, who moves, who quits, who bankrupts, 1st Right, etc. define valuation. Income division/Asset sale division etc- how? Legal- who can open bank accounts, double signature on checks, insurance, handling tenants, etc. Cash infusions- how are they refunded, when, any interest, etc.

    WHY? What is your REI financial objectives? Is this a flip, $200 per month income, cushion from inflation or the USD de-dollarization, diversification. Why? Do you both have the same objective and time frame?

    Financing- I would have your sister on all of the Financial lending documents. Personal Guarantee, loans, even the Heloc I would tie her to paying that back. Would not want a Financial Partner with no Financial skin in the game. Use the Heloc if for a flip. Long term hold, get out of it as fast as possible.

    Scaling- is this just for fun, then disregard. If you plan to grow, then stop and discuss how you will scale. Have a discussion on how big, how fast, how much risk. Do you two align? Make sure your families agree and are aligned.

    Personally if you're wanting to make Money, I would not include your sister, unless she wants to put up Cash. Although you can do both, I would concentrate on either Cash Flow or Appreciation. If your interest rate is 7.5% that is harder to work with for Cash Flow, but a Cheap rate for quick Appreciation deals.

    Since you're a Realtor and like Horse properties. I would go with that strength. Always have an Unfair Advantage. Old house with 30 acres. Split it. Dumpy property with marsh or ditches. Build a pond. Great location- 20 acres- split for Self Storage location, RV park, or Boat/RV storage if zoning works. Or do Cargo Container Storage.

    Start small and Make Your Big Mistakes Early.

    It's your money and Risk. Digest posts, then make your decision for your situation. Disregard us.

    0Reply
    • Sherry SumpterPro Member
      OP
      Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
      5d

      Thank you Henry for your wise advice. I see that I have a lot to think about!

      0Reply
    • Sherry SumpterPro Member
      OP
      Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
      5d

      Also, San Peppy Badger...great performance horse line. My quarter horse is Wylie...Top Sail Whiz (reining). Whoa Wylie, I said Whoa...haha!

      0Reply
  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 508 votes
    5d

    If buying with an LLC, a DSCR loan would be an option. Working with an experienced mortgage broker that specializes in DSCR loans will help as there will be more options to choose from. Happy to connect to discuss further.

    [email protected]818-770-0340
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    0Reply
  • Sherry SumpterPro Member
    OP
    Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
    5d

    Thank you, Stacy!

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    5d

    Many credit unions won't lend to a LLC. You can go with a traditional bank or go with a lender who does DSCR loans. Rates will be pretty close with any of them and depend on down payment amount and prepayment penalty language

    More down payment is lower rate

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  • Sherry SumpterPro Member
    OP
    Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
    5d

    Hi Chris. Thank you for your advice...much appreciated!

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    5d

    @Sherry Sumpter

    Hi Sherry. I know this wasn't your question, but it sounds like you may be looking to finance 100% of the property - down payment via HELOC, and the balance consisting of another loan. Is that accurate? Most properties won't support 100% debt - you'll just lose money.

    Hope this helps

    0Reply
  • Sherry SumpterPro Member
    OP
    Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
    4d

    Hi Nicholas. I have cash for a significant down payment and will only use the HELOC if needed. It's sitting there just in case. I want to finance a portion of the property. Sorry if my question wasn't clear. I am wanting to understand the best route to finance. It sounds like several of the contributors are suggesting a conventional loan in my name and transition title to the LLC later on. Thanks for your feedback!

    1Reply
  • Diana KhanPro Member
    Attorney · 10451 Mill Run Cir #755 Owings Mills, MD 21117 · Member since 2024 · 483 posts · 177 votes
    4d
    Quote from @Sherry Sumpter:

    I formed an LLC with my sister. I'm the realtor and she's the designer/construction expert. We are wanting to buy our first investment property this month. I have tapped into a HELOC and would like advice on the right type of loan to get. I reached out to a Credit Union who was going to prequalify me but when I said the property would be in the LLC, he said oh that will be another department with higher rates. The conventional rate was 7.5%. Any advice would be appreciated! Many thanks in advance.

    @Sherry Sumpter, after reading your follow ups, I wouldn't assume that buying personally and transferring the property to the LLC later is automatically the best route just because it may make financing easier. Before doing that, I'd want to understand exactly what the loan documents allow and make sure the lender, insurance, title, and ownership pieces all work together.

    I've worked with investors where the LLC itself was the easy part. The bigger questions came from how the property was titled, what the financing documents required, and what the owners had actually agreed to between themselves. Since you and your sister are equal partners, I'd also want a very clear operating agreement covering money, responsibilities, decisions, and what happens if one of you eventually wants out.

    You’re asking these questions at the right time, @Sherry Sumpter, before you’ve bought the property and have to unwind something later. I’m a real estate attorney and investor, so this is a side of investing I see often. I practice in Maryland, so I’d have Florida counsel review the specifics before you make any ownership changes, but I’m happy to stay connected as you get started.

    [email protected]240-266-0291
    0Reply
    • Sherry SumpterPro Member
      OP
      Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
      4d

      Thank you Diana. I'm so glad now that I'm taking my time and getting such wise advice from all of you. I believe I need to work on the operating agreement as the next step. Thanks again!

      0Reply
  • Brad SeidBusiness Member
    Lender · Licensed in 28 States · Member since 2026 · 161 posts · 46 votes
    4d

    @Sherry Sumpter Congrats on taking the first step! The LLC structure and how you're using the HELOC can definitely impact your financing options and rate. I'd be happy to help you look at the best loan structure for your investment property and see what options may be available. Feel free to reach out!

    [email protected]248-408-3855
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  • Sherry SumpterPro Member
    OP
    Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
    4d

    Thank you Brad!

    0Reply
  • Ashley RigsbeePro Member
    Customer Success & Onboarding Specialist at BiggerPockets · Charlotte, NC · Member since 2023 · 85 posts · 33 votes
    1d

    Welcome to the BiggerPockets community! You and your sister's mix of realtor and construction skills is a strong team for a first deal. Beyond the credit union, you may be able to get a DSCR quote and a local portfolio lender to compare rates.

    BiggerPockets
    1Reply
  • Sherry SumpterPro Member
    OP
    Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
    1d

    Hi Ashley. Thanks for the encouragement and advice! I'm studying DSCR since I didn't have a clue what that meant when people were mentioning it in the posts. Now I'm getting it...duh! My credit score is 819, I have down payment cash to work with, so now I need to find a deal and connect with a DSCR lender. So much to learn but it is exciting! Thanks again!

    0Reply
  • Nicholas FloydBusiness Member
    NY · Member since 2026 · 214 posts · 83 votes
    1d

    Sherry, congratulations to you and your sister on getting your LLC established! One thing I'd recommend is comparing a few different funding options before committing to a loan. Since you're purchasing through an LLC, you may want to explore DSCR loans or investor-focused financing, depending on the property and your investment strategy.

    I work in business funding, and I've seen how having the right financing structure can make a big difference, especially on your first investment. There may also be business lines of credit or 0% introductory APR business credit cards worth considering for certain renovation or startup expenses, depending on qualifications.

    Are you planning to fix and flip the property or hold it as a rental? That would help determine which funding options make the most sense.

    0Reply
  • Sherry SumpterPro Member
    OP
    Real Estate Agent · Ocala, FL area · Member since 2026 · 17 posts · 8 votes
    22h

    Hi Nicholas, we are initially looking for a rental that would require minimal cosmetics or turn key. We would also like to put a flip or two in the mix if it's not too much of a headache. Thanks for the advice. I may reach out once we find a deal.

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