All Cash vs DSCR Loan / Personal Name vs Ohio LLC

[Henry Bagh]

Hello, 

I live in Los Angeles and I am pretty liquid. This is a two part question and I hope someone can guide me in the right direction. 

1) I am looking to buy Single Family Homes in Cleveland, OH to rent to Section 8. With average price of $70-$85k, I am considering either buying 10+ all cash or by using DSCR loans. With interest rates at an all time high, I am wondering if I should buy all cash at the moment, wait until rates go down, and refinance OR should I just jump into DSCR loans immediately so that instead of i.e. 10 units, I can get i.e. 30 units instead with less down.

On a $75k purchase, an 8% interest rate vs a 5% interest rate isn't much difference, so I'm leaning towards DSCR loan vs my own money. However, I've spoken to a lot of lenders and closing costs end up being like $4-5k (which is a big chunk of a $75k purchase). Any advice on which way to go with this?

2) On the legal side, since I live in Los Angeles, I don't know how to structure property out of state. If I buy in my personal name, I don't have to deal with franchise tax ($800/yr) for an LLC. However, I am opening myself up to risk for lawsuits, etc. And if I have 20 properties in 10 different LLC's, that adds up and kills a lot of rental profits (10 x $800 = $8k/yr).

However, from some pros I've talked to, in order to avoid paying taxes on LLC's out of state as a California resident, I need to open up a Wyoming Statutory Trust, which leads to a Wyoming Holding Company, which leads to each Cleveland LLC. And the quotes I got for setting up these structures is like $10k. Though I have the money to pay for this structure, I am new to investing and I don't want to jump into creating these expensive structures when I'm not even a 100% sure I'm going to scale in Cleveland. Who knows what happens after I buy my first couple rental properties? 

I just want some guidance on how to quickly start, get my feet wet, and make the bigger choices later on, when I start stacking rentals. Im in analysis paralysis and it isn't allowing me to make a decision. Can I just create a quick OHIO LLC, and purchase a property? Do I just buy in my personal name?

Thank you in advance and I apologize for the long post!

[Jason James]

@Henry Bagh answer to question 1, it all depends. If the properties make sense and cash flow with DSCR loans, you will be able to leverage it into more properties. If the intent is to avoid the closing cost, remember you will still incur these costs during acquisition and when you go to refinance down the road. On question 2 I would just make a list of LLC/ Trust formation companies (Ex. Anderson & Sons) and have a discovery call. They will be able to guide you in the best direction based off your specific situation. In regards to taking action... just take ACTION. My first rental property was purchased in my name, then my next few in LLC. you can setup a LLC in a quickly as 24 - 48 hours depending on state. Don't let that be the reason holding you back. Lastly, just keep it simple purchase one, go through the process and that will give you a ton of clarity on the next steps!!! Good luck, and I'm looking forward to see your progress!