Any creative ways to get 30 year fixed loans inside an LLC ?

Question

I am looking to build a SFH portfolio and I would like to use leverage and put them inside an LLC. Im really not a fan of commercial debt with rates that adjust. At that point id probably just pay them off completely. Leveraged I'm looking at about 20-30 houses so my idea is 2-3 houses per LLC. Is there a creative way to get 30 year fixed financing this way ? I'm looking to do 50% down payments to begin with so the loans are pretty conservative. I know many people use DSCR loans, are the 30 year fixed DSCR loans available inside an LLC ? Id prefer to have the protection of an LLC on top of an umbrella liability policy. It might be overkill but for me the peace of mind is worth the extra cost.

Doug Smith · Answer

You can do a 30 year fixed rate DSCR, but the pricing is higher. Most savvy investors we work with opt for an arm that is fixed for 5, 7, or 10 years and then goes variable after that. The reason for this is that they come with a bit lower rate. Think about it, let's say you save 1/2% for the first 5 years of a deal? This is overly simplified, but that's 2.5% lower in that period. How long to most people hold a property or a loan before refinancing...particularly an investment property. If you work out the break even (even if the rate does go up), it's well beyond the time when it goes variable in most cases. I know it's contrary to what most people are prone to think, but a 30 year fixed rate in real estate investing, where properties are often sold and loans often refinanced, is usually not the strategy that most experienced, savvy investors opt for. Do some math on it and you'll see what I mean. Good luck to you.

Robin Simon · Answer

Yes - DSCR Loans are generally not only fully allowed under an LLC (30-year fixed rate) but most DSCR Lenders prefer it that way!

PS - check out this article on BP on advanced strategies for DSCR Loans which has a detailed section on using LLCs for DSCR

https://www.biggerpockets.com/...

Kevin Sobilo · Answer

I'm going to comment slightly off topic but maybe something you want to think about.

Putting taking loans with 50% down payments locks your money up in these properties where it will be hard to access and yield less returns than using it to buy more properties!

If you intend to put 3 houses within an LLC, perhaps put 20-25% down on 2 properties and buy one in cash, That is about the same cash outlay as you would make putting 50% down on each BUT it allows you to cash-out refi just the one property you bought in cash later when you want to deploy more capital! One refi is cheaper and easier than multiple.

Stacy Raskin · Answer

There are fixed 30 year fully amortized DSCR loan options as well as DSCR options that are fixed 10 year interest only and then going to a fixed 30 year fully amortized term. Some investors like the interest only option as it will help with cash flow. These loans are available for an LLC.

Andrew Giunta · Answer

I was considering doing something like this and owning one in each LLC in cash if it meant I had options to better financing. If I can just do a DSCR loan I probably wont bother with that. These are for the most part meant to be a pretty conservative cash flowing investments that I hold until I die. With the cashflow alone I could pick up another one or two yearly so im not too concerned about being super efficient.They are also property managed in an area that I really don't have a large desire to live in. If they were in a town over Id probably do less down and build out a management team but the yields are relatively high and cost per door are relatively low. I don't think the homes with appreciate a ton in value maybe just slightly over inflation so the benefit of putting less down and buying more weighed against the headache of having that many doesnt make a ton of sense (unless I decided I wanted to move there)

Zach Edelman · Answer

Another vote for DSCR loans being allowed and perhaps even encouraged with borrowing under LLCs.

Dustin Lauer · Answer

You can find fixed rates and get up to 75% typically so long as the properties at least hit 1.1 DSCR

Eliott Elias · Answer

Creative finance (subject to & owner finance), and DSCR lending will allow you to purchase property in your LLC.

Any creative ways to get 30 year fixed loans inside an LLC ?

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