Financing a purchase through LLC

[Drea Smit]

I'm looking to purchase my third single family rental property through my LLC and am not sure how to structure the financing. I paid cash for the first property, then used a combination of cash and an equity LOC on first property to buy the second.

Should I pursue a commercial mortgage on the third property or pull equity out of the second property that I own free and clear? 20% down payment will be personal cash that I'll put into the LLC as a capital contribution. I'm assuming that I'd have to personally guarantee the mortgage as the LLC is fairly new (18 months) and the cash flow from the property is not especially compelling given the current high interest rates.

I have stellar credit and own my personal residence (valued approx $950k) free and clear, so it would be easy for me to get financing personally to purchase it and then transfer to LLC, but that sounds like that could be messy. One final option would be to take a HELOC on my personal residence (approx $350k would be needed) and contribute that to the LLC as a capital contribution and use that to purchase. However, then would that interest be deductible as an expense of the LLC?

Appreciate any thoughts.

[Robin Simon]

A lot of people in your situation move to DSCR Loans away from conventional as one of the main advantages of DSCR vs. Agency/other Non-QM is ability to have the LLC as the borrower. DSCR rates and points are likely going to be competitive with the other options if you are thinking long term and don't mind slapping a 5-year prepayment penalty provision on it

I think the answer to your options are clearly just model out the total cash flows and projections of each scenario and compare.