My 2 Options: Personal vs Commercial Loan

[Danny Lyu]

Hi All,

First-time poster here. I’m currently in the pre-approval process to purchase a 2-4 unit multi-family property. I’ve approached a local bank in Upstate New York offering a 30-year loan with a 10% down payment. However, the loan would need to be under my name, as they won’t allow LLCs.

I’ve received advice from others who feel comfortable with this arrangement as long as they have high insurance coverage limits, which the lender also recommended. Assuming the insurance premiums don’t significantly impact my cash flow (which is one of my primary goals), how do you assess the risk of taking out a loan under my personal name versus opting for a commercial loan that requires a larger down payment and comes with a higher interest rate?

My goal is to spread my funds across multiple investments to grow my portfolio while keeping my down payments as low as possible. At the same time, I prefer to minimize liability, though I’m not a seasoned investor.

Is this one of those calculated risks that investors eventually become comfortable with, or should I prioritize limiting liability from the outset?

Thanks in advance for your advice!

[Robin Simon]

Quote from @Danny Lyu:

Hi All,

First-time poster here. I’m currently in the pre-approval process to purchase a 2-4 unit multi-family property. I’ve approached a local bank in Upstate New York offering a 30-year loan with a 10% down payment. However, the loan would need to be under my name, as they won’t allow LLCs.

I’ve received advice from others who feel comfortable with this arrangement as long as they have high insurance coverage limits, which the lender also recommended. Assuming the insurance premiums don’t significantly impact my cash flow (which is one of my primary goals), how do you assess the risk of taking out a loan under my personal name versus opting for a commercial loan that requires a larger down payment and comes with a higher interest rate?

My goal is to spread my funds across multiple investments to grow my portfolio while keeping my down payments as low as possible. At the same time, I prefer to minimize liability, though I’m not a seasoned investor.

Is this one of those calculated risks that investors eventually become comfortable with, or should I prioritize limiting liability from the outset?

Thanks in advance for your advice!

At a high level, this is generally the path people take - we see a lot of people have success in this route - start building the portfolio with banks, low down payments, and then **generally** when you hit around 5 or so properties - it starts to make sense to switch over to LLCs, its too hard to qualify/deal with paperwork of banks and switch towards private lenders like DSCR Loans - (LLC friendly, easier) to scale past 5 or so. But when you can qualify and deal with the process before then - usually worth it to do bank options like this until you hit the scaling point (could be 3 rentals could be 5, could be 10 etc - no real "hard and fast rule")