DCSR vs Conventional with transfer tax

[Anthony Vaganos]

Hi all,

First time post as I get ready for my first investment. For the PA investors out there or maybe in other states with high transfer taxes (2% of property value). Curious on whether you've found the math more favorable between purchased under an LLC with a DSCR loan vs. buying with a conventional loan under personal name and then paying transfer tax again to get property into an LLC. Convention lenders said they are OK with this approach, but in PA not sure paying the transfer tax twice (once at sale and once at transfer into LLC) is worth the savings on the interest rate between the conventional vs DSCR (just pay transfer tax once at sale). Curious what others have concluded....or for any lawyers out there if buying under personal name and then transferring into an LLC diminishes your liability protection with the LLC. Thanks!

[Zach Edelman]

Regardless of if there is a due on sale clause or not - if you are paying a 2% of property value tax twice - that's a large expense. The spread between conventional loans and DSCR loan pricing is not 2% of the property value. Spreads between conventional loans are typically 100-150 bps of the loan amount. With the transfer tax - you're being charged 2% of the property value (not the loan amount)! Additionally, add in the ambiguity/risk of the due on sale clause or ramifications on the conventional loan of transferring the property from your individual name to an LLC - the economics don't make sense, and the headache isn't worth it even if it did, in my opinion!