Commercial Loan or Conventional Mortgage for first 2 rentals?

[Mahesh G.]

Hi, I'm in the process of buying 2 SFHs as my first rental properties that I will be managing myself. I've spoken to a few banks and a portfolio lender and I'm having hard time deciding which route to take. Conventional mortgage offers about 4.5% rate for 30 years fixed with 20% down but portfolio lender wants 35% down with adjustable rolling 5 years over 30 years and prepayment penalty. But the advantage of portfolio lender is that I can put both properties under an LLC which is a must according to my attorney. But the 35% down payment will tie up a lot of cash and the pre payment penalty worries me. Any suggestions from experienced investors will be appreciated.

Thanks