Real estate investors often choose to purchase and hold rental properties through a Limited Liability Company (LLC) for liability protection, partnership structures, and easier management of multiple investment assets. However, conventional mortgage programs can make it difficult for LLCs with several members to qualify for financing. Our DSCR (Debt Service Coverage Ratio) loan program is designed specifically for real estate investors and provides flexible financing options for borrowers purchasing rental properties through an entity. One of the most attractive features of this program is that it allows up to eight members in a domestic LLC, making it an excellent solution for partnerships and property investment groups.
Example Scenario: Financing an Investment Property Through an LLC
Richard is an experienced real estate investor who already owns four investment properties. He is purchasing another single-family rental property and would like the borrowing entity to be Richard’s Property Management LLC, rather than financing the property in his personal name. Richard has the funds needed for the down payment, closing costs, and required reserves, and he meets the credit requirements to serve as the guarantor on the loan. Here are the key details:
- Property type: Single-family investment property
- Loan amount: $385,000
- Down payment: 20%
- Borrower: Richard’s Property Management LLC
- LLC members: 8 members
- Richard’s ownership: 25%
- Richard’s credit score: 763 FICO
- Richard will act as the personal guarantor
How DSCR Loans Work
A DSCR loan is a Non-QM mortgage that allows real estate investors to qualify based on the property’s cash flow rather than their personal income. Instead of reviewing tax returns, W-2s, or pay stubs, lenders evaluate the subject property’s Debt Service Coverage Ratio (DSCR). The DSCR compares:
Property Rental Income ÷ Total Monthly Property Expenses
If the rental income adequately covers the mortgage payment and expenses, the property may qualify for financing. This approach makes DSCR loans extremely popular with:
- Real estate investors
- Self-employed borrowers
- LLC-owned investment properties
- Property investors with multiple holdings
DSCR Financing for LLC Borrowing Entities
Our DSCR program allows real estate investors to purchase properties in the name of a domestic LLC, which can offer several advantages:
- Liability protection
- Easier partnership structures
- Clear separation of business and personal assets
- Simplified management of investment portfolios
Key Program Highlights
Our DSCR investor loan program offers creative guidelines for both experienced and new investors.
Program Highlights
• Up to 8 members allowed in domestic LLC borrowing entities
• Up to 4 personal guarantors permitted
• At least one personal guarantor required when the borrower is an entity
• Personal guarantor must have 25% or greater ownership interest in the LLC
• Loan-to-Value (LTV) up to 80%
• Loan amounts from $75,000 to $5,000,000
• Minimum FICO score: 580
Contact us to be connected with a DSCR loan specialist.
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