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Maximizing Real Estate Investments with DSCR Loans: Closing in Your Business Entity’s Name
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Welcome, property investors! As you navigate the landscape of real estate investment, understanding the strategic use of Debt Service Coverage Ratio (DSCR) loans is essential. Today, we delve into a crucial aspect of these loans: using a DSCR loan to close in the name of your LLC or other business entity.
The Benefits of Closing in Your Business Entity's Name
Many DSCR programs offer the flexibility to close in the name of your business entity, be it an LLC, Corporation, S-Corporation, Limited Partnership (LP), General Partnership (GP), or Limited Liability Limited Partnership (LLLP). This approach is highly sought for its tax and liability advantages, helping to separate your business affairs from personal ones.
The Process Explained
When you opt for this route, the loan application is made in your name, and you personally guarantee the loan. However, the public records will reflect your entity's name on the title, not yours. It's important to understand that this is full recourse lending, meaning you are personally liable for the loan's monthly payments, just as if you had closed in your own name.
Unique Lender Benefits
Some lenders, like us, provide additional benefits when closing in the name of your business entity. In our DSCR program, you can close in your entity's name with a personal guarantee, but we do not report the mortgage on your personal credit history. This feature can be particularly advantageous for maintaining a clear distinction between your personal and business credit profiles.
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Key Requirements and Considerations
- All Guarantors Must Be Entity Members: Each member must complete a loan application and undergo a personal credit and background evaluation.
- Member Involvement: Some lenders require all entity members to be loan applicants. Ensure you discuss this with your loan originator if your business entity has multiple members.
- Single Guarantor Option: In our DSCR program, an entity with multiple members can have a single guarantor, provided they are a managing member or a majority owner.
- Multiple Business Entities: In our DSCR program, you can close in the name of up to two business entities, as long as there is one guarantor who owns 100% of both entities.
Essential Documentation
To successfully close in your entity's name, you’ll need the following:
- Entity Documentation: Articles of Organization, Partnership, and Operating Agreements, if applicable.
- Employer Identification Number (EIN): This will be verified during the process.
- Certificate of Good Standing: To confirm the legal status of your entity.
- Certificate of Authorization: This document authorizes a specific individual to execute all necessary documents on behalf of the entity.
Closing Thoughts
Understanding the nuances of DSCR programs, especially when closing in the name of your LLC or other business entity, can significantly impact your real estate investment strategy.
With the right knowledge and the right lender, you can leverage these loans to their fullest potential, ensuring a separation between your personal and business investments, while enjoying the tax and liability benefits.
How to Run Your Own DSCR Scenarios
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Utilize our free tools like our own DSCR CALCULATOR to run your own loan scenarios for potential investments.
Conclusion: Your Investment Lending Partner
We hope this guide has illuminated the path to successful real estate investment using DSCR loans. We lend in 29 states, we have a robust array of DSCR loan programs to meet almost any need, and we have a ton of experience originating DSCR loans!
We're here to support your journey! Simply give us a call so we run some numbers for you and answer all your questions!
You can also drop us a line HERE »
Yours in successful homeownership,
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Derek Bissen
Loan Originator
NMLS#365627
Unconventional Lending Program Director
Derek Bissen is a licensed Mortgage Loan Originator with over 25 years of experience in the industry. Derek is a self-employed lending expert who is known for his ability to work with borrowers who have substantial wealth and non-traditional lending needs. He is a creative loan structurer and specializes in portfolio lending, asset-based lending, bank statement lending, as well as traditional loans such as Conventional, FHA, VA, and first-time homebuyers.
Derek's expertise in the mortgage industry is unparalleled. He is a trusted advisor to his clients, providing them with customized loan solutions that meet their unique financial goals and needs. His vast experience and knowledge make him a valuable asset to anyone looking to purchase a home or refinance their existing mortgage.
As a highly-experienced loan originator and author, Derek is committed to sharing his knowledge with others. He regularly provides valuable insights and advice to readers looking to navigate the complex world of mortgage lending. His articles are informative, engaging, and backed by years of hands-on experience.
With his wealth of knowledge and dedication to his clients, he is the go-to source for all your mortgage lending needs. If you're looking for a reliable and trustworthy mortgage expert, contact Derek today to learn more about how he can help you achieve your financial goals.