Real estate investors are increasingly turning to LLCs (Limited Liability Companies) for holding rental properties, protecting personal assets, and optimizing tax strategies. However, financing properties owned by an LLC can present challenges—especially with traditional lenders who prefer working with individual borrowers. Fortunately, Debt Service Coverage Ratio (DSCR) loans provide a flexible and scalable financing option that’s perfectly suited for investors purchasing or refinancing properties through an LLC.
In this guide, we’ll explore how DSCR loans work, why they’re ideal for LLC-held properties, what lenders require, and how investors can leverage them to grow a real estate portfolio under a business entity.
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A DSCR loan is a type of non-QM (non-qualified mortgage) that evaluates the cash flow of the investment property rather than the borrower’s personal income. These loans are designed for real estate investors—especially those using entities like LLCs or S-Corps—and focus on the property’s ability to cover its own debt.
DSCR = Net Operating Income (NOI) / Annual Debt Service
If a rental property earns $60,000 annually and the total mortgage payments are $48,000, the DSCR is:
DSCR = $60,000 ÷ $48,000 = 1.25
Most DSCR lenders require a minimum ratio of 1.20 to 1.25 for approval.
Before diving into financing, it’s worth understanding why many investors use LLCs to purchase and manage rental properties:
However, financing properties under an LLC can limit access to conventional mortgage products. That’s where DSCR loans come in.
Unlike traditional residential loans, DSCR loans:
This makes DSCR loans especially attractive for real estate investors running their operations like a business.
| Loan Feature | Typical Range |
|---|---|
| Minimum DSCR | 1.20 – 1.25 |
| Maximum Loan-to-Value (LTV) | Up to 80% (may vary based on property type) |
| Credit Score Requirement | 660+ (700+ preferred for best rates) |
| Loan Amount Range | $100,000 – $5,000,000+ |
| Ownership Type | Individual, LLC, LP, Corporation |
| Loan Term Options | 30-year fixed, ARM, interest-only available |
| Prepayment Penalty | Yes (typically 3–5 years) |
| Reserve Requirements | 6–12 months of PITIA |
DSCR loans are available for a wide range of rental properties that can be held under an LLC:
Note: Properties must be non-owner-occupied. DSCR loans are strictly for investment purposes.
Lenders will assess both the property performance and LLC structure. Typical documents include:
Investor Profile: Jane owns five rental properties through “Sunset Holdings LLC.” She wants to acquire a sixth property, a duplex, also through the LLC. Her tax returns show minimal income due to depreciation and write-offs.
Traditional loan outcome: Denied due to low verifiable income and existing loan limits.
DSCR loan outcome: Approved based on the duplex’s NOI and DSCR of 1.35. No personal income documents required, and the loan is closed under her LLC within three weeks.
DSCR loans offer self-employed investors and LLC owners a powerful tool to acquire, refinance, or scale rental properties without the roadblocks of traditional financing. By prioritizing property income over personal income, these loans make it easier to operate your real estate portfolio like a true business.
Whether you’re just forming your first LLC or already managing multiple properties under one, DSCR financing can help you grow strategically—while protecting your personal assets and optimizing for long-term success.
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