I have money and credit. but no income

17 Replies

Hey guys I got about 250k in my bank account. I only made about 8k this year, I started my job in may (in the middle of the year) its 100% commission based, and my credit score is in the low 700's. I spoke to a lender about financing, but they said they will not be able to lend to me due to the fact I have low income. I want to purchase a rental property in FL Broward county. I want to purchase a rental property first then do fix and flips. 

I'm thinking about buying a property in all cash @ 80k I'll have a 10% cash on cash return (but a significant amount of cash will be tied into one property)...I was thinking with this property I'll do asset lending mortgage to purchase my second rental property. and with the rest (170k) I'll work on fix and flip deals.

This is the only idea I could come up with currently.... is this a good idea?

What @Steve Kontos said is right on.  Here is your problem: 

1 - You spend your money on an income property, you will have nothing to move forward with, and have limited passive income until you can expand and move forward.

2 - You use your money on a flip, you get your original cash back, with profit and can then move forward with a bigger sum of seed money, but...I would imagine you don't have the time or the team to do this.

Your answer is, as Steve stated, to use your assets and team up with a partner(s) to fill in your deficiencies (as your assets fill theirs).  Your power is in the cash area...always a problem for many investors.  Just don't finance a hold...finance a flip.  Let your money work for you.  Expand that $250k first, then let that expanded money "seed" continuously fund the rest of your investing.

You could look in markets outside of NY. I'm betting you could find 2-3 cashflow turn key properties outside of NY that you could acquire, get rented, and then easily refi after a few months. Start playing with the house's (no pun intended) money. Not sure (constructively. :) ) how long you've been on BP but you'll see several discussions about the BRRRR method. With a good property management company, etc. you'd be able to have 2-3 perhaps 4 properties out of the gate that would generate $250+ month in cash flow per door. Then double down. rinse and repeat, etc.

I see potential with your plan!

Where you are weak, you can make yourself stronger!  Currently, you state that your income is low.  So, by purchasing the first property you mentioned as all cash, you are giving yourself a boost in income.  The lender will be able to use up to 75% of the rental income to help qualify you on future purchases.

Do you have enough to purchase a couple of these as all cash in essence to "Create" an income for yourself through cash flow on the properties?

Some thoughts on your other options....

There are asset based lenders out there that don't even look at you (other than to qualify your level of experience), but rather the asset.  These are hard money lenders, so they will likely offer more expensive rates and terms, but will help you accomplish your goal.  These would work well especially for the fix and flip strategy as these would be short term and would just serve as an expense for the flip that you could include in your budget.

Also, you may want to consider trustee sales in your area.  These are all cash projects, and would be a great opportunity for you at the beginning of your journey when you have the most cash available for acquisition and rehab.  

Best of luck to you!

We were in a similar situation and we were able to get commercial financing through a portfolio lender. These lenders are looking at the strength of the deal and your overall assets. Rather than debt to income they look at Debt service coverage ratio for the deal.

Would recommend you purchase all cash where you can drive to and do work yourself. Interest cost for high risk loans kill profits, so does hiring help and not thoroughly looking over properties yourself.

Personally, I would look at doing some flips only with the amount of capital you have if you buy a rental property and then find a good flip deal. You might not have the fund available if they are tied up in the rental. 

On a flip you should be able to get at least 30% ROI on your capital, significantly boosting your return as opposed to a 10% CoC deal.

You are basically the exact reason that hard money lenders and other types of "no doc" loans exist. You'll be able to get financed if you have a good deal without having to worry about not showing any income on your tax returns.

Anthony Palmiotto, Lender
732-825-8095
Originally posted by @Jill F. :

We were in a similar situation and we were able to get commercial financing through a portfolio lender. These lenders are looking at the strength of the deal and your overall assets. Rather than debt to income they look at Debt service coverage ratio for the deal.

What type of terms did they offer?  Are they a nationwide lender?

@Jonathan Polanski  Being an all-cash buyer is a great advantage to getting, and closing on good deals. Usually less complications, and quicker closings. Once your property is fixed and rented out you can get a mortgage on that property, cash out, and use the proceeds for the next deal.

732-333-1477
Originally posted by @Brian Garrett :
Originally posted by @Jill F.:

We were in a similar situation and we were able to get commercial financing through a portfolio lender. These lenders are looking at the strength of the deal and your overall assets. Rather than debt to income they look at Debt service coverage ratio for the deal.

What type of terms did they offer?  Are they a nationwide lender?

 Hi Brian,

Wayne Savings, headquartered in Wooster, OH, is our lender. I believe they are a regional lender. We did a 20y, 5y adjustable at 5% with 25% down back in April. We are working on another deal now.

Originally posted by @Steve Kontos :

@Jonathan Polanski

Partner with those who are strong where you're weak.  While your plan isn't bad, it also isn't the most efficient way if your ultimate goal is to invest in buy and holds.

 Good suggestion, however it's pretty hard to convince my peers that this is something they should invest in with me. Parents don't make that much either. It seems as if money and good credit can't get you anything either.

Originally posted by @Jill F. :
Originally posted by @Brian Garrett:
Originally posted by @Jill F.:

We were in a similar situation and we were able to get commercial financing through a portfolio lender. These lenders are looking at the strength of the deal and your overall assets. Rather than debt to income they look at Debt service coverage ratio for the deal.

What type of terms did they offer?  Are they a nationwide lender?

 Hi Brian,

Wayne Savings, headquartered in Wooster, OH, is our lender. I believe they are a regional lender. We did a 20y, 5y adjustable at 5% with 25% down back in April. We are working on another deal now.

 Jill that sounds really attractive! maybe we could work on financing my first deal?

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