Refinance options for the self-employed? | BRRRR Approach

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Refinance options for the self-employed? | BRRRR Approach

Jake E.
New to Real Estate · Pasco & Pinellas County (FL) · Member since 2020 · 10 posts · 6 votes

Hello BP!

I'm curious if anyone has experience in getting a property refinanced as a self-employed individual. I'm currently seeking investment properties (SFH or possibly duplex) with the intension of paying cash (including rehab) as outlined in the BRRRR strategy, then refinancing based on its improved value.

I know income verification is a common question for the self-employed, but what if one already owns the property free and clear? Are lenders just as concerned about one's income, or can the added rental income be enough of a justification on its own? With the various types of loans and lengthy regulations for each, I'm curious what options are available if one couldn't provide 2 years history or proof of steady income.

Obviously, this is all hypothetically speaking as I'm just thinking ahead to possible scenarios and sizing up options before moving forward. With so many loan types available (conventional, commercial, personal, etc.) I wonder if one approach might work better in such a situation.

If anyone wants to share their experiences or offer suggestions, feel free! I'm sure I'm not the only one wanting to know.

Thanks!

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  • Gretchen Guarino
    Real Estate Agent · Buffalo, NY · Member since 2021 · 35 posts · 13 votes
    5y
    Originally posted by @Jake E.:

    Hello BP!

    I'm curious if anyone has experience in getting a property refinanced as a self-employed individual. I'm currently seeking investment properties (SFH or possibly duplex) with the intension of paying cash (including rehab) as outlined in the BRRRR strategy, then refinancing based on its improved value.

    I know income verification is a common question for the self-employed, but what if one already owns the property free and clear? Are lenders just as concerned about one's income, or can the added rental income be enough of a justification on its own? With the various types of loans and lengthy regulations for each, I'm curious what options are available if one couldn't provide 2 years history or proof of steady income.

    Obviously, this is all hypothetically speaking as I'm just thinking ahead to possible scenarios and sizing up options before moving forward. With so many loan types available (conventional, commercial, personal, etc.) I wonder if one approach might work better in such a situation.

    If anyone wants to share their experiences or offer suggestions, feel free! I'm sure I'm not the only one wanting to know.

    Thanks!

    0Reply
  • Gretchen Guarino
    Real Estate Agent · Buffalo, NY · Member since 2021 · 35 posts · 13 votes
    5y

    Hi! There are definitely lenders out there that are collateral focussed and can refinance a rental property with a lite doc or stated income program. Of course, there is a bump in rate and/or reduction to loan to value to compensate for the risk the lender is taking. They can also refinance with no seasoning requirement if the collateral is good. Feel free to connect/message me directly.

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  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    5y

    @Jake E., typically lenders give little to no value for rental income until you have a year of operating history on small assets. They will look at you and your income. You will find more flexibility on the commercial side, but rates will be higher, lower LTV, and often shorter amortization and term.

    On the commercial (balance sheet) side lender, they will still want your income, but will also weigh in credit score and net worth as well.  At the end of the day, I would start calling lenders, talking to the loan officer and ask what they will be looking at when underwriting a deal.  

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  • Paul Welden
    Real Estate Agent · Tempe, AZ · Member since 2011 · 1k+ posts · 543 votes
    5y

    Rental income can be used if it's on your tax returns for 1 year ... typically. 

    Self employed borrowers will need to submit lots of docs -  personal and biz tax returns, p/l statements, balance sheets, invoices to verify biz is open, etc. While it is exhaustive, it is possible. 

    I did a cashout refi to conventional 85%LTV on an investment condo in 2020 as a self employed borrower. It was not as easy or cheap as other loans, but I got it done.

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