Getting Loans with no income??

[Scott Bidwell]

Hello. I am new to investing.  I am trying to find our how to get into brrrrr.  While I don't have a current income, I have good to excellent credit. 

I am in the middle of closing on my own first home, which is $450,000.  I lost my job in November.  But I have cash available, aprox 1.5m.

I would like to get conventional style lending so I can minimize my cash investments and maximize my speed to growth, and get to work on finding my first of 10 properties within 3 years.

love to get some insight,  creative ideas, or just flat out honesty of my options.  

[Jon Q.]

Quote from @Scott Bidwell:

Hello. I am new to investing.  I am trying to find our how to get into brrrrr.  While I don't have a current income, I have good to excellent credit. 

I am in the middle of closing on my own first home, which is $450,000.  I lost my job in November.  But I have cash available, aprox 1.5m.

I would like to get conventional style lending so I can minimize my cash investments and maximize my speed to growth, and get to work on finding my first of 10 properties within 3 years.

love to get some insight,  creative ideas, or just flat out honesty of my options.  

Don't get a loan.  Do not buy a home.  

READ BOOKS, specifically the ones in the list I'm providing you here (see below).

Take your $1.5M... Rent, then acquire multiple investment properties that will rent at high rates for less than $200k each.  They will produce plenty of income.

Then, gain some experience managing them, then shop for a lender that will give you a Cash Out Refinance on all of those properties so that you can buy more properties.

That is your solution.

[Jon Q.]

Quote from @Scott Bidwell:

Hello. I am new to investing.  I am trying to find our how to get into brrrrr.  While I don't have a current income, I have good to excellent credit. 

I am in the middle of closing on my own first home, which is $450,000.  I lost my job in November.  But I have cash available, aprox 1.5m.

I would like to get conventional style lending so I can minimize my cash investments and maximize my speed to growth, and get to work on finding my first of 10 properties within 3 years.

love to get some insight,  creative ideas, or just flat out honesty of my options.  

 You should look for a new job. With no real estate investment experience, you should have a job and income to support your real estate investment activities until you gain sufficient experience.  In fact, keep that job a bit longer that you think you'll need it, because the income will help.

[Raymond J. Rodrigues]

I’ve seen quite a few no income verification lenders but the down payment requirement starts at 20% for primary, second home and investment property residences. 

[Rayal Johnson]

@Scott Bidwell This will be my first post, but it seems like an interesting problem. Assuming you don't have additional non-W2 income, you probably will not be able to close with conventional loan on (I assume, your primary residence). I think it would make sense to purchase cash. The next steps I think after step 0 above are:

1. Move in a renter (house hack), if you are willing, to subsidize your living expenses which should now be low since you don't have a mortgage (most of the time, your largest expense). (-$450,000)

2. Since this is a networking site go to NETWORK above and

a. Find a member in your area that is investing with the BRRRR method (As you specifically asked about it); Offer to work with them for free to get the experience. Think of how to offer value by learning more about the strategy itself. Pay for your living expenses out of your savings. I assume you can live on $40k/yr with no mortgage even with no renter. This gives you a year to make progress. (- $40,000)

    b. Contact Hard Money Lender to learn their criteria 

    c. If possible you may want to sign up for 'Rookie Bootcamp Weekend' happening April 30th - May 1st (Learn strategy     and network more)
3. To keep from overleveraging your remaining $1M, find a property (again after learning BRRRR) with ARV in the $250k to $500k range. Since you aim to refinance at 75% after having a renter, you will need to be all in (with repair cost) at $187.5k to $375k. The hard money lender which you found in the 'NETWORK' tab will put up lets say 80% of the all-in-money (you need to also account for closing and interest cost), and you put up 20% which is $37.5k to $75k. This seems doable with your capital. Even if you could do it without the hard money lender, it is probably good to go through the process to learn the ins and outs.

4. Refinance as the 3rd 'R' in BRRRR and get back your $37.5k to $75k on a property which you should now have $62.5k to $125k in equity coupled with positive cash flow.

5. The next BRRRR you can do with private money as you will have built some relationships, credibility and experience. The above is only year one. You could accelerate after going through the process once.

I also think you need to learn the strategy even if you were to be a private money lender as you would need to be able to discern if the investor that brings the deal to you is accounting for everything. Whether you lose money being inexperience or lose money lending to an investor that may be inexperience, you still lose money. Hopefully this makes sense.

[Mark S.]

@Garrett Bowser please illuminate the rest of us on vacation areas where the cost of real estate is low, demand is high, and occupancy is 70%. A lot of us would love to know. Thanks.

[Jerrod James]

You are most likely using what I call a Net Worth Loan, they look at your asset statements and will lend up to the amount that is in your liquid investment/bank accounts. This is only way I have seen to get a primary with no income, not 100% sure on the down payment on that.

For the investment prop there are plenty of options with no income. I am in one now, no income doc needed 20% down (haven't found legit lenders that do less and answer questions) and you can use interest only option for cash flow. I am a lender if you want to DM, if not that's okay. I hope you find best solution, there are lots out there depending on your goals!

[Matt M.]

All I can tell you is this- 

In 2010, post-divorce  being self employed for 8 years prior, with a 720+ credit score, I had to get a co-signer for an $80,000 house with 20% down as my new single guy primary residence. So with no income, good luck. 

[David Flores]

@Scott Bidwell

Put your money up as collateral for a loan, bank would do that in a second

[Garrett Bowser]

Quote from @Mark S.:

@Garrett Bowser please illuminate the rest of us on vacation areas where the cost of real estate is low, demand is high, and occupancy is 70%. A lot of us would love to know. Thanks.

Hey Mark, I'll give you a hint ... they're not located in California. LOL
Although, that said, I'm sure a more savvy and experienced investor than myself could make other people's ADU's, homes, condos, RV's, tents, or whatever be quite profitable as California-based STR's with the right deal but we're talking about buying real estate aren't we?

Personally, I use a combination of AirDNA, Realtor, Zillow, Airbnb, and VRBO along with Google searches like "Top US Cities to Visit", "Best Places to Visit in the USA", or "Best-Kept Secret Vacation Destinations" to find deals like the ones I mentioned that peeked your interest.

I also think reading the news and sifting through social media posts help too. For example, if you know a city or town is about to receive millions of dollars in funding to make improvements to attract more tourists and the hotels are investing in the area then that could be a hint that great deals can be found before the other investors swoop in and start driving up the real estate values. Of course, that's more speculative and the occupancy rates might not reflect that reality yet. I'm not ready to gamble on those types of properties yet but I definitely would if I had more money to invest in buy-and-hold types of assets. Right now I'm focused on vacay STR's with stats like I mentioned before. 

I also hear cities with large hospitals and a higher than average population growth rate is a great place to invest in to rent to traveling nurses. They might not be great tourist destinations but the numbers have worked for a few investors I've listened to on the BP podcast. I haven't looked for those kinds of deals yet. Maybe down the road. 

Hope that helps! Happy investing, my friend.  

[Kevin Scott]

@Scott Bidwell  I'm glad to see this thread got better with time and people actually started giving options instead of telling you it can't be done.

The reality is 1.5 million liquid is a lot of money even now.  This isn't that difficult and if you were extremely motivated all of what you wanted could be done in 1 year or less (not even 3 years).  I'm not saying you should approach it that way but it is very possible to buy 10 rentals and your own 450k home when you have that kind of cash regardless of having another real income. 

Buying 10 rentals with 500k is not that difficult (for experienced investors) using the right lenders which there are several.  Buying one decent deal a month isn't that difficult and getting it fixed then rented to pull the even 1/3 of your down payment back out will get you to 7 or 8 houses.  Once you get the system down the last 5 months you could buy more than one and you would have more than 10 even if your lender needed a renter in there for 4 months in order to refi.  You have 1.5M and you said in 3 years so this becomes a walk in the park.  If people are saying it is difficult or giving you lectures then I question whether they are really investing or they are just saving.  Nothing wrong with saving but it is a very slow way to get to independent money.  

I'm not even considering owner finance solutions to get you to these numbers which others rightfully stated above can help.

Structuring things to get to your goals is not the hard part because of your low capital restraints.  Great deals that get you back most of your money on each deal is the hardest thing. But you don't need to get most of the money back on each deal since you will be able to use 10 to 20 percent hard money bridge loans then get some of that back.  Your money will go a very long way.

As for getting you the home you wanted you really could pay cash and have enough left over to reach the goals you put out. But I can think of plenty of ways you can show income without actually having to do any kind of difficult work.  

If your existing lender can use investment income for your loan then loaning money per project to a flipper should be able to get you plenty of income to show.  As an example we have gap fund investors that make can make 5k to 20k on a 50k loan in 2 months worse case they make a min of interest and points but we add equity so when a deal does well the numbers go up dramatically.  If you ran that scenario with 1 million (keeping 500k for your brrrs) and we used 5k per deal profit. Then your income is  50k per month (not realistic that would assume every dollar was always active and turned exactly every 2 months but its a start).  So let's cut that down to saying half the money was actively invested and each deal averaged 3 months time and still only the 5k per deal which is low.  This puts your income at 16,666 per month.  This is the low-end IMO for this kind of deal structure.  That is more than enough for the 450k loan to go through and leave you 500k for brrrr investments, and the flips you are funding (with risk of course) are making you 200k per year in income through equity and interest (talk to a tax expert of course).

If you need actual income from a job to get the loan its possibly too.  I'm sure if you are loaning that kind of money someone would give you a "job" that paid you something and then lowered your investment return on the money.  Probably want to be careful with how this goes down but I'm just trying to give you ideas that might spark or lead to more ideas.

I'll stop rambling now but I  think you should go for it.  Start out with a deal or two to get your feet wet.  Probably need to stay in some markets under 400k preferably 300k or less really but its totally doable.  Look up the lender types mentioned above, bridge lenders etc.  They will help you recapture some of you capital making it go further.

[Joe Hammel]

@Scott Bidwell

You can use non-qm/dsrc loans that’s are similar to conventional just a little more expensive.

(Non-qualified money - meaning no W2 needed)

(Debt service Ratio coverage - meaning they use the “rent” of the property to cover the taxes, principal, interest, to qualify)

Then there are other forms of private and hard money.

Just find a broker that does non-qm/dscr.

[Dexter Lowery]

Hi, I'm new to this. From my understanding couldn't you start an LLC and pay yourself? I'm not sure of the technicalities but there might be something there.

[Dylan Bennett]

Hey @Scott Bidwell

In my experience, a good way to get your ball rolling with cash is to use that cash to secure a Line of Credit (LoC).

I have found this to work very well and gives me the ability for multiple strategies without having to use your own cash. Buy a couple properties with the LoC and Refi after. With this method, you'll more than likely have to leave some cash in the property, but you can start receiving rents to pay off the refi. I would recommend when you're looking to buy, look for a property to add some value and use the BRRRR strategy. If done correctly you can pull out enough money to pay off LoC and still have equity in the property.

I used this exact method to go from 0 to 4 properties in one year without being approved by a bank the typical way using income. Reach out to me if you have any questions, I'd love to talk you through it. The area you buy in will 100% matter. If you are currently looking in a more expensive area, I recommend looking in smaller, less expensive areas so you can expand quicker and grow that passive income.

[Jay S.]

If you don't have a job but have an asset (which you have), there are many loan options for buying investment property just not conventional loan though. It is going to be 20% down for the loan. DM me if you are interested in more details. 

[Account Closed]

Quote from @Scott Bidwell:

Hello. I am new to investing.  I am trying to find our how to get into brrrrr.  While I don't have a current income, I have good to excellent credit. 

I am in the middle of closing on my own first home, which is $450,000.  I lost my job in November.  But I have cash available, aprox 1.5m.

I would like to get conventional style lending so I can minimize my cash investments and maximize my speed to growth, and get to work on finding my first of 10 properties within 3 years.

love to get some insight,  creative ideas, or just flat out honesty of my options.  

 The underwriter is required to contact your employer (previous employer now) within 7 days prior to closing and verify that you still work there and that you are going to be employed for the foreseeable future. Too many times a company has had a mass layoff planned that hasn't been announced yet and the lenders get stuck holding the bag and the investors lose their money.

The most important thing to remember is that a lender is expecting to get paid every month on time in full mortgage payment. I'm inclined to think that the underwriter is more inclined to keep their job and not be under federal investigation for motgage fraud, than to satisfy your investment desires and overlook your unemployment. Also, it is probably written into your loan documents that you must inform your lender that you have lost/changed jobs during the process or it can be construed as deception (mortgage fraud) which is actually, a federal offense with jail time. Hey, I didn't make the rules.

Not good news for sure, but let's face reality, you are putting other people's money at risk by being deceptive and there are serious laws regarding that for obvious reasons. There are real investors behind that loan. The bank doesn't just "print" money.  Just as if someone you would lend to didn't disclose something you had a right to know, you'd be upset and maybe sue.

So, don't go there. It's a very dark place to go.

[Julie Wright]

Hey Scott,

I don't think you'll be able to minimize cash investments in your current situation. However, on a really recent episode of the podcast (Sunday, in fact!), David talked about something that might help you get started anyway. You will need to use your own cash at first, though.

I am going to re-phrase his advice so that it could possibly apply to your current situation.

Go buy a property with your own cash, stabilize the property (fix it up, get rents up, increase occupancy, etc) then you can ask a private lender for money, while SECURING the deal with the 100% equity you have in the property. So you'd put that lender in 1st lien position on the property you already own.

Not a lawyer, but I think you have a real shot in doing this if you're using your own capital. Then once you've proven yourself, you can go to potential lenders (likely private) and show them your track record.

Another similar option would be to purchase an already cash-flowing 5+ unit multi-family with a commercial loan. Just know you'll probably need at least 20% down. The banks will use the property's income when considering your application. Since I'm not a banker or lender, I am not 100% sure if you can get a commercial loan with no personal income, but its 100% worth a shot.
I hope this helps!

Best of luck to you!

-Julie

P.S. The podcast I'm referencing is Episode 585. The advice starts at 33mins. Although the caller's question was a few minutes before that point)

[Stephanie P.]

Quote from @Julie Wright:

Hey Scott,

I don't think you'll be able to minimize cash investments in your current situation. However, on a really recent episode of the podcast (Sunday, in fact!), David talked about something that might help you get started anyway. You will need to use your own cash at first, though.

I am going to re-phrase his advice so that it could possibly apply to your current situation.

Go buy a property with your own cash, stabilize the property (fix it up, get rents up, increase occupancy, etc) then you can ask a private lender for money, while SECURING the deal with the 100% equity you have in the property. So you'd put that lender in 1st lien position on the property you already own.

Not a lawyer, but I think you have a real shot in doing this if you're using your own capital. Then once you've proven yourself, you can go to potential lenders (likely private) and show them your track record.

Another similar option would be to purchase an already cash-flowing 5+ unit multi-family with a commercial loan. Just know you'll probably need at least 20% down. The banks will use the property's income when considering your application. Since I'm not a banker or lender, I am not 100% sure if you can get a commercial loan with no personal income, but its 100% worth a shot.
I hope this helps!

Best of luck to you!

-Julie

P.S. The podcast I'm referencing is Episode 585. The advice starts at 33mins. Although the caller's question was a few minutes before that point)

Hey Julie,

You are correct. You can get an 5+ unit building using the assets income instead of the borrowers, in most cases with a 1.2 DSCR or better (sometimes 1.0 or better).

Stephanie

[Scott Bidwell]

Quote from @Account Closed:

Quote from @Scott Bidwell:

Hello. I am new to investing.  I am trying to find our how to get into brrrrr.  While I don't have a current income, I have good to excellent credit. 

I am in the middle of closing on my own first home, which is $450,000.  I lost my job in November.  But I have cash available, aprox 1.5m.

I would like to get conventional style lending so I can minimize my cash investments and maximize my speed to growth, and get to work on finding my first of 10 properties within 3 years.

love to get some insight,  creative ideas, or just flat out honesty of my options.  

 The underwriter is required to contact your employer (previous employer now) within 7 days prior to closing and verify that you still work there and that you are going to be employed for the foreseeable future. Too many times a company has had a mass layoff planned that hasn't been announced yet and the lenders get stuck holding the bag and the investors lose their money.

The most important thing to remember is that a lender is expecting to get paid every month on time in full mortgage payment. I'm inclined to think that the underwriter is more inclined to keep their job and not be under federal investigation for motgage fraud, than to satisfy your investment desires and overlook your unemployment. Also, it is probably written into your loan documents that you must inform your lender that you have lost/changed jobs during the process or it can be construed as deception (mortgage fraud) which is actually, a federal offense with jail time. Hey, I didn't make the rules.

Not good news for sure, but let's face reality, you are putting other people's money at risk by being deceptive and there are serious laws regarding that for obvious reasons. There are real investors behind that loan. The bank doesn't just "print" money.  Just as if someone you would lend to didn't disclose something you had a right to know, you'd be upset and maybe sue.

So, don't go there. It's a very dark place to go.

 I'm not trying to still get a loan on my own property.   I'm not looking to bypass any systems.  And certainly not committing fraud.  I was originally planning to finance this home, as my personal residence. However that's not gonna happen, at least not traditionally.  

I'm looking for creative and ligit ideas get into investing in real-estate, as well as advice on how to best reinvest and not hold onto/lose the cash i have earned.

thank you all for your responses.

[Zach Edelman]

You seem like a perfect candidate for a DSCR loan! It has a "conventional style" in that it is a 30 yr note, but is qualified based off the cashflow of the investment itself, and does not take into account your personal income!

[Daniel Christopher]

Quote from @Scott Bidwell:

Hello. I am new to investing.  I am trying to find our how to get into brrrrr.  While I don't have a current income, I have good to excellent credit. 

I am in the middle of closing on my own first home, which is $450,000.  I lost my job in November.  But I have cash available, aprox 1.5m.

I would like to get conventional style lending so I can minimize my cash investments and maximize my speed to growth, and get to work on finding my first of 10 properties within 3 years.

love to get some insight,  creative ideas, or just flat out honesty of my options.  

Sounds like the perfect scenario for a DSCR loan. I recently wrote about it as one of BP's featured lenders if you want to learn more about the mechanics of it: https://www.biggerpockets.com/blog/dscr-loans-the-short-term...

Written in the perspective of the STR lender but is good for LTRs and MTR strategies as well.