Seasoned investor without W2 income seeking loan products

23 Replies

I'm a seasoned investor with a modest cash flowing portfolio ($2.8M value, $200K annual gross income) and capital in the bank.  My wife and I have left the workforce and consider ourselves retired for the time being.  I am 42, she is 37. We still want to pursue investments though.  I have 10 Fannie/Freddie mortgages under my name only.  The wife has zero.

Our current limiting factors are that I have the 10 mortgages and neither of us have W2 income.  I have reportable income from other sources (pension), but the goal here is to get some mortgages under my wife's name, who does not have any reportable income at the moment, and getting a job is not an option as she just left her six figure position for retirement.

What's the best way to work around this situation?

Who are the lenders that are lending against forecasted rental income from the subject properties?  Do they exist?

Hey @Steve LeBlanc  

I think the option here would be for you to co-sign or be a guarantor for your wife's property purchases. I don't know how else she would be able to qualify with no W2. That being said she could use private money and be able to qualify that way with no W2. However it sounds like you are also attempting to avoid private money. A third option may be you refinancing a piece of your portfolio and gifting that money to your wife. She could then use those funds to purchase properties all cash in her own name entirely. The logic here is it is easier to refi an asset that is running well and fully paid off then it is to purchase a new property. Perhaps she JV's with a money partner putting the deals in her name and leveraging your track record, name and exp to raise capital and or find a co-signer. Anyways there are some thoughts.

Good Luck!

Originally posted by @Jason Shackleton :

Hey @Steve LeBlanc 

I think the option here would be for you to co-sign or be a guarantor for your wife's property purchases. I don't know how else she would be able to qualify with no W2. That being said she could use private money and be able to qualify that way with no W2. However it sounds like you are also attempting to avoid private money. A third option may be you refinancing a piece of your portfolio and gifting that money to your wife. She could then use those funds to purchase properties all cash in her own name entirely. The logic here is it is easier to refi an asset that is running well and fully paid off then it is to purchase a new property. Perhaps she JV's with a money partner putting the deals in her name and leveraging your track record, name and exp to raise capital and or find a co-signer. Anyways there are some thoughts.

Good Luck!

Jason,

Thanks for the inputs and suggestions.

Co-signing is not an option.  As I already have 10 Fannie/Freddie mortgages, I am no longer eligible for conventional financing, not even as a co-signer.

You are correct, the objective is to avoid hard money...it's not economically feasible for this strategy.  The intent is to secure 30 year conventional financing in her name.  

Gifted money cannot be used in investment transactions.

She has capital to purchase properties using cash. I should have been clear that the strategy is for long term cash flow. Therefore, it's important to leverage the cash that she has by purchasing multiple properties with 25% down, therefore maximizing ROI and cash flow.

Thanks again.


 

Have you tried commercial loans? Commercial loans can lend to you based on the cash flow of the property. As long as you have decent credit score and the down payment money (25%), you should be able to qualify. No W2, paystub needed. The downside is that the interest rate is usually 2% higher than conventional residential mortgage.

@Steve LeBlanc Yes tough spot. Private long term financing can be as low as 5%-6% but best to find a conventional way if possible. If you can't co-sign I would try to locate someone who can. You can get creative with a small % JV split for that co-signer (mortgage qualifier). I believe I know of a Broker in my network that has mentioned lending against retirement income but again that would be for you and not your wife. I also belive he brokers Private money. Again not what you are looking for. Good Luck

@Steve LeBlanc commercial loans are available for 1-4 unit properties. The terms are usually better the larger the loan is. So if you have the cash to purchase three or four properties get them cash flowing and then package them as one commercial loan you may get better rates. Talk to some commercial lenders and small community banks and credit unions.

These also would not need to be in your wife's name then - you could keep them in an LLC If you wanted. If you do keep them in your wife's name (or even have her own the LLC), then she would have her own business income that could qualify her for conventional mortgages after a couple years.

@Steve LeBlanc ,

Would condensing your 10 properties into a portfolio loan be an option and then open up the opportunity to acquire more Fannie/Freddie loans? I have heard of local investors doing that and in some instances increasing their cash flow by eliminating all the fees from numerous loans all the while securing a good rate too.

Stephen

Originally posted by @Stephen Mackivitch :

@Steve LeBlanc,

Would condensing your 10 properties into a portfolio loan be an option and then open up the opportunity to acquire more Fannie/Freddie loans? I have heard of local investors doing that and in some instances increasing their cash flow by eliminating all the fees from numerous loans all the while securing a good rate too.

Stephen

Stephen, this has been a consideration, but, it's really hard to give up 3.5% to 5% interest rates that I have on the existing mortgages.  Indeed, it would resolve the issue of having the 10 mortgages, but the overall cost I think is a bit prohibitive.

Alas, I did come across a company called LendingOne. You don't have to have W2 income. But you do have to have capital and assets, you have to get the loan in an LLC, and you have to investor experience. The lending fee is a bit high at $2500, but you can get a 30 year term at about 4.5% to 5.5% depending on if you do a purchase or a delayed financing product.

Thank you to the others for your inputs and suggestions.  

 

Originally posted by @Nurzhan Abenov :

@Steve LeBlanc

You can do commercial loan. I just did one with finance of america.

Would you mind sharing the cost and terms? I'm curious what the lending fees were, and the term and rate of the loan?  Would be interesting to see the difference between comm and residential. 

 

Originally posted by @Shawn M. :

@Steve LeBlanc

Try CoreVest or visio lending for no doc loans

Ahh yes, I kind of forgot about CoreVest. I had a $2M LOC with them last year but never acted on it unfortunately. CoreVest left a bit to be desired on their costs for residential products.

Originally posted by :

Would you mind sharing the cost and terms? I'm curious what the lending fees were, and the term and rate of the loan?  Would be interesting to see the difference between comm and residential. 



So we did rental condo cash out refi. for purchasing I believe fees are similar. It is higher rates and fees than conventional, but I don’t have w2, so that was the way we can get the refi done.

Appraised value $160k

Ltv 65% (you can go up to 75 on refi and 80 on purchase)
loan amount $105k

1% origination fee

Buy down rate $1,500. Rate after buy down 4%

Processing and Closing fee (to finance of amercia) $1,395.

Plus appraisal, title, escrow, tax recordation fees.



 

@Steve LeBlanc - I've worked with investor friendly lenders to build my 127 unit rental portfolio.  No W2s needed.  They fund based on the property not the borrower.  As long as you have liquidity for down money and a credit score above 600 you're good to go.  Message me if you want some names.

@Steve LeBlanc Your problem is all to familiar with investors with a good portfolio. We a lender that is only for active RE investors and all properties must be for business purpose. This is all we do, we do not lend in the conventional space. I would be happy to go over our portfolio products as we are asset based lenders that is mostly based on the asset and your DSCR of the property or portfolio of properties. Your income is not considered and does not fall under your allotted 10 conventional loans. Our rental loans are 30yr fixed products. I would be happy to jump on a call anytime to discuss. I am based out of Tucson and will be in Phx next week if you wanted to connect.

As many others have intimated there are multiple ways to skin a cat. I have an S Corp that pays myself a salary. We use that as proof of income even though I'm self employed. There are also fantastic tax benefits. I'd talk to a CPA first then shop lenders.

@Steve LeBlanc You can look at some of the highlights on our website, there are a few options to help conserve cash as well so you don't have to leave 20-25% in each property. Once I see your portfolio, and what you are trying to do as a whole, we can look at multiple solutions. Just know that this is a very common problem and I close several large portfolios a month. One of the biggest concerns with these products is the LTV that the leases (DSCR) can get. The minimum DSCR to qualify is 1.2. Our calculation is very simple and does not add in unnecessary cost into that calculation. It is based on PITIM. Hope this helps and please reach out anytime.

Regards,