Started a Business, QUIT MY JOB! .... Now How To Get Funding?

Question

Hi!

You may have seen my posts from about a year ago stating I was going to get into wholesaling. I have gone another route and started a non-real-estate related business that has been doing well and growing. Thankfully it allowed me to quit my job (hallelujah) mid way through the year.

Where I am at now is I am currently renting, and would like to purchase and do a live in investment with an fha loan on a 4 plex. I want to do this by early next year.

Issue I've had is that my business was incorporated in 05-2015, and I've talked to bank and loan officers which have all said they would need the business to be established for a minimum of 2 years. I do not want to wait another year and half before my first purchase.

What are my options to make this happen?

Thanks ahead of time!

Jon Holdman · Answer

Hard money is probably not an option for a residence.  Most HMLs require that you do not occupy the property.  A loan for a property you're going to occupy is subject to a lot of rules and regulation.   HMLs usually don't do that sort of loan.

Brandon Stevens · Answer

I believe Washington Federal does a lot of portfolio loans and they have decent rates.

Hattie Dizmond · Answer

@Frank Garcia

Brandon Turner found himself in the same situation, after he quit his job and had to go back to work at a bank to qualify for the financing.

An option may be to find someone to go on the mortgage with you.  That or waiting the 18-months for your business to season is probably your best choices, since hard money is expensive and will likely require you refi in 12-mo or less.

Scott Trench · Answer

Frank - this is an issue that a lot of newbie real estate investors seem to run into. By quitting your job, you have made it much harder to qualify for financing on a rental property and will likely not be able to, or have extreme difficulty in qualifying for an FHA loan. Banks (and landlords like myself) want to see reliable, long-term income streams.

Honestly, I'd suggest looking into re-entering the workforce for a few more months with a job again in the same line of work. Once you've had the job a few months, you may still be able to show a lender "continuity" demonstrating that you have been in the same line of work for a few years and qualify for financing. Just make sure that you talk to a few lenders first and verify that yes, you CAN get qualified for a loan of this type if you re-enter the workforce.

Quitting your job to invest in real estate full-time seems to me to be a poor plan in most cases, because of the very predicament you find yourself in now. Far better is to build up your portfolio while leveraging your income and establishing several years of rental history and business income.

Troy Sheets · Answer

Owner financing is your best bet at this point. Search Craigslist daily for owner finance, owner carry, etc. Something with a small down payment requirement. You could also direct mail and see if any of your prospects are interested in owner financing. Worst case, they're not, but you can still wholesale the property if they want out.

Logan Hicks · Answer

Its called unique financing.What youll nee dto do is Establish your D&B (Dun and bradstreet) go get a fedex line, an Amazon line, a cell phone line (verizon is best), and a FIOS business internet.Have the 4 lines report to Dun and Bradstreet, and that will start to establish your business credit.

You are going to need it in order to grow past the 2.5 million dollar cash reservers, or the 300+K income requirement in order to qualify for financing, even after you clear the 2 year mark.

Vincent Crane · Answer

Join every real estate association in your city, it's all about relationships.

Nnabuenyi Anigbogu · Answer

@Frank Garcia The reason i ask that is that some porfolio lenders use a more common sense approach to underwriting and will consider businesses less than 2 years old if it is in the same field as where you previously worked. That way they know you are more likely to keep up the track record of making money.

Since that is not the case then you will have a VERY hard time finding someone to do a low downpayment loan. Any portfolio lender that takes a chance with you will require at minimum 20% down (probably over 30% given your risk level). At this point i would say start calling up small banks that might do portfolio loans and save up a significant downpayment. Wholesaling can help you build some capital.

Brian Gibbons · Answer

Low down traditional is ONLY FHA

Non traditional is JV Partners, syndication, and and private lending.

Otherwise its 20% down full docs and credit

Started a Business, QUIT MY JOB! .... Now How To Get Funding?

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